The Modi-government’s plans to fastpace infrastructure projects seem to have run into a speed breaker hit by increased delays and cost overruns over the last two years.
The number of delayed or stuck projects have jumped significantly over the last two years despite the government’s efforts to hasten bureaucratic decision making, ease procedures and raise the pace of project execution.
As on March this year, 893 infrastructure projects worth Rs 11.36 lakh crore across a range of sectors from thermal power to highways were delayed.
This is a sharp jump from the 816 stuck or delayed projects valued at Rs 9.68 lakh crore as of March 2015 and 766 stalled projects worth Rs 9.79 lakh crore as of March 2014, according to data assembled by the Centre for Monitoring Indian Economy (CMIE), a research agency.
“Unfavourable market conditions, weak commodity prices, funding constrains, poor raw material linkages are the key reasons contributing to the increase in stalled projects,” sources in government as well as private sector told HT.
A host of factors including inter-ministerial consultations, environmental concerns and procedural bottlenecks at the states continue to slow down infrastructure project implementation.
Mounting bad loans, which has topped Rs 4 lakh crore, has also made banks reluctant to lend to projects that are prone to delays.
India would require about $1 trillion (Rs 66 lakh crore) — half the value of the national GDP —over the next five years to overhaul its collapsing infrastructure.
The Narendra Modi-led NDA government aims to build 40 km of highways every day, four times more than the previous UPA government’s target, which it had failed to achieve.
The road and other infrastructure projects can spur economic activity, boost construction and create jobs.
According to credit rating and research firm Crisil, the construction sector is the most labour-dependent among all non-agricultural sectors, requiring more than 12 people to produce Rs 10 lakh of real output.
Experts said delays are happening despite the government’s policy focus to eliminate red-tape to get stalled projects going.
“The government is trying to address the root causes for project delays such as environmental clearances, long-term financing instruments. But, what’s concerning is the number of stalled projects are rising every quarter,” said Neeraj Sharma, Director, Grant Thornton Advisory Private Limited, a consulting and audit firm.