The Hindu Business Line : Faulty projecs reflect fault lines within

A number of water and sanitation projects financed by multilateral agencies have been criticised for wrong assumptions or the conditionalities imposed on the borrowing governments. However, our own estimations and governance systems are also to blame.

"Urban poor in India will be 200 million by 2025. Urban areas need an annual investment of $59 billion, but investment for all the ten years of the 9th and 10th Five Year Plans was only $57 billion."

IT DOES not matter who said this; the sad truth is that poverty eradication still remains India's primary concern even after as many as ten Five-Year Plans.

The double-digit poverty figures, the pervasive slums and the appalling infrastructure, even in such cities as Bangalore, set the context for a thriving constituency of do-gooders, ranging from an aspiring ward politician in a small town to multilateral development banks eager to lend to the social sector schemes that are intended for poverty alleviation.

Over the years, these multilateral development banks have `graduated' from lending for core sector projects to granting loans for all sorts of programmes. For instance, earlier World Bank loans to India, were predominantly to core sector, long gestation projects. Its lending during the 1950s was $611 million. Of this, half went to transportation projects and the rest almost wholly to industry and power projects. Results and expenses in such projects were component- and time-bound, and monitoring and supervision were relatively straightforward.

Education, health, urban development and water and sanitation entered the World Bank lending portfolio in the 1970s, with loans to those sectors forming just about 7 per cent of the total during that decade. By the 1980s, the four sectors accounted for 10 per cent of the portfolio, going up to 32 per cent in the 1990s, which period also witnessed interesting innovations in lending; loans were then given under such heads as economic policy, environment, private sector development and social protection.

The multilateral development banks, in the context of India's `vibrant' democracy, have become a sort of a lender of last resort for the Central and State governments. India's democracy rests on elections.

The electorate needs sops, and sops need funding. It is not uncommon to see politicians vocally denouncing a ruling party for its World Bank dependence and then, within weeks of gaining power, embracing the Bank. Similarly, it is not uncommon to see NGOs being both critical of the multilateral banks and enjoying their hospitality.

In recent weeks, water and sanitation projects financed or being funded by the Asian Development Bank (ADB) have been in the news. Media reports indicate that the ADB has sought a number of assurances from the Kerala Government in connection with the release of funds to five municipal corporations in the State. The Bank is funding some Rs 1,200 crore for Thiruvananthapuram, Kollam, Kochi, Thrissur and Kozhikode Corporations for sustainable development programmes, including improvement of the drinking water system, urban transport, drainage and solid waste treatment. The assurances sought by the Bank include phasing out of public taps, levy of user fee for treatment of solid waste and sewage, hike in property tax and programmes for HIV/AIDS awareness among workers.

Replacing public taps by metered pipe connections for all residents in the cities is to be achieved by 2007. An important benefit of this will be minimising the loss of safe drinking water.

The city administrations are also to be ready with action plans for the levy of user charges for seweage treatment, solid waste management and efficient revenue collection.

By 2008, the city administrations are to put in place measures to mobilise resources to cover the repair and maintenance costs of the drinking water system. For this, the Kerala Water Authority (KWA) needs to be empowered to hike tariffs from 2010. The property tax should be assessed on the basis of plinth area of the buildings and the system should be in place from 2006-07 fiscal.

The Hindu, in a November 18 report, said that the Kochi Corporation found most of the ADB-set conditions unacceptable, "even as the State Government is all set to receive the financial assistance from the Bank".

The proposal to phase out public taps has been criticised by most, as the leaders feel that it is impractical in a city like Kochi, where a large number of residents depend on them for their drinking water needs.

"Phasing out public taps is unacceptable as a large number of city-dwellers and migrant labourers are dependent on them," said Mayor Mercy Williams.

Who does not like free education, electricity, transport, water and healthcare? If local, State and Central governments are able to raise resources to provide all of them free, why not?

As for borrowing, commercial banks in the country are best if we do not wish to have any conditions imposed on us. But which bank would be ready to lend to municipal governments? An alternative, such as a loan from the ADB, is preferred as the repayment can stretch over 25 years with the first five years as grace period.

Like Kerala, Karnataka too was in the limelight, attracting criticism for ADB-financed urban projects, with an unsatisfactory consultant report being at the centre of the storm in respect of the Mangalore water supply project. This is a part of the Karnataka Urban Development and Coastal Environmental Project (KUDCEMP) being implemented by the Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC).

Apparently, the Mangalore project was based on the assumption that there was enough water in the existing vented dam at Thumbe for the next 25 years; water is to be brought to Mangalore from this dam. A technical analysis report of 1998 by a Dutch engineering company put the capacity of the vented dam at 9.6 million cubic meters, while the late monsoon in 2003 resulted in less water supply to the dam.

Fresh evidence gathered at the instance of the KUIDFC found that the capacity of the dam was only 4.9 million cubic meters, a far cry from the estimates of the Dutch company. The situation calls for a formal complaint to the ADB authorities and penalties on the consultant plus fresh funding from the Bank, if need be, on terms that compensate for the earlier mistakes.

All the same, one must not forget that at the end of it all, it is a matter of our own governance systems that must be found fault with if we have accepted an exaggerated estimate of water capacity from an external consultant.

(The author, formerly with the National University of Singapore and the World Bank, is Professor Emeritus, GITAM Institute of Foreign Trade, Visakhapatnam. He can be reached at bhanoji@gmail.com)

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