Business Standard

Despite 3-year low, project delays remain higher than pre-pandemic levels

Railways have incurred the highest cost overrun

project financing, infrastructure financing

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Anoushka Sawhney New Delhi

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The share of delayed infrastructure projects costing Rs 150 crore or more hit a three-year low in March 2024, but this was still significantly higher than the pre-pandemic level.  
 
The March 2024 figure of 41.6 per cent remains way higher than the pre-pandemic figure of 27.1 per cent in March 2019, shows a Business Standard analysis of data from the Ministry of Statistics and Programme Implementation (MOSPI) on central infrastructure projects worth Rs 150 crore or above.

The March 2023 figure of 56.7 per cent was the highest since 2004.



The rise in project delays comes amid the government’s increased thrust on infrastructure. A total of 1,873 projects were underway as of March 2024, compared to 1,405 as of March 2019.

Out of 779 projects delayed, 36 per cent were running behind schedule for 25-60 months, 26 per cent for 1-12 months, 23 per cent for 13-24 months, and 15 per cent for more than 60 months, averaging a three-year delay.

“Most projects have a fixed contribution by the Centre, state and urban local bodies. If the municipalities are not able to generate that money for the project, it leads to a delay,” said Devendra Kumar Pant, chief economist, India Ratings and Research.

An example of projects delayed for an extended period is the Muneerabad-Mahaboobnagar railway line which was approved in 1997. It has been hanging fire for around 23 years.

The project under the South Central Railway was supposed to be completed by 2000, and the revised date was 2023.

Land acquisition, obtaining forest and environment clearances, lack of infrastructure support, and law and order problems are some of the reasons for the delay.

Delay in projects resulted in an additional expenditure of Rs 5 trillion in March 2024 or 18.7 per cent of the original cost. It was lower at Rs 3.3 trillion or 18.3 per cent in March 2019.
 

However, the time and cost overrun figures might be under-reported since “project agencies are not reporting revised cost estimates and commissioning schedules for many projects”, according to the MOSPI report.

Cost overrun is a cause of worry, said Pant.

“The return on investment on the project is not coming until completed. It also impacts the social benefits since some projects are related to sanitation or quality of life,” he said.

Railways incurred the highest cost overrun of Rs 2.4 trillion. Next was petroleum with an increased cost of Rs 0.6 trillion, followed by power (Rs 0.5 trillion), water resources (Rs 0.5 trillion) and road transport and highways (Rs 0.4 trillion).

Out of all projects across sectors, the Polavaram irrigation project from the water resources sector has the maximum cost overrun of Rs 0.5 trillion followed by the Udhampur-Srinagar-Baramulla railway line project with a cost overrun of Rs 0.4 trillion.

An earlier India Ratings and Research report released in March highlighted that cost overrun due to project delays as of January 2024 was about 1.6 per cent of the gross domestic product.


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First Published: May 14 2024 | 4:41 PM IST

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