CHAPTER 9
Project Management in India
Project Targets and Achievements, Project Time and Cost Overruns—Issues
After going through this chapter, you should be able to
• Understand project management practices in India
• Have an overview of major activities of ministry involved in monitoring of central sector projects including social sector
• Oversee periodical reports to monitor projects performance in various sectors
• Appreciate Flash Reports for mega projects and major projects illustrating reasons for time and cost overrun, trend, and the remedial measures initiated
Key Terms: Flash Report, Infrastructure and Project Monitoring Division (IPMD), major projects, mega projects, performance report, Public Investment Board (PIB), project monitoring, cost overrun, time overrun.
Having discussed the significance and techniques of project management in the earlier chapters, namely, project formulation and appraisal, this chapter is devoted to project management practices and monitoring in India. In this regard, an overview of Infrastructure and Project Monitoring Division (IPMD), a wing of the Ministry of Statistics and Programme Implementation involved in independent monitoring of central sector projects and key infrastructure sectors including the social sector, is presented. Major activities of the IPMD, its periodical reports to monitor projects in various sectors, and reasons for time and cost overrun along with the remedial measures initiated are discussed. These are illustrated by the flash Reports for mega projects and major projects. However, project monitoring practices vary across different countries and are beyond the purview of this chapter.
Infrastructure and Project Monitoring Division
The Infrastructure and Project Monitoring Division (IPMD)1 is the project management arm and apex monitoring institution of the Government of India. It performs triple role in monitoring the implementation status of central sector projects costing more than Rs. 150 crores in infrastructure sectors and performance of 11 key infrastructure sectors. It is independent from planning and implementing agencies, collects at one place information about ongoing projects, and provides management services to the government for concurrent decision making and corrective action for efficient and effective management of projects. As a member, it assists Public Investment Board (PIB) in the appraisal of projects, identifies causes and their remedies for time and cost overrun, and assists the government in fixing responsibility for the same. The division plays a key role in the institution development and enhancement of project management practices in the country with a view to strengthening delivery of infrastructure projects for economic development of the country.
The role of IPMD can be summarized as follows:
• Monitoring implementation of projects and infrastructure performance,
• Initiating systemic improvements for better project management practices, and
• Facilitating taking up issues with the relevant authorities in case of individual projects.
Major activities of the Infrastructure and Project Monitoring Division include2 the following:
• To monitor the progress of central sector infrastructure projects costing Rs. 150 crores and above;
• To monitor the performance of 11 key infrastructure sectors;
• To bring out analytical reports, that is,
Monthly Flash Report on central sector major projects costing Rs. 150 crores and above,
Monthly Flash Report on mega projects costing Rs. 1,000 crores and above flagging projects with time and cost overruns,
Overview report, review of infrastructure sector performance,
Capsule report on infrastructure sector performance,
Quarterly project status report on projects costing Rs. 150 crores and above, and
Quarterly mega project status report on projects costing more Rs. 1,000 crores and above providing information on all projects on the monitor;
• To visit the project sites to identify critical and important milestones for monitoring the projects, review progress of implementation of projects, and hold in-depth discussions with the Public Sector Undertakings (PSUs) and administrative ministries/departments in order to get firsthand knowledge of the problems and to initiate facilitative action for resolving them;
• To organize training programs on Project Planning and Management to propagate the uses of project management tools and techniques for smooth implementation of projects.
Before we discuss the project performance reports let us the present the infrastructure sector performance for various sectors. Table 9.1 presents the infrastructure sector performance for various sectors for the year 2014.
Table 9.1 Infrastructure sector performance (April–October 2014)
# : Includes widening to four/six/eight lanes & two lanes and strengthening of existing weak pavements.
| * : Provisional | BU : Billion Units | MT: Million Tonnes | NA: Not Available |
| MCM : Million cubic metre | BRO : Border Road Organisation | Km: Kilometre |
Performance Report of Projects
As mentioned earlier IPMD brings out analytical reports periodically. Periodical report for 750 projects3 with original cost of Rs. 948,105 crores and anticipated cost of Rs. 1125,674 crores involved a cost increase of 18.7 percent. These projects included 247 mega projects each costing Rs. 1,000 crores and above and 503 major projects each costing between Rs. 150 crores and Rs. 1,000 crores (see Table 9.2).
Sector-wise details of 750 projects containing original cost, anticipated cost, cost overrun, and time overrun are presented in Table 9.3. These projects had cost overrun of 18.75 percent. Of these, 312 projects were delayed having range of time overrun. Projects in sectors like water resources, railways, and petro chemicals reported cost overrun of 119, 67.7 and 63.3percent, respectively. Similarly, higher range of time overrun reported for railways, road transport, petroleum, and power and coal sectors were 3–247, 2–120, 2–110, 1–106, and 1–120 months, respectively (see Table 9.3).
