Urban renewal to get $500mn IBRD boost
Business Standard

India is negotiating an urban infrastructure fund worth $500 million with the World Bank to take forward the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), a plan to modernise 63 cities.

The fund was likely to be announced shortly, Urban Development Secretary M Ramachandran said.

The World Bank had approached the Planning Commission for the fund, which would require Cabinet approval.

“Financial credibility will be a must for local urban bodies to access the fund,” Ramachandran added.

Sources in the ministry said larger cities could be able to access more funds as they were more credible financially. The credit rating of the mission cities would be over by October.

The ministry is in talks with banks and financial institutions for financing the urban infrastructure at subsidised interest rates.

“If this type of investment requirement is to be met, the government of India’s share in the form of grants to states will have to be something like Rs 1,35,000 crore. States and local bodies will have to find the balance amount. Here is a challenge to our government, local bodies, and banks and financial institutions,” Ramachandran said.

A review of the mission, which comprises projects worth about Rs 26,500 crore, earlier this week found that India lacked the contracting capacity to undertake and execute these projects. This served to underscore what Finance Minister P Chidambaram had earlier said — that India does not lack public sector investment but the ability to spend it.

“Cities have been reporting constraints in the execution capacity and there is a need to attract large engineering firms to ensure timely execution of projects,” the reviewers said. They also suggested a subsidised interest rate regime for projects undertaken by the mission, especially by banks and financial institutions.

They also noted that banks have an essential role in financing these projects and needed to have a second look at the terms and conditions on which money was being lent.

Representatives of city corporations, officials from banks and financial institutions, industry organisations and state government representatives attended the meeting.

After city development plans are submitted by most cities, the projected investment requirement (sector-wise) would be as follows: Rs 81,418 crore will be required for 7 mega cities and Rs 55,973 crore for remaining 56 cities, for urban transport. Rs 40,062 crore will be needed for all 63 cities to improve water supply while Rs 33,324 crore is estimated for sewage. Another Rs 20,100 crore will be needed for drainage while Rs 56,649 crore will be required for basic services for the urban poor.

Steel prices likely to soar
Business Standard

May rise by Rs 500/tonne on booming construction, power cuts in Punjab.

Structural and long steel prices are likely to increase by Rs 500 a tonne this month because of a renewed demand from the construction sector and fears of low production ahead in the wake of a planned power cut by the state electricity board in Punjab.

According to Anil Suraj, a Gobindgarh-based steel analyst, the Punjab government is likely to implement a power cut for 4 to 5 hours in industrial units and 6 to 8 hours in residential complexes. This would affect around 430 steel rolling mills in and around Gobindgarh, which accounts for about 23 per cent of the country’s total 40 million tonnes of production.

Anil further said the government could not curb the price rise any more due to a rising demand for steel. The government had pressured primary producers to prevent a price rise earlier, but now the rise could not be resisted any longer, he added.

Since the beginning of the second fortnight last month, prices of raw materials, including ingot and scrap, have gone up by Rs 600-700 a tonne because of a tight tight supply. Domestic generation of steel scrap, especially from shipbreaking, has come down as no ships are coming to the country for dismantling. Therefore, domestic users depend solely on imports of steel scrap or they use ingot as a raw material.

The prices of the finished products remained steady during the last 15 days, with mild steel (MS) ingot currently quoting at Rs 25,350 a tonne, while hot-rolled coil (HRC) and cold-rolled coil (CRC) are sold at Rs 32,300 and Rs 36,500 a tonne, respectively. Moving in tandem, HR and CR sheets are priced at Rs 31,900 and Rs 36,700 a tonne, while galvanised products are sold at Rs 38,500 a tonne in Gobindgarh, the country’s largest physical steel market.

The construction activities are likely to continue into the rainy season as a number of infrastructure projects, including national highways, multiplexes and roadways, are lined up for completion within the stipulated time. The demand of steel is, therefore, set to rise even during the slack rainy season.

“We are used to the annual power cuts as the demand for electricity in Punjab is several times that of generation. Surprisingly, despite the power cuts affecting steel production every year, the government is yet to take any adequate measures to facilitate the production without any interruption,” said Anil.

In the last six months, about a dozen new rolling mills with a daily production capacity of 150-200 tonnes have mushroomed in Gobindgarh, with no threat for the existing units.