 "Cost overruns ebb, yet delays persist in half of major infra projects")
The efforts to enhance coordination among ministries might have contributed to a decline in cost overruns, yet nearly half of the major infrastructure projects still confront delays.
Data from the Ministry of Statistics and Programme Implementation’s (MoSPI’s) monthly flash reports reveals that in June 2023, cost overruns were reduced to 19.5 per cent compared to the initial expected cost. The report covers projects with expenditures of Rs 150 crore or more. However, cost overruns remain substantial in absolute terms, amounting to an additional expense of Rs 4.6 trillion across more than 800 projects (see chart 1).
The 821 projects experiencing delays account for 49.6 per cent of the projects analysed in the June 2023 report. This share of delayed central infrastructure projects has been progressively rising, from 48.4 per cent in May and 32.1 per cent in October 2021 (see chart 2).
On average, projects have been delayed by over three years as of June 2023, or 37.49 months, with the timelines of some projects being pushed back even longer.
The Udhampur-Srinagar-Baramulla project, which was approved in 1995, has suffered delays exceeding 20 years. It was initially expected to be ready by June and the deadline was later extended to December this year, according to the MoSPI flash report.
More From This Section
Among the 24 sectors examined, Railways exhibited the highest cost overrun of Rs 2.4 trillion. This was followed by power with an additional expense of Rs 0.5 trillion, water resources (Rs 0.5 trillion), and road transport and highways (Rs 0.4 trillion) as depicted in chart 3.
Factors such as land acquisition delays, tendering, technical approval and environmental clearances are cited in the report as reasons for the projects slowing down.
While the central government's capital expenditure exceeds historical levels, state governments are lagging, as highlighted in an August 9 Bank of Baroda note titled “How has state capex performed in Q1FY24?”.
Out of a budgeted capital expenditure of Rs 7.98 trillion, actual capex for 23 states stands at only Rs 1.06 trillion, representing a mere 13.3 per cent of the budgeted amount, according to the note authored by economist Aditi Gupta.
In contrast, the central government spent over 27.8 per cent of the budgeted amount in the first three months. State spending, although relatively lower, exhibits improvement compared to the previous year's first quarter expenditure of 9 per cent of the budgeted amount, according to the note.