Realty, power, telecom, infra in troubled zone with vulnerable debts worth Rs 5 lakh crore: ASSOCHAM managing committee

The managing committee of apex industry body ASSOCHAM noted with concern that real estate, power, telecommunication and infrastructure are among the most troubled sectors of the Indian economy, leaving a potential for vulnerable debts to the extent of Rs five lakh crore.

ASSOCHAM President Mr Sandeep Jajodia said, in the power sector itself, the recent Economic Survey (part 2) itself has mentioned a figure of Rs 3.60 lakh crore which is vulnerable, resulting from non-viability of the thermal projects , which in any case are under heavy leverage.

Among other factors like low capacity utilization in the industry, around 72 per cent in the wake of subdued consumer demand and investment, a mismatch seems to be emerging among the solar and thermal, making it imperative that a balance needs to be struck in the short to medium term for ensuring that both the energy sources are well tapped and protected. With solar tariff falling too much, the confidence and viability of the thermal is at stake. We need both in the near and medium term, though clean energy would always be welcome for the long term. As for the telecom sector, intense price competition is taking a toll on the already-leveraged firms and the sector is in the grip of at least Rs one lakh crore, if not more, of a vulnerable debt.

 

The ASSOCHAM President said, The Managing Committee of the chamber underscored the need for a fair play and level playing in the sector, also urging the industry players, new and old, to see long term viability of the industry, which has been a flag bearer of a success despite several bump ups. We cannot afford to lose on telecom. The regulator, TRAI and the Department of Telecommunication should keep a close watch along with regular oversight of the leverage of the public sector banks, from the Finance Ministry. If some issues crop up, the solutions must be found and implemented immediately without allowing the companies to bleed and burn their fingers in ultra competitive market.

The real sector remains in a big mess which is a paradox, because it is the sector with the largest employment potential. Majority of the projects have been stuck in the Delhi NCR, Mumbai, Hyderabad, Chennai and Bengaluru and other major cities. In the hindsight, the developers may have erred on commercial judgments, but it is not right to count all the developers as unscrupulous. Some of the fault lies with the state regulatory bodies and other organisations which sit on clearances for environment, completion and several other complicated level of approvals. All these add to the costs in a fast changing markets for the realty. Certainly, the sector needs pragmatic solutions from the banks, government, both the centre and the states, before we can see reversal of fortunes.

The ASSOCHAM President said while the chamber has always been supportive of the farmers' cause, the farm loan waiver, has forced the state governments to cut their capital expenditure resulting in slowdown even in the government sector, which had remained the only hope in an otherwise subdued investment scenario.

Asked about the exuberance in the stock market, he said, it is largely driven by the global liquidity excess find ways into the emerging markets. The Price to Earning Multiples of over 25 in the Indian market looks on the higher side; though the good thing is that still there are no signs of any bubble. Even if there would be a fall, it would not shake up the markets.

As for some surge seen in the inflation, the ASSOCHAM chief said, the price rise would remain well under the comfort level of RBI at four per cent and the central bank should continue with the softer rates.

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