Environment clearance delaying projects execution - ASSOCHAM
According to ASSOCHAM Bizcon Study, environmental clearances, infrastructure shortfalls and land acquisition problems continue to be key concerns for corporates, intending to realize their investment dreams both for expansion as well as fresh investments due to which most of investment projects remain on announcement stages.
The study in which 266 corporates were interviewed by ASSOCHAM Research Bureau on issues of Constraints on Corporate Investments, 67% of those interviewed said that environment clearances, infrastructure shortfall and land acquisition problems still remain the top 3 constraints due to which uncertainties prevail in realizing their investments.
Dr Swati Piramal president of ASSOCHAM said that the other concerns include beaureaucratic approvals, availability of labor with suitable skills, cost of credit and labor cost, besides demand conditions.
Environment clearances take away hell lot of a time of corporates as projects for expansion and modernizations including new projects have to pass through over 36 channels at state and central levels before being finalized. On top of this political clearances are also needed as some of the projects involving thousands of crores of investments need to be cleared off strategically, said over 70% of business leaders whose opinion were sought in this regard.
Despite liberalized economic environment for close to 20 years, infrastructure pitfalls go on with electricity and power including roads and highways creating problems for corporates in terms of moving their logistics which multiply their production costs and render them uncompetitive. As a result of higher production cost due to poor infrastructure facilities, inventories pile up at production centers and industries suffer immense losses and release of inventories cause challenge for factory owners, felt 80% of such CEOs.
50% of business leaders have stated that bureaucratic ways of functioning have improved drastically at centre in which higher echelon of government machinery is supportive and sensitive towards industry needs but at states’ level not visible improvement is seen in operational methodologies of bureaucrats. This leads to delays as projects have to be implemented in states in the federal set up of Indian constitution.
The ASSOCHAM Bizcon survey also highlights glaring deficiencies in terms of recruitment of skilled labour. Seventy per cent of corporates have felt that low labor is available at extremely competitive conditions in India, availability of skilled labor will remain a problem until systems are evolved by state owned investments for imparting skills to a vast section of labor pool.
In addition to aforesaid problems, cost of credit is another problem for India Inc. which gets liquidity at a cost through which business operations cannot be sustained for longer period. Interest rates remain very high for majority of corporates with exception in large industries as these are denied credit at relaxed rates especially in MSMEs sector and other areas below it, felt 55% of CEOs.
The survey has recommended a host of measures to fructify corporates investment plans by assuring for them congenial industrial atmosphere in which bureaucratic approvals and infrastructure shortfalls are streamlined and land acquisition is made simpler. Other measures recommended in the survey comprise tax concessions, relaxed rates of credit, better regulation of imports and liberal exit policy.
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