Massive lags, cost overruns and a tale of India's plagued infra projects

Covid-19 has affected the addition of new projects, but that may act as a breather in making good the massive shortfall in implementation

Lalitpur is a 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 the country. A railway line connecting the two, an economic lifeline for the small towns in between, was approved in 1998 under the Atal Bihari Vajpayee government. It was to have been commissioned by 2008 at an expenditure of Rs 248 crore. 

This was, however, the plan, and 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 currently at a staggering Rs 8,250 crore. The new deadline has now been extended to March 2025: twenty-five years and thousands of crores for putting rails over 300 miles, yet incomplete. Local publications have reported that it may not get completed even before 2030. 

A thousand miles away in the South, the Polavaram dam and multipurpose irrigation project in Andhra Pradesh is too awaiting completion. From about Rs 10,000 crore envisaged in 2009, its cost escalated to Rs 55,550 crore over the decade. Ahead of its planned commissioning in December 2021, about 40 per cent of the anticipated cost (Rs 23,000 crore) is yet to be spent, raising questions about the seriousness of the deadline. 

The details might change across projects, 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. 

Call them Temples of Modern India, or large scale public utilities, mega projects are the breathing valves of any economy, and especially a developing country like India. Big power, road and rail, petroleum and urban development projects are key job generators, and they add value to lives of people by creating opportunities on a mass scale. 

Status and Covid impact

Currently, 1,698 projects worth Rs 25 trillion are under implementation in India. Some Rs 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 that more than half of the work under current projects is pending. 

There are 459 projects (out of the 1,698) due for completion 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 deadlines extending to many years prior to 2020. 

Table 1: Project implementation pace slows in pandemic phase

Quarter	Projects added	Projects dropped
Jan-Mar: 2019	13	41
Apr-Jun: 2019	349	31
Jul-Sep: 2019	75	153
Oct-Dec: 2019	94	47
Jan-Mar: 2020	5	25
Apr-Jun: 2020	14	19

Source: MoSPI

The activity around projects seems to have dimmed in the pandemic phase. 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 who did not wish to comment on the progress said that the project 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. Same happened in the last quarter of FY19 and FY20, both. 

Lag in data, lag in 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 the schedule, and 123 projects are delayed. Overall, out of 1,698 ongoing projects, original or revised completion date for 975 projects 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 currently under implementation, 483 are delayed with respect to their original date of completion at the end of 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. 

Table 2: Rail and road projects suffer the most

Sector	Percentage increase in costs	Delay in months*
Railways	80.3	324
Roads	23.7	150
Coal	15.3	144
Power	19.4	126
Commerce and industry	9.4	90
Health	12.2	85
Atomic energy	37.5	75
Human resources	29.3	75
Urban development	25.3	72
Petroleum	23.1	56
Water resources	447.2	21
Fertilisers	0	10
Civil aviation	8.4	9
Steel	0	9
Telecom	85	3
Shipping	27.8	0
Mines	0	0
Heavy industry	0	0

Source: MoSPI; * Maximum delay in a project under that particular sector

Water resources, telecom and railways are the top three sectors in terms of cost overruns. For water resources projects, the rise is entirely due to the Polavaram project. For the two others, the cost overrun is more than 80 per cent, almost doubling. Railways tops in terms of time delays as well. Roads, coal and power projects are the core infra sectors which lead others in time delays. 

Table 3: Smaller states get the weakest preference in spending

State	Cost overrun in % over original cost	Actual spending as % of revised cost
Chandigarh	63	0
Pondicherry	0	1
Nagaland	28	15
Meghalaya	161	18
Andaman	4	18
Sikkim	83	19
Assam	11	27
Uttarakhand	33	30
Karnataka	7	32
Multi-state	31	35
Goa	0	40
Telangana	7	42
Kerala	11	42
Odisha	6	44
Maharashtra	6	45
Andhra Pradesh	48	46
Jharkhand	11	47
Haryana	8	47
Bihar	33	49
Mizoram	44	50
Uttar Pradesh	5	51
Delhi	2	51
Madhya Pradesh	10	52
Gujarat	14	52
Tripura	6	54
Chhatisgarh 15 55	15	55
Himachal Pradesh	55	56
Tamil Nadu	17	56
West Bengal	30	57
Punjab	23	62
Arunachal Pradesh	90	63
Rajasthan	17	63
Manipur	129	77
Jammu & Kashmir	126	81

Northeastern and hilly states are at the receiving end of financial progress in big infrastructure projects, in that, the actual money released and spent on projects in Nagaland, Meghalaya and in union territories is less than 20 per cent of the revised cost. Among big states, Karnataka, Kerala and Maharashtra lag the most in terms of money spent, while Rajasthan, Punjab and West Bengal lead. But even among the leaders, the spending is about 50 per cent of the required amount. 

Cost overrun, too, is massive in hilly and NE states. Among big states, Uttar Pradesh, Maharashtra, Karnataka, Haryana and Telangana exhibit the least cost overrun, at below 10 per cent of the revised approved costs. 

As mentioned earlier, about 60 per cent of the anticipated cost is yet to be spent on the projects whose approval has already happened. As projects struggle to gather pace, the government has come up with a National Infrastructure Pipeline to streamline big infra projects under a single banner. There are as many as 6835 projects costing Rs 111 trillion, more than half of India’s GDP, as their original cost, and more than four times the value of projects under implementation currently. 

This shows the gravity of the uphill task.