Delays in infrastructure projects leading to high cost overruns

Delays in infrastructure projects leading to high cost overruns
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First Published: Tue, Aug 12 2008. 09 59 PM IST

Hard facts: A file photo of Pronab Sen, secretary, ministry of statistics and programme implementation.  Photograph: Harikrishna Katragadda / Mint
Hard facts: A file photo of Pronab Sen, secretary, ministry of statistics and programme implementation. Photograph: Harikrishna Katragadda / Mint
Updated: Wed, Aug 13 2008. 01 13 PM IST
New Delhi: More than half the infrastructure projects being executed by the government in vital areas such as atomic energy, railways, power, telecommunications and petroleum have been delayed, resulting in a cost overrun of over 10%. Experts say the delays may stretch further.
Some 234 out of 515 central projects—each estimated to cost Rs100 crore and above—had been delayed from the expected date of commissioning, as of March, according to the Flash Report on Central Sector Projects released by the Union ministry of statistics and programme implementation.
Hard facts: A file photo of Pronab Sen, secretary, ministry of statistics and programme implementation. Photograph: Harikrishna Katragadda / Mint
With only a quarter of the projects on schedule and 2% ahead of schedule, all the projects put together have already overrun costs by 10.6%. The total cost of implementation of these 515 projects was Rs3.47 trillion at the time of sanctioning, but was subsequently revised to Rs3.84 trillion, the report said, without detailing the reasons for the delays.
“The ministry’s job is to catch the data and publish. It is up to the nodal ministries to find out reasons for these delays and act on them,” said Pronab Sen, chief statistician. “We, however, submit these reports to the Prime Minister’s Office and the cabinet secretary and also brief the secretaries of respective nodal ministries about specific projects which have been delayed.”
Sen added there are genuine problems of procuring equipment in sectors such as power, mining and petroleum. “For instance, there is an acute shortage of drilling machines. And additional delays shown over the previous month’s delays can be on account of a large number of factors,” he said.
Increased exploration activity has meant that rigs are in short supply globally. This has pushed up daily rentals for a deep-water rig to around $500,000 (Rs2.12 crore). Rent for an ultra-deep-water rig could go up to $550,000, excluding service cost. The shortage of rigs has already affected Oil and Natural Gas Corp. Ltd’s exploration and production plans, causing it to recently surrender three of its 10 blocks in the Kerala-Konkan basin to the government.
The situation is particularly serious in the power, railways and petroleum sectors where some projects have reported additional delays of more than a year compared with what was shown in February’s report.
During the period, the atomic energy sector reported an additional delay in project implementation of two-six months, steel sector of nine months and telecom segment of three-nine months.
In the power sector, for instance, NTPC Ltd’s 800MW Koldam power project was set to be commissioned by April 2009. While the project was “on schedule”, according to February’s Flash Report, the March report projects an 11-month delay.
Similarly, the commissioning date for the 1,000MW Tehri Pumped Storage Plant, which was revised to December 2011 from July 2010 in February’s report, has now been extended to April 2013.
Mint had reported on 22 October that adverse environmental conditions had forced NTPC to miss its deadline for the Koldam project in Himachal Pradesh. K.B. Dubey, director (projects), NTPC, had earlier said: “The delay has been primarily due to three reasons: landslide, time taken in settlement of rates with the contractor in the event of landslide, and the need to do more and deeper grouting.”
According to Shubranshu Patnaik, executive director of consulting firm PricewaterhouseCoopers, “Energy projects in the country have been plagued by supply- and procurement-related issues. There is also not enough corporate governance, particularly in several state sector projects.”
In the petroleum sector, construction of ONGC’s new processing complex in Mumbai High North has reported an additional delay of 12 months owing to stalled supply of equipment. In railways, too, some projects have reported additional delays of over four years. R.S. Sharma, chairman and managing director, ONGC, said: “The earlier tender for the project was cancelled and we are going for retendering. This is the reason behind the delay.”
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First Published: Tue, Aug 12 2008. 09 59 PM IST