Home / Opinion / Views /  Minimize behavioural biases to reduce project delays

India appears at its best in the slogans used at political rallies of the ruling party. We feel happy to hear how many big projects were commissioned. It makes us happier to hear that many long-pending projects were completed and duly dedicated to the nation. But an objective analysis of governmental data reveals that little has changed over time. Time and cost overruns of central sector projects (CSPs) have remained a problem.

Ministry of statistics and programme implementation (Mospi) data shows that in March, 1,679 central sector projects costing 26.67 trillion were under implementation. Of these, just 0.85% were running ahead of schedule and 17.17% on schedule. In contrast, 41.27% of the projects were running late. For 40.7%, even the date of commissioning had not been fixed.

Surface transport, which accounts for 50.94% of all CSPs, could complete only 15% of projects either ahead of schedule or on time. Railways, which account for 16.2%, could complete 4% by the scheduled deadline. Petroleum, coal and power, accounting for 8.64%, 8.30% and 5.06% of the projects, had timely completion rates of 35%, 51% and 24%, respectively.

Delays in completion delay the availability of benefits arising out of public projects. Forecasts of revenue streams going wrong also impinge on the feasibility of projects.

Time overruns lead to substantial cost overruns. The 2022 data shows that the ongoing CSPs were originally estimated to cost 22.30 trillion. Delays in completion schedules have enhanced their anticipated cost to 26.68 trillion, thereby causing a loss of 4.38 trillion to the public exchequer.

The anticipated cost of CSPs is 19.65% higher than the original estimates. In a few cases like the water resource sector, the cost overrun was as high as 184%, followed by telecommunication (80.79%), railways (54.52%) and home affairs (42.89%).

In absolute terms, railways suffered the largest such losses ( 2.42 trillion), followed by power ( 60,850 crore), water resources ( 45,540 crore) and urban development ( 29,890 crore).

Time and cost overruns may be inherent to large-sized projects, but with improved estimation and management techniques, their magnitude should have declined. This, however, is not the case. A comparison with past data shows no noticeable changes. In 2004-05, for example, 617 central sector projects were underway. Their anticipated cost was 2.67 trillion as against the original cost estimated at 2.21 trillion. The loss to the public exchequer due to cost overruns was 45,760 crore. This as a proportion of the original estimated cost works out to 20.68%.

In 2014-15, 750 CSPs were at various stages of implementation. Their reported anticipated cost was 11.26 trillion, whereas their original cost was 9.48 trillion. Consequently, the anticipated cost overrun was 1.78 trillion or 18.75%. Thus, the cost overrun in 2021-22, instead of declining, went up to 19.65%.

Importantly, all these years, the need for containing time and cost overruns has been emphasized and central departments have been exhorted to complete projects within predetermined time frames. Gaps between budgeted and actual time lines and costs need to be negligible. Higher variance speaks badly of the planning and execution of public projects.

Government procedures for appraisal, evaluation and sanction are quite rigorous. Preliminary and detailed project reports must pass the scrutiny of able administrators from different ministries. Their views are taken quite seriously and such project proposals undergo revisions to address all the concerns raised.

Similarly, the guidelines for project monitoring are also specific and quite stringent. In fact, the infrastructure and project monitoring division (IPMD) of Mospi insists on strict control over time and cost overruns through quarterly reviews.

A standing committee at the central level oversees the progress. A central sector project coordination committee (CSPCC) works in tandem with state-level committees (SLC) for project implementation to expedite clearances and dispute resolution for the speedy completion of projects. An online computerized monitoring system (OCMS) requires the project status to be uploaded at regular intervals.

The reasons for time and cost overruns are also well known. Delays in land acquisition and clearances are at the forefront. At times, delays are caused by inefficient practices of the project management’s consultants, contractors and subcontractors.

Mid-course corrections, design changes, slow decision-making, delays in the sanction and timely release of funds are all quite common, as also disputes among parties. Macroeconomic factors like changes in the prices of input materials and supply chain disruptions are other factors. Weather and climatic conditions and force-majeure events (‘acts of God’) may also hamper project progress.

These are predictable variables, mostly. Still, time and cost estimates often go off the mark. What is difficult to predict with a fair degree of certainty, unfortunately, is a propensity to ignore or undermine valid information in decision-making processes. Such behavioural biases can lead to suboptimal decisions. Of these, emotional biases like over-confidence could be especially critical. It is about time that project management expertise goes beyond technology to include behavioural finance and economics.

Furqan Qamar & M. Saifuddin Mujaddidi are, respectively, a former adviser for education in the Planning Commission and currently professor of management at Jamia Millia Islamia; and a PhD student at Jamia Millia Islamia.

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