Infra projects show huge cost overruns

As per recent reports, 437 infrastructure projects, each worth Rs 1.50 billion or more have been adversely affected due to cost overruns, amounting to over Rs 4.37 trillion. Of 1,663 such projects, 531 projects witnessed time escalation, and 437 projects have reported cost overruns. Cost overrun quantum. The incurred expenditure on the projects stood at Rs 11.62 trillion till September, which was 45.60% of the expected cost.

All infrastructure projects worth Rs 1.50 billion and above are monitored by the Ministry of Statistics and Programme Implementation (MoSPI). The Ministry's latest report for September 2020 reported that the original cumulative cost for the 1,663 projects was Rs 21.09 trillion. However, the anticipated cost of completion of the projects is probably going to be Rs 25.47 trillion. The overall cost overruns indicated by this is of Rs 4.37 trillion, which is more than 20 per cent of the initially calculated cost.

However, the report said that if the delay is assessed based on the latest schedule of completion, the number of delayed projects reduces to 430.

The report also mentioned that neither the tentative gestation period nor the year of commissioning was reported for 924 projects.

Time overruns quantum. Of the 531 projects that have been delayed, 121 projects reflect a delay of 61 months and more; 160 projects show a delay of any duration between 25 to 60 months; 128 projects reflect a delay in the range of 13-24 months; while 122 projects show an overall delay from anywhere between 1-12 months. The average time overrun in all the 531 projects is 43.89 months.

Several project-implementing agencies reported various reasons for the time overruns. The reasons varied from delay in acquiring environment and forest clearances, a delay in acquisition of land or even a lack of linkages and infrastructural support.

The report mentioned tendering delays, delay in ordering and supplying of equipment, delay in finalisation of detailed engineering, delays in project financing tie-ups and issues with law and order as some of the other reasons.

The report also stated that project agencies are not reporting revised cost estimates and commissioning schedules for many projects, which suggests that time and cost overrun figures are under-reported.