Hindsight or Overview?
Author: Maj Gen S.G.Vombatkere (Retd)
It has often been discussed in Mysore whether the assets that Mysore City has acquired from the Asian Development Bank (ADB) loan are worth the long-term liability of interest and principal repayment that has been incurred, but these discussions have often been without the background information that puts the matter in proper perspective. This article attempts to provide the information and perspective.
As long ago as 1993, the Government of Karnataka (GoK) had initiated a strategy to deflect the population that is attracted to Bangalore, according to the recommendations of a foreign consultant appointed by the Asian Development Bank (ADB). The strategy is to create counter-magnets, growth-centres, and satellite towns in the Bangalore Metropolitan Region (BMR) and in six Districts of Southern Karnataka Region (SKR), namely, Mysore, Chamarajanagar, Mandya, Hassan, Tumkur and Kolar. Mysore and Hassan cities have been designated as counter-magnets, and the other towns as growth centers and satellites. The pattern of growth envisaged for the counter-magnets is no different from the manner in which Bangalore has grown, and so in time, these cities will suffer from the same ills from which Bangalore now suffers.
As is well known, infrastructure development is capital intensive and therefore GoK have negotiated a loan from ADB for over Rs.1,200 crores for infrastructure upgradation in the designated cities and towns of SKR. Similar schemes are also in place for the other regions of Karnataka, under the Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC). Mysore is the first city in SKR to receive a loan from ADB, and according to the Consultant’s Report, Mysore is meant to serve as a model to other City Corporations or Town Municipalities in SKR. The work using funds from ADB commenced during 1998.
On the initiative of Mysore Grahakara Parishat (MGP), a Public Workshop was held on 21 January 1999, organized jointly by the Mysore City Corporation (MCC), MGP and the Mysore Local Centre of The Institution of Engineers (India) and supported by CII. The Proceedings of the Public Workshop had been released to the press media and have been officially sent to GoK (KUIDFC) by MCC. According to the statement made by the MCC Commissioner, Dr.P.Boregowda, during the Workshop, projects planned under ADB funded works were based on projections for the periods 1996-2011 and 2012-2026, for which the estimated population is 11 lakhs and 17 lakhs respectively. The funds were to be utilized for the following works: Roads, Water supply, Sewerage, Surface drains, Solid waste management, Bus terminal, Truck terminus, Public latrines, Residential sites and services, Slum improvement, and Low-cost sanitation.
Prequalification of contractors to execute the works was done at the level of KUIDFC based on their financial capacity (40% weightage), technical capacity (20% weightage), and experience (40% weightage). Out of about 170 applications received, 59 were assessed as being eligible to receive tenders. The consultant firm appointed for Mysore by ADB through KUIDFC is M/s Dalal Consultants, who prepare the bid documents, which are then approved by a Steering Committee appointed by the State Government Cabinet (which has been delegated powers so as to save time) before work is awarded to the Contractor. It is informally understood that M/s Dalal Consultants is being paid a sum of over Rs.10 crores for consultancy and other services rendered.
Funds flow from ADB to the Implementing Agency (IA) i.e., MCC/ MUDA/ KUWS&DB, through the Government of India (GoI), the Government of Karnataka (GoK), and KUIDFC. The total loan amount sanctioned for Mysore is Rs.124.65 crores and the grant amount is Rs.17.11 crores, making a grand total of Rs.141.76 crores. While GoI has a burden of 2% at dollar rates, GoK has to bear a rate of 6% interest, the rate charged to the City of Mysore is 12% to be paid back in a period of 25 years, with an initial 5 years moratorium. Thus, the amount stated to be given as “grant” is not a grant at all, but is from the moneys that GoK “saves” from the interest rate which they pay to GoI and the rate that they charge Mysore City. The IA does not draw the money directly but claims the amount based on bills after the quality and quantum of the executed work is passed by ADB-appointed Consultants, and makes payment to the contractor. This Third Party Inspection is a part of the process of certification that is mandatory for ADB funded works. This system of working and payment as also the requirements of quality and adherence to time for execution are quite new to the Engineering, Accounts and Management personnel of MCC, MUDA and KUWS&DB at all levels. It called for a change in the very ethos of management within the IAs, particularly within the Engineering Departments, and for this among other things, a “capacity building program” was initiated as part of the ADB package.
The entire work was to be completed by January 2000. Hence, as far back as 1998, the implementation was to be broken into monthly segments for monitoring, particularly as there is a clause in the contracts, which makes either the contractor or the IA liable to pay penalty for delay in completion. There was, and still to a great extent is, a lack of transparency in the system, that does not make it known whether in fact such monitoring was made possible. The fact of on-going and incomplete works in the latter half of 2002 indicate that time over-runs are the rule rather than the exception, and bring doubt whether the monitoring program was instituted or if done, whether it was implemented.
