Number of infrastructure projects rise, so do cost overruns: CARE

The central government's thrust on infrastructure development has translated to a rise in the number of infrastructure projects under implementation in the country. However, measures to arrest time delays and cost-overruns show limited impact, a CARE Ratings report shows.

According to a CARE report released on Thursday, the total number of projects under implementation stood at 1361 for the month-ended August 2018 against 1247 in April 2017. The anticipated cost for completion of these projects, however, has grown from an original cost outlay of Rs 16.78 trillion to Rs 20.16 trillion. "Cost overruns stood at Rs 3.38 trillion, accounting for 20% of the original costs," the report said.

The CARE report gives a brief on the status of 1,361 Central Sector Infrastructure projects costing Rs 1.50 billion and above. 

The report stated of the 1361 projects, around 296 projects are facing a delay, 358 projects are facing a cost-overrun and 66 projects are such that are facing both a cost and a time over-run. “Delayed or projects without a definitive timeline of completion make up for almost 71% of the total projects being implemented,” CARE said in its report.

A closer look at the trend of time overrun and cost overrun shows, percentage of projects facing cost overrun was at 18.08% in March 2011, which was at 20.1% in August 2018, the highest ever between March 2011 and April 2018. CARE also attributed the rise in the share of cost-overrun to projects reaching completion. “Cost overrun trend has settled higher in August 2018 at 20.1% to the previous two years which witnessed decline in cost overrun. This is indicative of more number of projects undergoing implementation and reaching completion stage,” the CARE report said.

In terms of delays, government measures have helped reduce the number of projects facing a time overrun in the last seven years. As of March 2011, 47.33% of projects were facing a delay, which has now fallen to 21.7% as of August 2018, according to CARE Ratings.

CARE added what ails these delayed and cost-overrun projects issues like land acquisition delay, environmental clearances, lack of infrastructure support and linkages, financing delays, delay in detailed engineering, contractual issue, escalation in environmental safeguarding, amongst other factors including change in inflation and monopolistic pricing by vendors.

The country’s mega infrastructure plan will also hinge on availability of funds. CARE in its note observed, almost two-third of the costs required for completion of projects is yet to be spent which highlights the large funding requirement from the government in order to complete these projects.

Crisil Ratings in another report on the road sector lowered its execution forecast in National Highways Authority of India (NHAI) projects for financial year 2018- 2019 to 3,600 – 3,800 km from earlier anticipated 4,300 km. “We estimate around 800 km of execution is at risk this fiscal because many hybrid annuity model (HAM) projects are still awaiting appointed dates seven months after they were awarded,” the Crisil report said.

In terms of state-wise break-up, Maharashtra has the largest share in the total value of projects which are under implementation, at 9.2%. “The state has 129 projects being implemented at a total original cost of Rs 1.72 trillion,” the CARE Ratings report said.