Delays in infrastructure projects: Modi's record is as bad as Manmohan's

One of the first things Prime Minister Narendra Modi did when the NDA government came to power in 2014 was to bring the Project Monitoring Group (PMG) that had been set up in 2013 by the UPA under his direct control.

It was a delay in infrastructure projects that had lead to the slowing down of the Indian growth rate and investments from the private sector.

It was thought that under Modi’s unwavering attention, the projects would get back on track.

However, three years later, it is clear that the PM’s ‘direct monitoring’ has not achieved much.

Even so, every now and then, newspapers report that ‘an X number of projects have been revived’ by the government.

Take this report for example.

It says that the Modi government has revived 42 stalled projects worth Rs 1.15 lakh crore. 

But the number of stalled infrastructure projects increased to 893 in March 2016 compared to 766 in March 2014, according to a report from consultancy firm EY.

And if we believe the latest report by the Asian Age newspaper, nearly “1,200 projects with a total original cost of Rs 15 lakh crores stand delayed.”

The report further adds, “Owing to delays, their anticipated cost is likely to go up to Rs 17 lakh crore approximately and according to information available with this newspaper, the overall cost overrun will be around 11%.”

The ground reality

The increase in the number of delayed projects over the past three years indicates that the narrative of PMG becoming more efficient under the NDA government does not stand the ground reality. This is one of the reasons why infrastructure companies are under severe financial stress.

A majority of these projects have failed to take off due to problems like environment clearances, delay in land acquisition, and the lack of long-term alternative financing options, among others.

Infrastructure projects have long gestation periods that range between 5-10 years. If they face delays of over 3-5 years in laying their foundation stone, the cost overruns can make them financially unviable.

Many of the power projects that were envisaged in 2012, when the price of electricity in the open market was higher, would not even make money in today's circumstances.

In India, it is very common to celebrate the number of newly awarded projects when it comes the roads, highways, power and ports projects. But those projects contribute to the economy only once they become operational and start servicing their loans to the banks and other financial institutions. 

Unfortunately, the current government, much like its predecessor has not been able to find a solution to the problem of time and cost-overruns of infrastructure projects, and so long as this continues, India would not be able to reach its full economic potential.

Edited by Aleesha Matharu