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

Abstract

Delays in project implementation and the attendant cost overruns have been a regular feature in the electric power sector in Kerala. Almost all the public projects, including the prestigious major hydroelectric project of Idukki, have been the unfortunate victims of time and cost overruns on account of a number of avoidable factors, labour disputes being singled out as the prime villain. In this paper we take up a detailed analysis of the cost of inefficiency involved in the time and cost overruns in the power projects of the KSEB, and their possible causes. We find that the arguments by the government in favour of private sector participation in power generating capacity addition, under the pretext of a severe resources crunch, is flimsy to the extent that the government is actually over-spending on each of the projects undertaken. We find that the real problem arises not out of a shrinking coffer but out of the inefficiency of management coupled with the political economy of vicious rent seeking. JEL Classification : L94, Q48 Key Words : Kerala, power sector, time and cost overruns, labour disputes, corruption