The Punjab Government may end up an paying additional Rs 56.86 thousand crore for delay in implementation of projects. The startling figures released by Associated Chambers of Commerce and Industry of India (ASSOCHAM) actually put escalation to almost 47 per cent of actual cost on investment.
If that is not enough to throw light on the state of affairs in Punjab, a total of 70 per cent investment projects remained “non-starter” as of financial year of 2013-14.
Assocham, an apex industry body, has listed delay in land acquisition, fund constraints, delay in environmental and other clearances, along with law and order problems in the State as some of the “key factors” resulting in “serious cost overruns”.
“The important factor which are affecting implementation of projects are manifold regulatory approvals from several agencies leading to delay, delay in environment clearance, delays in land acquisition and site handover, lack of skilled labour force, due to imperfect techniques and contractual incompleteness etc,” pointed the Assocham study titled ‘Impact of delay in investment implementation in Punjab’.
These factors have “resulted in serious cost overruns to the tune of a whopping Rs 57,000 crore, about 47 percent of the actual cost of over Rs 1.21 lakh crore of investment projects attracted by Punjab from various public and private sources, thereby further affecting their implementation in the State,” stated the study.
The study further pointed that “slow rate of implementation” has emerged as one of the “prominent bottleneck for attracting new investment in the State”.As a result, a massive fall in growth rate of outstanding investments attracted from various public and private sources across industries and sectors in Punjab has been witnessed from about 78 per cent in 2008-09 to just about four per cent as of 2013-14.
Growth of new investments have also significantly declined and slipped to a negative average growth rate of over 43 per cent during past three years, stated the study. “New investments in Punjab had reached their peak of over Rs 33,000 crore in 2008-09 and the figure has now fallen to a meagre sum of Rs 4,600 crore,” it added.
“Punjab’s implementation rate has been worsening over the years and under implementation rate has been increasing over the period of time,” read the study, adding that State’s under implementation rate was much higher than all India’s figure of 57.9 per cent in 2013-14.
In 2004-05, projects under implementation in Punjab — 55.3 per cent of outstanding investment — were almost equal to all India projects under implementation — 51.6 per cent, it added.Among the States, Punjab is ranked third in terms of projects under implementation, next to Haryana and Uttar Pradesh.
Analysis of sector-wise projects under implementation suggested that electricity and services were two sectors that have recorded 38 and 38.7 per cent respective share in under implementation projects.
“Construction and real estate has recorded 18.1 percent and manufacturing sector has recorded 4.4 percent share in under implementation projects. Irrigation has 0.9 per cent share in under implementation projects during 2013-14,” stated the report.
In sector-wise, there has been a shift in investment flow in Punjab as the share of services sector has increased to over 40 per cent as of 2013-14 from about 24 per cent in 2004-05, while the share of construction and real estate sector has increased by 12 per cent during the aforesaid period.
While the share of manufacturing sector in the overall investments attracted by Punjab has declined by about 14 per cent, electricity sector’s share has declined by about 13 per cent, highlighted the Assocham study.
As initial cost estimates are arrived at using current input prices, with delays in implementation, the input costs swell thereby increasing projects’ cost. Besides, it also causes depreciation of assets together with necessitating expenses on repairs or replacements.
The projects which have declared cost escalation are from power and electricity, airports, rail projects, roads, construction and real estate, manufacturing, urban development sectors, canal, civil aviation, among others.
Power and electricity alone contributes 38.86 per cent in cost escalation followed by airport with 28.93 per cent and rail with 12.12 per cent. The combined share of these three sectors almost 80 per cent of total cost escalation.
“Sector-wise, water-related investment projects have seen massive escalation in cost as per cent of actual cost of project to the tune of about 98 per cent followed by airport by 82 per cent, railways by 70 per cent, construction by 68.5 per cent, canals by 52 per cent, roads by 46 per cent, urban development by 44 per cent, manufacturing by 38 per cent, power and electricity by 32 per cent, processing by 23 per cent and others.