9th Five Year Plan (Vol-1)
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Implementation, Delivery Mechanism and Institutional Development
Introduction and Review || Strategy for the Ninth Plan || People's Participation || Monitoring and Evaluation - Methodological and Organisational  Issues

Introduction

5.1 During the last 50 eventful years, India has acquired rich experience and learnt useful lessons in the field of economic development and social change.

5.2 When the First Five Year Plan was launched, the planners were aware that they were super-imposing economic development programmes on a semi-feudal society, which was characterised by age-old social inequalities, long persisting economic disparities and a general attitude of the common masses to expect everything from the Government. Besides, the Indian economy was saddled with outmoded legal institutions, incompatible administrative system and procedures and generally unenterprising behavioural attitude of even those who were functioning as economic agents. The nation decided to launch upon the development plans with the hope that some of these institutional barriers which were operating in the Indian economy and hindering economic development and social change might get themselves transformed and become positive motivating factors. They were also aware of the strength of the deep-rooted institutional deficiencies and proceeded with the assumption that these institutional barriers could be rectified as the development process proceeded along and the deficiencies could be minimised as and when found necessary and feasible in the course of implementing the development plans.

5.3 The past fortyfive years of development experience reveals that while some minor institutional hurdles have been gradually weakened by the forces of development initiated through successive Five Year Plans, the nation has not fully succeeded in building up institutions to answer the needs of the times. Many institutional hurdles and semi-feudal socio-economic institutions, which existed at the time of Independence, have remained. Notwithstanding these hurdles, deficiencies and failures, the Indian economy has entered into a higher growth path as compared to not only the pre-Independence period but also the early Five Year Plan periods. Covering a span of thirty years from 1951 to 1981, the Indian economy grew at the rate of 3.5%, which of course, was more than the growth of its population and much more impressive compared to the decadent economic situation in the pre-Independence decades. During the eighties, the Indian economy entered into the higher growth path of nearly 6% per annum and the growth performance has become even better during the recent years. This is not a small achievement considering the vastness of the country and disparate regions. But what is of concern is that these achievements have not been uniform across regions, sectors and groups of people. There lies the inherent weaknesses of the strategies and programmes of Indian Five Year Plans.

5.4 This Chapter takes stock of the implementation of the Five Year Plans with a view to identifying the weak spots in the formulation and implementation of the Plan programmes and projects and will attempt to find solutions to the weaknesses in the delivery system. Implementation of the Plan involves designing of the strategies, programmes and schemes, designing of the projects, monitoring of their implementation and ex-post evaluation of the results or benefits flowing from the projects.

Implementation and Delivery Systems - A Review

5.5 For the realisation of the intended Plan objectives, the quality of design and effectiveness of implementation of the Plan programmes are as important as the availability of resources. Past experience has shown that many development projects and programmes, having laudable objectives, have failed to deliver the result/ because of the inadequacies in design and implementation. Time and cost overruns have been widespread and substantial in public sector infrastructure and investment projects. It is common knowledge that the benefits intended to be delivered to the people through development programmes in the social sectors have not fully reached the beneficiaries because of the weakness in administrative planning and delivery mechanism. An area of priority of the Ninth Plan is to improve project planning and implementation to ensure that avoidable time and cost overruns are reduced, if not eliminated and the intended benefits actually reach the people.

5.6 While designing and executing projects/ programmes, assumptions are made about some technical and non-technical parameters because of imperfect knowledge about the local situation, inadequate data base and time and resource constraints. In designing large irrigation projects, for example, assumptions are made about water availability, land acquisition, irrigation intensity, cropping pattern, land productivity and co-operation of the water users- all of which have a bearing on the viability of projects. More often, such assumptions turn out to be unrealistic or too optimistic and, as a result, the progress of implementation of such projects suffers. This has been corroborated by ex-post evaluations of such projects. While it is possible to bring about an improvement in project design and implementation through extensive groundwork and giving adequate attention to the minute details of every aspect, it is not always feasible because of time and resource constraints and certain unforeseen factors.

