Budget Snapshots: Cost Escalation, Delays Pose Challenges In Infra Development

The Confederation of Indian Industry (CII) has suggested a 12% increase in capex. 

The main highlight of the Union Budget 2025-26 was that it continued the scheme of providing 50-year interest-free loans to States for capital expenditure.

Challenges That Must Be Addressed

In the Union Budget 2026-27, the government should address a few challenges that tend to hinder infrastructure development. Firstly, private investment has not been up to the expectations, as pointed out by policymakers. 

Delays and cost escalation-related issues have also been persistent in the sector. Cost overrun has been estimated to be over 20% for 800-plus major infrastructure projects, the total worth of which is ₹150 crore. Cost escalation would provide the expenditure by over ₹5 lakh crore. 

Cost overrun has been estimated to be over 20% for 800-plus major infrastructure projects, the total worth of which is ₹150 crore. A total of 574 delayed highway projects will cost ₹3.6 lakh crore more than anticipated. In April last year, 43% of projects were behind schedule, with cost overruns of over ₹5 lakh crore.

The measures that have been taken to cut costs and reduce time overruns include:

• Online Computerised Monitoring System (OCMS), which envisages the monitoring of milestones;
• Revised Cost Committees in the Ministries for the fixation of responsibility for time and cost overruns;
• Regular review of infrastructure projects;
• Setting up of Central Sector Projects Coordination Committees (CSPCCs) in States under the Chief Secretaries.

The PM GatiShakti National Master Plan (PMGS-NMP), which was launched in October 2021, is a digital platform that could also cut costs and reduce time overruns in infrastructure-development projects.