A significant number of large-scale infrastructure projects in India have faced significant cost overruns. As of November 1, 2024, 438 projects worth Rs 150 crore or more have seen a combined cost increase of Rs 5.18 lakh crore, representing a 62% increase over the original estimated cost, according to a report tabled in the Parliament on 16th December.
The primary reasons cited for these cost overruns include:
- Underestimation of Original Cost: Projects were often initiated with underestimated budgets.
- Fluctuating Exchange Rates: Changes in foreign exchange rates impacted project costs.
- Rising Land Acquisition Costs: Increasing land prices contributed to higher project costs.
- Labor Shortages: Shortages of skilled labor led to delays and cost escalations.
- Environmental and Social Costs: Stricter environmental regulations and rehabilitation measures increased project expenses.
- Changes in Project Scope: Modifications and expansions to project scope led to additional costs.
- Price Rise and Inflation: General inflation and rising input costs impacted project budgets.
- Time Overruns: Delays in project execution resulted in increased costs.
The government’s monitoring system tracks the progress and cost of these projects to identify and address issues that may lead to further delays and cost overruns.