5.7 A more practical approach to programme/project formulation and implementation is to put the lessons learnt from experience to practice. Ex- post and concurrent evaluation of projects have brought out how the inadequacies in design and implementation affected the completion of a project. In the past, these lessons were not fully systematised and adequately used by the policy makers, planners and project managers. To ensure effective utilisation of available resources, the Ninth Plan strategy for programme implementation and delivery system will be built upon the lessons learnt from experience in the execution of innumerable projects and programmes in the past. To this end, a review of the past experience has been made to identify the factors that generally contributed to delay in completion and sub-optimal project outcomes. As the nature and problems of implementation of public sector infrastructure and investment projects differ from those of poverty alleviation and social sector programmes, the lessons learnt from experience and the steps to be taken for efficiency improvement are discussed under separate headings.

Public Sector Development Projects

5.8 A recent review of 187 Central sector projects, each costing more than Rs.100 crore, by the Department of Programme Implementation (DPI) showed that, as on February, 1997 as many as 118 projects were running behind schedule and the time overrun varied from one month to 200 months. A study of a few major projects indicated that the cost overrun, for reasons other than inflation and changes in the duty/ exchange rate regimes, ranged from 40% to 75% of the original estimates. Past experience reveals that the factors responsible for time and cost overruns are:

  • Poor project formulation due to inadequate field investigation, lack of adequate data, inadequate analysis of environmental and rehabilitation implications, changes in prices and exchange rate regimes, etc.
  • Delays in clearance from various regulatory agencies in land acquisition and in procurement of materials. Such delays are primarily due to poor coordination and project planning, as these problems are not explicitly considered or taken into account at the planning stage.
  • Changes in design or scope of projects midway through execution.
  • Inability of the project management to take prompt decisions on various aspects of these projects even when the objective circumstances warrant such decisions.
  • Management problems such as personnel, labour and contractor disputes, mis-match of equipment, etc.
  • Inadequate and untimely release of funds.
  • Unforeseeable factors such as adverse geo-mining conditions and natural calamities.

5.9 Reviews of some projects with substantial time and cost overruns were undertaken to identify activity-wise delays, type of cost overruns and the reasons thereof. In a coal washery project with a time overrun of 10 years, the activity-wise time overruns and the reasons thereof were: 4 years in land acquisition owing to litigation and law and order problem; 1 years in land filling work (not envisaged at the planning stage) due to poor planning; and 4 years due to non-fulfillment of contractual obligations. About 94% of the cost overrun of the project is explained by these delays.

5.10 An ongoing power project, which was to be completed in 6 years, has already taken more than 11 years to complete about 90% of the project activities. The expenditure incurred so far is about 210% of the original estimates. Inordinate delay in land acquisition, inability of a public sector unit to supply vital equipment and designs as per contract, slow progress of work by private contractors, changes in scope midway through execution, serious funds crunch on account of non-payment of dues by electricity boards, inadequacies in the tender documents etc. are found to be the major reasons for time and cost overruns.

5.11 Time and cost overruns due to changes in design and scope midway through execution are quite frequent in large public sector projects. In the case of large surface irrigation projects, in particular, this problem is so acute that several projects had alarming time and cost overruns. To cite an example, an irrigation project in a State, which was initially designed in 1953 for flood protection and irrigation benefits to 5.7 lakh hectares, underwent drastic changes in design and scope, midway through execution, to include: (a) hydel power generation, (b) an additional branch canal with a command area of 1.6 lakh hectares, (c) another main canal system taking off from the barrage with an aggregate command area of 3.25 lakh hectares, (d) extension of the embankments (flood protection) and (e) cost of watercourses as the project cost. Because of these changes, the project got delayed by more than 20 years and the cost escalation, as per the latest available estimate was 347.25 percent. It is also not clear if the benefit-cost ratio of the entire project will still be favourable, as the planned power generation and irrigation capacities have not been realised.

