But project execution ratio declines
The 88th Survey of Projects Investment in India indicated a healthy growth of 36.59 percent in fresh investment announcements in the first half of the fiscal 2023 (H1/FY23) on Year on Year basis. The growth was observed in both public and private investment intentions.
However, during the last one year, the project execution ratio (Project investment Under Execution/Total Outstanding*100) has slid sharply from 38.06 percent in September 2021 to 35.05 percent in September 2022. This indicates a slower transfusion of projects from the announcement stage to the execution stage.
The six months (April-September 2022) period saw announcement of 4,996 new projects with a total investment intention of Rs 13,19,506.67 crore. A year ago, during the same period the country had seen announcement of 5,251 new projects worth Rs 9,66,068.35 crore.
Compared with the number of new projects announced in H1/FY22, the first half of the current fiscal attracted 255 less new projects. However, the increase in the number of mega projects (cost of Rs 1,000 crore or more) and the presence of around nine super mega projects (cost of Rs 25,000 crore or more) saw the aggregate fresh investment increasing by a handsome 36.59 percent.
As against 130 mega projects aggregating Rs 6,19,834.0 crore announced in the first half of last fiscal (h1/FY22), the H1/FY23 period saw increase in both numbers and amount committed therein with 162 mega projects worth Rs 9,20,874.30 crore. This included super mega projects (Cost Rs 25,000 crore and more) of business houses like Vedanta, ACME, and Adani. Of this, the Rs 1,54,500 crore twin projects of the Vedanta group in Gujarat were the most ambitious investment decisions seen in the recent past.
Projex by Ownership
In the first quarter of the current fiscal (Apr-Jun 2022), barring the Central government sector, declines in fresh investment were observed in both - the State government and the Private sector. However, the scenario changed for the better with both the State government and Private sector upping their projex commitments in the second quarter. As a result, the share of the Government sector in the total fresh investment announced in H1/FY23 increased to 30.80 percent as against 24.28 percent recorded a year ago.
While the Central government agencies announced 775 new projects worth Rs 1,69,841.30 crore, state government-owned agencies announced 2,325 projects worth Rs 2,36,531.81 crore in H1/FY23.
Despite fall in the number of new projects (497 less than last year’s number of 2,393), aggregate fresh investment commitment in the Private sector increased by 24.82 percent. Thanks to the presence of mega and super mega projects among the new projects. The four super mega projects (project cost of Rs 25,000 crore or more) were announced by the Vedanta, ACME, Adani, Avaada and Petronas groups.
Two Vedanta group companies – Vedanta Displays and Vedanta Semiconductors – in collaboration with Foxconn have drawn up plans to invest a whopping Rs 1,54,500 crore in Gujarat. Though the project was to come up in Maharashtra, better options extended by the Gujarat government made the foreign group, to locate the projects in Gujarat. The state government has reportedly offered subsidies and incentives, like zero stamp duty on land purchase and subsidised water and electricity, under the Gujarat Semiconductor Policy 2022-27.
The ACME group has firmed up investment plans of Rs 1.5 trillion on three Green Ammonia projects in Tamil Nadu, Karnataka and Oman. In June 2022, it signed a MoU with the Karnataka government for setting up a 1.2 million tpa Green Hydrogen and Ammonia plant at an investment of Rs 52,000 crore at Mangaluru. In July 2022, it signed another MoU with the Tamil Nadu government for setting up a similar project at Rs 52,474 crore at Thoothukudi.
Close on the heels of these two groups, the Adani group announced two mega projects – a Rs 42,490 crore expansion of Dighi port in Maharashtra and a Rs 41,653 crore alumina refinery project at Kashipur in Odisha.
Other super mega projects were proposed by Avaada Power, Petronas, IGSS and Elest (see table).
Projex by Sectors
Of the five major sectors, Manufacturing, Infrastructure and Irrigation sectors posted positive growth but Mining and Electricity sectors after posting positive growths in the first quarter of this fiscal, could not maintain the same tempo in the second quarter of FY23.
Manufacturing: The sector accounted for 50 percent of the total fresh investment announced in H1/FY23. In all, 958 new projects entailing a total investment of Rs 6,66,222.71 crore indicating a growth of 36.17 percent on a Y-o-Y basis. Food and Agro, Paper, Aluminium, Electronics and Automobiles sectors attracted increased investment proposals. On the other hand Cement, Steel, and Pharmaceuticals sectors saw fall in fresh investment on a Y-o-Y basis.
Within the Manufacturing sector, sub-sectors that will play critical roles in not only enhancing the growth of Indian economy but also in fulfilling its commitment towards reduction in carbon emission, have seen increased number of new projects. During the first six months of the current fiscal 19 Ethanol projects, 19 Green Hydrogen projects, 111 Active Pharma Ingredients projects, five Semiconductor projects and 29 Electric Vehicle projects were announced.
