Business Today

Order inflow in construction sector dips

Several major highway and irrigation projects remained in limbo as a result of indecisiveness on the part of government departments in placing orders.

Lalatendu Mishra | July 4, 2011 | Updated 08:13 IST

China on Thursday unveiled the world's longest sea bridge spanning 35 km, making massive strides in the road infrastructure sector, but India, touted as the dragon's closest competitor, miserably lagged behind because of inaction.

Several major highway and irrigation projects remained in limbo as a result of indecisiveness on the part of government departments in placing orders. This led to the order inflow in the April-June quarter of 2011-12 declining by 32 per cent from the corresponding period of last year, according to the latest data. Construction companies received orders worth Rs 39,500 crore during this period, which was down 40 per cent as compared to January-March 2011.

Despite aggressive targets, the National Highway Authority of India (NHAI) failed to award new projects. "There is lot of indecisiveness on the part of officials in placing orders. There is accumulated delay in handing out government orders and I think things should accelerate in the first half of the current year," A.M. Naik, chairman and managing director (CMD), L&T, had said recently.

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Analysts said that the absence of a chairman at NHAI contributed to the sluggishness at one of India's biggest infrastructure developers.

"NHAI awarded (contracts for) just about 500 km of road in the April-June quarter against its set target of about 1,800 km. According to its monthly plan, it had aimed to award 14 projects during April to June 2011 but awarded just four projects, which were scheduled for April," said analysts at broking firm Sharekhan. Five to six large projects were scheduled to be awarded in June 2011 but have been postponed by about two to three months, they said.

There was a ray of hope recently with IRB Infra and L&T bagging projects worth over Rs 7,000 crore. "Our interactions with various companies point towards a revival in NHAI bidding activity once again but we believe this lumpiness will continue till a permanent chairman is appointed for NHAI," the analysts said.

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The order inflow has been consistently falling since the first quarter of 2010-11 but had shown some recovery in the last quarter of the previous year. According to analysts, the Assembly elections in April and May severely impacted the growth of the construction sector during the April-June quarter as new orders dried up because of the reluctance of state-run undertakings to place orders. Also, the high-profile arrests in connection with the 2G and CWG scams and the high rate of inflation reduced order inflows, said construction companies.

The irrigation segment contributed a lot to this lack of growth because new orders completely dried up from Andhra Pradesh, the most active state in this space. The downturn in the real estate sector has also affected growth. The road transport and highways ministry has identified 20 new national highway projects that would add 2,071 km. This is in addition to the already planned 7,300 km for this financial year. The additional projects will involve an estimated investments of Rs 16,000 crore. With this, the total investment in the national highways sector in 2011-12 would be around Rs 73,000 crore.

The government has also asked the ministry to plan new projects for massive road infrastructure growth in the country but how much of it will be translated into action is yet to be seen.

Courtesy: Mail Today 

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