Land acquisition, green nod, project financing delay 1,476 central projects worth ₹23 lakh cr

Many central projects across the country are delayed leading to cost overruns. As per data collated by the Ministry of Statistics and Planning, there are 1,476 central sector infrastructure projects worth ₹150 crore and above at various stages of implementation.

The original cost of these 1,476 projects was ₹20.84 lakh crore but as on March 1, 2023, it had increased to ₹25.36 lakh crore due to delay. A total of 756 of the total of 1,476 projects (51%) were running with a time lag.

Out of the remaining 720 projects, 9 projects were ahead of schedule, 255 were on schedule, 132 were without the original date of commissioning and 324 either did not have the date of commissioning or it had lapsed, and hence the delay could not be ascertained.

Common reasons for the delay in implementing the projects include problems in land acquisition, forest/environment clearances, lack of infrastructure support and linkages, delay in tie-ups of project financing, delay in finalisation of detailed engineering, change in scope of the project itself, delay in tendering, law and order problems, geological surprises, per-commissioning teething troubles and contractual issues. Besides these, inadequate manpower and lockdown due to the COVID-19 pandemic have accounted for major reasons for delays as reported by the project implementing agencies.

Delays and cost overruns in public sector investments can raise the capital-output ratio in the sector and elsewhere, bringing down the efficacy of investments. Yet there are no estimates of the delays and cost overruns, and of their opportunity cost.

Sector-wise data of various projects being implemented shows that water resources projects face the maximum cost escalation due to delay.

“There are 41 water resources projects which are at various stages of implementation. These projects have seen a cost escalation of 195.55%, the maximum among all other ministries' projects,” said economist Venkatesh Athreya. He said the delay in the acquisition of lands for these water resources projects could be the main cause of cost overrun.

Factors internal to the public sector system and government largely account for the delays and cost overruns. “Poor project design and implementation, inadequate funding of projects, bureaucratic indecision, and the lack of coordination between enterprises cause such delays. Appraisal by the government very often is devoid of meaning when the emphasis is only on the form of the project proposal rather than on its content - a tendency quite usual in bureaucracies,” said Athreya.

Since public enterprises, particularly those in the core sector, have large dealings with each other, a ‘vicious circle of delays’ built up.

“The politically expedient tendency to take up large numbers of projects and short-fund them all, except those with the very highest priority, is perhaps the most important factor in delays,” said Athreya.

The government’s approach in accordance with high priority to certain sectors - oil and natural gas, and petroleum - while perhaps overcoming the problem in these sectors have compounded the problem elsewhere, particularly in the infra-structural areas - railways, coal and steel, he said.

Railways comes second to water resources with a cost run of 67.56% There are 173 projects which are being implemented under the rail ministry. Out of these, 111 projects have seen cost overruns. The original cost of 111 projects was ₹1,70,944 crore but the revised cost is ₹3,11,559 crore. The delay is anywhere between 3 to 276 months.

“Railways delay is due to the acquisition of land for laying new tracks. In many cases, the land owners either refuse to sell the land to Railways or seek unimaginable costs and finally go to court against land acquisition. The delay is even more with regard to the Metro Rail projects being implemented across the country,” said a Southern Railway official.

He said that as metro rail projects need land within the heart of the city or town, the land prices are very high. “We have faced this problem while implementing the Mass Rapid Transit System (MRTS) in Chennai city. It took nearly a decade to get a few sq. mts. of land to link two rail systems. Only recently have we got the Madras High Court order to acquire the land, and work is expected to be completed soon,” said the railway official.

Renewable energy projects like solar or wind do not take more than one year to commission a project, provided the land is available. But a renewable energy ministry’s project has seen a cost overrun of 34.24%.

“The gestation period of wind or solar power is low compared to any thermal or nuclear power project. We need land in acres for both solar and wind and if this is available, the project will be ready for commissioning within a few months,” Kasthuri Rangaiyan, president of the Indian Wind Power Producers Association. He said the majority of the renewable power projects are completed within time and without any cost overrun.

Next to renewable power are the Union home ministry’s five projects which have seen a cost overrun of 34.15%. Details of the home ministry’s projects are not known.

Power projects have seen a cost overrun of 29.34%. “In many thermal projects, we face problems in getting environment clearance. This delays the implementation of the projects,” said a former NTPC chairman. He said the acquisition of land for these projects is also a major problem for the delay in finishing the projects.

Mining projects have seen 100% delay. There are 7 projects being implemented at an original cost of ₹7,333.99 crore but all 7 projects are delayed. Due to this, the cost has escalated to ₹8,585 crore. In terms of months, the projects are delayed anywhere between 3 to 54 months.

Projects of the steel ministry have seen a cost overrun of 26.82%. Out of the total of 9 projects being implemented by the Union Steel Ministry, 4 have seen cost overruns and time delays to the extent of 13 to 94 months.

Even after the world has begun to live with the COVID-19 restrictions, the pandemic continues to impact economic activities, said Athreya. He said the pandemic-related restrictions also played a major role in the delay in the implementation of these projects.

The revised cost of these projects has been under-reported. This is because most of the project agencies are not reporting the revised cost of these projects, he said.

“The Centre must take to task its ministries when there is a delay in implementing projects as it is the taxpayers’ money. The officials must be held accountable, and frequent review of projects being implemented will put an end to the delay and cost run,” said Athreya.