Mining: The seven mega mining projects failed to lift the total fresh investment amount in the first half of the current fiscal vis-à-vis the first half of the last fiscal. As against 72 new projects worth Rs 38,812.23 crore announced in H1/FY22, a total of 111 new projects worth Rs 31,223.87 crore were announced in H1/FY23, indicating a fall of 19.55 percent in fresh investment.
Of the seven mega projects, prominent were two iron ore beneficiation projects of Aarti Steels and Sompuri Infrastructures in Odisha. Together these two projects would see Capex of Rs 10704.46 crore.
Electricity: The sector attracted 18 mega projects worth Rs 70,943 crore. Most of these were in the Hydel and Solar power sectors. In the hydel sector, Adani group was the largest investor. The group’s company, Adani Green intends to install 7,300 MW of generation capacity at a total capex of Rs 30,109 crore in Andhra Pradesh and Maharashtra.
Of the 150 new power projects (costing Rs 84,073.46 crore) announced in H1/FY23, 84 Solar power projects worth Rs 37,905 crore intends to install new generation capacity of 16,168 MW.
A Rs 12,000 crore, 2,000 MW Wind & Solar Power project of Ayana Renewable Power in Karnataka, a Rs 6,614.15 crore, 1200 MW Hydel power project of Greenko Energies in Telangana and a Rs 5,000 crore, 1,000 MW Solar power project of NLC India in Assam were other major projects announced in this sector.
While the Thermal power segment attracted six new projects, no new investment intentions were seen in the Nuclear power sector.
Infrastructure: Accelerated capex spending by the State and Central government agencies in the Roadways, Water Supply and Treatment and Community Services sectors coupled with a spur in private investment in sectors like Construction, Hospitals, Ports, Data Centres led to a healthy 46.86 percent in the infrastructure sector in H1/FY23 on Y-o-Y basis. In all, the sector attracted 3,636 new projects worth Rs 4,99,795.93 crore in H1/FY23 vis-à-vis 3,609 projects worth Rs 3,40,316.32 crore announced in H1/FY22. Every major sub-sectors within this sector posted growths in fresh capex on Y-o-Y basis.
Transport Services: This is the most happening sector among the sub-sectors of the Infrastructure sector. The sector comprising Roadways, Railways, Ports, Airports, Pipeline and Power Distribution accounted for around 43.65 percent of the fresh projex announced in the Infrastructure sector and for around 16.5 percent of the total fresh capex seen in H1/FY23. Further, every sub-sectors mentioned above posted positive growth in fresh investment on Y-o-Y basis.
In the Roadways, though state government agencies announced 662 new road projects to be built at a collective cost of Rs 53,433 crore, the sector was dominated by the Central government owned National Highways Authority of India (NHAI). The national highways builder announced 110 new highways of 4,660 km to be built at a total cost of Rs 69,769.41 crore. Of this, 14 projects were of mega category with investment of Rs 1000 crore or more.
As against 19 projects worth Rs 2,214.63 crore announced in H1/FY22, the Railways sector attracted 146 new projects worth Rs 12085.88 crore in H1/FY23. Of this, a Rs 5,800 crore Lucknow Metro Rail (Phase II) project of UP Metro Rail Corpn was the largest.
In the Port sector, a Rs 42,490 crore Dighi port expansion by the Adani group company, Dighi Port was the most ambitious project. In all, the shipping infrastructure sector attracted 27 new projects worth Rs 53,081.11 crore.
Construction: The sector comprising mainly of Commercial Complexes, Real Estate and Industrial Parks has seen increased activities since last fiscal. The sector has retained its tempo in the first half of the current fiscal too. The three sub-sectors collectively attracted fresh capex worth Rs 1,48,095 crore in H1/FY23 vis-a-vis Rs 1,08,600 crore secured in H1/FY22.
Vikhroli Business City's Rs 2000 crore and AMB Infrabuild's Rs 1089.76 crore capex proposals were the two mega commercial complex projects announced in Maharashtra and Haryana respectively.
In the Real Estate sector, Karnataka Housing Board's Konasandra Residential Complex (Rs 3,355 crore); U P Housing & Development Board's Ayodhya Township (Rs 3000 crore) and Hyma Developer’s Rs 2,200 crore Kokapet Residential Complex in Telangana were some of the notable projects. In all, the sector saw announcement of 765 new projects worth Rs 96,580.5 crore in the first six months of Fiscal 2022-23.
In the Industrial Park segment some of the prominent investment intentions were a Rs 7,000 crore Larsen & Toubro's IT/ITES Park at Vadodara in Gujarat, a Rs 9,000 crore Ganesh Housing Corpn's SEZ at Ahmedabad in Gujarat, a Rs 2,500 crore Kakinada SEZ Multiproduct Industrial Park in Andhra Pradesh and a Rs 2,231 crore Tetrarch Developers Industrial Park at Devanahalli in Karnataka.
