MoSPI report on Cost Overruns of Infrastructure Projects

The Ministry of Statistics and Programme Implementation (MoSPI) recently released its report on Cost Overruns of the Infrastructure Projects. The ministry monitored the infrastructure projects worth Rs 150 crore.

Key Findings of report

  • As per the report, around 450 infrastructure projects have been hit by the cost overruns. Each of the project is worth Rs 150 crore or more.
  • The cost overrun amount stands at Rs 4.28 lakh crore.
  • The figure says, out of 1,687 projects, 450 reported cost overrun while 558 were delayed.
  • Further, the expenditure on these projects till December 2020 was Rs 12,17,692.37 crore. This amounts to 47.33 per cent of the anticipated cost of the projects.
  • The report however highlights that the number of delayed projects decreased to 408 in case the delay is calculated on the basis of latest schedule of completion.
  • The year of commissioning or the tentative gestation period has not been reported for 923 projects.

Why there are cost overruns?

The project implementing agencies cited several reasons for time overruns. The reasons include- delay in land acquisition, delay in obtaining forest and environment clearances and lack of infrastructure support and linkages. Further, the report highlights that these projects were delayed because of state-wise lockdown due to COVID-19.
However, the report cited that the Project agencies are not reporting their revised cost estimates and commissioning schedules for many projects. So, time and cost overrun figures are under-reported.

What is Cost Overrun?

Cost overrun is also called as cost increase or budget overrun. It simply means the unexpected incurred costs. Such costs exceed the budgeted amounts because of underestimation of the actual cost during budgeting.  The Cost overrun is different from the cost escalation. Cost escalation is an anticipated growth in a budgeted cost because of factors like inflation.

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