India: CMIE: Project implementation and completions stalled

  • CMIE’s CapEx service that tracks the initiation, implementation and completion of capacity-expanding projects has chronicled the suspension of investment activities since the lockdown.
  • We reported in early-Jul 20 that 674 projects worth INR9.7tr were stalled because of the lockdown in 1Q20. These were predominantly in the month of Mar 20. Another eight projects worth INR62bn were stalled in 2Q20.
  • These numbers now stand revised at 721 projects worth INR9.8tr in 1Q20 and 22 projects worth INR85bn in 2Q20. Another INR32bn worth of projects were stalled in 3Q20.
  • As the severity of the lockdown was scaled down progressively, many of these projects, whose implementation was stalled, resumed activities. Implementation of projects worth INR9.9tr was stalled YTD through Sep 20. Projects worth INR9.2tr were revived during the same period.
  • A relatively small, INR41bn worth of projects whose implementation was stalled were abandoned during the first nine months of 2020. Just before the lockdown, this averaged at over INR100bn and before that much more.
  • Projects did get stalled in a big way when the lockdown began but, most of them resumed work as the lockdown was eased. The net effect on stalling has been marginal.
  • But, the impact on project completions has been far more severe. Projects worth INR326bn were commissioned in 3Q20. This is the second consecutive quarter when project completions have fallen to such precipitously low levels.
  • In 2Q20, projects worth INR240bn were completed. In comparison, project completions averaged at INR1.3tr per quarter in FY20 and INR1.6tr per quarter in FY19.
  • The rate of project completion has dropped sharply during the lockdown. This rate, which is the value of projects completed expressed as a percent of value of projects under implementation, had dropped to 0.2% in 2Q20.
  • It recovered marginally to 0.28% in 3Q20. These proportions compare poorly with the average rate of completion of well over 1% in the recent past.
  • While the logistical reasons for slowing down of project completions may be getting over, the problem of depleted demand will linger and will remain a hindrance to project completions.

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