An analysis of time and cost overrun in hydropower Projects of Himachal Pradesh

Abstract

The present study endeavored to check the magnitude of cost and time overrun in the Hydroelectric Projects of Himachal Pradesh. The study revealed that eighty per cent of completed projects (out of 39) in Himachal Pradesh have cost overruns. Larger project sizes and long construction years significantly affect the cost overrun. Further factors contributing to these overruns were listed using the Relative Importance Index and Principal Component Analysis. Delays in land acquisition, delays in regulatory approvals, and opposition to projects by locals came out as the top three factors causing cost and time overrun. Lastly, different uplifts in estimated cost and time were suggested to make better estimates of cost and time under uncertainty. It was done using the Reference Class Forecasting (RCF) technique developed by Kahneman and Tversky and further expanded by Flyvbjerg and Cowi, (2004). The higher the willingness to accept risk, the lower the required uplift in cost and vice versa. The empirical model also confirmed that cost and time estimates, along with uplifts (suggested by RCF), significantly predict the actual cost and time. newline