The share of delayed central sector projects is rising, bringing with it an increase in cost and time overruns.
The budget for the fiscal year 2024 allocated Rs 10 lakh crore for government capital expenditure, amounting to approximately 3.3% of the GDP. This figure surpasses the revised estimate of Rs 7.28 lakh crore from the previous fiscal year.
Despite the government's focus on infrastructure development, the Achilles heel in capital expenditure continues to be the delays that hamper project execution.
According to data from the project implementation status reports of central sector projects, the share of delayed projects rose to its highest level in at least 16 quarters during the January-March quarter. In this period, the percentage of projects running behind schedule increased to 59.5%, compared to 56.7% in the previous quarter and 41.27% a year ago.
Among the 1,566 projects reported during the January-March 2023 quarter, 12 projects were ahead of schedule, 292 projects were on schedule, while 931 projects faced delays, disrupting their scheduled completion.
Out of the 1,566 projects in the January-March 2023 quarter, 443 were categorised as mega projects with a cost exceeding Rs 1000 crore and above, while the remaining 1,123 projects were major projects, costing between Rs 150 crore and below Rs 1000 crore.
According to the report, the highways, roads, and transport sector not only accounts for the largest number of ongoing projects but also experiences the highest number of delays.
A joint study conducted by PMI and KPMG shows that there are multiple factors contributing to these project overruns. These include a lack of comprehensive upfront planning and risk management, non-collaboration across stakeholders, uncertainties in the land acquisition process, regulatory approval challenges, scarcity of skilled labour, and lower maturity of project management processes.
Moreover, a number of large projects including Bharatmala, Sagarmala, Green Energy Corridor, as well as numerous oil and gas projects are in the pipeline. The report, backed by the Ministry of Statistics and Programme Implementation, said it was essential to re-evaluate the core issues and address them adequately.
Cost Overruns
In terms of cost, among the 1,566 projects in the January-March 2023 quarter, 384 encountered cost overruns amounting to Rs 4.66 lakh crore, which accounts for 21.6% of their sanctioned cost. However, in terms of the latest approved cost, 285 projects reported cost overruns of Rs 1.97 lakh crore.
The report also showed that 259 projects are facing both time and cost overruns, underscoring the challenges in adhering to project timelines and staying within the confines of budgetary limits.
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