Infrastructure Development in Mysore
By
S.G.Vombatkere
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 perspective. This article attempts to provide the information and perspective. Without consulting the people who will have to actually repay a loan with interest, the question of whether Government is within its rights to negotiate such a loan on their behalf is a moot point that is not discussed in the present paper even though it certainly needs to be discussed.
External funding of infrastructure projects is touted by most Governments (politicians both in and out of power and bureaucrats, who are supported in this by big industrial and commercial houses) as the only solution for provision of infrastructure. The main reasons for this TINA (there is no alternative) factor are two. The first is the nexus between politicians, bureaucrats and contractors in the building construction lobby up the scale from town or city Corporation or village Panchayat level, to State level and to the Central Government. This nexus ensures that percentages are creamed off at the consultancy and planning stage, the tendering and contract stage, and the execution and works passing and payment stages. Thus it is much easier to get huge projects sanctioned and executed than small projects that may not be worth their while, howsoever essential the work may be. The second reason is the fact that international financing institutions (IFIs) often take the initiative in “selling their financial products” (loan packages with in-built conditionalities) through the influential and the powerful people in India who are assured kickbacks or lesser incentives to identify the end use of the loan, prepare a Project Report and process the papers.
The political party that formed the Government of Karnataka when the loan would have been negotiated with ADB Government was different from the party that is currently in power, but even so there has been no political recognition of the problems associated with the loan. This is obviously because of the TINA factor mentioned above. That such a system works in favour of those who negotiate such astronomical loans is because of public apathy as well as there being no transparency or accountability in the system of governance.
The case of Mysore City receiving a package of about Rs.140 crores @ 12% interest for infrastructure development from the Asian Development Bank (ADB) in 1998 and the planning and execution of the works serves as a typical example of the effect of external funding in the existing environment of non-governance and even misgovernance that has resulted in the City receiving only marginal benefits while being saddled with a huge debt burden. While there is no doubt that infrastructure needs to be upgraded, it is obvious in the present case that both the State Government as well as the ADB were in the knowledge that Mysore City did not and does not have the capacity to service such a debt burden. It is the perception among the informed and concerned citizens of Mysore that better definition of infrastructural upgrading and realistic planning involving local people would have resulted in getting only necessary work done at substantially lower cost and limited civic liability. In any case, there can be no justification for taking a loan beyond what is the capacity of the recipient of the loan to repay. It is understood that the State Government stands guarantee for the loan, and this matter is discussed in later paragraphs.
Government’s Strategy & Planning
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 proposed was 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 were designated as counter-magnets, and the other towns as growth centers and satellites. However the pattern of growth envisaged for the counter-magnets, satellite towns and growth centres is no different from the manner in which Bangalore has grown, and so in time, these towns and cities are sure to suffer from the same ills from which Bangalore now suffers.
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.
According to ADB’s norms, public participation was necessary. But this was done only very cursorily, Corporators being given little or no information and the general public being completely in the dark. The first that the public got to know anything about the ADB works was when the statement of an official of KUIDFC appeared in the press media in Feb 1998. Enquiries with the Mysore City Corporation from concerned citizens drew a blank. Therefore, 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 the Confederation of Indian Industries (CII). The Proceedings of the Public Workshop were released to the press media and were 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 by KUIDFC based on 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 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 and 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 really a grant at all, but is from the moneys that GoK earns from the difference in interest rate between what it charges Mysore City and that which it pays to GoI. 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 M/s Dalal 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 split 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 ever conducted. 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. It has also come to light that there are also cost over-runs in some of the works.
According to the “capacity building program” that is part of the ADB package, three options exist for servicing the undoubtedly heavy loan. These are given 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 for various reasons, not the most unimportant of which is corruption, and even if GoK makes a law of the formula, the PT demand may only outstrip collection.
# Upward revision of water charges. There is a move by GoK to privatize urban 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, KUIDFC had asked MCC and MUDA 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. But the City of Mysore seems to have been treated as a mere recipient of funds, without real civic discretion. In the context of such involuntary public commitment, Mysore Grahakara Parishat (MGP) has been at the forefront of attempts to get the best possible results out of the ADB-funded works in Mysore ever 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 (“Star of Mysore”, 11.2.1998). Also, since then, concern regarding the repayment of the loan was expressed in articles (SOM, 14.4.1998, “Who will repay the ADB loan?” / SOM, 16.2.1999, “Mysore’s debt burden”) and letters to the Editor, 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.” Public concern however has not been diminished, but on the other hand has increased due to various failures on the part of the IAs.
A combination of three main factors is responsible for the failure of ADB works in terms of quality, time or cost. First, there is a lack of interest and/or competence combined with lack of coordinated planning and/or authority among the key Government officials posted here in Mysore on a tenure basis, who are merely secondary stakeholders. The fact that the people of Mysore who are the primary stakeholders are not sufficiently active to demand their rights is contributory. 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 little if anything to planning of 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.
Comments on specific works
Much has been spoken and published in the local media on the planning, execution, quality and effectiveness of the various works under ADB loan. The focus of the present article is not so much upon the particular as upon the systemic problems, and therefore comments on specific works are not included. These have been dealt with in a separate article. Suffice it to say that broadly, the works are under three Implementing Agencies (IAs), viz., MCC, MUDA and Karnataka Urban Water Supply & Sewerage Board (KUSSWB). They cover construction of new roads (Outer Ring Road or ORR), strengthening/improvement of existing roads (Intermediate Ring Road or IRR and 48 other City roads) together with drainage and footpaths, water supply augmentation, solid waste management, construction of sewerage and Sewage Treatment Plants (STPs), construction and clearance of storm water drains, and construction of a truck terminal and bus terminal.
Reasons for shortcomings
In general, the planning, design and supervision work of M/s Dalal Consultants (their overall performance) is considered to be sub-standard and the people are agitated that they are being paid a sum of over Rs.10 crores as consultancy fee as part of public liability. KUIDFC has remained silent through all these months and adopted a “stand-off” posture.
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 at 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 huge loan on the citizens of Mysore without consulting them, and with no plans of how the loan will be repaid or how expensive assets will be maintained.
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. 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.
Conclusion
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. The huge amount of money spent has given Mysore some infrastructural assets of doubtful quality 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 (Fund-based Accounting System) 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 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.