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Every fortnight or so, the pink papers carry high-pitched headlines that claim stalled infrastructure projects worth lakhs of crores of rupees have been cleared by the CCI or Cabinet Committee on Investments. Just yesterday the PM’s project monitoring group declared that it had given a green signal to and resolved issues that were dogging 94 troubled projects worth Rs 4.3 lakh crore in sectors like power, oil and gas, railways, shipping and mines. Investors, industry bodies and the business community as a whole have hailed the attempts made by the Cabinet Committee on Investments to debottleneck stuck projects and kick start activity to revive the economy, but has CCI really been a game changer as was envisaged?
The CCI was set up in January this year after pressure mounted on the government to act on a decision paralysis that had built up since 2009 and in due course resulted in the stalling of a hideous Rs 17 lakh crore worth of infrastructure projects. It was a snowball effect that was hitherto obfuscated by growth numbers generated through an artificially stimulated but unreformed economy that was growing at 8-9%, and a blinded government that was in denial mode.
It was only when GDP started plummeting faster than ever imagined, and a din of protest from ratings agencies, promoters and investors got louder, that the government accepted that there was indeed a problem, and in response, set up the NIB or National Investment Board late last year. The NIB was eventually watered down into what’s now known as the CCI – a virtual pressure group under the Prime Minister that co-ordinates fast tracking of clearances, but cannot override ministerial jurisdiction, in effect limiting its powers. The PM’s monitoring group was constituted in June to give further stealth to the functioning of the CCI. Its mandate was to pick on low hanging fruit – projects which were nearly complete, but had minor clearances pending and could easily be given a thrust.
But has that thrust resulted in a tangible upshot in investment activity on the ground? Have projects started to move dramatically, or are these clearances only on paper, yet?
“No one really knows what these clearances mean. For more clarity on that, the Project Monitoring Group must start disseminating weekly information on the status of projects that have been given a go ahead” suggests Vinayak Chatterjee, Chairman & Managing Director of Feedback Infrastructure Services.
The PMG is possibly reluctant to do that, because it doesn’t really have much progress to share. Anecdotally, speaking with promoters one gets the sense that things aren’t really moving on the ground. For one, setting up an infrastructure project needs close to 60 clearances and the CCI does not have jurisdiction over many of the local permissions and state clearances that make up the sum total of these approvals. So while the docks could be cleared in New Delhi by co-coordinating with ministries, projects are still grappling with last mile delays on land acquisition, resource linkages etc.
Reports suggest states want to replicate the a local level PMG mechanism for smaller projects in their regions but Chatterjee suggests that a mirror image of the CCI needs to be created at the state level where by the central CCI opens channels with 29 state CCIs to co-ordinate clearances.
But others believe, the entire idea behind CCI was perhaps too little too late as other market events have far overtaken the sole disquiet about approvals when it comes to getting mega projects to move. Projects being fast tracked by the committee are all over Rs. 1000 Cr and “most infrastructure developers simply don’t have the capital to take these projects forward” says Sanjay Sethi, Executive Director & Head of Infrastructure Group at Kotak Investment Banking.
“Had the CCI been formed 2 years ago, it would have gone a long way in moving things forward. But today even if approvals come through, unless overall market conditions improve, lenders get the confidence to deploy resources and fresh capital can be raised, the impact of CCI’s actions will be very limited in the immediate context.”
Newspaper reports suggest Economic Affairs Secretary Arvind Mayaram has now written to the RBI suggesting easier rules for infrastructure financing as a next step past regulatory clearances. While these measures could help in bits and pieces, experts believe it will need an overall market recovery for the CCI’s clearances to really provide a fillip and kick start investment activity.
