Capital work in progress

Money already spent on a plant that is not yet ready for use. It sits on the balance sheet earning nothing and, importantly, carrying no depreciation, because depreciation begins only when the asset is commissioned.

A cement maker with ₹2,400 crore of gross block and ₹960 crore of capital work in progress has 40% as much again under construction. Two things follow. Reported return on capital is flattered, because the denominator includes spending that has not yet produced a rupee of revenue. And a large charge is coming, since depreciation will start once the line is commissioned.

The disclosure that matters is the ageing of the balance. Indian schedules now require projects overdue or over budget to be shown separately.

A balance that has sat unchanged for four years is not a project. It is a question.