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India to spend $500 billion a year on infra to accommodate population rise by 2030: Mace study

BusinessToday.In     November 3, 2020

Global construction and consultancy company Mace, in a report titled 'A Blueprint for Modern Infrastructure Delivery', has said India will spend $500 billion or over Rs 37 lakh crore a year on infrastructure by 2030 to accommodate the rapidly expanding population. Like India, other major economic powers will also spend a huge amount of money on large infrastructure projects.

According to Mace's data, up to 80% of large infrastructure schemes are delivered late and over budget, and then under deliver on benefits.

By Q1 FY21, there were 1,698 central projects under implementation across India -- 469 mega projects (each costing Rs 1000 crore and above) and 1,229 major projects (each costing Rs 150 crore but less than Rs 1,000 crore). Of these, 414 are suffering from cost overruns of Rs 4,33,762.29 crore, which is 66.71% of their sanctioned cost.

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Since the global COVID-19 pandemic began in 2020, infrastructure delivery and its role in society has changed dramatically in nature, said the report. For instance, at its peak, the COVID-19 pandemic caused a 73% drop in public transport use in India, it added.

It said that the world is now facing huge challenges. "Gradually easing restrictions notwithstanding, networks around the world face longer-term strategic challenges. India is no exception," said the report.

Citing a World Bank report, Mace said the impact of lockdown measures and behavioural changes in response to COVID-19 caused the most severe global contraction since World War II. "Economies around the world are hit hard by the impact of the virus, and many governments have positioned infrastructure deployment as a core part of the remedy," it maintained.

Mace believes the need to improve delivery seems "stark."

Why are projects and programmes across the globe suffering in this way?

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Mace, based on interviews of nearly 40 senior executives and collecting new data on both developed and developing countries in the context of COVID-19, found that decisions on projects are often driven by political pressure rather than rigorous cost and benefit analysis.

It also found "poor" predictive abilities of project teams in their early stages, who are pressured into providing fixed point price estimates before accurate predictions are possible or realistic.

Procurement is based on 'cheapest price' rather than 'value' to fit within unrealistic initial budgets. On large and complex projects, 'cheapest price' procurement is a false economy, the report concluded.

Anuj Puri, Chairman, ANAROCK Group said construction halt, labour shortage, and revocation of toll collection were some of the major challenges India's infrastructure sector has faced due to the COVID-19 lockdown since March.

"The government's focus has shifted primarily towards building healthcare infrastructure to accommodate the pandemic's fallout. Even now, after a staggered easing of lockdown rules over the last few months, major infrastructure work across the country haven't resumed usual pace," he said.

Mace CEO Jason Millett said around the world, good infrastructure is vital for socioeconomic prosperity. "India is no different and, unfortunately, not all infrastructure projects are properly planned and delivered, resulting in delays, cost overruns and under-delivery against expected benefits," he said.

Millett stated that the negative impact of such issues was significant. "In India, this could result in an additional cost of Rs 10,820 billion by 2030. Globally, the cost could be as much as $900 billion," he said.

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