India Development News & Foreign Investment Opportunities

The Big Challenge: Cost Overrun of Projects

Rail and Power projects face delay


Rail and Power projects face delay


With more and more projects being announced and implemented, managing costs is going to be a bigger challenge for India’s trillion dollar development programme.

Data from Ministry of Statistics and Programme Implementation shows that 358 central projects are facing cost overrun.

More can be expected in the challenges of managing cost overrun, unless domestic suppliers ramp up production of materials and resources, warns construction market observers.

A case in point is the Nagpur Metro ordering 69 stainless steel coaches from China, an indication that local supplies are not up to date with the demand.

Indian media reports on 25 Nov 2018 cited Ministry’s data and highlighted that 216 rail projects faced cost overrun of Rs.2.46 lakh crore. Rail projects are capital intensive and accounted for 60% of the 358 central projects as of July 2018.

The 216 projects for Rs.165,343.22 crore are now estimated to cost Rs.412.160.04 crore, an massive increase of 149.28%.

Sixty-five of the 350 Indian Railways projects monitored by the Ministry in July 2018 were also being delayed by between three months to 374 months.

Forty-five of the 110 capital intensive power projects have reported cost overrun of Rs.63,973.82 crore.

The cost of 45 projects rose from the original Rs.178,005.08 crore to Rs.241,978.90 crore.

Thirty-six of the 110 power projects have reported delays of between one month to 135 months.

Imports of components for these projects are not going to get cheaper as foreign suppliers feel pressure of deliveries to the large scale planned development in India, the market observers cautioned.

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