Options exist for servicing the undoubtedly heavy loan, according to the capacity building program that is part of the ADB package, and these are presented below with brief comments:
# Guarantees of GoI and/or GoK to ADB. This is only possible because of the difference between the rates of borrowing and lending by both GoI and GoK, which are 4% and 6% respectively. In other words, when honouring the guarantee, GoK or GoI only give Mysore City a “concession” out of the 12% charged.
# Upward revision of Property Tax (PT). Besides objections regarding the new proposed formula itself, it is being resisted by many people and organizations as being “too much too suddenly”, due to no upward revision for the past two decades. As it is, the collection of PT is considerably below the demand and even if GoK makes a law of the formula, the PT demand will merely outstrip collection.
# Upward revision of water charges. There is a move by GoK to privatize water supply. If this is done, this source of income will vanish.
Public concerns
There is a general perception that the loan from ADB was foisted on the City of Mysore without adequate public information or consultation. It is understood that even as early as 1995, MCC and MUDA had been asked to submit proposals to utilize the proposed loan and these had been sent after consulting the City Corporators, and it therefore appears that KUIDFC and ADB were satisfied that the people had been consulted. However, the City of Mysore seems to have been treated as a mere recipient of funds, without any real civic discretion. In the context of such involuntary public commitment, Mysore Grahakara Parishat (MGP) has been at the forefront of the attempt to get the best possible results out of the ADB-funded works in Mysore since the first report of the loan appeared in the local press media in the form of a brief statement made by Mr. Mohd. Habeebulla of KUIDFC in “Star of Mysore” on 11.2.1998. Also, since then, concern regarding the repayment of the loan was expressed in various articles (SOM, 14.4.1998, “Who will repay the ADB loan?” / SOM, 16.2.1999, “Mysore’s debt burden”), but these drew no response from the authorities. It is to the credit of MCC Commissioner Dr.P.Boregowda, that he candidly remarked during the Public Workshop on 21 Jan 1999 that “The magnitude of the present loan is certainly of alarming proportions. It is also not fair that we have to bear a 12% interest burden while Government pays only 2%. The repayment of the loan is sure to be a difficult process. It may even worsen the foreign resource crunch. It is true that repayment should be given the most serious attention as it is of the gravest concern.”
Comments on specific works
MCC is the IA for 19 km of existing roads to be upgraded as Intermediate Ring Road (IRR) and improvement to 48 other designated City roads, plus some other relatively smaller works such as clearance and repair of storm water drains. MUDA is IA for the Outer Ring Road (ORR) and Lorry Terminus, and KUWS&DB for water supply and sewerage. Out of the entire infrastructure works being carried out with ADB funds, perhaps the most visible is work connected with roads.
The road work under MCC includes construction of footpaths, side and cross drains, kerbs, construction of traffic regulating islands and resurfacing, and is supposed to be designed and executed to international standards under the supervision of M/s Dalal Consultants. However, right from the start itself, planning shortcomings, technical flaws and supervision inadequacies were noticed and pointed out to MCC. The Contractor for MCC road works is M/s Nagarjuna Construction Co., a firm with very little experience in road construction works. The Contractor started out with re-surfacing Contour Road in Gokulam. The work was so obviously poor in quality that local residents with no technical knowledge raised protest and actually stopped the work. Briefly, Quality Control was at best, only nominal. MGP sent its members who have experience in this area of work, namely Mr. H.R. Bapu Sathyanarayana, retired Chief Engineer in the Ministry of Surface Transport, Govt. of India, and Maj. General S.G.Vombatkere (Retd), erstwhile Commander Border Roads Task Force and Chief Engineer of Border Roads Project “Himank”, to check out the work. It was found that the re-surfacing was being done without correcting the old surface and also without proper side drains. Both these defects would reduce the life of the road considerably. MCC suitably advised the Contractor and even called an expert from Bangalore (Dr. C.E.G. Justo) to discuss specifications and quality control with MGP. However the improvement in the work standards has been only partial. There are many roads in Mysore that were taken up under the ADB scheme which, 2 years after completion, are already in a very poor state of repair mainly due to poor workmanship and lack of reliable supervision.
