Major Infra projects hounded by Cost and Time escalations
Most major infra projects seem to be at a standstill, with roads and highways being the most badly effected sector. According to reports regarding the progress of these projects which are available with the Ministry of Statistics and Programme Implementation (MOSPI), 89 among the 149 major national highway projects, accounting to 60% of the projects are facing inordinate delays in their progress.
Among the 67 projects in the petroleum sector, 37 are reported to be facing delays. The same is the case with 50% of the 101 projects in the power sector, with 9 of the major power projects facing additional delays since March, 2013. Cost escalations have resulted in delays to 62% of railway projects. There has been a 20% escalation in cost of 124 railway projects from Rs. 69,505 crore in March, 2012 to Rs. 87,170 crore in March, 2013. As a result, the estimated cost of these projects went up from Rs. 60,590 crores that was originally sanctioned to Rs. 147, 761 crores.
The reasons for the projects being withheld are common across all sectors as reported by MOSPI. The issues arising due to land acquisition, forest and environmental clearances, law and order, equipment assembly, rising costs of raw material, supply of material and change in scope of work, and contractual issues can be cited as some of the major reasons for the standstill of all pending projects. A majority of the projects are facing serious cash crunch issues due to cost estimates made during the start of these projects going completely awry. Plaucity of funds has arisen due to the inexplicable delays caused mainly due to issues related to land acquisitions.
Cost escalations in all infrastructure projects has gone up by 6-8% since March, 2013 as per estimates provided by MOSPI. Most of the major infrastructure projects which had a cost estimate of Rs. 40 lakh crore in March, 2013 had exceeded the cost estimates considerably, with cost escalations to the tune of Rs. 9.29 lakh crore reported. This was as high an increase of 17.7% compared to the estimated original cost of the project, which was Rs. 7.89 lakh crores. This is a considerable escalation compared to the March, 2012 cost escalation of 1.19 lakh crores, which was 16.5% of the estimated original cost of that month.
According to estimates, drawn by MOSPI, the cost escalations in overall infrastructure projects must have increased by at least 6-8 per cent since March, 2013. Most central projects costing approximately Rs 1.40 lakh crore as on March, 2013 were facing a cost escalation of Rs 9.29 lakh crore. This was 17.7% more than the original cost of Rs 7.89 lakh crore. In March 2012, the cost escalation was 1.19 lakh crore, 16.5% of the original cost in that month.
It is generally perceived by officials monitoring infra projects that cost and time escalations could further increase unless ministries in charge of these projects take appropriate action to see that the gap is bridged. It is also believed that project agencies are not reporting the revised cost and time schedules of many projects which have over-run their cost and time estimates. As a result these figures are mostly go unrepresented due to not being reported.
For projects which have a cost escalation of 20% and time escalation of 10%, it is the responsibility of a standing committee in the respective ministries to sort it out. The MOSPI is handicapped as they can monitor the progress of projects based only on the data forwarded to them by the ministries and implementing agencies.