5.12 It is quite common in large projects, particularly in mining and large scale surface irrigation schemes that the project authorities have not been able to get possession of land in time for the construction of various components of the project. Generally, two factors are associated with the problem of land acquisition. First, more often than not, there is a significant difference between the land prices assumed at the time of project planning and the market rates, as a result of which the process of land acquisition leads to time and cost overruns. The second problem relates to the absence of an institutional mechanism for speedy disposal of disputes arising in the context of land acquisition. When such disputes acquire a high profile, as in the case of Tehri and Narmada dams, the projects get delayed indefinitely with adverse consequences on costs and benefits.

5.13 The findings of diagnostic evaluation studies/ reviews lend support to the general observations about the factors causing time and cost overruns. However, what is important to note is that factors like problems relating to land acquisition/rehabilitation, obtaining clearances, non-fulfillment of contractual obligations by both public sector units and private contractors, inadequate and untimely release of funds and inadequacies in tender documents contribute more often to the greater part of the time and cost overruns of public sector projects. These problems arise due to inadequacies in planning procedures and implementation.

5.14 Project planning has to be more scientific and approval procedures more realistic to ensure that avoidable time and cost overruns are much less frequent. The approval procedure should be linked with early completion of incomplete projects and sustainability of project output. Because of the unrealistic approval procedure, many of the projects are delayed. At the other extreme, less stringent approval procedures encourage a tendency to get too many projects cleared without the requisite financial resources in sight. There is, thus, a need for striking a balance between these extremes. It is important to ensure that rigour in appraisal and planning does not itself become a cause of delay because of repetitive and multi-level examination of technical and economic data. Strict time-tables need to be laid down for completion of the approval processes and preliminary work. Similarly, strict financial procedures should be formulated for eliminating projects, which do not have financial backing.

5.15 The implementation of projects will considerably improve if the planning and approval procedures become more scientific and rigorous. However, for effective project management, there is a need to keep track of the progress in implementation and take necessary corrective actions, as the progress may be affected by unforeseen factors. Thus, monitoring and evaluation system must be strengthened and the implementing agencies must be made accountable for non-adherence to the plan of work. There is evidence that effective monitoring of implementation and mid-course corrections by the project management have often led to timely completion of projects without any cost overrun. An IFFCO fertilizer project was completed well within the approved cost estimate and time schedule, even though there had been delays in certain activities ranging from one to seven months during implementation. This was possible because the project management used to review the progress every week and take corrective actions to re-adhere to the original schedule of works. The corrective actions, inter alia, included actions against defaulting contractors, provision of standby generators, import of steel structures and cement to augment domestic supply and the like.

5.16 Apart from rigour in planning and project management, certain procedural and institutional reforms would be required to reduce avoidable delays and thus cost overruns. Time -bound clearances at different stages and effective inter-agency coordination would cut down time and cost overruns considerably. It is also not uncommon to find that where public sector units are the main providers of engineering design, equipment and material, non-fulfilment of contractual obligations by these agencies has been a major source of delays in project completion. Appropriate rules and procedures must be framed to avoid such delays and alternative strategies to deal with such situations by the project management must be evolved. The project management must be made fully responsible for the inadequacies in tender documents which often lead to delays, avoidable litigations and cost escalations. Stringent penal clauses to deal with non-compliance must form a part of the tender documents and suitable laws must be in place for early resolution of legal disputes.

5.17 Sustainability of the assets created has received much less attention in the planning process. This is the primary reason for the deteriorating conditions of assets and low capacity utilisation. The project design should include the parameters which bring out clearly as to how the project output in the form of goods and services will be sustained during operation, how various assets will be maintained and quality ensured. This question is also linked with the issue of ‘pricing’ of project output. This too must be squarely addressed, and within some defined parameters the project authorities should have freedom to price their output to recover legitimate costs and generate a reasonable surplus for further investments.

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