India's spending on infrastructure will go up to 37 lakh crore rupees by 2030, prompted at least in part by the Covid pandemic. One of the significant factors, if you take present conditions, is the delay in completion of infra projects (including housing projects) and cost overruns witnessed due to the pandemic, according to a new report.
The costing overruns assume critical significance as most global economies pin their hopes of a growth revival on increased infrastructure spending. With the world seeing the biggest GDP growth contraction since the second world war, how and 'how much' you spend, and on what, is of utmost importance in a cash-strapped scenario.
As per the report by the international construction and consultancy company Mace titled 'A Blueprint for Modern Infrastructure Delivery', as much as 80 per cent of big infrastructure projects are delivered late and goes over-budget, besides under-delivering on benefits. 'These challenges must be addressed so as not to undermine the global infrastructure-led economic recovery; evidence of change through successful delivery is essential to boosting public confidence in the months ahead,' the report argues.
For example, by June this year, there were 1,698 central govt projects under implementation across India, with nearly 500 costing upwards of Rs 1,000 crore, and around 1,200 costing between 150 and 1,000 crore. Out of these, 414 projects were estimated to suffer from cost overruns totalling as much as Rs 4.3 lakh crore. This would come to two-thirds of their original budgeting.
“Construction halt, labour shortage and revocation of toll collection were some of the major challenges India’s infrastructure sector has faced due to Covid-19 lockdown,” points out Anuj Puri, chairman of leading Indian real estate consultancy Anarock.
“Even now, after a staggered easing of lockdown rules over the last months, major infrastructure work across the country haven’t resumed usual pace. In India, there is a very real need to ensure timely implementation. Many of India’s infrastructure projects were already delayed even before the pandemic,” he points out.
“Around the world, good infrastructure is vital for socioeconomic prosperity, both directly through investment and jobs, and indirectly through thing like improvements to transport connectivity and access to clean water. India is no different,” comments Jason Millet, CEO (Consultancy) at Mace, which did the report. “Unfortunately, not all infrastructure projects are properly planned and delivered, resulting in delays, cost overruns and under-delivery against expected benefits.”
The negative impact of this is significant, with Millet's calculation that this could mean an additional expenditure for India which could go as high as nearly 67 lakh crore rupees in the next 10 years. “This financial burden, combined with a perceived lack of delivery capability due to project delays and mismanagement, risks severely damaging public confidence in the sector; something we cannot afford when community buy-in is so critical to establishing and achieving positive outcomes,” he says, pointing out, “With Covid-19 placing greater emphasis on the importance of infrastructure as an economic multiplier, it is more important than ever that we get this right.”
To shift the balance, the report outlines recommendations, including implementing independent scrutiny panels on big projects, changing procurement methods, and planning the scheme more carefully from the beginning.
