Infrastructure sector projects delay lead to cost overruns of Rs1.5 trillion: report

The total original cost of implementing these projects had been estimated at Rs12.5 trillion, but due to delays, they are now estimated to cost Rs14 trillion


Around 326 projects are delayed, 241 projects reported cost overruns and 70 projects reported both time and cost overruns. Photo: Hemant Mishra/Mint
Around 326 projects are delayed, 241 projects reported cost overruns and 70 projects reported both time and cost overruns. Photo: Hemant Mishra/Mint

New Delhi: Tardy progress of central infrastructure projects in power, railways, roads and transport, coal and urban development sectors is going to cost the government an extra Rs.1.5 trillion.

An April report prepared by the ministry of statistics and programme implementation says 1,061 infrastructure projects costing above Rs.150 crore are in various stages of development.

The total original cost of implementing these projects had been estimated at Rs.12.5 trillion. Because of delayed project execution, these projects are now estimated to cost Rs.14 trillion, an increase of 12.43%.

The silver lining is that 32 projects were completed—two in the coal sector and 30 in road transport and highways. Out of the total 1,061 projects, only four are ahead of schedule and 242 are on schedule.

Around 326 projects are delayed, 241 projects reported cost overruns and 70 projects reported both time and cost overruns.

Topping the list of time and cost overruns are railway projects where a project dating back to 1983 is still languishing and whose cost has escalated from Rs.36.80 crore to Rs.1,336.57 crore. This project entails converting the existing railway line between Eklahi and Balurghat in West Bengal to broad gauge.

The major reasons cited for time overruns are delays on account of land acquisition, obtaining forest and environmental clearances, tie-ups of project financing and delays in tendering, ordering and equipment supply.

Apart from these delays, lack of infrastructure support and linkages, geological surprises, contractual issues and change in scope are some of the other causes that lead to holding up of projects.

The reasons for cost escalation cited by various infra-related ministries are under-estimation of original cost, spiraling land acquisition costs, monopolistic pricing by vendors of equipment services, inflation and time overruns.

The report studies projects across 16 sectors—roads, railways, power, coal, petroleum, steel, urban development, health and family welfare, shipping and ports, civil aviation, atomic energy, mines, telecommunication, fertilizers, petrochemicals and heavy industries.

A senior official from the ministry of statistics, who did not want to be identified, said the government had taken several steps to minimize time and cost overruns.

Rigorous project appraisals, the use of online computerized monitoring systems for better monitoring and fixing responsibility for time and cost overruns are among the measures. These measures are yet to yield results, the official said.

Even setting up of Central Sector Projects Coordination Committees in the states under the chief secretaries for removal of bottlenecks and for facilitating speedy implementation of major projects isn’t helping much, he added.

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