Indian Railways – Time Overruns and Cost Overruns in Projects.
V. A. Padmanabham, IRAS
Projects are sanctioned on Indian Railways every year through the mechanism of annual works programme, Rolling Stock programme and Machinery & Plant Programme. In order to execute and complete the projects, in specified time schedule, funds are allotted through annual Rail Budget. A look at Capital Budget for the year 2013-14 reveals that the plan outlay excluding extra budgetary support for Indian Railways is Rs.42,260 crores and in the form of extra budgetary support either through public private partnership model or through private funding, the funds allotted during 2013-14 are Rs.21,103 crores.
The cost of various projects sanctioned over Indian Railways which are under execution may account for lakhs of crores of rupees and number of projects are in thousands. Even though, it is estimated to complete a project in four to five years, time overrun is a natural occurrence in Indian Railways. It is also assessed that to complete the ongoing railway projects huge resources to the tune of about Rs.5 lakh crores are required. It is in this contest, the reasons for both time overruns and cost overruns are examined in detail and they are summed up as under.
Time overruns generally means and include the extra time taken to complete a project over and above the originally envisaged completion time at the time of sanctioning a project. Reasons are both controllable and uncontrollable.
Following are the generally known reasons for time overrun in execution of projects in Railways.
·Delay in sanction of detailed estimates after the project is approved in Railway Budget.
·Time taken in obtaining the clearances from different ministries/agencies like environmental clearances etc.
·Acquisition of land for new lines and doublings by the State Govt. is a long drawn process involving considerable time and effort.
·Time taken to award contracts and also to execute the same
·Delays involved in finalizing drawings plans and issue of necessary administrative instructions.
·Changes introduced in execution of project by introducing material modifications etc. would lead to time overruns.
·Non-allotment of funds or less allotment of funds over years.
·Failures/termination of contracts due to problems in executing the works.
·Lack of proper co-ordination among different departments/agencies.
Projects are sanctioned for a specified cost and any increase in cost would lead to cost overruns. Some of the factors contributing to cost over runs are not controllable like changes in prices, declining value of rupee, fluctuation in exchange rates, Govt. policy etc. and some are controllable provided adequate care is exercised by the Railways.
Following are the generally known reasons for cost overrun in execution of projects in Railways.
·Time overruns would naturally lead to cost overruns though the reverse may not be true. Longer the time taken to complete a project, greater will be the time overrun than originally envisaged completion time.
·Escalation in prices of materials like cement and steel in Permanent Way Materials like rails, ballast etc. would lead to cost overruns.
·Fluctuation in foreign exchange rates, increase in oil prices and electrical energy cost by State Electricity Board and labour rates.
·Introduction of additional items leading to change in scope of works.
·Introduction of large scale modifications constituting material modification to sanctioned projects.
·Disputes and claims arising out of contracts leading to arbitrations/court cases.
·Awards by Courts allowing higher compensation for land acquisition.
·Change in priority of the project by the management.
·Thin allotment or no allotment of funds over years.
·Incorrect estimation of project costs at the time of obtaining sanction of competent authority by under estimating the both items and quantities.
The right course of action to minimize the above situations in execution of projects would be proper planning, programming, scheduling, monitoring and executing projects and at the same time ensuring regular flow of funds to the projects as required. Different functionaries involved in the execution of projects should be in the same line of thought and action and minimize conflicts and contradictions in the process.