Upgrade of India’s Creaky Infrastructure Seen Delayed by Virus

(Bloomberg) -- Infrastructure projects in India are infamous for cost overruns and delays, and they are set for even more pain as the coronavirus sweeps through Asia's third-largest economy.

Construction of everything from roads to ports were behind schedule by an average three-and-a-half years, according to an analysis by the Statistics Ministry. Costs of 1,682 projects have shot up by a combined 4 trillion rupees ($54 billion) over their life cycle, the ministry's latest update as of April shows.

A nationwide lockdown for more than two months since March 25 and continuing restrictions to contain the Covid-19 pandemic are the newest threat. The casualties are expected to be flagship projects such as the 3,300-kilometer (2,050-mile) freight rail network to connect India's eastern and western regions.

Conceived in 2006, the state-run Dedicated Freight Corridor Corp. of India Ltd. was originally scheduled to complete the work by 2016, but has missed several deadlines. The rail link is now expected to be ready by December 2021.

The project will be completed as per schedule despite the virus crisis, V.K. Yadav, the Railway Ministry's top bureaucrat, was cited as saying by the Press Trust of India in a report this month. But not everyone shares the optimism.

“The lockdowns induced due to the pandemic will lead to delays” in infrastructure projects, said Suvodeep Rakshit, an economist with Kotak Securities Ltd. in Mumbai. “The multiplier effect of infra works will also be missing. Overall, the impact will be felt both at micro and macro level.”

Same Tracks

The costs aren't limited to the projects. Delays in adding railway infrastructure -- such as building new lines to making more wagons -- hinder fuel supplies to power plants. Freight and passenger trains jostle for space on the same tracks, and goods carriers often have to make way for passenger traffic, prolonging the turnaround time for carriages to haul coal, the mainstay of power generation in the country.

India has made progress in infrastructure but gaps remain, Shaktikanta Das, governor of the Reserve Bank of India, said Monday as he made a case for boosting investments in the sector to spur the economy.

Prime Minister Narendra Modi's administration has drawn up a plan for $1.5 trillion of such projects over the next five years. But delays in land acquisition, environment clearances, and financing are among issues that have held up projects over the years -- a big worry for multilateral lenders when it comes to funding projects in India.

“At present everything is in a state of pandemonium,” Hemant Kanoria, chairman of Srei Infrastructure Finance Ltd. in Kolkata, said, while seeking a one-time recast of loans for construction firms, clearance of dues owed by the government and faster resolution of disputes to ease cash flow. “Otherwise everyone is dead.”

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