Can Gatishakti reverse the drain?
ECONOMY & POLICY

Can Gatishakti reverse the drain?

The National Infrastructure Pipeline (NIP) envisages an average spend of Rs.20 trillion per year over the next five years. However, reports from Ministry of Statistics and Programme Implementation (MoSPI) have been citing a regular overrun of an average of `4 trillion per annum on a base of hal...

The National Infrastructure Pipeline (NIP) envisages an average spend of Rs.20 trillion per year over the next five years. However, reports from Ministry of Statistics and Programme Implementation (MoSPI) have been citing a regular overrun of an average of `4 trillion per annum on a base of half the size of the project outlay envisaged in the NIP. This clearly means that the project overrun is likely to cross `6 trillion in the coming year if the government manages to step up spending by 50 per cent of the existing spend on infrastructure. Further, going forward, the project overrun is likely to hit `8 trillion in 2022-23 if the NIP gets going full throttle. The Centre has issued a strict advisory to different ministries and departments to reduce delays and cost overruns that have reached a staggering `4.30 trillion in 1,670 central-sector projects.The original cost of implementation of these projects was about Rs.21.66 trillion, while the present anticipated completion cost is around Rs.26 trillion, reflecting a cost overrun that amounts to almost 78 per cent of capital expenditure proposed this fiscal. Further, an MoSPI report points out that one of every five infrastructure projects has a delay of over five years. The 1,670 projects span 25 sectors, including roads, railways, petroleum, power, coal, telecom and fertiliser, among others.The Prime Minister’s Gatishakti intends to save 5-6 per cent of costs spent on logistics, amounting to savings of Rs.20 trillion. Cost estimates are also not being reflected accurately as project agencies are not reporting the revised cost estimates and commissioning schedules for many projects. The report listed 15 reasons for delays, which include lockdowns in states owing to COVID-19, law and order problems, land acquisition issues, obtaining forest/environment clearance, contractual issues and inadequate manpower. The PM’s Gatishakti has been launched to create savings through greater coordination among various central ministries and departments and with state governments and local bodies.The roads sector has already seen a lag in award of contracts with the rain playing spoilsport. A hope of overcoming such obstacles is seen in the awards of highway projects, which though lower than those of fiscal year 2020-21 are more than double of those in the same period (April-September) in 2019-20.The stock market has been beating gains in all asset classes as the Sensex has continued to move north. But one of the most undervalued asset classes can turn out to be the roads sector. As part of the asset monetisation plan, it can fetch rich gains. Consider this: Last year, IRB bagged the Mumbai-Pune Expressway tolling contract for Rs.82.62 billion for 10 years. The 94.5-km expressway was India's first six-lane, concrete, high-speed, access-controlled tolled expressway that significantly reduced the travel time between Mumbai and Pune. Earlier, in 2004, IRB had won a 15-year contract from MSRDC for toll collection to IRB Ltd for an upfront payment of `9.18 billion for 15 years.The same road asset has appreciated about 10 times in 15 years! With the government greenlighting second airports in Mumbai and Bengaluru, the aviation space is also likely to see a build-up in valuations. However, the biggest contributors to the Rs.6 trillion asset monetisation plan are roads, railways and the power sector.You will see CONSTRUCTION WORLD’s 25th year celebrations across this issue. A special highlight was the elation in the spirits of attendees when Lt General Rajeev Chaudhry, Director General, Border Roads Organisation, received the award of CW Person of the Year 2021 for the Public Sector.The next CW issue in December will bring you a dedicated issue on ‘Metro Rail’. Meanwhile, warmest wishes for a happy and prosperous Diwali!

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