Time and cost over-runs of the power projects in Kerala

Abstract

Delays in project implementation and the attendant cost overruns
\nhave been a regular feature in the electric power sector in Kerala. Almost
\nall the public projects, including the prestigious major hydroelectric
\nproject of Idukki, have been the unfortunate victims of time and cost
\noverruns on account of a number of avoidable factors, labour disputes
\nbeing singled out as the prime villain. In this paper we take up a detailed
\nanalysis of the cost of inefficiency involved in the time and cost overruns
\nin the power projects of the KSEB, and their possible causes. We find
\nthat the arguments by the government in favour of private sector
\nparticipation in power generating capacity addition, under the pretext of
\na severe resources crunch, is flimsy to the extent that the government is
\nactually over-spending on each of the projects undertaken. We find that
\nthe real problem arises not out of a shrinking coffer but out of the
\ninefficiency of management coupled with the political economy of vicious
\nrent seeking.
\nJEL Classification : L94, Q48
\nKey Words : Kerala, power sector, time and cost overruns, labour
\ndisputes, corruption