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May 14, 2024

Infrastructure Project Delays Remain High Despite Recent Improvements

The share of delayed infrastructure projects costing Rs 150 crore or more has hit a three-year low in FY24, yet remains significantly higher than pre-pandemic levels. According to a Business Standard analysis of data from the Ministry of Statistics and Programme Implementation (MOSPI), 41.6 percent of such projects experienced delays as of March 2024, compared to 27.1 percent in March 2019. Although improved from the March 2023 peak of 56.7 percent, delays are still a considerable issue.

This rise in project delays is occurring despite the government’s intensified focus on infrastructure development. The number of ongoing projects increased from 1,405 in March 2019 to 1,873 in March 2024. Among the 779 delayed projects, 36 percent were running behind schedule by 25-60 months, 26 percent by 1-12 months, 23 percent by 13-24 months, and 15 percent by over 60 months. On average, these projects are delayed by three years.

Devendra Kumar Pant, chief economist at India Ratings and Research, attributes many delays to funding issues. “Most projects have a fixed contribution by the Centre, state, and urban local bodies. If the municipalities are not able to generate that money for the project, it leads to a delay,” he explains.

One notable example of prolonged delays is the Muneerabad-Mahaboobnagar railway line, approved in 1997 and still incomplete after 23 years. Initially slated for completion by 2000, the revised deadline was pushed to 2023, yet the project remains unfinished.

Various factors contribute to these delays, including challenges in land acquisition, obtaining forest and environmental clearances, lack of infrastructure support, and law and order issues. The financial implications are substantial, with additional expenditures amounting to Rs 5 trillion as of March 2024, or 18.7 percent of the original cost. This marks an increase from Rs 3.3 trillion, or 18.3 percent, in March 2019. The true extent of these overruns may be even higher, as many project agencies fail to report revised cost estimates and schedules, as noted in the MOSPI report.

Pant emphasizes that cost overruns are a significant concern. “The return on investment on the project is not coming until completed. It also impacts the social benefits since some projects are related to sanitation or quality of life,” he states.

Among various sectors, the railways incurred the highest cost overruns at Rs 2.4 trillion. The petroleum sector followed with an increased cost of Rs 0.6 trillion, then power and water resources sectors both at Rs 0.5 trillion, and road transport and highways at Rs 0.4 trillion. The Polavaram irrigation project leads in cost overruns with Rs 0.5 trillion, followed closely by the Udhampur-Srinagar-Baramulla railway line project with a Rs 0.4 trillion overrun.

An earlier report from India Ratings and Research, released in March, highlighted that cost overruns due to project delays amounted to approximately 1.6 percent of the gross domestic product as of January 2024. This underscores the broader economic impact of these delays, making it clear that while some progress has been made in reducing the number of delayed projects, significant challenges remain in achieving timely and cost-effective project completion.

Jhumpa Lahiri

Jhumpa Lahiri

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