How delays in public projects could impact govt's fundraise plans via NMP

Time and cost overruns could impact private sector participation in the ambitious National Monetisation Pipeline programme

Delays and cost overruns have been a chronic problem with government projects but the significance of these inefficiencies may come into greater play now that the government plans to raise resources via the National Monetisation Pipeline between 2022 and 2025 by tapping private sector investment in new infrastructure creation. Data from the Ministry of Statistics and Programme Implementation (MoSPI) shows that only a little under a fifth of projects (worth about Rs 150 crore) are on schedule.

In disaggregated terms, MoSPI data reveals that of the 1,559 projects under development in April 2022, 289 were scheduled and six were ahead of schedule. In April 2018, a third of the projects were either on schedule or ahead of schedule.

Last week, data released by the government showed that of the 1,559 infrastructure projects under consideration, 428 projects, or 27 per cent, were facing cost overruns. In terms of value, the economy had an overall cost overrun of Rs 4.98 trillion, 22.92 per cent of the original cost. Last April, 525 of 1,737 projects were facing cost overruns. But the value of cost overruns was lower at 19.61 per cent of the original cost.
 

Further analysis by Business Standard shows that rising cost overruns are just one part of the problem the government might be facing. Although 18.8 per cent of the projects were on schedule in April 2022, this represents a steep jump from last year when 12.9 per cent of the projects were on schedule or ahead of schedule. But the ratio was still lower than levels achieved in previous years (see chart: “Ahead of the curve”). In April 2019, 21.7 per cent of projects were either on or ahead of schedule. The ratio was 33.4 per cent in April 2018, the best performance in the past eight years.

Further research indicates that the level of projects facing delays and cost overruns was higher than projects completed in most of these years. Power, petroleum, road transport and highways were the three sectors where projects were completed in April 2022. The Railways, on the other hand, faced the most delays and cost overruns.

An earlier analysis by Business Standard found that delayed projects have declined, even as cost overruns have risen. Ideally, that would indicate that projects with higher value have been delayed for a long time, and the government is rushing to complete the easier projects.

With commodity prices rising, delays are expected to cost more over time. A Business Standard analysis had shown that a 27 per cent increase across all infrastructure projects would end up incurring an additional cost of Rs 8 trillion for the entire Rs 114-trillion National Infrastructure Pipeline, which is part of the National Monetisation Pipeline.