This Article is From Jul 09, 2014

Policy Design Flaws Affected Infra Investments: Economic Survey

New Delhi:

Stating that delays in 110 central infrastructure projects have caused a cost overrun of over Rs 1.57 lakh crore, the government today said the core sector investment in India has been hit due to design flaws in policies that need to be urgently corrected.

"The first wave of infrastructure investment in India has been grounded in an array of design flaws that now need to be addressed," the Economic Survey 2013-14 tabled in Parliament said.

To top it all, allegations of corruption, intervention by investigating authorities and courts, problems in land acquisition and regulatory hurdles, including delays in green nods, took toll on infrastructure sector projects, it said.

It said the issues that need urgent redressal include "removing procedural bottlenecks, improving governance, and above all maintaining consistency in government infrastructure policies".

It said problems in the sector resulted in a "large number of stalled projects, a balance sheet crisis for many infrastructure and natural resources firms, and difficulties for banks which have lend them".

The key document expressed concerns that as many as 110 out of 239 central sector infrastructure projects, each costing Rs 1,000 crore or above, have reported delays, which range up to 26 months in case of steel, coal, power and petroleum projects.

"The total original cost of implementation of these 239 projects was about Rs 7,39,882 crore and their anticipated completion cost is likely to be Rs 8,97,684 crore, implying an overall cost overrun of Rs 1,57,802 crore (21.3 per cent of the original cost," it said.

It said: "Infrastructure will continue to be a bottleneck for growth and an obstacle to poverty reduction" unless sectors particularly transport, energy and communication, put under enormous burden due to recent years rapid economic growth, are significantly improved.

Also, it stressed the need for tackling on war-footing issues like problems in land acquisition, delays in regulatory approvals and environment clearances.

Pinning hopes on revival of investment it said, "Need has been felt to kick-start stalled infrastructure projects by stepping up infrastructure investment and increased private participation will usher in desired funds".

The government is promoting public-private-partnership for (PPP) bringing private sector efficiencies in creation of economic and social infrastructure assets and for delivery of quality public services.

By end of March 2014, there were 1,300 projects in the sector with the total project cost of Rs 6,94,040 crore, it said, adding that to promote PPP, government is providing viability gap funding, support for project development, capacity building programmes and other tool kits, the survey said.

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