Cost overruns of Infra projects

Cost overruns of Infra projects

News: According to Ministry of Statistics and Programme implementation, cost overruns of Infra projects stood at INR 4.80 lakh crore in May.

Background:
• Out of 1,681 projects, 408 reported cost overruns and as many as 814 projects were delayed.

What is cost overruns? What are the reasons for it in India?
• Cost-overrun is the amount by which the actual cost of a project exceeds its original or estimated cost. In the context of infrastructure projects in India, cost-overrun is a common and serious problem that affects the efficiency and effectiveness of public investment.
• Some of the reasons for cost overruns in infrastructure projects in India include delay in land acquisition, delay in obtaining forest and environment clearances, lack of infrastructure support and linkages, delay in tie-up for project financing, finalisation of detailed engineering, change in scope, tendering, ordering and equipment supply, and law and order problem.

What are steps taken by Government of India to prevent cost overruns?
• PM Gati Shakti National Master Plan - This is a plan to create a multimodal connectivity infrastructure network that will integrate road, rail, air and waterways and reduce the duplication of resources and efforts. The plan aims to improve the coordination among different stakeholders, streamline the project approvals and clearances, and enhance the efficiency and quality of project delivery.
• Online Computerized Monitoring System (OCMS) - This is a system developed by the Ministry of Statistics and Programme Implementation (MOSPI) to monitor the progress and performance of infrastructure projects costing Rs 150 crore and above.
• Amendment to Land Acquisition Act and development Standard Rehabilitation Package - These are measures taken by the government to address one of the major causes of delay and cost escalation in infrastructure projects, which is land acquisition. The amendment to the Land Acquisition Act aims to make the process more transparent, fair and participatory, while the Standard Rehabilitation Package provides compensation and assistance to the affected landowners and families.
Source – Economic Times, Indian Express

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