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Home / Business News / States go slow on infra spend amid fund crunch

States go slow on infra spend amid fund crunch

Preliminary data from public sources and conversations with consultants and engineering companies show that many states have postponed tendering for new projects in the past few months, while ongoing projects are facing delays.

business Updated: Jul 11, 2020 09:09 IST
Tanya Thomas
Tanya Thomas
Hindustan Times, Mumbai
State governments that account for more than half of all government-funded capital expenditure in the economy have resorted to the deepest cuts in spending.
State governments that account for more than half of all government-funded capital expenditure in the economy have resorted to the deepest cuts in spending. (Bloomberg)

The sharp deterioration in states’ finances because of the prolonged lockdown is taking a toll on government-funded infrastructure programmes, with an increasing number of projects being put on hold for lack of funds.

Preliminary data from public sources and conversations with consultants and engineering companies show that many states have postponed tendering for new projects in the past few months, while ongoing projects are facing delays.

The total number of projects, including both private and government, whose implementation has been stalled, rose 32% to 1,377 in the six months ended June 30 from 1,046 in the preceding six months, data from the Centre for Monitoring Indian Economy showed.

Project monitoring organisation Projects Today’s data showed new project announcements in electricity, infrastructure, irrigation, manufacturing and mining fell 75% to 1,241 projects, valued at ₹98,000 crore, from 2,500 new projects, valued at Rs 3.86 lakh crore a year ago.

State governments that account for more than half of all government-funded capital expenditure in the economy have resorted to the deepest cuts in spending.

The overall capex budgeted by states rose to around Rs 5.7 lakh crore in the current fiscal from Rs 5.11 lakh crore in the previous year, according to a May report by credit ratings agency Icra.

Predicting a steep capex cut by states, Icra estimated that not only would awarding activity fall, the receivables days would also lengthen, triggering a vicious cycle on the cash flows of contractors.

“On the ground, we’re seeing a delay when many of the tenders that were supposed to be floated in March/April have got pushed to June/July or later, and a few of them have also been cancelled,” said Sandeep Gulati, managing director, Egis India, an engineering company.

“The delay is more pronounced on state-funded projects as compared to those funded by the Centre or multilateral agencies. Some states have budgetary constraints and are diverting existing funds to emergency healthcare.”

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