The Flash Report for December 20154: To illustrate the project management practice, we analyze the Flash Report for the month of December 2015. The report contains information on the status of the 1,058 central sector infrastructure projects costing Rs. 150 crores and above. During December 2015, 9 projects (4 projects in petroleum and 1 project each in shipping and ports, telecommunications, power, civil aviation, and coal sector) reported completion. Further, out of 1,058 projects, 334 projects were delayed with respect to original schedule and of these 13 were mega projects costing Rs. 1,000 crores and above.
Total original cost of implementation of the 1,058 projects was Rs. 11,68,413.82 crores and their anticipated completion cost was reported to be Rs. 13,79,878.25 crores, which reflects overall cost overruns of Rs. 2,11,464.43 crores (18.10 percent of original cost). However, the expenditure incurred on these projects till December 2015 was Rs. 589,925.05 crores, which was 42.75 percent of the anticipated cost of the projects.
Table 9.2 Details for 750 projects
|
No. of Projects |
Original Cost (Rs. Crores) |
Anticipated Cost (Rs. Crores) |
Cost Overrun % |
|
|
Mega projects (Rs 1,000 crores and above) |
247 |
754,176 |
908,236 |
12.0 |
|
Major projects (Rs. 150 crores to less than Rs. 1,000 crores) |
503 |
193,929 |
217,438 |
12.1 |
|
Total |
750 |
948,105 |
1125,674 |
18.7 |
Graphical presentation of all 1,058 projects and the delays for the 334 projects for December 2015 is presented in Figures 9.1 to 9.5. Similar results are reported for the previous 3 months.
As discussed earlier, Flash Report5 on mega projects each costing Rs. 1,000 crores and above is prepared every month. To illustrate, the Flash Report for the month of September 2015 which contains information on the status of the 254 Central Sector Infrastructure Projects is analyzed. Of these 254 projects, 3 projects (1 project each in steel, petroleum, and power sector) have been reported completed; 104 projects are delayed with respect to original schedule.
Sector-wise 254 mega projects details regarding original cost, anticipated cost, and cost overrun are presented in Table 9.4. The total original cost and anticipated completion cost were Rs. 831,432.21 crores and Rs. 10,16,898.06 crores, respectively, reflecting an overall cost overrun of Rs. 185,465.85 crores (i.e., 22.31 percent of the original cost). The expenditure incurred on these projects till September 2015 was Rs. 420,793.07crores.
Further, of the 254 mega projects, details of time overrun and cost overrun are as under:
• Time overrun was reported for 104 projects, and among these, railways, power, and road transport sectors reported range of time overrun (TOR) of 3–261, 6–123, and 6–61 months, respectively.
Table 9.3 Sector-wise details of cost overrun and time overrun
Source: Annual Report 2014–15 Ministry of Statistics and Programme Implementation GOI.
Figure 9.1–9.2 Graphical presentation of all projects with respect to original schedule, including breakup of 334 delayed projects in December, 2015
• Cost overrun was reported for 100 projects having average cost overrun of 89.34 percent; and among these the cost overrun for coal, railways, and road transport were 478.5, 187.8, and 106.5 percent, respectively.
• Projects reporting both time overrun and cost overrun were 50 in number, of which railways had the highest number of projects (see Table 9.5).
Having discussed various reports reflecting cost increase and time overrun, let us discuss reasons for such increase and the steps initiated to overcome these.
Figure 9.3–9.5 The image illustrates the summary of projects in the Flash Report December, 2015; brief analysis of 1,058 projects; and investment scenario of 1,058 projects
Reasons for Time Overrun
There are various reasons for delay in projects and these are grouped under three broad heads as6
• Regulatory mechanism: These relate to land acquisition and forest and environmental clearances.
Table 9.4 Mega projects costing Rs. 1,000 crores and above—Flash Report September 2015
*Information in respect of Ministry of Railways is as on January 1, 2015. Ministry of Railways is not updating the information.
**Out of 34 projects, the data/information of only 4 projects was submitted online by the NHAI for the month of September 2015.
(Compiled from 76th Report on Mega Projects (Rs. 1,000 Crores and above), September 2015, Ministry of Statistics and Programme Implementation.)
• Lack of sound project management practices: These included lack of proper planning resulting in changes in scope of project; delay in tie-up of project financing, finalization of detailed engineering, tendering, ordering and equipment supply; contractual issues and pre-commissioning teething troubles.
• External forces like law and order problems and geological surprises.
Table 9.5 Mega projects costing Rs. 1,000 crores and above—Flash Report September 2015
*Information in respect of Ministry of Railways is as on January 1, 2015. Ministry of Railways is not updating the information.
**Out of 34 projects, the data/information of only 4 projects was submitted online by the NHAI for the month of September 2015.
