The Standing Committee on Finance for Demand for Grants of 2006-07 of the Ministry of Statistics and Programme Implementation (MOSPI) had observed that addressing the time and cost overruns in project implementation could save up to 2% of the Gross Domestic Product (GDP). This was despite the fact that the cost overruns of the mega and major projects had declined from 67.70% in 1990 to 18.1% in 2005.
Recognising the gravity of the problem, the committee urged for more rigorous monitoring of the projects under implementation. It pushed for expeditious implementation of the Online Computerised Monitoring System (OCMS), which has been in the offing since 2000.
The OCMS was finally implemented in 2006 and became fully functional within a year. It enabled project-executing agencies to regularly monitor and check the status of projects through a web-based interface. The implementation agencies, besides reporting the progress of the projects, are required to explain the reasons for delays regularly.
The platform is used by most administrative ministries to monitor, evaluate and report the progress of projects against the benchmarks. It is aimed at eliminating delays in project implementation and thus minimising cost escalation.
However, the Standing Committee on Finance on Demand for Grants 2011-12 of MOSPI found that 563 Mega and Major Projects under the monitoring of MOSPI had a cost overrun of 20.3% and a time overrun of 51%. It further found that as many as 83 ongoing projects had both time and cost overruns, 54 projects cost overrun and 193 time overrun. In 2011-12, for the sake of dynamic improvements, the IPMD changed the OCMS and resolved PSU issues through OCMS training or interaction-based clarifications in response to PSU comments. In this period, the emphasis was mainly on convincing the PSUs to forward the information online.
By 2016-17, MOSPI has been generating detailed monthly and quarterly progress reports on the status of the central sector projects of Rs 150 crore and above. These provide information on the cost and time overruns which are “detailed and comprehensive enough to be useful to the administrative ministries and other user agencies for taking timely remedial and corrective action”.
However, the problem of time and cost overruns continued to persist. As of 1 May 2016, there were 1,061 ongoing Central Sector Projects on the monitor of MoSPI. Of these, 241 projects showed cost overruns, 326 projects showed time overruns, and 70 projects showed both time and cost overruns.
Redesigning, revamping and upgradation of OCMS have made it more user-friendly. All major projects are monitored on a quarterly basis, while the mega projects are monitored on a monthly basis through a flash report system.
The monthly flash report can now be uploaded in 15 days. Close to 92% of the agencies implementing mega and major projects in the country are now on board the OCMS portal. These developments notwithstanding, the menace of time and cost overruns continue. January-March 2023 quarterly flash report informs that of 1,566 projects, 384 have cost overruns of Rs 4.67 lakh crore or 21.59% of their sanctioned cost. Besides, 259 ongoing projects have both time and cost overruns.
The Ministry‘s 2022-23 annual report informs that as of 1 December 2022, 414 mega projects, each costing Rs 1,000 crores or more, were under implementation at an anticipated cost of Rs 20.86 lakh crore. The original estimated cost of these projects was Rs 16.44 lakh crore, a cost overrun of 26.89%. It also reports that 1,062 major projects, each costing between Rs 150 crore to Rs 1,000 crore, had an anticipated cost of Rs 4.50 lakh crore against their original estimated cost of Rs 4.40 lakh crore, indicating a cost escalation of 2.27%.
Taken together, 1,476 central sector projects costing Rs 150 crore or above are expected to be completed at Rs 25.36 lakh crore against their original estimated cost of Rs 20.84 lakh crore, recording a cost overrun of 21.69%. Rigorous monitoring of the ongoing infrastructure projects helps track progress and flash calls for corrective action, but can’t eliminate the time and cost overruns. Going by the submissions before the Standing Committees, projects are delayed due to difficulties in land acquisition, rehabilitation and resettlement, forest, environment and wildlife clearances, shifting utilities, removal of encroachments, funding constraints, geological surprises and changes in the scope and design of the projects after their commissioning. These also lead to cost escalation.
Many of these can be taken care of at the project planning stage. Recommendation of the standing committees to pay due attention to pre-project activities and sanctioning a project only after obtaining all the necessary clearances can effectively address the persistent problem of time and cost overruns.
A landmark study of 16,000 projects, each costing US$1 billion or more, spanning over a century and spread over 136 countries (Flyvbjerg, Bent and Gardner, Dan (2023), How Big Things Get Done, Currency, 2023) reported that 91.5% of projects go over budget, less than a per cent are completed on time and deliver the espoused benefits.
Most of the findings in the book emanate from data-driven analysis and discussion. They are quite applicable in all country contexts, including India, as the author argues that few projects are unique and most can benefit from the experiences of others.
Some of the critical suggestions for the timely completion of projects within the allocated budget have been summarised well by Daniel Akst in his review of the book in a PwC publication, the Strategy+Business. Accordingly, large projects demand “thinking slow and acting fast”, “planning with ferocious rigour”, “following the Lego principle”, and “beware the gravitational pull of sunk cost”.
In sum, optimistic revenue projections, conservative cost estimates, ambitious time scheduling and acting in a hurry to get the project proposal approved and sanctioned are the sure-shot recipe for cost and time overruns. Monitoring is important, but planning is critical.
Furqan Qamar, former Adviser for Education in the Planning Commission, is a Professor of Management at Jamia Millia Islamia, New Delhi. M. Saifuddin Mujaddidi is pursuing PhD in the Department of Management Studies, Jamia Millia Islamia. Views expressed are personal.