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Sunday, July 21, 2024

Bharatmala Phase-I Deadline Extended to FY28: Challenges, Cost Escalation, and Considerations for the Future

The government has decided to extend the deadline for the completion of the ambitious Bharatmala Phase-I highway development project by a significant six years, now targeting the fiscal year 2027-28. This adjustment comes in response to a substantial over 100% surge in the estimated cost of the mega project, reaching almost Rs 11 trillion, along with challenges in implementation pace and financial constraints.

Originally unveiled in 2017, the first phase of Bharatmala was slated for completion by 2022. The Ministry of Road Transport and Highways (MoRTH) aims to allocate all projects by the conclusion of land acquisition and obtaining necessary clearances by the end of 2024-25, emphasizing their commitment to project progress.

While 76% of the total length of 34,800 km has been awarded so far, the pace of awarding projects has slowed, with only 102 km under Bharatmala Phase 1 being awarded in the first eight months of the current financial year. Further delays are expected until the revised project cost is sanctioned by the Cabinet Committee on Economic Affairs (CCEA), as the Ministry of Finance has restricted the creation of any new liabilities under the project until then.

The revised deadline for completing the construction of all identified stretches is now set for 2027-28, with 15,045 km or 42% of the project completed by November-end.

Originally approved at Rs 5.35 trillion, the sanctioned cost of awarded projects has escalated to Rs 8.5 trillion, and the Public Investment Board has assessed the revised cost at Rs 10.95 trillion. Actual spending under the project has reached Rs 4.10 trillion by October-end.

Factors contributing to the difference in actual project cost and normative cost include increased raw material costs, higher land acquisition expenses, the construction of high-speed corridors, and an increase in Goods and Services Tax rates.

Changes in project scope, cost estimates, and enhanced project specifications have driven up the sanctioned cost per kilometer, reaching Rs 23.89 crore for civil cost and Rs 8.28 crore for pre-construction cost, compared to the CCEA-approved costs of Rs 13.98 crore and Rs 1.39 crore per kilometer, respectively.

The Bharatmala project initially aimed to cover a total length of 74,942 km, with 35,800 km slated for completion in Phase 1 by 2022. As challenges persist in meeting Phase 1 targets, there are discussions about forgoing Phase 2 of Bharatmala and considering alternative strategies for the remaining 40,412 km, sparking a debate on the government’s future course of action.

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