The design and planning by the Consultants leaves much to be desired, and the supervision to ensure quality of work is demonstrably poor. The planning with respect to footpaths, kerbs and traffic islands is in particular, very poor. This has been pointed out several times to MCC and has also found expression in local newspapers several times. But nobody locally has been particularly accountable, and KUIDFC has maintained a standoff attitude with regard to local concerns. MCC even gave Notice to the Contractor for termination of the contract due to time over-runs and poor quality, but the Contractor continues working in much the same manner even to date while the public remains generally in the dark. The footpath on KRS Road on the side of the Railway officers’ residential quarters (opposite Ramakrishna Mission) is provided at the wrong place, and a pedestrian is forced to get off the footpath since roadside trees are in the middle of the footpath next to the kerb, even though there is plenty of space available to shift the footpath by about two metres. Also at the same place, the cross drains that are to conduct rainwater away from the road actually slope downwards towards the road and carry the berm water onto the road surface! This particular instance of crazy planning by M/s Dalal Consultants, thoughtless execution by the appointed contractor (M/s Nagarjuna Consultants) and colossal neglect by the Corporation engineers needs to be seen to be believed. The traffic islands that were constructed on the design of M/s Dalal Consultants are quite unsuitable for traffic, actually becoming a hazard and the defects in design were shown time and again to them. Today Mysore is left with the burden of traffic islands that are traffic hazards and it will cost the City Corporation more money to modify or demolish and re-construct them. The Ball Wall Park traffic island near V.V.Mohalla Police Station is only a typical example of this mismanagement.
The 26-km long Outer Ring Road (ORR) for Mysore was planned under ADB funded works. This ORR was marked on the map as passing through Lingambudhi Lake. Concerned and informed citizens of Mysore told MUDA that about 2-km length of the ORR needed to be re-aligned. This was not done when it could have been easily done. When tenders for the work (with ORR cutting across Lingambudhi Lake) were called for, a representative of MGP met ADB representative Nitin Patel in Bangalore, and apprised him of the environmental damage that was about to be perpetrated in violation of ADB’s own environmental standards due to MUDA’s apathy, lack of understanding by M/s Dalal Consultants, and ineffectiveness of KUIDFC. MGP also wrote to the ADB President Mr. Tadao Chino at Manila to apprise him of the state of affairs. As a result, Dinesh Mahindra from Hyderabad was called in 1999 by ADB to prepare an Initial Environmental Examination Report and Alex Jorgensen of ADB and Robert Berlin (a Canadian Consultant to ADB) came to Mysore and visited the site. Later STEM of Bangalore was asked to prepare a Rapid EIA Report that was put before the people. They were forced into conducting a “Public Hearing” on the issue, and the outcome was that the view of the people was accepted as being in the best interest of the entire work. The action of concerned and informed citizens was responsible for Lingambudhi Lake being saved. As a tailpiece, it is worth mentioning that even though MUDA blamed the agitating people for delay in starting the work, now nearly 3 years on, the work has not started even in the section where re-alignment was not involved, due to problems of land acquisition.
It is piquant that the agitation concerning Lingambudhi Lake did not receive support from the political class. It would not have been necessary for citizens to agitate in the manner that they did, spending time and effort and money, if ADB officials had been more vigilant and worked harder at ensuring that their own standards and requirements were met by their consultants and clients, and KUIDFC and local bodies had been sensitive to environmental issues and the matters raised by informed and concerned citizens.
The garbage bins constructed on the design of M/s Dalal Consultants are massive and impractical and a waste of money. This was pointed out to M/s Dalal Consultants who did nothing. The bins cannot be emptied completely (only about the top half can be emptied) and stinking garbage remains in it for days, causing a health hazard. Smaller bins suggested were not considered, and MCC went ahead with spending money to construct bins that do not perform their function anywhere nearly adequately.
The reasons why the ADB works have not been progressing properly in terms of time, quality or cost may be seen as a combination of three factors. First, there is a lack of interest and/or competence combined with lack of coordinated planning and/or authority among the key Government officials who are posted here in Mysore on a tenure basis, and are therefore merely secondary stakeholders. The flip side of the coin is that the people of Mysore who are the primary stakeholders are not sufficiently active to demand their rights. Second, the elected representatives of the people spend most of their time and energy in inter-Party (and even intra-Party) rivalry and personal aggrandizement, and contribute very little to core civic affairs. Third, corruption in public life, and a nexus between the politician, the bureaucrat and the contractor that results in poor planning, poor execution, sub-standard work and its inadequate maintenance.
Conclusion
In general, the planning, design and supervision work of M/s Dalal Consultants is considered to be sub-standard and the people are agitated that they are being paid a sum of over Rs.10 crores as Consultants as part of public liability.
The four main reasons for the shortcomings of the ADB funded infrastructural works as summarized during the concluding session of the Public Workshop held on 21 Jan 1999 (and made public) still hold good, and these are given below:
1. Poor planning of the entire scheme from the outset, i.e., from feasibility and financial viability even upto work identification and drawing up technical specifications. The planning was done without any real public participation. NGOs (MGP and MLSA) which asked to be included in a Seminar organized by KUIDFC and conducted by TISS in May 1998 in the Administrative Training Institute, Mysore, were denied entry, and eventually the volunteers had to almost force their way in and participate in the Seminar. All this, even though ADB has laid stress upon the need for public participation. Even now, public participation has not received official sanction. Failure in planning is due to failure of GoK or Government agencies, in forcing a loan of Rs.125 crores on the citizens of Mysore without consulting them, and with no plans of how the loan will be repaid.
