Massive lags, cost overruns and a tale of plagued infra projects
Lalitpur is an agricultural town in Uttar Pradesh that grows pulses extensively. Three hundred miles to the east lies Singrauli, the energy hub that houses large coal and power plants. The towns are a part of Bundelkhand, one of the most under-developed regions in India. A railway line linking the two was approved in 1998 under the Atal Bihari Vajpayee government. It was planned to be commissioned by 2008 at an expenditure of ~248 crore.
As you might have guessed, it went off the tracks. The rail project is still incomplete, and its anticipated cost has grown 33 times to stand at a staggering ~8,250 crore. The new deadline is March 2025. Local publications have reported that it may not get completed even before 2030.
A thousand miles away in south, the Polavaram Dam and multipurpose irrigation project in Andhra Pradesh also awaits completion. From about ~10,000 crore envisaged in 2009, cost escalated to ~55,550 crore over the decade. Ahead of its planned commissioning in December 2021, about 40 per cent of the anticipated cost (~23,000 crore) is yet to be spent, raising questions on the seriousness of the deadline.
The details might vary, but the principle remains the same: projects in India are facing lags and cost overruns to an extent that is hindering public provisioning.
The project monitoring division of the Ministry of Statistics and Programme Implementation (MOSPI) facilitates the review of these large-scale projects under the Proactive Governance and Timely Implementation (PRAGATI) in the form of monthly meetings under the chairmanship of Prime Minister Narendra Modi.
Mega projects are the breathing valves of a economy, especially a developing nation like India. Big power, road and rail, petroleum and urban development projects are key job generators, and they add value to the lives of people by creating opportunities on a mass scale.
Status and Covid impact
Currently, 1,698 projects worth ~25 trillion are under implementation in India. Some ~11.5 trillion has been already spent (or allocated) by the agency in charge of the project, be it the government or a public sector undertaking. This means more than half of the work under current projects is pending.
There are 459 projects (out of 1,698) due to complete this year, according to their revised commissioning plan. But in the first quarter, only 15 are complete. Many of those due for completion have revised deadlines for this year, from original ones going back many years.
The activity around projects seems to have dimmed in the pandemic. As many as 349 new projects were added in April-june 2019, and 31 approved ones were dropped from the list. In April-june 2020, only 14 new projects were added to the fold, despite the fact that infra spending is front-loaded. The pandemic and the subsequent need to provide cash and employment support to precarious households took away resources from capital-intensive mega-projects.
Officials did not wish to comment on the progress, but said implementation will revive, once the economic fallout of Covid-19 ebbs.
Further, the last quarter of any financial year witnesses more approved projects being dropped than new ones added. This happened in the last quarter of both FY19 and FY20.
Lag in data, implementation
The number of projects that do not have a reported date of completion is far more than those having a deadline. For example, as many as 621 road projects do not have a reported date of commissioning, most recent data shows. In comparison, only 44 projects are ahead of schedule, and 123 are delayed. Overall, of 1,698 ongoing projects, original or revised completion date for 975 of them was not available with the ministry concerned.
Delay in completion is the original sin that perpetrates wastage of time and resources, as it is one big reason for cost overrun. Among the 1,698 projects, 483 are delayed with respect to their original date of completion at June 2020. As many as 231 were on track.
Though the number of delayed projects has come down from 567 at the end of March 2020, it is likely that the lockdown in June quarter made data gathering further difficult. Due to this, the share of delayed projects has fallen to 28 per cent now, from 38 per cent a year ago.
Land acquisition, removing encroachments, relief and rehabilitation plan, forest clearance are the main reasons for delays accounted for by state governments. From the central government side, environmental clearances and industrial licenses are time consuming, the MOSPI notes in the quarterly report. High cost of environmental safeguards and rehabilitation, change in scope of the project, “spiralling” land acquisition costs and time overrun contribute the most to cost overruns.
In terms of cost overruns, 414 projects exhibit that. But there has been a slight numerical improvement in the amount. In quarter ending June 2019, 20.9 per cent of the cost of implementation was due to overruns, which has declined to 19.6 per cent at the end of June 2020.