Irrigation: The sector, where bulk of the investment is done by state governments, did not attract any significant investment proposals in FY2022. During that fiscal, the sector saw announcement of 144 new projects worth only Rs 13,222.53 crore. However, in the first half of the current fiscal things changed for the better. Thanks to a couple of mega irrigation projects announced by Narmada Valley Development Authority and Water Resources Department of Madhya Pradesh, the sector saw fresh investment of Rs 38,190.70 crore in the form of 141 projects. While Narmada Valley Development Authority announced 10 projects worth Rs 14,233.24 crore, Water Resources Department of Madhya Pradesh announced 16 projects worth Rs 12,223.82 crore. These two agencies accounted for around 69 percent of the total fresh investment seen in this sector in H1/FY23.
Projex by States
The top five states – Gujarat, Karnataka, Maharashtra, Odisha and Tamil Nadu – accounted for around 62 percent of the total fresh capex announced in H1/FY23. Interestingly, the same five states appeared among the top five states a year ago and accounted for around 59 percent of the total fresh capex announced in H1/FY22.
Further, of the total fresh investment cornered by the top five states, around 83 percent was by the Private sector. All nine super mega projects announced in H1/FY23 are going to be executed in these five states.
Among the states, Gujarat topped the table with 530 projects worth Rs 2,61,913.39 crore. The twin projects of Vedanta and Foxconn worth Rs 1,54,500 crore, which moved from Maharashtra to Gujarat in the month of September, helped Gujarat to retain the premier investment destination rank, which it had occupied in the first half of the last fiscal. Gujarat was also the favourite investment destination of private promoters. Around three-fourth of the total fresh investment committed in the state was by private companies.
Karnataka with 461 new projects worth Rs 1,92,522.62 crore ranked second and accounted for around 15 percent of the total fresh capex announced in H1/FY23. Among the top 10 states, the share of private investment in total capex was the highest in Karnataka at 89.35 percent. Two Green Hydrogen projects of ACME Cleantech (Rs 52,000 crore) and Petroliam Nasional Berhad (Petronas) (Rs 31,200 crore) both at Mangaluru district were the large private projects attracted by the state in H1/FY23.
Maharashtra missed the numero uno rank following the shift of Vedanta-Foxconn projects to Gujarat in the month of September 2022. Had the state managed to retain those super mega projects, the total fresh capex the state attracted in H1/FY23 would have ballooned from Rs 1,44,046.79 crore to Rs 2,98,546.8 crore.
The other two topper states, Odisha and Tamil Nadu bagged 252 new projects worth Rs 109430.07 crore and 265 projects worth Rs 106775.52 crore respectively.
A Rs. 41,653 crore Alumina refinery project of Adani Enterprises at Kashipur was the largest new project bagged by Odisha and a Rs 52,474 crore Green Hydrogen project of ACME Green at Tuticorin was the largest project announced in Tamil Nadu in H1/FY23.
The revival seen in fresh investment announcements, especially in the private sector, in the second quarter vis-à-vis the first quarter has re-assured the faith of Indian and foreign companies in the India growth story. This is further solidified by the recent statement of the IMF that at present India is in a relatively bright spot compared to other countries and would be one of the very few countries which will post positive growth in 2023.
India will reap the fruits of increased investment proposals only when the announced projects are grounded and completed in time. This will not only ensure higher production of goods and services but also increase employment opportunities.
The headwind which may derail the positive growth in fresh investment is the falling project execution ratio. The ratio (Project investment Under Execution/Total Outstanding*100) has fallen alarmingly from 38.06 percent in September 2021 to 35.05 percent in September 2022. The fall has to be reversed at the earliest. Hence, we expect the government authorities to ensure the grounding of projects (at least those which are critical and of mega size) without much delay.
The faster implementation of PM Gati Shakti, which aims to institutionalise holistic planning for project promoters across major infrastructure projects, would also go a long way in ensuring the faster transfusion of projects from the Planning stage to Under Execution stage.
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Projects Today is India’s largest online databank on new and ongoing projects in India. The website, launched on 8 September 2000, aims to provide the required foresight to its clients based on sectoral insights its research team possesses. The project-related information provides an invaluable marketing resource to assist the business development efforts of the organisations that focus on the new projects market. It is widely used by the project fraternity, primarily, as a business opportunity identifier.
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Disclaimer : The opinions expressed within this interview are the personal opinions of the interviewee. The facts and opinions appearing in the answers do not reflect the views of Indiastat or the interviewer. Indiastat does not hold any responsibility or liability for the same.