2. Poor supervision of the works. Quality Control (QC) of the works i.e., work being done according to the specifications, is important not only because the life of the work depends upon it, but also because the Contractors receive payment for the specified work. Poor QC may be the result of ignorance, negligence or personal greed on the part of the supervisory staff. At any rate, the public gets a finished product (infrastructural development asset) which does not perform the designed duty adequately, and calls for additional financial resources to repair or maintain it. That is, there is loss of public money.
3. There is no system of Quality Assurance (QA) through post-construction inspection of works in procedures of GoK. A system of QA needs to be urgently introduced to compensate for lapses and shortfalls in Quality Control (QC). Work found to be below specifications must be devalued if otherwise technically acceptable from performance criteria, or else got re-done at the risk and cost of the Contractor, with simultaneous administrative or disciplinary action against the supervisory and inspecting staff. This should be built into the tenders that are yet to be issued.
4. Corruption between the Contractor and any Government, quasi-Government or Consultant staff at any level. There is no defined system of accountability of officials to the public when they are dealing with public funds in the performance of public functions. Nobody has as yet been punished for poor work, loss of public funds or for corruption. Complaints of less quantity of work being done, work not done according to specifications, even grass growing on bitumen surfaced roads within days after completion, attract no comment from the authorities, leave alone action against the erring staff. This shows weakness or apathy at best and collusion or involvement at worst between the authorities, their engineering staff, and the Contractor(s). In order to take action against erring staff, no additional powers are required. The existing administrative and disciplinary powers are adequate to deal with any case – all it requires is that the authority concerned should have a clean record himself, and take the right initiative. There should be no objection from any public official (whether elected or appointed) to declare his personal assets, and public officials should investigate any assets disproportionate to the declared or known income of officials. This will help in checking corruption and getting value for public money.
There has been little or no liaison of ADB officials or KUIDFC officials or M/s Dalal Consultants with the public, whether at the early planning stages or at the execution stages. M/s Dalal Consultants have not proven the quality of their work. The resultant poor quality of design and construction of work is there for all to see. It is true that the huge amount of money spent (about Rs.130 crores) has given some fillip to Mysore’s infrastructure but it is generally opined that it is not anywhere commensurate with the heavy repayment burden that will have to be borne by the residents of Mysore. In the ambience of official apathy and worse, concerned and informed citizens who have a right to expect good quality of work from ADB and its Consultants, have had to intervene, spending time, effort and money to do what M/s Dalal Consultants did not or could not do, and have ended up holding the short end of the stick. Indeed, with knowledge of the experience of Mysore vis-a-vis ADB works, it is understood that NGOs of Mangalore City have opposed the acceptance of an ADB loan from KUIDFC for Mangalore City.
The loan from ADB was literally thrust upon Mysore and the planning was done with only a sham of public consultation. Even today, mere months away from expiry of the 5-years moratorium period, MCC is neither clear how much is to be paid nor how to raise adequate revenue to meet the liability. A previous Mayor stated that Mysore will have to pay about Rs.1.25 crores per month (Rs.15 crores per year), but it is also known that the MCC budget cannot handle this. An attempt by MCC to raise Property Tax failed because the people have no faith in MCC’s ability to do work due to its track record of ignorance, lack of interest and corruption. KUIDFC had advised MCC to institute the double entry system of accounting to permit the preparation of a balance sheet, and computerize certain records, but these have not yet been achieved. MGP made a study of MCC’s finances and published two articles in local newspapers but neither the Councilors nor Legislators nor Officials have taken any notice.
A very serious problem that has been brought to the notice of KUIDFC and MCC but has not been addressed at all is that when expensive works (particularly road works) are completed, the assets so created cannot be adequately maintained with the meagre funds available according to Government scales for maintenance and poor technical resources of the IAs. After a few years, with normal deterioration, the assets created out of borrowed funds will be virtually lost, while the payment of loan and interest will have to continue at public cost. In particular, roads would deteriorate and eventually the entire asset would degrade and revert to the original state. Already many of the roads under ADB funded works that were completed just two years ago have deteriorated and will continue to get worse. This is something that should have been thought of at the planning stage by Government planners and Consultants.
A review of the Asian Development Bank’s inspection function was conducted during a Regional Consultation Review meeting in Kathmandu, Nepal, on 14-16 August 2002. It is to be hoped that the experience of Mysore will be a learning experience for other cities and towns not only in Karnataka but also in the whole country. At any rate, after spending about Rs.130 crores, there is little of lasting value that Mysore has to show even though the citizens of Mysore are left holding an annual debt burden of around Rs.15 crores with no foreseeable way to meet the liability. Who is accountable for this financial debacle foisted upon the unwary citizens of Mysore?