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Projects delays cost Rs 1000 bn; govt plan to force pace

Vinod Behl in New Delhi

The ministry of planning and programme implementation is worried about the sharp cost escalations of various mega projects that may put the government back by over Rs 1,000 billion. According to the minister of planning and programme implementation, Prof Y K Alagh, this follows a recent review of 110 major projects, each costing Rs 1 billion or more, in a major economic escorts with time over run of up to five years and cost escalation of about 40 to 75 per cent.

A ministry status report reveals that some of the projects where cost overruns have been exceptionally high are at the two nuclear power plants in Rajasthan, the modernisation of the Rourkela and Durgapur steel plants, the Kandla-Bhatinda pipeline, the Dulhasti and the Koyalkaro hydroelectric projects, and the Kehalgaon thermal power projects.

In case of 19 mega railway projects alone, the cost over runs have been to the tune of about Rs 35 billion. For the Jammu-Udhampur railway line project, the cost escalation is over Rs 1.3 billion whereas for the Jagighopa-Guwahati, Talchar-Sambalpur, Guna-Etawah and Madras-Trichy lines, the cost overruns are Rs 1.08 billion, Rs 1.17 billion, Rs 1 billion, Rs 1 billion respectively. The MRTS line from Madras Beach to Luz will also have cost overrun of Rs 1.08 billion.

The review of all these projects showed that several factors are responsible for the time and cost overruns. Delays in clearance from various regulatory agencies for land acquisition and procurement of material, changes in design or scope of project midway through execution, management problems such as personnel, labour, and contract disputes, and inadequate and untimely release of funds are found to be the main factors responsible.

The blueprint for the action plan to cut cost and time overruns, which is the thrust area of the ninth plan, aims at making planning and approval procedures more scientific and rigorous. The blueprint, prepared at the recommendation of a group of ministers, calls for scrapping all those projects in which less than 10 per cent of approved outlay has been spent and which were for completion in the 8th plan, while expediting projects which are nearing completion.

The action plan suggests that during the 9th plan, only a limited number of new projects should be considered for approval and projects due for completion during this plan or beyond as per approvals could be included as plan projects for which no further details can be provided. For all other projects, the states and central ministers would have to provide complete justification for their continuation with revised estimates of cost and time

According to Dr Y K Alagh, his ministry has already initiated action with regard to winding up or privatising those projects which have been delayed the most. "We have also suggested a reform in the memoranda of understanding between the ministries and the project authority. The present MoU only relates to the target of the working of the project in terms of production, project or loss. But now we have suggested that project implementation guidelines should also be part of the MoU. This means that if the project authority is not able to meet the guidelines, then they get the negative marks. This is not being done now. Some departments have already accepted our proposal," Alagh told this correspondent.

Besides modifying MoU between the ministries and the project authorities to make the whole area of project implementation (success or failure) more explicit, there is another proposal aimed at following a more detailed contract management procedures to give incentives to efficient contracts and to punish the corrupt ones.

Dr Alagh firmly believes that from the current fiscal year, the implementation of his ministry's action plan will not only cut cost and time overruns in mega projects, but push up the economic growth rate as must of these projects are in the key infrastructure sectors.