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Cost and Time Overruns in Public Utility Projects.

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 The cost and time overruns in projects executed by public sector units in India has direct impact on inflation and increases the cost of the final products both in private sector and public sector. This is the conclusion of Mr. Sebastian Morris of IIM, Ahmadabad, writes in one of his papers published in 1987. It sounds little surprising and unconvincing. This paper by Mr. Morris gives a detailed analysis of the cost and time overruns in the projects.

 According to Mr. Morris,

  1. The original cost of the 133 projects of Rs. 19567 crores was escalated with additional Rs. 16101 crores. That is 82% increase in the cost.
  2. The time overrun was 70.5%.
  3. There is a 'Capital waste' due to these overruns.
  4. Reasons for these overruns can be attributed to:
    • Short Funding
    • Inadequate project preparation, planning and implementation
    • Planning was non-existent
    • Monitoring was absent
    • Estimations were built on inadequate data
  5. Raises the capital-output ratio which brings down the investment efficiency
  6. Goods produced in private sectors gets escalated as private sector is largely dependent upon its inputs like steel, power, cement etc.

One of the main reason I noticed in the analysis is the project costing done by the public sector is entirely inaccurate. Since there is lack of political and public will to hold the accountability in large projects, colossal waste of public money is evident every where from Panchayat to City corporations.

 The need is to institutionalized the Project costing that is accurate and accountability from politicians and Babus. Going by this analysis, it is time to review the project costs on each and every projects taht si being executed in Bangalore and elsewhere in all of the Karnataka State.

 Syed

 

 

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Cost and Time Overruns in Public Sector Projects.pdf103.17 KB

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