Delays in projects across railways, roadways and coal sectors, among others highlight the need for faster bureaucratic clearances and availability of funds.
Nearly three out of 10 central infrastructure projects worth more than Rs 150 crore were running behind schedule, underlining the need for speedier procedural approvals, easier funds and quicker bureaucratic decision-making.
Official data collated by Moneycontrol show that as on February 1, 2017, as many as 329 projects worth Rs 6.68 lakh crore (nearly three times India’s defence budget) of 1,201 government-monitored projects were facing delays ranging from a few months to as long as 21 years hit by fund shortages, environmental concerns, hurdles in government clearances and land acquisition problems among others.
For instance, the gauge conversion project on the Gondia-Jabalpur stretch in Madhya Pradesh, undertaken by South East Central Railway, is facing a delay of 21 years.
As many as 293 projects covering roads and highways, railways, petroleum power, coal, steel, urban development, atomic energy, civil aviation, telecommunications and in shipping and ports were facing cost over-runs and 95 were showing both time and cost over-runs with respect to their original project implementation schedules.
The Lalitput-Satna-Rewa-Singruli railway line of the West Central Railways, originally supposed to completed in May 2008, has seen its costs jump 2360 percent from Rs 447 crore to Rs 6,093 crore. It is now scheduled to be commissioned in March 2023, a delay of 178 months or nearly 15 years.
There were 12 projects that were delayed by more than an 10 years. As many as 12 of these projects were from the railways.
These 12 projects are worth an estimated Rs 42,625 crore, nearly equal to the government’s annual budget for the rural job guarantee scheme NREGA. Of these, the Udhampur-Baramula-Srinagar railway line, which was approved in March 1995, is among the costliest delayed project that is now valued at Rs 19,565 crore, followed by the Lalitpur-Satna-Rewa-Singruli railway at Rs 6,093 crore and the Brahmaputra Bridge at Bogibil, Assam at Rs 5,000 crore.
As many as 122 projects were delayed in the roads and highways — highest number in any single sector — followed by 80 in the power sector, 68 in the railways, 47 in the petroleum sector, 45 in coal, 22 in urban development and 18 in steel, among others.
The government data shows that 293 projects have seen their costs surge manifold as labour, raw material and capital costs have seen significant jump in over the years. Already facing delays, this has compounded problems as achieving financial closure and tying up funds through bank loans and other sources became difficult of questions over viability.
For instance, the Lalitpur-Satna-Rewa-Singruli railway line has seen its cost jump 2360 percent from and original cost of Rs 247 crore to Rs 6,093 crore. Similarly, the Udhampur-Srinagar-Baramula line has seen its cost jump 682 percent from Rs 2,500 crore to more than Rs 19,000 crore now.
Studies have shown that a key factor behind the difficulties facing the construction sector is the pendency of claims from government bodies.
An estimated Rs 70,000 crore is tied up in arbitration. Over 85 percent of the claims raised against government bodies are still pending of which 11 percent is pending with government agencies, 64 percent with arbitrators and 8.5 percent with courts.
It takes an average of seven years to settle claims.
“A majority of arbitration awards have gone against the government agencies. In the case of the National Highways Authority of India, out of a total of 347 arbitral awards, 38 went in favour of the authority and 309 went in favour of the contractor,” said an official, who did not wish to be identified.
According to a government, an additional Rs 1.76 lakh crore — nearly six times the annual budget of rural job guarantee scheme NREGA — will be required in the next three years to build 15,000 kms of highways.
Road and other infrastructure projects can spur economic activity, boost construction and create jobs. The segment accounts for about 8 percent of GDP and is the largest creator of direct and indirect employment, employing about 40 million people.
It has a strong multiplier effect, creating an estimated 2.7 new jobs indirectly for every Rs 1 lakh invested, with major forward linkages to sectors like real estate, infrastructure and manufacturing and backward linkages to steel and cement among others.
Government sources said that the construction sector has been affected by the large number of projects which got stalled during the period of stagnation between 2011 and 2014. The banking sector also has a large exposure to construction, estimated at over Rs 3 lakh crore. As much as 45 percent of the bank loans in the sector are under stress.
Earlier this month, Finance Minister Arun Jatiley said India would require USD 646 billion in next five years for modernising infrastructure — from highways to urban infrastructure.“India has a huge unmet need for investment in infrastructure, estimated at Rs 43 lakh crore (about USD 646 billion) over the next five years. Out of this Rs 43 lakh crore, 70 percent of the amount will be required in the sectors such as power, roads and urban infrastructure,” Jaitley said at the second annual meeting of the New Development Bank (NDB), popularly called the BRICS Bank, in New Delhi recently.