Cost overrun of mega projects easing in FY23

New Delhi: As a percentage of the cost overruns of infrastructure projects of above Rs150 crore to the original cost, the last six months have shown a secular decline in the current fiscal. In April, cost overruns were 22.92 per cent, which came down to 21.28 per cent in September 2022, official sources told Bizz Buzz.

Out of 1,529 projects, 384 have incurred cost escalation, whereas 662 have been delayed. The cost of completion of these projects, as anticipated in September, was Rs 2,578,197.18 crore, which is Rs4.52 lakh crore, or 21.28 per cent of than original cost, more than the original cost. Eleven projects completed in September.

While cost escalation has shown a downward trend in the first half of 2022-23, there has been a rise in the last eight and a half years. In March 2014, cost overruns were 19.4 per cent. After rising to 20.03 per cent in March 2015, they began decreasing, going down to 12.52 per cent in March 2016. They further fell to 11 per cent in March 2017 - the lowest since March 2014.

Officials have listed a number of causes of cost escalation, one of which is underestimation of the original cost in the first place.

Fluctuations in the rates of foreign exchange and statutory duties also raise costs. The weakening rupee has made things worse.

The high cost of environmental safeguards and rehabilitation measures is another factor, as also is that related to land acquisition. Other factors include the changes in the scope of projects, high pricing by dominant vendors supplying equipment, general inflation, disturbed conditions, and delays.

In order to bring down cost overruns, the central government has made project appraisals more rigorous, begun online Computerised Monitoring System, and set up of the revised cost committees in the line ministries for fixation of responsibility for time and cost overruns.