According to official data, delays and cost overruns in central infrastructure projects costing $150 million or more have increased dramatically in the last year. Economists blamed the delays on a covid-19 outage and a labour shortfall, while cost overruns were blamed on inflation.
This comes as part of the government’s flagship Gati Shakti programme, which aims to increase efficiencies and minimise compliance burdens in infrastructure projects. This comes as part of the government’s flagship Gati Shakti programme, which aims to increase efficiencies and minimise compliance burdens in infrastructure projects.
“The Covid-19 disruption and labour unavailability during the last two years may be to blame for the increase in time delays and expense overruns.” Now that normalcy has returned, it’s possible that labour will return and infrastructure projects will be completed more quickly,” said Aditi Nayar, chief economist of Icra Ltd.
Because these are central government projects, the time overruns could be attributed to delays in the government’s delivery of funding, according to Madan Sabnavis, chief economist of Bank of Baroda.
“This was due to the constant rebalancing of cash flows during the year as priorities shifted,” Sabnavis explained. Second, contractors working on projects encountered issues with workers who had returned to their houses in 2020.
“It’s possible that this contributed to the timing delays. Finally, due to the unequal performance of many industries, such as coal, power, and metals (due to price fluctuations), there would have been a tendency to move slowly on these projects,” Sabnavis explained. resulting in a total cost overrun of $4.98 trillion, or 23% of the original budget.
“Cost overruns have increased as a result of the second consecutive year of high inflation. “Time overruns usually expose organisations to cost distortions because as projects lengthen, they become more exposed to input cost increases,” said Sabnavis of Bank of Baroda.
Delays in land acquisition, state-by-state lockdown due to Covid-19, insufficient manpower, lack of infrastructure support and linkages, delays in arranging project financing and finalising detailed engineering, and changes in scope were all cited in the Mospi report as reasons for cost and time overruns.
Other reasons include tendering delays, ordering and equipment supply concerns, legal and regulatory issues, and contractual issues. This comes as part of the government’s flagship Gati Shakti programme, which aims to increase efficiencies and minimise compliance burdens in infrastructure projects.
According to data published by the ministry of statistics and programme implementation (Mospi), nearly 41% of all monitored projects are running with a time lag as of April, compared to just 30% in the same month last year.
Overall project cost overruns jumped to 23 percent from 19.6 percent the previous year. More than half of railway, petroleum, power, and civil aviation projects are going behind schedule.
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