The Hindu Business Line : Alarming cost and time overruns

A substantial part of the drain on the coffers of the Centre occurs due to delays in the execution of departmental and public sector projects. As such, the Finance Minister, Mr P. Chidambaram, will do well to involve himself and his officials in a joint exercise with the Ministry of Statistics and Programme Implementation (MOSPI) to speed up the implementation of already sanctioned projects. The picture emerging from data put out by the MOSPI is truly alarming.

As on March 31, 2006, out of the 742 ongoing projects, 273 projects were due for completion, but only 91 were actually completed. No date of completion has been intimated to the MOSPI in respect of 219 projects, of which 168 belonged to the Ministry of Railways.

Grave situation

The delayed projects numbered 269, entailing a a cost overrun of Rs 30,420 crore or 33.49 per cent of the original cost. The total number of projects showing cost overrun with reference to original approved cost was 216, and of these, the cost overrun of 76 projects was as high as 78.36 per cent of the original cost, and the time overrun ranged from three to 252 months.

In a nutshell, the total anticipated cost of the 742 projects is slated to rise steeply by Rs 48,483 crore from Rs 2,79,081 crore to Rs 3,27,564 crore, reflecting a jump of 17.37 per cent in the overall.

The gravity of the situation can be understood by noting that 58 mega (costing Rs 1,000 crore and more) and 346 major (costing between Rs 100 and Rs 1,000 crore) projects account for Rs 3,10,140 crore or 94.68 per cent of the total anticipated cost.

If only all the projects had been completed as per schedule, the exchequer would have benefited to the extent of nearly Rs 50,000 crore, besides adding to the GDP a tidy two or three percentiles in the form of the multiplier effect of goods and services flowing from the projects.

The causes of the backlog are well-known, including all the old villains — land acquisition, finalisation of engineering and technology blueprints, release of funds, environmental clearances and the like. But there is one factor — the fear of audit and vigilance — that wreaks considerable havoc, contributing a quarter of the overruns, but figures nowhere in the list.

Cruel dilemma

The audit and vigilance personnel, as also of the CBI, are yet to become attuned to the special challenges of economic governance, especially those of public sector enterprises. They go by the book, and look upon any deviation as a criminal offence.

Economic decision-makers often face the cruel dilemma of a choice between higher payment terms to ensure faster delivery of better quality materials and the strict conformity to rules which may save a few thousands of rupees in the immediate term but will result in delays costing lakhs of rupees.

In the rush of work, they may even make wrong decisions in good faith. Unless audit, vigilance and the CBI learn to distinguish between bona fide errors of administrative judgment on the one hand and blatant misappropriation, embezzlement or corruption on the other, project managers will play safe, regardless of time and cost overruns.

The MOSPI reports give a detailed analysis of the status of projects in each of the 16 sectors it monitors, and the Finance Minister could lighten the burden on the Budget by calling a meeting of the heads of administrative Ministries to give a push to the projects.

B. S. RAGHAVAN

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