NEW DELHI: The sudden “reversal” in infrastructure projects, including cancellation of the construction of the Metro rail car shed in Aarey Colony and a review order on Prime Minister Narendra Modi’s ambitious Ahmedabad-Mumbai bullet train project following the regime change in Maharashtra, has come as a shock for investors involved in these two projects and has also created panic in the infrastructure sector.
Infrastructure consultants say calling off ongoing infrastructure projects following regime change creates fear among investors and developers. Such action shows the “lack of seriousness” in the ruling class for building urban infrastructure.
Sources said that the decision of the Shiv Sena-Congress-Nationalist Congress Party Maharashtra government of Uddhav Thackeray to halt the car shed project in Aarey Colony will not be the only one; there are many more projects that will face the brunt of broken ties between the Bharatiya Janata Party and Shiv Sena in the state.
The Maharashtra government has already signaled constituting an audit programme which will review the tendering process of many infrastructure projects floated by the previous BJP-led Maharashtra government. The projects that the newly formed Maharashtra government wants to review include the Mumbai-Nagpur Samruddhi Corridor; the Mumbai-Ahmedabad bullet train and a refinery and petrochemicals complex in Raigad, besides other projects. All these projects are very ambitious and huge costs are involved.
The Shiv Sena was part of the previous government, but now, the party has broken its long association with the BJP and formed a government with the NCP and Congress; this change in Maharashtra politics is proving to be a nightmare for infrastructure investors.
Infrastructure consultants and experts said that halting ongoing development projects initiated by previous governments by new governments to please their core constituencies, has been a usual exercise in the country for more than five decades. However, unlike in the past when private sector involvement was less, the present scenario in which investors and developers are mostly private entities, means that going back on ongoing projects will prove fatal for the infrastructure sector.
Abhijeet Wadkkar, a senior engineer who previously worked for the Indian Railways as a consultant, told The Sunday Guardian: “Contract cancellation or asking for reviews of big projects following regime change can create fear in the infrastructure sector. Investors would fear putting in money and the situation will put pressure on the already poorly managed infrastructure sector of the country.”
“The contracts signed by the government should be treated as sacrosanct; if not, then trust deficit will emerge. No private entity would like to place trust in any contract and you can imagine the scenario if this kind of situation occurs. Today, in implementation of one project, you may see that one company is in charge of the project, but in reality, there are 10 foreign and indigenous companies working together to complete the same project; so a sudden decision like that taken by the Maharashtra government drives fear among all developers and investors involved in the project,” Wadkkar added.
Maharashtra is, however, not alone in going back on ongoing projects. Recently, a similar decision of calling off some infrastructure projects was taken by the Y.S. Jagan Mohan Reddy-led Andhra Pradesh government. Reddy’s decision stalled almost all wind and solar power purchase agreements which were earlier made by the Chandrababu Naidu-led government. The projects which faced cancellation of purchase agreements in Andhra include 21 wind contracts, the Siemens Gamesa 600 MW hybrid project, the Axis Energy hybrid project, energy storage projects and 600 MW of scheduled power projects.
Vijay Ravikanth, an Andhra-based consultant who has worked for many private companies, told The Sunday Guardian: “Green energy is the future of the country and Y.S. Jagan Mohan Reddy’s decision is not only damaging the current energy sector of the state and country, it has also damaged the future prospects of this sector in the country.”
“Huge cost is involved in pre-construction activity and cancellation of contracts means a loss for companies working on the projects. Apart from this, the sudden cancellation of a contract or a review notice creates uncertainty and dilemma for the contractors. In my view, the government should think rationally and unless there is any discrepancy, the government should avoid taking up such decisions,” Ravikanth said.
“The country is already struggling with poor infrastructure and such a decision will cause great stress for the sector. Decisions like the one taken by the Andhra government show a lack of seriousness of the ruling class in providing urban infrastructure,” Ravikanth added.
In a similar manner, several infrastructure projects were stopped by the Telangana government and in Delhi too, the Phase-4 Metro project has been delayed due to the slugfest between the BJP-led Central government and the AAP-led government in Delhi.