Financial Daily from THE HINDU group of publications
Tuesday, Nov 23, 2004
Industry & Economy - Infrastructure
Infrastructure projects make tardy progress
New Delhi , Nov. 22
INFRASTRUCTURE development is touted as the sure-fire route to progress as also to get the economy moving on a higher growth trajectory.
Yet, it is in the crucial domain of infrastructure development, projects record snail's pace movement with delays dogging them right from concept to commissioning, thereby depriving the economy of early harvest of results.
Sources in the Government told Business Line that a dossier prepared by the Infrastructure and Project Monitoring Division (IPMD) of the Ministry of Statistics and Programme Implementation makes a dismal reading of the ground situation with the report highlighting the hiatus and halting headway of each one of the infrastructure projects be it power, road, shipping and railways.
The Prime Minister, Dr Manmohan Singh, and the Union Finance Minister, Mr P. Chidamabaram, quite often refer to the enormous outlays, domestic and foreign, needed to improve the country's rickety infrastructure. There is no gainsaying the fact that infrastructure is the fulcrum of progress and development for ensuring higher economic growth and removing the curses of backwardness, poverty and unemployment. Yet the projects under way make a painfully tardy progress.
In the monitoring radar of IPMD, one could espy as many as 605 projects under implementation in different segments as on end-June 2004. The anticipated cost of 605 projects is Rs 2,67,815 crore, while the aggregate expenditure incurred up to that period was Rs 1,05,146 crore.
These 605 projects are categorised into mega projects (costing Rs 1,000 crore and above), major projects (costing Rs 100 crore to Rs 1,000 crore) and medium projects (costing Rs 20 crore to Rs 100 crore).
It is interesting to note that the original cost of these 605 projects was Rs 2,20,362 crore with the overall cost overrun to original cost being 21.5 per cent. The range of delays is from one month to 156 months with reference to the latest approval/schedule.
Analysis of causes for cost escalation reveal a medley of factors ranging from under-estimation of original cost, escalating cost of environmental safeguards and rehabilitation measures, spiralling land acquisition costs, changes in project scope to monopolistic pricing by vendors of equipment and services.
Most of these factors also hold good for time overrun of the projects, though factors such as delays in finalisation of detailed engineering, geological surprises and pre-commissioning teething troubles led to time overruns.
A sector-wise project study shows that as on September 30, 2004, the "Pooktee Balihari Underground" coal project of BCCL is currently suffering from time overrun of 156 months. In the crucial power sector, the latest anticipated cost of the 55 projects is Rs 89,201.99 crore, against the original approved cost of Rs 70,365.7 crore, marking an escalation of 26.8 per cent.
These 55 power projects suffer from both cost and time overruns which was mainly due to problems plaguing execution of hydro projects with the four hydro projects viz., Dulhasti, Dhauliganga, Tehri and Nathpa Jhakri being under construction for more than a decade. These 55 projects together would yield an additional capacity of 17,272 MW once completed.
In the Railways segment, there were 224 projects (Rs 20 crore and above) as on end-June 2004, out of which 65 projects stay surprisingly within time and cost, while 106 projects are within time but with cost overruns and 14 projects are within cost but with time overruns.
A particularly piquant point is that the percentage increase of original cost of 224 projects as compared to anticipated cost is 47 per cent, while the time over-run ranges between two month to 168 months, making a mockery of the original project cost and schedule for the country's major mode of eco-friendly transport.
On the National Highway Development Project (NHDP), as on end-August 2004, 3,121 km constituting 53.39 per cent of the various Golden Quadrilateral (GQ) linking four metropolises of Delhi-Mumbai-Chennai and Kolkata projects has been four-laned. Delhi-Mumbai has, so far, been the corridor with least of hurdles and the completed length was 86.33 per cent, followed by 53.8 per cent in the Kolkata-Chennai and 49.92 per cent in the Mumbai-Chennai corridors.
The Delhi-Kolkata corridor has achieved only 25.46 per cent physical progress till date. As a result of several constraints encountered in the execution of the GQ packages barring the Allahabad Bypass on NH-2, the entire GQ is likely to be completed by December 2005 a year behind the original schedule.
As on end-August 2004, 71 NHDP packages have reported slippage in their commissioning schedule in the range of one to 12 months.
With its focus firmly on infrastructure development, the United Progressive Alliance Government must perforce address the cost and time overruns in these mega projects in order to see them launched without further loss of resources and schedules.
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