States that speed up various clearances are set to grab a larger slice of two of the most ambitious infrastructure programmes — Bharatmala Pariyojana and Sagarmala, involving investments of Rs 5.35 lakh crore and Rs 8 lakh crore, respectively — as the Centre has decided to initiate a “challenge method” to foster competition among states for expeditious implementation of such projects, a senior finance ministry official told FE. Under the recently-mooted “challenge method”, the Centre is considering setting aside 20-30% of budgetary resources meant for infrastructure projects to incentivise those states that score high in offering clearances, including land, and executing the plans well. As the overall budget remains the same, the exclusive pool for performers would reduce funds available to laggard states and discourage sloth. “To start with, the challenge method will be initiated in Bharatmala and Sagarmala, as the government is serious about fast implementation of these projects, which have the potential to push up economic growth dramatically and create massive jobs. This method will be adopted in other key central infrastructure projects as well,” said the official.
FE reported in October that Cabinet secretary Pradeep Kumar Sinha had 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 are covered under it. In October, the government announced Rs 5.35 lakh-crore investment under the Bharatmala Pariyojana project to construct 34,800 km of roads over five years, which will create 14.2 crore jobs. Under the Sagarmala programme, 415 projects, at an estimated investment of around Rs 8 lakh crore, have been identified for port modernisation and new port development, port connectivity enhancement, port-linked industrialisation and coastal community development between 2015 and 2035. Faster implementation of critical infrastructure projects will not just boost economic growth, which rose 60 basis points sequentially in Q2FY18 but still remained below par at 6.3%, but also prevent massive cost overruns, saving the exchequer a huge amount of money. According to official data, 322 of 1,231 ongoing central-sector infrastructure projects worth Rs 150 crore or more each have witnessed cost overrun of Rs 1.71 lakh crore due to delays and other reasons as of March 2017. The overruns represent 11% of the original costs.
The Centre’s move comes at a time when 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 Rs 3.09 lakh crore for the current fiscal. Within this, capital expenditure in the 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 investment 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.