Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment; Government Budgeting; Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Key Phrases: Capital Expenditure, infrastructure projects, time and cost overruns, PRAGATI, PM Gati Shakti National Master Plan.

Why in News?

• The big headline numbers (7.5 lakh Crores) in the current Budget, is the massive step up in capital expenditure. But just having the money isn’t enough. We need to be able to spend it effectively.

Keypoints:

• The capital expenditure outlay for 2022-23, at ₹7.5 lakh crore is a whopping 35.4 per cent higher than the Budget estimate of ₹5.54 lakh crore in 2021-22 and more than 2.2 times the spending outlay in the 2019-20 pre-pandemic Budget.
• In the current Budget, taking into account Centre’s support to States, the effective capital expenditure is 4.1 per cent of GDP.
  • For the decade up to 2020, capital expenditure as a percentage of GDP remained more or less stuck around the 1.5 per cent mark.

Concerns:

The outcomes can be transformative if this is sustained. However, as past experience has shown, merely spending the money doesn’t mean that the desired ends have been achieved.

• The Ministry of Statistics and Programme Implementation, for instance, keeps tabs on the progress of infrastructure projects of ₹150 crore and above.
  • According to a recent report by MOSPI, of the 1,679 ₹150-crore-plus projects currently underway, 439 projects reported cost overruns and 541 projects were delayed.
  • Delay means money, with average delays running at 33 months or more, costs have shot up.
  • The original cost of implementation has risen by over ₹4.38 lakh crore, almost a fifth of the original cost.
  • The report also observed that project agencies are not reporting revised cost estimates and commissioning schedules for many projects, which suggests that time/cost overrun figures are under-reported.

This points to the one big stumbling block in executing the government’s grand infrastructure vision - the ability to execute.

Reasons:

• Government’s cumbersome tendering and purchase process, the long delays in funds and orders trickling down from the top to the project managers on the ground, as well as sheer inefficiency and massive corruption - all lead up to delays.
  • It can take months from a budget being approved to money actually being released.
• Delay in tie-up for project financing, delay in finalisation of detailed engineering, change in scope, ordering and equipment supply, and law and order problems are among the other reasons.
• Reasons also include delay in land acquisition, delay in obtaining forest and environment clearances, and lack of infrastructure support and linkages.
• The MoSPI report also cited state-wise lockdowns due to COVID-19 as a reason for the delay in implementation of these projects.

Steps Taken:

• Periodic review of projects under PRAGATI through video conferencing; rigorous project appraisal; and online computerised monitoring system.
• Steps also included setting up of revised cost committees in the Ministries for fixing responsibility for time and cost overruns; regular review of infrastructure projects by the concerned administrative ministries.
• Government also shifted the Budget presentation from the last day of February to the first, to give an extra month for this process to get completed before the next financial year actually kicks in.
• PM Gati Shakti National Master Plan for Multi-Modal Connectivity, launched in October 2021, is an initiative aimed at coordinated planning and execution of infrastructure projects. The objective is to bring down logistics costs.
  • The government is aiming to create a digital platform promising the “integrated planning and coordinated execution” by sixteen ministries.
  • Each ministry and government department will be able to access information about the ongoing and upcoming projects us for a balanced and synchronised approach.
  • In this era of Geo-Satellite imagery, Big Data, land and logistics plans would be realised in an efficient manner on the ground.

Way Forward:

• The real challenge now is not in finding more money - a growing economy and a stable tax regime will see to that - but in improving the absorption capacity of the government.
• The decision-making process has to change radically.
• The long drawn out tendering process needs to be shortened and the dependence on L1 (the lowest financial bid) must make way for a more nuanced estimation of bids based on quality and speed of work.

Source: The Hindu BL

Mains Question:

Q. 'Having a great idea or innovation is only the start of the journey. Success entirely depends on execution.' In this light critically analyse the Infrastructure vision presented in Union Budget 2022-23.