The finance ministry has flagged the issue of delay in giving clearances by state governments to infrastructure projects increasing risks of defaults and bad loans for banks.
In the eastern region, five infrastructure projects, with a total investment of Rs 16,686 crore, are awaiting various approvals.
The banking sector, in general, and public sector banks, in particular, have sanctioned a significant amount of loans for large projects. In a number of projects, implementation is held up because of pending approvals at the central/state levels, banks said in communication to state governments in the eastern region. Lending by banks to infrastructure projects, including telecom, power and roads, increased 21.7 per cent to Rs 5,74,569 crore in October, compared with Rs 4,72,142 crore in October 2010, according to Reserve Bank of India (RBI) data.
On Saturday, finance minister Pranab Mukherjee held discussions with chief ministers of eastern states in Kolkata on credit flow to farming, small and micro units and infrastructure projects. The finance ministry had, in October and November, held several meetings with the ministries concerned on the status of pending approvals in a bid to expedite the process.
| IN TROUBLED WATERS Projects pending approval in the eastern and northeastern regions | |||
| Project | State | Total Investment* | Bank loan sanctioned* |
| Athena Demew Power | Arunachal Pradesh | 12,879 | 719 |
| Navayuga Jahnavi Toll Bridge - Road | Bihar | 1,600 | 720 |
| Chhapra Hajipur Expressway | Bihar | 813 | 585 |
| Coal Bed Methane Project Raniganj | West Bengal | 819 | 573 |
| * Rs crore Source: Finance ministry communication | |||
The delay in approvals often means cost and time overruns and endangers the viability of a project. The risk of the loans sanctioned/disbursed by banks turning into non-performing assets is also significantly enhanced, the finance ministry said. The secretary (financial services) in the ministry had recently written to the chief secretaries of various state governments for expediting approvals.
RBI, too, is concerned, with commercial banks increasing exposure to infrastructure projects. In its trends and progress report 2010-11, It said risks were emerging from the concentrated and high pace of lending to the sector by public sector banks. Such exposure raises apprehension of increasing delinquencies in the future, it had said.
