Ernst & Young said in a report that the engineering, procurement and construction sector is facing major challenges, including inordinate delays in land acquisition, regulatory bottlenecks and difficulty in getting working capital funds.

Sushi Shyamal, Ernst & Young India Partner, Infrastructure Practice, while releasing a report on ‘EPC: Driving growth efficiently’, said that “Land acquisition delays, regulatory bottlenecks and working capital management glitches can lead to time and cost overruns and have an adverse impact on perceived project margins.”

As of February 2011, of the 559 ongoing infrastructure projects in the country, as many as 293 are behind schedule. Of these projects, 69 are delayed by six months to one year, 67 by 13 to 24 months, 107 by 25 to 60 months and 37 projects are delayed by over 60 months.

The report said that the EPC sector is also faced with an acute shortage of manpower, machinery and material. This is most visible in the construction sector, where the shortage of skilled workers is as high as 40%.

On the rising incidence of cost over runs, the report noted that fluctuating input prices like that of steel and cement are the major contributors, apart from project delays.

The report maintained that fund raising is another key challenge. It said that “One of the key challenges for the EPC sector in the backdrop of market turmoil and fears of a slowdown is the ability to raise adequate financing required to fund the execution of existing large order books.”

The report added that a major reason for the funding issues is the rising interest rates, adding the increasing interest rate burden does not boost the finances of companies.

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