Infra, power hope rises as Centre-state power align in UP

Uttar Pradesh (UP) may be grabbing headlines for cow politics and Romeo squads but for India Inc, the state means business, more so as the new state government is showing early signs of getting its act together in the roads and power sectors. 

“We look forward to getting more business from the state. It is still very early, and the government has just come in. Many of the previous government’s programmes seem to be getting appreciated and if they (the new government) continue in the same manner, there would be new schemes they would want to get implemented now,” said S N Subrahmanyan, who is deputy managing director and president, Larsen & Toubro (L&T), and will take over as chief executive officer and managing director in July. 

L&T has a significant exposure to the water, power and buildings sectors in this state.
 

In its run-up to the Assembly elections, UP has seen significant activity in the road sector. Most analysts expect this momentum will be carried forward because of the Lok Sabha elections of 2019.

“UP and Karnataka have seen the highest number of projects this year, and Odisha, UP, Bihar and Andhra Pradesh have seen a regular flow of projects,” according to an Equirus Capital report on the upcoming project pipelines and recent bidding activity in the road sector for April-December 2016.

“The previous UP government gave a lot of push to infrastructure in the last 15-18 months. Lucknow Metro work is going on at full speed; further extensions of the Metro project are likely to be taken up in the Noida region. With the same party in power in the state and the Centre, both funding and the approval process will ease for road projects,” said Shubham Jain, vice-president at Icra.

Officials of the National Highways Authority of India (NHAI) say there are some signs of improvement in UP. “There has been some improvement, and land acquisition and forest clearance are getting expedited,” said an NHAI official.

According to the Press Information Bureau (PIB) data, as on June 10, 2016, nine projects had missed their commissioning date. Another 10 were awaiting a no-objection certificate (NoC) from the state government. “A length of 811 km of newly declared National Highways is yet to receive the NoC from the state PWD. UP has 60 National Highways with a length of 8,483 km,” a PIB statement of June 2016 said.

Not just roads, power producers may also anticipate changes with informal discussions having started on ways to ease power procurement. For the April 2016 to February 2017 period, 9.8 per cent (1,682 megawatt) of the state’s power demand was not met against the all-India average of 1.6 per cent. 

Sabyasachi Majumdar, senior vice-president, Icra, said there were more segments the state had to pay attention to. “A substantial reduction in AT&C (aggregate technical and commercial) losses in the next two to three years, timely tariff filing and factoring for change in fuel surcharge as soon as possible are some of the steps that the new state government should focus on,” he said.

Analysts say listed entities such as PNC Infratech and L&T are among those likely to gain, apart from small companies that have a huge exposure to projects in the state. Others such as Sadbhav Engineering also have a significant road portfolio.