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Editorial

Published on: Jan. 14, 2021, 2:30 p.m.
The economic cost of faulty execution
  • Illustration: Panju Ganguli

By Business India Editorial

After waiting for over 15 years, the people now have something to cheer about. Last fortnight saw two stretches of the ambitious Dedicated Freight Corridor (DFC) project finally coming live. Just a couple of days before the conclusion of 2020, Prime Minister Narendra Modi inaugurated the New Bhaupur-New Khurja of the Eastern Dedicated Freight Corridor (EDFC). And recently, he unveiled the New Rewari-New Madar section of the Western Dedicated Freight Corridor. During the video-conferencing-guided inaugurations, while the Prime Minister reiterated the game changing dimensions of the project, he also did not mince words about the execution process being full of fault lines.

His detractors may well say that he is again trying to take undue credit for pushing something big to a conclusive stage, which was actually initiated by the previous regime. But talk to any analyst and he would agree that there is merit in the delay theory resulting in huge cost overrun (the most apparent disadvantage). And that it is not only restricted to DFC but other defining projects too and, therefore, symptomatic of a larger malaise, which seems to be inherent to the execution process of epic-scale or game changing projects.

The over 2,800km-long DFC project was conceived in 2006, during the UPA I regime, when the economy was firing on all cylinders and probably enjoyed the best spell in GDP growth in the history of independent India. It entailed putting together all elements of radical transformation in railways freight carriage activities on a grand scale. 

The key objectives of the project included putting India in the select list of countries with a ‘dedicated freight only’ railway line; bringing in more efficiency in railway freight operations which, in terms of revenue generation, is its mainstay, despite being a cheaper mode of transportation; linking India’s main production clusters in central and eastern India with ports in western coast for exim trade; and energising economic activities in the towns closer to the line and facilitating the creation of modern and advanced multimodal assets (warehouses, logistics and industrial parks, container terminals, etc).

Around the same time, the then UPA government had also announced the setting up of an equally super ambitious project – Delhi Mumbai Industrial Corridor (DMIC), which entailed the creation of a world class expressway between India’s two major cities, facilitating the fast carriage of goods from seven massive industrial nodes – the driving element of the project.

Together, these two freight-centric projects in the last decade were believed to significantly bring down logistics costs in the country from a high double-digit number, making India more competitive. And the major parts of these projects, estimated to incur a staggering investment ticket size of $80-100 billion initially (implementation was planned phase-wise) were supposed to go live between 2015 and 2020.

  • According to a report by the Statistics Ministry released in July last year, the cost overruns of leading infrastructure projects (403 projects, with estimated investments of Rs150 crore or more) had shot up to a staggering $54 billion

But like DFC, progress in DMIC has also been slow, with some of its nodes just managing to become partially functional. While teething troubles in land acquisition at different locations for these two geographically expansive projects are cited as major hurdles, lack of co-ordination between the Centre and the states and absence of administrative will to execute something at such a grand scale have been the other clear bottlenecks.

The disquieting fact is: these two examples are just clear cases in point and the scene seems to be no different in an overall sense as far as other vital infrastructure projects are concerned. According to a report by the Statistics Ministry released in July last year, the cost overruns of leading infrastructure projects (403 projects, with estimated investments of Rs150 crore or more) had shot up to a staggering $54 billion. The report, which was based on the analysis of about 1,650 projects, also pointed out that over 525 projects face a time escalation of over three years.

While Corona-led disruptions last year further accentuated the slackened implementation pace and the government’s tight financial situation in clearing the dues of contractors has also somewhat contributed to the larger subdued sentiments, there is the clear need of a more concerted effort by stakeholders and a display of unflinching will on the part of the governing stakeholders. Letting critical infrastructure pieces stay in abeyance for a long time has a huge economic cost and it can no longer be an attribute of a country which, in a post Covid scenario, aims at grabbing some business from China, which became a global magnet only after developing world class infrastructure.

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