1. Narendra Modi government unveils this challenge method to stop delays, give infra a big boost

Narendra Modi government unveils this challenge method to stop delays, give infra a big boost

The finance ministry's medium-term expenditure framework has projected capital spending to rise to Rs 3.90 lakh crore by 2019-20, up 26% from the budgeted 3.09 lakh crore for the current fiscal. Within this, capital expenditure in the critical transport and power sectors is expected to rise in excess of 30% to Rs 1.62 lakh crore by 2019-20 from the budgeted level for this fiscal.

By: | New Delhi | Published: October 18, 2017 6:40 AM
Under ‘challenge method’, up to 30% of resources being set aside for states quick on project clearance, implementation. (Reuters)

To cut huge delays in infrastructure projects, the Centre has decided to initiate a “challenge method” to incentivise those states that expedite clearances for and implementations of such projects, a senior finance ministry official told FE. The government is considering a proposal to set aside 20-30% of budgetary resources meant for infrastructure projects for those states that score high in offering various clearances, including land, and executing the plans well. As the overall budget remains the same, the exclusive pool for performers would mean a reduction in the funds available for the slow-moving states and militate against their lethargy.

“The states that perform well could get more such projects. This will nudge the laggard ones to get their act together and expedite the process of various clearances as well. Ultimately, the government wants to foster a healthy competition among states in implementing infrastructure projects,” said the official. Cabinet secretary Pradeep Kumar Sinha is learnt to have written to states to take up the “challenge method”. Projects in sectors such as railways, roads, power, new and renewable energy and rural and urban development will be in focus, said the official. Faster implementation of critical infrastructure projects will not just boost economic growth, which hit a three-year low of 5.7% in Q1FY18, but also prevent massive cost overruns, saving the government a huge amount of money. Of the 1,199 ongoing central sector projects, including infrastructure ones, costing Rs 150 crore or more, 295 had cost overruns as of February, with the average cost overrun being a massive 94.4% of original estimates, according to official data. Also, 334 of these were delayed and the average “time overrun” of such projects was as much as 44 months.

Pronab Sen, former chairman of the National Statistical Commission, said while such a challenge method can work, the Centre has to be careful while evaluating states’ performances. “States which have been planning infrastructure projects from their own resources and are almost on the verge of giving clearances or even completing required processes may tend to transfer that expenditure from their budgets to the central budget to show good performance,” he said. So, unless monitored carefully, this kind of step could end up benefiting those states whose fiscal positions are already fairly good and the ones slipping on financial discipline may not gain much, he added. The move comes at a time when the government intends to raise productive capital spending at a faster pace than revenue expenditure.

The finance ministry’s medium-term expenditure framework has projected capital spending to rise to Rs 3.90 lakh crore by 2019-20, up 26% from the budgeted 3.09 lakh crore for the current fiscal. Within this, capital expenditure in the critical transport and power sectors is expected to rise in excess of 30% to Rs 1.62 lakh crore by 2019-20 from the budgeted level for this fiscal. Even grants for the creation of certain capital assets — including those for the Mahatma Gandhi National Rural Employment Guarantee Scheme, rural housing and Pradhan Mantri Gram Sadak Yojana, which are otherwise considered part of revenue expenditure — are also projected to rise over 30% to Rs 2.55 lakh crore by 2019-20. The infrastructure sector needs a massive Rs 43-lakh-crore investments over the next five years, of which 70% will be in power, roads and urban infrastructure projects, finance minister Arun Jaitley had said earlier this year.

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