Funding Done, Focus Now Must Shift To Project Execution — Infravisioning
The focus has shifted from financing issues to rigorous analysis of project execution and project implementation.
Vinayak Chatterjee's Infravisioning video series analyses and explains developments in India’s infrastructure sector to the BQ Prime audience.
Edited excerpts of the video:
We are now living in times where the focus is happily shifting from financing infrastructure projects to managing the execution and implementation with far more rigour than previously.
The last three decades of Indian infrastructure have seen struggles and striven efforts to raise capital and financing, to build the infrastructure projects that the country needs.
Towards this end, not only the budgetary outlay stepped up, but a slew of financial institutions were set up.
The earliest was the Infrastructure Leasing and Financial Services in 1987. The next was the Infrastructure Development Finance Corp., a company incorporated in 1997. Then came the Indian Infrastructure Finance Co. in 2006, the National Infrastructure and Investment Fund in 2015, and very recently, in 2021, the DFI or developmental financial institution for infrastructure—the National Bank of Financing Infrastructure Development.
Simultaneously, public-private partnership frameworks were established. Even in earlier times, there have been sector-specific financing institutions in the infrastructure arena. The notable ones are the Rural Electrification Corp. Ltd. set up in 1969, the Housing and Urban Development Corp. Ltd. set up in 1970, the Power Finance Corp. set up in 1986, as well as the Indian Railway Finance Corp. set up 1986.
In the last two decades, a number of private non-banking financial companies and private equity firms have also become quite active in funding infrastructure projects. Many global long-term institutional investors have also come in. Moreover, a new generation of capital market instruments have come into existence, such as real estate investment trusts or REITs, and infrastructure investment trusts or InvITs.
With all of this, India is now well-poised to actualise the funding capacity, the financing capacity to build infrastructure projects. That is almost shaping up to be able to fund around Rs 22 lakh crore per annum of infrastructure projects, as envisaged in the Indian National Infrastructure Plan or NIP.
This financial capacity could broadly be construed to be made up of the union budgetary outlays, as in the last budget, of Rs 7.5 lakh crore, investment from all states together of Rs 6 lakh crore; public sector undertakings, extra budgetary resources, National Bank for Financing Infrastructure Development, and domestic and foreign capital–including bilateral and multilateral–all these together add up to Rs 20-22 lakh crore.
Thus, it is most appropriate that the focus is shifting from financial efforts to far greater focus on project execution and that is the need of the hour.
However, in stark contrast to financing capacity, the ground realities and project execution are quite grim.
Watch the full video here:
An update as of December 2021, from the Ministry of Statistics and Programme Implementation covers 1,679 projects. These are central sector projects, each costing Rs 150 crore or more across 10 areas–roads, railways, power, petroleum, urban development, coal, water, atomic energy, steel and telecommunication.
Out of these projects, 11 are ahead of schedule, 292 are on schedule, and 541 are delayed. There are 835 projects where neither the year of commissioning nor the expected date of completion is available and that is simply not acceptable.
The original cost of implementation of these projects together was about Rs 23 lakh crore and the anticipated cost to completion is about Rs 27 lakh crore. That's showing a cost overrun of Rs 4-5 lakh crore, which is 20% of the original cost. So, as you can see, focusing on project execution is not only timely but extremely necessary.
It is not that the government is not seized of the enormity of the problem. The online Computerised Monitoring System, or OCMS, maintained by the Infrastructure and Project Monitoring Division of the Ministry of Statistics and Programme Implementation has been in existence for quite some time.
But the grouse of the ministry is that the project execution agencies concerned do not upload their milestones, achievements or failures regularly.
The project management group was first set up as a special cell in the Cabinet Secretariat in the last few years of UPA to push stalled projects. They did sterling work, and it was subsequently brought under the administrative control of the Prime Minister's Office in 2015. In 2019, the PMG was merged with the Department for Promotion of Industrial Internal Trade. It is now known as the Project Monitoring Invest India Cell.
The Ease India Project Management System under the PMIC monitors a database of mega projects from both public and private sector investments. There is also the platform called Pragati; it is an acronym for Proactive Governance and Timely Implementation in the PMO. This platform was introduced in 2015, reviews important programmes and projects of the central government as well as projects flagged by the state governments.
Recognising the mounting problems, the Quality Council of India launched in October 2020 the National Program and Project Management Policy Framework, targeted at bringing radical reforms in the way infrastructure projects are executed in India. Its key recommendations included setting up of a National Institute of Chartered Programme and Project Professionals under the QCI.
Point number two, it suggested developing a technical repository of best implementation practices called the Indian Infrastructure Body of Knowledge.
Three, a four-level certification system for project implementation professionals, and a slew of capacity-building measures.
Finally, the two recent technologically-driven platforms Gati Shakti and the National Single Window System for online clearances and permissions are powerful tools to positively impact project implementation.
In early November this year, the NITI Aayog was mandated with the task to monitor energy and infrastructure, and it shortlisted 494 projects worth Rs 5.7 lakh crore to be rigorously completed by March 2023.
The projects have already incurred expenditure of about Rs 4 lakh crore and the anticipated expenditure for the completion in this fiscal is pegged at Rs 1.8 lakh crore. So, even NITI Aayog has now been brought into the system to focus on project execution and project implementation.
NITI has suggested that some 116 infrastructure projects worth Rs 1.26 lakh crore could be shut down due to unresolved obstacles ranging from land acquisition to centre-state tussles.
While these projects have incurred accumulative capital expenditure of Rs 20,000 crore, the central government is seriously considering the possibility of finally pulling the plug on them, which is a good and unusual step for a government agency, because India has rarely seen conscious decisions on stopping projects that are going nowhere.
So, we have a battery of institutional formats to address the historic problem of chronic delays in project execution. Hopefully, these are collectively going to radically improve matters.
We shall monitor and see how these measures impact project execution. But it is clear that the focus has rightfully shifted from financing issues to rigorous analysis of project execution and project implementation.
Vinayak Chatterjee is founder and managing trustee, The Infravision Foundation; and chairman, CII Mission On Infra, Trade & Investment.
The views expressed here are those of the author, and do not necessarily represent the views of BQ Prime or its editorial team.