Infra projects’ cost escalation doubles
Cost overrun was 21.67% in last Jan as against 11% in March 2017; Key factors like monopolistic pricing by vendors of equipment services, general price rise, disturbed conditions and time overruns resulting in cost rise
image for illustrative purpose
New Delhi: Even as the Narendra Modi government is zealously working on infrastructure development, cost and time overruns continue to remain a big headache. In March 2017, cost escalation for projects Rs150 crore and more with respect to the original cost was 11 per cent. It almost doubled to 21.67 per cent in January this year.
In January, 335 infrastructure projects reported cost overruns, whereas 871 projects were delayed. The total original cost of the 1,454 projects was Rs2,059,065.57 crore, now, it’s anticipated that at the time of completion, the cost will be Rs2,505,248.43 crore. This means that the overall cost escalation would be Rs446,182.86 crore.
In the last nine years, cost escalation has gone up by more than two percentage points. In March 2014, it was 19.4 per cent, whereas in January 2023, it was 21.67 per cent. After a slight rise in March 2015, when it was 20.03 per cent, there was a steep decline till March 2017. Since then, there has been an almost continuous rise, official sources told Bizz Buzz.
In March 2018, cost overruns went up to 13.44 per cent; in March 2019 to 18.25 per cent; in March 2020, 19.6 per cent; in March 2021, 19.53 per cent; in March 2022, 22.01 per cent; and in January 2023, 21.67 per cent.
It is interesting to note that the upward trend in cost escalations predated the Covid pandemic and the resultant disruptions. Officials have been listing similar causes of cost escalation: under-estimation of original cost; changes in rates of foreign exchange and statutory duties; the high cost of environmental safeguards and rehabilitation measures; more expensive land; changes in the scope of projects; monopolistic pricing by vendors of equipment services; general price rise; disturbed conditions; and time overruns. Now, Prime Minister Narendra Modi is himself monitoring the progress of infrastructure projects. On February 22, he chaired the meeting of the ICT-based multi-modal platform for Pro-Active Governance and Timely Implementation or PRAGATI.
