Home / Industry / Infrastructure /  Capacity constraints to hit infra: E&Y

The dwindling capacity of non-state companies in the infrastructure sector is an emerging challenge in achieving 12th Five-Year Plan (2012-17) targets, said an Ernst and Young report.

An analysis of six leading engineering, procurement and construction (EPC) contractors showed that their working capital growth slowed to 27% in the last fiscal compared with a high of 55% in 2008. Average debt on their books rose to almost 1.5 times equity compared with 0.85 in 2007, according to the report released at the India infrastructure summit organized by the Federation of Indian Chambers of Commerce and Industry (Ficci) in New Delhi on Friday.

Roads minister C.P. Joshi expressed concern over the “recent, sudden slowdown" in bids for public-private partnership (PPP) projects in the sector.Land acquisition was cited as the biggest hurdle in the faster implementation of infrastructure projects. Almost 70% of PPP road projects see delays in financial closure due to delays in land acquisition by National Highways Authority of India (NHAI), the report said.

NHAI is required to hand over 80% of the land for PPP projects under the existing model concession agreement. The Land Acquisition and Rehabilitation and Resettlement Bill, which was to have been taken up by lawmakers in the current monsoon session has been stalled due to the prevailing deadlock in parliament.

Another challenge was availability of funds. The share of loans to the infrastructure sector dropped to 14.4% of total outstanding bank credit as of March 2012 compared to 14.7% in the year ago period

Delays in regulatory and environmental clearances and inadequate project planning by sponsoring agencies in the pre-tendering or pre-bidding phase were the other hurdles in implementation, according to the report.

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