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Report | May 2015

Delay drains out energy

As many as 44 projects in the energy sector have witnessed enormous delays while showing Rs 63,000 crore of cost overruns. A grim situation at this point, the Ministry of Power has now woken up from its slumber to address this by setting up a high level committee.

Now let´s take stock of sector-wise performance of projects, their cost overrun and reasons.
To start with, both projects in the atomic energy sector are delayed. During the month, project ´Prototype Fast Breeder Reactor´ (Bhavini, 500 MWE), has reported additional delay of18 months due to logjam in delivery of certain critical items on account of longer (than expected) time taken for rigorous testing and qualification.

The project has witnessed a cost overrun of 63 per cent from its original cost of Rs 3,492 crore to Rs 5,677 crore. On the other hand, NPCIL´s Kudankulam power project too has shown a cost overrun of 31 per cent to Rs 17,270 crore from its original cost Rs 13,171 crore. Putting it together, these two projects in atomic energy category have cumulatively shown a cost overrun of Rs 24,175 crore.

Meanwhile, a source in the Ministry of Statistics and Programme Implementation (MoSPI) has raised some doubts on the overall cost overrun and implementation targets, as it has been observed that project agencies are not reporting revised cost estimates and commissioning schedule for many projects, which suggests that time/cost overruns figures are under-reported.

Oil spills the bean
Next in the line of delayed and cost overrun projects is the petroleum sector which has witnessed delays in 16 projects worth Rs 40,406 crore. However, a cumulative cost overrun may surprise the investors.

The sectors´ total cost overrun is closed to around Rs 55,000 crore.
During the month, two projects have reported additional delay of 1 and 38 months. The project ´strategic crude oil storage at Padur´ and the project ´strategic crude oil storage at Mangalore´ both by ISPRL have reported additional delays of 36 months and 48 months due to delay in tie -up of anchor local consumer.

Power fuels up
Eighteen projects are delayed in the power sector. During the month, five projects- Barh STPP, Prabati HEP, Koldam HEP, Bongaigaon thermal power and Agartala gas turbine plant have witnessed delays. However, no specific reasons have been reported by the project implementing agency for the delay in these projects.

The cumulative cost overrun incurred by these projects is around Rs 37,724 crore as against Rs 21,811 crore. In fact, Agartala gas turbine plant´s cost has been up by nearly 280 per cent than its anticipated cost, making it the costliest project in the power sector.

Black diamond tanks
During the month, five projects in the coal sector have reported additional delay in the range of 1-72 months. The projects ´TPS-II expansion (1,470 MW to 1,970 MW), NLC´ and ´Tuticorin Thermal Power Project- 2X500 MW, NLC´ have reported additional delays of 1 month each due to delay in acceptance testing and handover and inadequate mobilisation by the contractor respectively; the project ´Adriyala shaft project, SCCL´ has reported additional delay of 11 months due to delay in supply of equipments. Meanwhile, again, no specific reasons have been reported by the project implementing agency for the delay in this project.

According to MoSPI, brief reasons for time overruns as reported by various project implementing agencies are delay in land acquisition, forest clearance, delay in supply of equipment, fund constraints, geological surprises, equipment erection, geo-mining condition, shortage of labour, inadequate mobilization by the contractor, contractual issue, right of way (ROW) problems, law and order situation, etc.

-Rahul Kamat

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