27 Apr 2012

Cost Overruns in Projects

The Minister of State (Independent Charge) for Statistics and Programme Implementation Shri Srikant Kumar Jena has said that There are 555 Central Sector projects costing Rs. 150 crore and above on the monitor of the Ministry of Statistics and Programme implementation, (MOSPI) as on 1st February, 2012. Out of these, 190 projects were slipped into cost overruns with respect to their original schedule of completion. The State wise list of 190 projects with cost overruns is placed at Annexure-I. 

         In a written reply in the Rajya Sabha today Shri Jena said, the major reasons reported by project authorities for cost overruns are as follows:-
i)        Changes in rates of foreign exchange and statutory duties,
ii)      High cost of environmental safeguards,
iii)         Higher cost of land acquisition and rehabilitation measures,
iv)         Change in the scope of project,
v)           Under -estimation of original cost -original estimate is only an estimate, the project is tendered and tenders may go above the estimate.
vi)         General Price rise-due to normal rise in prices of input materials, the project cost rises. The inputs like cement, steel, bitumen, labour are generally indexed in the contract. Thus the project cost rises,
vii)      Time overrun

The Minister said, the monitoring of central sector projects costing Rs. 150 crore and above in 16 infrastructure sectors is done against the target date of commissioning. To ensure timely completion of infrastructure projects the Government has taken many steps.  The major steps are:

·        Stricter appraisal of projects by way of inter-ministry consultations and adoption of two-stage clearance system, first by PIB/EFC, secondly by CCI/CCEA.

·        Monthly monitoring of project above Rs. 150 crores by MOSPI  with respect of time and cost overrun.

·        In-depth review of projects on quarterly basis by the concerned infrastructure Ministries.

·        Follow up with the State Governments in respect of problems relating to land acquisition, rehabilitation related issues, forest clearances, environment/ wildlife clearances, removal of encroachments & availability of Right of Way (ROW), ensuring law and order at project sites, etc. This Ministry has already advised the states to constitute a Central Sector Projects Coordination Committee (CSPCC) under respective Chief Secretaries to facilitate Central Sector Projects in the states and 11 states have since constituted the Coordination Committee in their respective States.

·        Faster appraisal through Departmental Committees like Expanded Board of Railways in lieu of PIB;

·        Setting up of Standing Committees by the Government in the Ministries/Departments headed by respective Additional Secretaries to fix responsibility for time and cost overruns;

·        Appointment of nodal officers for each project with continuity of tenure;

·        Adoption of computer network based monitoring; and

·        Capacity building of project managers through  training courses and seminars on project planning, monitoring and project management for project managers of CPSUs by Ministry of Statistics and Programme Implementation.

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