Biggest bottlenecks for businesses in India: Here’s why projects don’t finish on time

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July 23, 2019 2:16 PM

Acquiring land and taking permits in India have continued to be a vital bottleneck, preventing businesses and projects from completion targets.

infrastructure, manufacturing, projects, overruns, cost overrun, time overrun, delay, land acquisition, clearancesThe main reasons for the delay in timely completion of the projects are law and order problems, delay in land acquisition, delay in the environment and forest clearances, etc. (Bloomberg image)

Acquiring land and taking permits in India have continued to be a vital bottleneck, preventing businesses and projects from completion targets. “The main reasons for delay in timely completion of the projects are law and order problems, delay in land acquisition, delay in environment and forest clearances, funding constraints, rehabilitation and resettlement issues, permissions from local body or municipal corporation, utility shifting, contractual issues, etc,” Rao Inderjit Singh, MoS (Independent Charge), MOSPI, said in response to a Rajya Sabha query.

Despite India being one of the only two economies in the list of top ten improvers for the second consecutive year in ‘Ease of Doing Business’ report of 2019, these bottlenecks have continued to plague manufacturing and infrastructure sectors in the country. “Global trade tension has definitely opened a brand new window for India, with a huge potential to expand the exports but India cannot completely fulfill the bulk demand due to the capacity shortage,” Sharad Kumar Saraf, President, Federation of Indian Export Organisations, told Financial Express Online.

“To improve the capacity and to make the most out of this opportunity, support from the government is of prime importance,” Saraf said, adding that the statutory land clearances and credit money stuck up with the government are the major roadblocks in capacity addition.

Dealing with construction permits, getting electricity, enforcing contracts and registering property are the areas where the government portrays that it has improved, leading to better results in ‘Ease of Doing Business’ report. But, the improvements shown are yet to match the progress on the ground. “Unlike infrastructure projects, the land requirements for the manufacturing sector is more concentrated and confined to a particular area. Whereas in the case of infra projects, especially transportation projects, which are linear in nature, the land requirement is spread out across cities/states & thus faces significantly higher bottlenecks. Having said that, many large manufacturing projects in the past have also faced significant issues in land acquisition, such as Tata Motors in Singur, Arcelor Mittal in Odisha, etc,” ICRA said in response to a query by Financial Express Online.

Even in the infra sector, more than a quarter of Central Sector Infrastructure Projects costing Rs 150 crore and above are suffering from time overruns. 134 out of 388 such projects are struggling through time and cost overruns simultaneously, according to a Rajya Sabha reply by minister Rao Inderjit Singh.

 

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