(compiled from 76th Report on Mega Projects (Rs. 1,000 Crores and above), September 2015, Ministry of Statistics and Programme Implementation Infrastructure and Project Monitoring Division GOI)
Causes of Cost Escalation are Grouped as Under
• Poor project planning and project management; underestimation of original cost; general price rise/inflation and changes in scope of projects
• Regulatory factors: Changes in rates of foreign exchange and statutory duties; high cost of environmental safeguards and rehabilitation measures; spiraling land acquisition costs
• Monopolistic pricing by vendors of equipment services
• External factors like disturbed conditions
Remedial Measures/Systemic Improvements7
IPMD introduced systemic improvements to reduce delays in project implementation and these included the following:
• Regular monitoring of time and cost overruns in projects, each project costing Rs. 150 crores and above
• Detailed review of projects on quarterly basis
• Setting-up of standing committees in respective ministries/departments to fix responsibility for time and cost overruns
• Adoption of stricter appraisal of projects and computer network-based monitoring
• Emphasis on project management and training of project managers
• Setting-up of Central Sector Projects Coordination Committees (CSPCCs) in the states under the Chief Secretaries for removal of bottlenecks and for facilitating the speedy implementation of major projects.
In Addition to the Above, Following Initiatives Were Introduced8
• Central Sector Projects Coordination Committees (CSPCCs) were set up in states on the intervention of the central government to address the issues such as land acquisition, forest/environment/wild life clearances, and encroachment/law and order issues; approximately 25states have constituted CSPCCs and these are holding regular meetings.
• Taking up of issues with ministries/reviews of sectors to analyze project delays at different levels in particular in Ministry of Railways and Road Transport and Highways.
• Active participation in MOU/review meetings to raise the issues of time and cost overruns in the project implementation item of the draft MOUs in the meetings of the MOU Task Forces conducted by the Department of Public Enterprises for assessing the performance of the CPSEs.
Summing up: Time and Cost Overrun in Projects
An analysis of the 750 projects at the end of September 2014 shows that 312 projects were running behind their original schedule. The time overrun in these projects ranges from 1 to 247 months. The cost overrun in the delayed projects has resulted in 18.75 percent increase in original cost. The anticipated cost for all delayed projects together is Rs. 652,164.21 crores. Figure 9.6 depicts the percentage of delayed projects during the last 15 years. This shows a decline in the delayed projects.
Time and cost overruns have been a major problem affecting the implementation of central sector projects. Due to close monitoring and improvement brought out mainly by the ministries concerned with the support of the Ministry of Statistics and Programme Implementation, the time overrun in projects is coming down, resulting in reduction in the cost overrun of the projects. An analysis of the trend in the last 15 years shows that the cost overrun has come down from 40.90 percent in March 1999 to 18.80 percent in September 2014.
Figure 9.6 Time and cost Overrun in Projects
Figure 9.7 depicts the trend of cost overrun during the last 15 years
Brief Case Example*
New Tripur Area Development Corporation Ltd
Tripur area development is the first public–private partnership project in the water and sanitation sector in South Asia operating on a build–own–operate–transfer (BOOT) basis. The project inaugurated on February 7, 2006, in Chennai by the Tamil Nadu chief minister covers the water and sanitation needs of the entire city population, including close to 80,000 slum residents. The project was initiated in the mid-1990s when the Tripur Exports Association recognized the need to improve the area’s infrastructure to remain competitive in the knitwear industry but did not have the resources to finance the project. Tripur residents receive water every day for 4 to 6 hours, as opposed to receiving water only on alternate days at the best times prior to the project. Household water connections have increased by 8,000 and the local industry now has a reliable source of water. One hundred percent of new domestic users have paid for the water connections to access high-quality water—the fee of Rs. 5,000 covers the capital costs of each new connection.
The Tripur project illustrates that private sector participation can provide the necessary complement to government investments to make it happen. It also demonstrates that the private sector can provide important service to the poor—and at lower costs, lower than those paid by so-called beneficiaries of government subsidies. Besides technical and managerial expertise, the private sector contributed Rs. 1,023 crores; USAID provided a partial guarantee and technical assistance to the project.
Similarly, performance-based contracts to manage water distribution and transmission system in Navi Mumbai near Mumbai have improved the water and sanitation services. The results are astonishing, the revenues increased by 45 percent, the year following the introduction of the new contracts. The city is able to reduce unnecessary expenditures over a 2-year period and the city has reduced its annual energy consumption by Rs. 45 lakhs on sewerage contracts alone.
1Ministry of Statistics and Programme Implementation, GOI Annual Report 2014–15
2Ibid
3Ibid
4CENTRAL SECTOR PROJECTS Rs. 150 crores and above Flash Report December 2015 (Ministry of Statistics and Programme ImplementationInfrastructure and Project Monitoring Division, GOI)
576th REPORT ON MEGA PROJECTS (Rs. 1,000 Crore and above) September 2015, (Ministry of Statistics and Programme Implementation Infrastructure and Project Monitoring Division, GOI)
6Ministry of Statistics and Programme Implementation, GOI, Annual Report 2014–15
7Ibid
8Ibid
*For other case examples relating on Infrastructure projects refer to
Dhameja Nand and Dhameja Sarika, Infrastructure Development and Financing including Social Infrastructure Issues and Challenges (New Delhi: Viva Publication, 2015)