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Journalism of Courage
Negative growth has been reported in the production of coal,natural gas,crude oil,fertiliser and electricity in February 2013. At the same time,the Purchasing Managers Index PMI has shown a decline,indicating that production in manufacturing is likely to slow down as well. This suggests that the decline in economic activity is not restricted to some sectors but is widespread. Initiatives by the government,such as the Cabinet Committee on Investment CCI,have made some progress recently on oil exploration,but have yet to solve the old problems of clearance and permission for the bulk of the infrastructure sector.
The contraction in power production,for the first time since 2005,is a symptom of the persisting crisis in demand and supply. While mega power projects were commissioned,the problems related to distribution and electricity theft have not been solved. With the main purchasers of power being state electricity boards,who continue to see losses as both theft and pricing policies remained unaddressed,the business of power production has still not become profitable. Now,with a much slower economy,and consequently with demand for power growing more slowly,the profitability of the projects remains an open question. As the slowdown continues and projects are stalled,the balance sheets of both the banks that lent to these infrastructure companies and the companies themselves are fast deteriorating. This means that today,even if the government gets its act together and starts granting clearances or changes the laws that are required for that to be done without further litigation,many of the projects may not be viable or the companies that had put in aggressive bids when they were flush with cash may not wish to pursue them any longer.
