Roll-out delay hikes manufacturing projects' cost by Rs 4.5 lakh cr: Assocham

Study observes that investors also cause delay in implementation of projects due to various reasons

Fund constraints, delay in land acquisition and absence of timely clearances hit roll-out of key manufacturing projects with cost overrun estimated at a whopping Rs 4.5 lakh crore as of FY 2013-14, says an Assocham study.

Of the total live investments worth over Rs 30 lakh crore attracted by the manufacturing sector across India as of financial year 2013-14, about 44.5% investment projects worth over Rs 13 lakh crore have remained non-starter, stated the study.

"The Government needs to ensure time-bound execution of projects and limit the time-frame for clearance by concerned authorities and penalise them if they are not able to meet deadlines," Assocham Secretary General D S Rawat said.

"New investments in the manufacturing sector have declined at an annual negative average rate of 21.5% since 2009-10," he added.

The study observed that investors also cause delay in implementation of projects due to reasons like inappropriate planning, change of ownership, lack of co-ordination with contractors and other stakeholders involved.

"Poor execution of investment projects in manufacturing sector across India has resulted in serious cost-push worth over Rs 4.5 lakh crore as of financial year 2013-14, about 44% of their actual cost of over Rs 10 lakh crore. The overruns vary from one month to as high as 50 months, placing the project viability at risk," the study said.

Private sector-based manufacturing investment projects have majority share of about 65% in projects that have registered cost overruns while public sector-owned projects accounted for the remaining 35%, the survey noted.

Sector-wise, the steel sector recorded maximum surge of 52% in cost overruns followed by refinery (22%), aluminum and aluminum products (6%).

Among states, Odisha has acquired maximum share of 27% in cost overruns in manufacturing sector-specific investment projects across India followed by Jharkhand (13%), Andhra Pradesh (10%), Karnataka (9.6%) and Rajasthan (8%).