Mumbai: According to a study by India Ratings, cost overruns in central projects post-Covid cost the economy Rs 480470 crore, around 1.6% of the country’s gross domestic product.
According to the study, large central projects are largely in sectors such as railways, roads, power, petroleum, coal and urban development. “The delayed project accounted for 42.83% of the total projects in January 2024, up from 18.99% in April 2018. No doubt, COVID-19 played its part in delaying the projects from April 2020 onwards,” the report said.
“Cost overruns in investment-heavy sectors were pronounced in railways, followed by power and petroleum. Together, they accounted for 42.9% of the total investment and 20.0% of the total cost overruns in January 2024. In comparison, government projects in road, coal and urban development are more efficient as together they accounted for 46.9% of the total investments but had only 5.7% cost overruns”, says Sunil Kumar Sinha, Senior Director and Principal Economist.
As of January 2024, in percentage terms, the highest overrun has been in water resources which has seen a 197% increase although the original cost is relatively low at Rs 23470 crore. The highest overrun in absolute terms has been in railways at 50% on an original cost of Rs 444420 crore.
In case of time overruns, the percentage of delayed projects in key sectors such as railways, roads, power, petroleum, coal and steel shows a decline till April 2018 and an increase thereafter, though not in a linear fashion. While the time overruns in case of railways and roads projects appear to be range bound, it shows a rising trend in case of power and petroleum.
In the event of exceeding costs, similar to project delays, the proportion of projects experiencing delays decreased to 10.71% of the initial project cost by April 2017, down from 19.98% in April 2014, but began to rise thereafter.
The situation regarding road projects is particularly intriguing. Despite more than 15% of projects experiencing delays lasting from 1 to 102 months over the same period, cost overruns have remained relatively low, ranging from just 0.94% to 9.99% between April 2014 and January 2024.
This stands in stark contrast to the railway and power sectors, where cost overruns ranged from 25.32% to 78.70% and 8.48% to 26.52%, respectively, during the same period.
