Put mega projects on fast track

Emphasis on pan-India mega infrastructure projects will boost inclusive and rural economy-driven growth

By Author A Amarender Reddy   |   Published: 24th Jun 2019   12:05 am Updated: 23rd Jun 2019   9:54 pm

Over the last two decades, the Indian government has introduced many gigantic programmes for improving infrastructure and welfare of its billion-plus population.

It’s now constructing about 32 km of highway per day under Bharatmala, providing employment guarantee for about 5.5 crore households under MGNREGA in about 6 lakh villages, has distributed 12 crore soil health cards to farmers, is handling 536 crore savings accounts through the banking system and about 80% of the adults have been covered under the Jhan Dhan Yojana. But the success rate is mixed with some programmes performing better than others.

With the new government in place, completing existing projects as well as initiating new ones in power, irrigation, transport and IT sectors will be an urgent priority to take the economy to the next level in a globalised world. The huge investments in these mega-projects will not only enhance India’s competitiveness but also boost GDP growth rates and reduce unemployment. Thrust on mega projects will help snatch opportunities arising out of trade war between the US and China, attracting global investments.

Implementation Problems

However, some of these megaprojects seem to be saddled with implementation problems. The Ministry of Statistics and Programme Implementation in its latest report pointed out delays and cost overruns while reviewing 1,424 central infrastructure projects worth Rs 150 crore and above. It said that over 25% of these projects were delayed. The original cost of implementation of these 1,424 projects was Rs 18.2 lakh crore and their anticipated completion cost now is likely to be Rs 21.3 lakh crore, which reflects an overall cost overrun of Rs. 3.1 lakh crore (ie, 17% of the original cost).

The key factors for delay or non-completion of projects are problems in land acquisition, environment, forest and regulatory clearances, lack of risk management capabilities and low maturity of project management processes, political uncertainty and allegations of corruption. The immediate priority of the government should be to overcome these problems through better planning and implementation.

Decentralise Diligently

Pushing a project into implementation without due diligence is a major reason for its failure. Inadequate money, time and expertise is devoted to preparing the project report. Proper time spent on details like market surveys, technological and procurement options, finance and implementation would save on costs and time.

Detailed risk assessment, adoption and coping strategies need to be evolved in the pre-planning stage to reduce risk during execution and to adhere to the schedule. Both government and private sector employees must be acquainted with project management tools, which include how to use latest technologies like real-time management information systems and geographical information systems to take quick decisions towards successful implementation.

All stakeholders, including government officers, private partners and households, must be sensitised about the results framework and benefits of the project to get all-out support at every stage. Genuine decentralisation in managing these mega projects to State governments will help in a closer look at implementation problems, tracking progress and timely utilisation of feedback mechanisms.

Other Countries

Countries like China, Japan and South Korea have centralised project management units to monitor megaprojects with linkages to State-level project monitoring units for seamless information flow with feedback loops. A similar institutional framework may be evolved in India so that feedback in time to the implementing agency can overcome the obstacles.

Development of a standards-based model for programme management, taking into consideration local economic and political situation, ensuring timelines, responsibility and accountability for the delivery of results are critical. Emphasis on mega infrastructure projects covering pan-India boosts inclusive and rural economy-driven growth. These projects should not starve for funds. Unlocking capital and infusing fresh credit without impairing fiscal prudence is the key.

India’s tax-GDP ratio is still abysmally low at 17%, while in South Africa it is 27% and in OECD countries, it is 34%. Bringing more people into the tax net by strengthening GST will create more fiscal space to fund these projects. Another source of funding infrastructure is disinvestment of public sector companies, targeted at Rs 90,000 crore this fiscal. But since both global and domestic stock markets are in the doldrums, depending on this source may be difficult.

Infrastructure Funding

In addition to better project management, allocation and timely release and utilisation of funds are important. The government has to play a bigger role in facilitating credit flow through the banking system to private players, which are working in PPP or BOT mode for government projects.

The share of bank credit to infrastructure declined steadily to 11.5% in fiscal 2018 after peaking at 15.2% in fiscal 2015. NPAs have saddled the banking sector and NBFCs are reluctant to provide credit to long-gestation infrastructure projects.

The government has to incentivise infrastructure funding through financial innovations like guarantee for infrastructure bonds, and encouraging pension and insurance funds to invest in infrastructure. Overall, the monitory and fiscal policy needs to be accommodative to ensure enough liquidity to speed the wheels of the private infrastructure companies to complete the projects on time.

Although infrastructure funding is essential, it should not be at the cost of funds from the welfare schemes. Welfare schemes like MGNREGA, pension scheme for unorganised workers, health insurance scheme (Aayushman Bharat), PM-Kisan and PDS scheme have not only reduced widespread rural distress, they are also creating additional purchasing power in the hands of poorest of the poor, with its multiplier effects boosting rural demand and growth.

(The author is Principal Economist, ICAR-Central Research Institute for Dryland Agriculture, Hyderabad)