Cabinet Secretariat steps in as mounting litigation stalls Rs 1.5 lakh cr worth of infra projects, leading to delays, cost overruns

New Delhi: Worried over thousands of crores stuck in infrastructure projects due to court cases and arbitration proceedings, the government has asked 14 Central departments and two state governments—Maharashtra and Telangana—to provide details of projects, current status and total amount trapped in the work till date. A review in 2017 of projects suffered massive delays due to litigation in six ministries—shipping, power, road, petroleum, mines and railways—had cost the national exchequer more than Rs 52,000 crore.

Litigation delays in infra projects worries governmet. Reuters

"If we calculate the total cost in 14 ministries, it would be more than Rs 1.5 lakh crore," informed government sources said.

Documents reviewed by Firstpost, reveals a missive has been recently sent to Ministries of Defence, Railway, Road Transport and Highways, Power, Housing and Urban Development, Heavy Industry, Petroleum, Telecommunication, Steel, Shipping, Coal, Water Resources, Financial Services and Health for immediate action. The information, the Cabinet Secretariat has desired, needs to be collected from all the public sector undertakings under 14 ministries focusing on category-wise amount stuck in the projects including arbitration award that has been subsequently challenged in the court. Although the government regarded to be the biggest contributor to litigation in the country, an analysis of 52 projects in 2017 revealed that average delay of more than four years in deciding the case is adding to the woes of infrastructure ministries.

“The feedback from the ministries will help in addressing the dispute at all three stages—pre-litigation, litigation and post-litigation—and to explore alternative means to resolve disputes that costing government huge amount of money. The government is currently fighting more than 1.35 lakh cases belonging to different ministries and proper mechanism may bring down the number. The cabinet meetings are closely examining the delays and have asked the concerned ministries for remedial steps wherever required,” sources said.

Among the ministries that have been asked to submit details, Ministry of Railways with over 66,000 pending cases contributes the highest number. Other like defence has 3,000, health 3,200, urban development 2,300, power 115, shipping 35, road transport 30, water resources 240 and steel 460 pending cases in various courts across the country. At least 80 cases in the Ministry of Steel and 200 in urban development are pending for more than 10 years.

The government has recently invited the attention of all high courts on granting indiscriminate adjournments which are causing the delay in the disposal of cases and had requested chief justices to issue suitable directions to the district courts. It has also got a law passed in Parliament in July to take away the discretionary power of the courts in ordering an injunction.

According to economic survey 2018, it is difficult to estimate the total costs of pendency and delays, however, since the project costs are pre-dominantly debt-financed, it is likely that project costs have increased by close to 60 percent given the average duration of court stay. The survey quoted data collected from State Bank of India (SBI) to highlight a similar grim situation in the private sector. At least 11 projects financed by the SBI worth Rs 33,540 crore sought at least 28 extension in the last three years due to legal tussle.

Even the Central taxes, the survey said, is plagued by the cases and in 2017 more than 1.37 lakh direct tax cases and more than 1.45 lakh indirect tax appeals were under consideration at the level of the tribunal, high courts and Supreme Court.

“Together, the claims for indirect and direct tax stuck in litigation (Appellate Tribunal and upwards) by the quarter ending March, 2017 amounted to nearly 7.58 lakh crores, over 4.7 percent of GDP. Pendency, delays and injunctions are overburdening courts and severely impacting the progress of cases, especially economic cases, through the different tiers of the appellate and judicial arenas. The Government and the Courts need to both work together for large-scale reforms and incremental improvements to combat a problem that is exacting a large toll from the economy,” 2018 economic survey 2018 had observed.

Colossal loss due to other reasons

Besides legal tussle, the government is facing huge cost overruns and delays in infrastructure projects due to problems in rehabilitation, land acquisition and approvals from stakeholders Central and state government departments. Documents reviewed by Firstpost indicates as on December 2018 around 1,471 projects were showing a whopping Rs 2 lakh crore additional burden on treasury due to delays at various stages. The government had also blamed policy paralysis in the UPA government for delays arguing that due to inadequate project preparation and lack of regulatory clearances and other delay attributable to the authority, the projects that were viable otherwise, turned unviable during execution.

Four atomic projects are reporting delays of three to nine years, in railway 29 years, some projects in road and transport may take more than 11 years while some projects in power sector could be delayed 11-12 years. Various issues in 212 projects worth more than Rs 9.38 lakh crore is still under consideration of the government. Even the six new IITs announced by the NDA government may face delays. Sources confirmed Firstpost that land issues has not been resolved for proposed IITs in Bhilai and Goa.