Govt Penalty Clause Essential As IT Spends Increase

State-owned firms spent $3.1 billion on information technology in India during 2008 and the amount is expected to reach $5 billion by 2011, at an annual growth of 19 percent between 2007-2011, states a new study by Springboard Research. In an interaction with Biztech2.0, Nilotpal Chakravarti, senior research analyst at Springboard talks about the cost overruns of e-governance projects.

In the interaction Chakravarti elaborates on how much the Government will be spending or has earmarked for baseline projects like Common Service Centres (CSCs), State Wide Area Networks (SWANs) and State Data Centres (SDCs). He explained, “The entire SWAN Scheme is approved by the government at an estimated outlay of Rs 3,334 crore of which Rs.2005 cr. would be supported by the Department of Information Technology (DIT) through grant-in-aid to be committed over five years for each SWAN approved by the Empowered Committee.”

According to the Union Budget last year, Rs.75 cr. was allocated towards the setting up of CSCs. The CSCs are proposed to be set up under the Public Private Partnership (PPP) model and the broadband connectivity will be provided by BSNL. The Government has earmarked Rs.275 cr. for the roll out of SDCs in last year’s budget.

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More than two-thirds of the total spending will be made by the Federal Government, with states accounting for 22 percent and local governments for another 11 percent, says the study on public sector IT opportunities in India by the market research firm.

India does have examples of prompt completion of e-governance projects by respective state governments. The ‘e-seva’ project in Andhra Pradesh and ‘Bhoomi’ in Karnataka has been a resounding success, and there have been tangible benefits for people and the government.

In spite of processes being set with appropriate budget allocation and the operational models in place, large ICT projects in India are often delayed due to prolonged and complex-bidding procedures along with delayed payment cycles. “There are projects like e-passport or the Indian Army’s US$ 1 billion Tactical Communication System, bidding for which was initiated in 2007 after prolonged delays,” said Chakravarti. The 113,000 Cr. Common Service Centres (CSCs) project is also running behind schedule across the country, especially in the states of Assam, Orissa, Himachal Pradesh, Jammu and Kashmir, among others. The Government is gearing up to tackle these issues.

Such delays do result in cost escalation however since the projects are of a long duration, vendors recover the cost in the long run. Also, with penalty clauses attached with these projects, vendors make concerted efforts for timely completion of the projects. “We have not seen the government imposing the penalty clause very stringently till date,” concluded Chakravarti. The government will actively look into this clause as the IT spending increases.