Tag: infra

It’s not just retail loans that banks may have to worry about.

The big infrastructure projects, which are already undergoing slow progress, may face more stress as the new Covid wave intensifies restrictions.

The government has unveiled an infrastructure push in the Union budget, which may be hit due to the renewed vigour of the pandemic.

Developers hit

Developers are facing issues of transporting labour and construction material to sites due to the new restrictions. With oxygen supply to steel and cement industries diverted to medical use dropping there may be bottlenecks in input supplies. Also, the government has indicated it may borrow more from the market, which would raise funding costs for the projects.

If the Covid wave continues for long, the infrastructure projects will face a setback and lead to their re-rating.

Cost overruns

Already projects are lagging even before the new Covid wave hit

As many as 448 infrastructure projects, each worth Rs 150 crore or more, have been hit by cost overruns totalling

more than Rs 4.02 lakh crore, according to a report. The Ministry of Statistics and Programme Implementation monitors infrastructure projects worth Rs 150 crore and above.

Of the 1,739 such projects, 448 reported cost overruns and 539 were delayed. “Total original cost of implementation of the 1,739 projects was Rs 22,18,210.29 crore and their anticipated completion cost is likely to be Rs 26,20,618.44 crore, which reflects overall cost overruns of Rs 4,02,408.15 crore (18.14 per cent of original cost),” the ministry’s latest report for January 2021 said.

The expenditure incurred on these projects till January 2021 is Rs 12,29,517.04 crore, which is 46.92 per cent of the anticipated cost of the projects.

Project delays

However, the report said the number of delayed projects decreased to 401 if delay is calculated on the basis of the latest schedule of completion.

Further, for 941 projects neither the year of commissioning nor the tentative gestation period has been reported.

Out of 539 delayed projects, 106 projects have overall delays in the range of 1-12 months, 131 projects have delays of 13-24 months, 187 projects reflect delays in the range of 25-60 months and 115 projects show delays of 61 months and above. The average time overrun in these 539 delayed projects is 44.65 months. Reasons for time overruns as reported by various project implementing agencies include delay in land acquisition, delay in obtaining forest and environment clearances, and lack of infrastructure support and linkages.

Delay in tie-up for project financing, delay in finalisation of detailed engineering, change in scope, delay in tendering, ordering and equipment supply, and law and order problems, among others, are the other reasons, the report said.