The much-talked about Kudankulam nuclear power project is expected go on stream by March 2012, a 39-month delay from its scheduled completion date.
Even as an inflationary scenario has resulted in estimated cost of projects such as the one above going out of kilter, time overruns of the above scale, exacerbates the cost over-run. In the above case, the revised cost of Rs 15,824 crore is 20 per cent higher than the original cost. Not to mention the difficulties faced by the end-users of the 1000 MW(at least) of power supply that the commissioning would have generated.
The above instance, sourced from the flash report (as of February 2011) of the Ministry of Statistics and Programme Implementation (MOSPI) on Central sector projects, is only one of the many delays and cost overruns that public sector projects are subject to. Here is a quick summary of the delays and cost jumps in projects that are over Rs 150 crore, as provided by Infrastructure and Project Monitoring Division of MOSPI.
As of February 2011, 285 of the 565 projects that are being monitored were facing delays. This is higher than the 48 per cent delay in projects a year ago (March 2010). This only adds to the worsening trend over the last four years. From 34 per cent of projects running behind schedule as of March 2007, the proportion of projects delayed has been on a steady uptrend to touch a high of 53.5 per cent in December 2010; coming down marginally by February 2011.
Adding to costs
Of the 285 delayed projects, a whopping 41 per cent witnessed delays ranging between two and five years and about 14 per cent over five years. Clearly, longer the delay, higher the impact on the expenditure incurred in these projects. For instance, over a one-year period up to February 2011, inflation (as traced by the Wholesale Price Index) rose by 9.5 per cent suggesting that costs could have been impacted at least to this extent. Over a three-year period, the impact could have been significant as inflation rose by an absolute 24 per cent.
It is therefore small wonder that the anticipated cost of all the projects monitored overshot their original cost by 20 per cent to Rs 7.26 lakh crore as of February 2011. This overrun becomes conspicuous when compared with the previous years. Post FY-04, cost-overruns were well under control, hovering in the 12-14 per cent range until March 2010. The jump in FY-11 therefore appears significant, coming as it does after concerted effort by the government to reduce cost-overruns.
Railways, petroleum and steel, atomic energy and urban development projects are some of the sectors where the overshoot in cost was significant.