In the earlier stories, we analysed the trends in time delays and the cost overruns of the delayed central infrastructure projects costing more than Rs.150 crores. In this story, we take a detailed look at few of the delayed projects to understand the reasons for the delays.
In the earlier stories, we analysed the trends in time delays and the cost overruns of the delayed central infrastructure projects costing more than Rs.150 crores. Various reasons were cited for the delays in the completion of these projects, including but not limited to – approvals & clearances from various ministries & departments, changes in the project plan, new requirements, inflation, incorrect estimations, project financing delays, tenders, etc.
We take a detailed look at a few of the delayed projects to understand the reasons for the delays.
The information is based on details provided in the Quarterly Reports and Flash Reports published by the Ministry of Statistics and Program Implementation (MOSPI)’s Infrastructure and Project Monitoring Division (IPMD)
Sevok Rangpo Railway line – NEFR (Railways) – delay in Environmental Clearance
As per IPMD’s Flash report for August 2022, the Sevok Rangpo NEFR project had a cost overrun of 488% compared to its initial cost estimate. It is among the projects with the highest cost overrun. The project is under the aegis of Railways and was approved on 04 August 2008. The initial estimate for the project was Rs.1.34 thousand crores while the cost estimate by end of August 2022 is Rs. 7.87 thousand crores i.e., a cost overrun of Rs. 6.53 thousand crores.
The Sevok Rangpo Railways line, when completed, is expected to connect West Bengal and Sikkim and the length of the Railway line is around 45 kms. Currently, the connectivity is only via road.
Reasons for delay: The project runs through a sensitive environmental zone, which is considered to be an Elephant corridor. Running through Darjeeling and Kalimpong Districts of West Bengal, the Sevok-Rangpo railway line passes through Mahananda Wildlife Sanctuary and various other zones earmarked as forest divisions in both states. The project has raised several environmental concerns and received opposition from different environmental groups along with the forest dwellers who would be impacted by the project.
IPMD’s quarterly report for April-June’2020, states that the work was delayed for want of clearance of diversion of forest land in West Bengal. The Supreme Court has given approval for the project only in February 2016. The permission for commencement of work was received from West Bengal Forest Department only in March 2019.
There were restrictions issued by the National Wildlife Board like digging of tunnels only during the daytime, which also has a bearing on the pace and cost of works being carried out. As per the latest quarterly report i.e., April-June’2022, about 33% of the work is completed. In view of the two-thirds work of the project yet to be completed, the costs could still increase.
Conversion of Rig Samrat to MOPS (Petroleum) – Increase in Scope of Work, non-performance of contractor etc.
The project “Conversion of Rig Samrat to Mobile Offshore Production Unit (MOPS)” undertaken by the Petroleum Ministry is one of the most delayed central sector projects that feature high in the lists of both time delays and cost overruns. The project was approved in March 2013 and was expected to be completed and commissioned by May 2015. The initial cost of the project was estimated at Rs. 862 crores. The current estimated cost of completion is Rs. 2001 crore i.e., a cost escalation of 132%.
Sagar Samrat was a 40-year-old jack-up rig under Oil & Natural Gas Corporation (ONGC), and the purpose of the project was to convert it into a Mobile Offshore Production Unit (MOPS).
Reasons for Delay: Multiple reasons contributed to the delay in the project. As per the update provided in the July-September’2020 Quarterly report, there was an increase in the scope of work compared to the initial scope. New works in fabrication – strengthening of the hull, replacement of all the legs, replacement of jacking cylinders, etc. were added to the scope of work. This was a substantial increase in the work and delayed the project further.
There was also a change in the contractor. Initially, the project was awarded to the Consortium of Mercator Oil & Gas Limited (MOGL) Mumbai, Mercator Offshore – Singapore and Gulf Piping Company (GPC), Abu Dhabi in 2011. In August 2018, MOGL wrote to ONGC and expressed its financial inability to complete the project without support from ONGC. The contract was terminated in September 2018, due to non-performance. The project was 85% complete by then. The rest of the project was awarded to GPC. The COVID-19 pandemic also affected the progress of the project. After a time overrun of around 115 months, the project is 99.2% as per the update provided for the quarter of April-June’2022. The revised anticipated ‘Date of Commissioning’ (DoC) is December 2022.
LHMC – New Delhi Redevelopment – Delay in Release of Funds
The aim of the project was to construct two new buildings for Lady Hardinge Medical College (LHMC). The project was approved in February 2013 with initial plans of completing the project by end of the year. But the project has neared its completion only recently. The initial cost of the project was Rs. 414 crores and the anticipated cost of completion is Rs. 586.5 crores.
Reasons for Delay: The delay in completion of this project highlights the procedural delays in approvals, granting of contracts, etc. in these projects. The initial proposal of coming up with new buildings was first proposed by the Central Government in 2003. However, it was initially approved in 2009 with the approval to start the activities received only in 2013. The project was stalled at the end of the year, and it took another 4 years i.e., 2018 to restart the construction activity.
