Monthly Archives: April 2015

Earthquakes compound building penalties

As news of the disaster caused by the 7.9-Richter magnitude earthquake hit news channels, my focus shifted back to the vulnerability of our structures. India has been besieged by earthquakes every few years since 1991—before that, the notable one was in 1975. In recent times, the biggest one was the 9.1-magnitude quake near Sumatra islands that caused the tsunami in December 2004. India suffered quakes of 7.6 magnitude in Kashmir in 2005 and Gujarat in 2001. All, inevitably, caused heavy losses of life and investments.

Living on fault zones, we are prone to these hazards and yet don’t seem to have learnt much. Japan withstands earthquakes of 7-plus magnitude in a routine manner with not much suffering caused to its citizens. Countries like Japan, New Zealand and the US have detailed seismic code provisions. India too has a fairly good range of seismic codes covering a variety of structures, ranging from mud or low-strength masonry houses to modern buildings. However, the key to ensuring earthquake safety lies in a robust mechanism that enforces and implements these design code provisions in actual construction of structures.

As urban migration gains momentum, we are likely to add another equivalent of our existing urban population of around 400 million to our cities by 2050. The lives and investment at stake will be even higher—it’s time to stop tolerating abuse of building codes. Last year, the Ministry of Urban Development (MoUD), Finance Ministry and PMO approved, through an ordinance, the regularisation of 895 unauthorised colonies of Delhi benefitting 6 million people. The Delhi government had also suggested that regularisation of unauthorised colonies would bring in planned construction under existing building bylaws and other applicable rules that, in turn, would result in more orderly development of these colonies. This is all fine until disaster strikes and then the ‘house of cards’ crumbles. The government should be duty bound to bring the colonies so ‘regularised’ to adherence by ensuring they get retrofitted to a certain standard of construction quality. There is need for a diktat from the MoUD to all state governments that all such regularisations are done only after audit and a certificate of their stability of structure is issued by the municipal corporation concerned. Further, all such regularisations already completed should be subject to a structural audit immediately and then the regularisation should be kept on hold until compliance takes place.

Boss, no action on the ground!

While addressing a private gathering recently, Union Minister of Power Piyush Goyal referred to the common disdain and complaint heard in corners of corporate boardrooms about the slow pickup of the economy: “Boss, there is no action on the ground!”

He narrated that when the NDA set about seeking a tender for street lighting using LED lights in place of incandescent bulbs as LED lights consume only 7 w (against the 60-w consumption of incandescent bulbs), the lowest offer it received was Rs 315. According to the minister, the use of energy-efficient LED lights will slash electricity demand by 10,000 mw and lead to savings to the tune of Rs 12,500 crore. He claimed that the price per LED bulb has come down to Rs 81.93 over the last few bids compared to Rs 315 in February 2014 owing to the transparent bidding process. Shekhar Bajaj of Bajaj Electricals confirmed that 75 per cent of inputs for LED lights are imported to achieve such cost savings. Reputed local companies like Usha and Crompton Greaves are among those bidding and such large-scale orders also help the ‘Make in India’ theme of the Government, confirming that quality is not being compromised in the quest for a lower price. The minister then shrugged his shoulders, saying this ‘action’ will not ‘show on the ground’ immediately.

We all know that solutions such as these—including recovering the best price for natural resources like coal, which recently won a commitment of over Rs 2 lakh crore during transparent bidding for mines—will show results on the ground eventually. But for the short term, the business community is growing listless and opposition parties are working overtime raking up controversial issues to derail the development agenda.

However, in recent times SEBI, in consultation with the Reserve Bank of India, has relaxed norms for conversion of debt of distressed listed companies into equity by banks and other financial institutions, to help ease recovery in non-performing assets (NPAs). Though this cannot be the only solution, the bankruptcy laws announced by the FM during the Budget in combination with this can prove to be effective as then there would be a choice between converting into equity if the interest coverage ratio turns positive or liquidating the company. As on December 2014, total gross NPAs at banks had swelled to over 5 per cent of all advances and improving financial health is of prime concern, especially in the construction and infrastructure sector. Indeed, the FM needs to come up with a more dynamic approach to resolve the NPAs. The growth rate in bank lending had also plummeted to 8.41 per cent by December 31, 2014, as against 16.05 per cent in December 2013.

Not only are the current debt-stressed developers yet to get relief by exiting projects but the latest figures compiled by the Ministry of Finance in March 2015 indicate that 299 mega projects involving an outlay of Rs 18.13 lakh crore still remain stalled with the Project Management Group (PMG).This is quite disturbing as there seems to be no headway by the Government in resolving stalled projects. As on February 25, 504 projects worth Rs 25.38 lakh crore were reported with the PMG for resolution of pending issues. Everything hinges on the Government’s ability to resolve the stalled projects and gather momentum—that’s the only way ‘action can show on the ground’ soon enough.