Delayed projects decline, but cost overruns rising, shows data

Although oil prices have fallen to around $105 per barrel, commodity prices are still high. The Bloomberg Commodity Index has remained above 120.
 

As prices are rising, so are expectations that the government may have to budget more for its infrastructure pipeline. Cost escalations are already a problem for the Indian economy, as cost overruns on delayed projects have been rising.

Data released by the ministry of statistics and planning (MoSPI) shows that until January, Rs 4.45 trillion was the estimated cost overrun on 1,671 projects — a 4 per cent increase over the last year.
 

A Business Standard analysis of the MoSPI data shows that cost overruns have been rising even though the number of delayed projects has reduced compared to last year.
 

Until March, 567 major projects with a value of Rs 150 crore and above were delayed. During the pandemic, 596 projects were delayed. With two months to go for the financial year, delayed projects have been reduced to 514.
 

However, the decline in delayed projects has had little impact on the cost overruns (calculated by subtracting the project's original cost from the anticipated cost). In January, the anticipated costs of the remaining projects were 19.76 per cent over original costs. Last year, cost overruns for infrastructure projects had been 19.53 per cent.
 

Rising cost overruns are not just a pandemic phenomenon. Cost overruns had declined to 11 per cent by the end of 2016-17, but they have been rising ever since.
 

Estimated time overruns on projects have also been rising. Until last year, the estimated time overrun on a project was 44 months. The estimated time overrun was 46 months or close to four years in January.
 

But the government still has an opportunity to correct this imbalance. The data from the latest infrastructure project reporting shows projects’ online reporting has improved in the last few months.
 

According to a Business Standard analysis, 94 per cent of the projects had online reporting in January, up from 76 per cent two

years ago.