The update in quarterly reports in 2020 indicates that the project was delayed due to paucity of funds as well as the termination of the contracts.
Raniganj Master Plan (coal) – Land Acquisition & Rehabilitation
Raniganj Master Plan coal project was approved to start in August 2009 with a cost estimate of Rs. 2.66 thousand crores. The project was initially estimated to be completed by August 2019. Around 38% of the project is completed and the anticipated date of DoC is August 2024.
Raniganj coalfield is under the aegis of Eastern Coals Fields Ltd (ECL), which is a subsidiary of Coal India Ltd. The Raniganj master plan was initiated to avoid any mishaps in the Raniganj coal area by rehabilitating the affected families to safer locations, in view of the active coal mining operations in the area.
There have been many earth subsidence incidents (due to mining activity) that have been recorded. Still, a sizeable population continues to live in these areas and in dilapidated houses (affected by the mining incidents), because of a lack of alternatives. The Master plan was intended to address these issues.
Reasons for the delay: Delays in the identification of land and acquisition, delays in construction of the houses, rehabilitation initiatives, etc. are a few of the direct reasons for the delay in the project. But these reasons are influenced by the coordination issues between the Central & State governments and the respective agencies.
A review of the updates about this project in the quarterly reports highlights a few of the specific issues.
- Identification of the area for resettlement of the affected population. The decision on the lands has been an issue of contention between both the Central & State governments. Related news reports over the years highlight the various instances where the respective governments have laid the onus of delay on the other.
- Determining compensation & rehabilitation package
- Agreement on options like cash compensation in lieu of land settlement, and the extent of such compensation.
- ECL had proactively shifted its employees & families. The responsibility for shifting the non-ECL families lies with West Bengal Government. Asansol Durgapur Development Authority (ADDA) was identified as the implementing agency. Status reports indicate the efforts of ADDA in identifying land & buildings for rehabilitation. Out of the requirement of around 362 acres of land for resettling around 29 thousand households, 279 acres across 12 resettlement sites were identified.
- There have been procedural & bureaucratic delays in all this activity.
Another reason for the escalating costs is the efforts involved in the prevention of any mishaps and the rescue operations in case of any incidents. Since the initiation of the plan, there have been multiple incidents of surface fires and other mining-related accidents.
The current anticipated cost estimate is Rs. 5.1 thousand crores i.e., a cost overrun of Rs. 2.4 thousand crores.
Kakrapar Atomic Power Project- 3 & 4 (Atomic Energy) – Re-inspection, financial delays, supply issues
Kakrapar Atomic Power Station (KAPS) is in Gujarat, and the current project i.e., Kakrapar Atomic Power Project – 3 &4, is aimed at adding two new units with a combined capacity of 700 MW. The project is developed and operated by the Nuclear Power Corporation of India (NPCIL), and the two pressurized heavy water reactors (PHWR) are the first set of indigenous-led plants to be developed in India.
The project received approval in October 2009, and the initial DoC of the project was December 2015. The initial cost of the project was Rs. 11.4 thousand crores.
Reasons for delay: The Fukushima Nuclear Disaster in 2011, required a re-inspection of the project design to ensure safety standards. This caused an initial break in the work of the project.
The increase in the gestation period of the project has resulted in the expenditure in the form of – increased Interest During Construction (IDC), price escalation, expense on manpower and establishment, etc. This required a new financial approval and there was a delay in getting the financial sanction.
Furthermore, the stipulations for the project by Atomic Energy Regulatory Board (AERB) have resulted in new additional works, which resulted in further revision of the time, effort, and financials of the project.
The project was further hit by financial constraints – an increase in cost due to GST and withdrawal of Megaproject Concession. Supply-side issues were also highlighted in multiple IPMD quarterly reports. The supply delays include – delay in the supply of equipment, delays in components from various contractors, delay in the delivery of fuel transfer equipment, etc. These supply-side delays have caused bottlenecks in the project.
The anticipated cost of the project is Rs. 17.1 thousand crores, a cost overrun to the tune of Rs. Rs. 7.7 thousand crores. The project is delayed by over 90 months and the anticipated DoC is June 2023. As per the latest IPMD reports, 97% of the project is completed by the end of the previous quarter. Around the same time two years ago, nearly 95% of the project was completed, which could indicate slower progress towards completion during the pandemic years.
These case studies are only a sample of those central infrastructure projects that are delayed. The reasons range from direct ones like lack of funds or delay in allocation of funds to more complicated reasons involving land acquisitions and rehabilitations. The human component, the environment, etc have also affected timelines. For many projects, there are multiple reasons that affected the completion of the project, with most of the reasons being the result of an initial delay. This cycle of delay & cost escalation resulting in further delays only complicates the process.
Featured Image: Central Sector Projects
