December 6, 2005

Mysore in a debt-trap

Thank you, Gen. Vombatkere, for putting us wise on how ADB loans work. It hasn’t occurred to the powers that be that they owe us an explanation of how a Rs.140-crore loan has morphed into a Rs. 295-crore liability. It took Maj. Gen. S G Vombatkere (retd.) a trip to Manila (where he attended a civil society consultations at ADB headquarters) to figure it out for us. As he explains, ADB charged a mere two-percent interest on its loan advanced to India government. The Centre passed on funds at eight percent to Karnataka. And the Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) gave it to the Mysore municipal corporation at 12 percent interest.
MCC can't get it from ADB, straight away. I can see that our municipal commissioner can’t just fill in a loan form and get a DD for the loan amount directly from ADB or IBRD. It is understandable that those doing it for us are entitled to service charges. But what I didn’t know, (did you?) is that development loans help, mainly, ‘development’ of the intermediaries; and, what is worse, have the effect of pushing the end-user (of loan) into a debt-trap.
Going into the nitty-gritty of how the money was spent by our civic body, with what results, would open quite another can of worms.
Meanwhile, how do we get out of this loan mess? My guess is that our municipal corporation would go in for a steep hike in levy, in line with the time-honoured bureaucratic ploy – ‘When in debt, pass the buck’. The buck stops with the law-abiding tax-payers here.
This is where our public administration/finance whiz-kids ought to think of something out-of-the-box. If it were a private firm, ‘liquidation’ would be the word.


S.G.Vombatkere said...

Dear GVK,
You're dead right! We need to demand from Mysore's senior administrator (Dy Commsr Selvakumar) and from GoK Principal Secretary Urban Development Smt Shamim Bano, (1) The Loan Agreement between Mysore City and GoK (KUIDFC) w.r.t Rs.140 Crores, and (2) guarantee in writing that no further loan will be taken for Mysore City without prior and full public consultation.

GVK said...

Gen.Vombatkere's points need wider public currency. I wish our friends in the media take up the issue he has raised regarding official accountablity on matters of public concern. Local authorities could consider convening, what is called 'town-hall hearings' at which the district and civic officials can explain proposals and clear public doubts before decisions are implemented. Such hearings would make a difference in bringing about transparency in governance.

ER Ramachandran said...

08, December' 05.

Like GVK has suggested, why can't we have an'ADB /MCC Adaalat' like they do for Electricty and telephone service by KEB and BSNL. Atleast when they face the public we will come to know the logic/ thinking behind the grandoise plans....

Suresh Yerapathi said...

I happened to attend the 1998 May 2002 meet organized by MGP with respect to the ADB loan its pros and cons.

I vaguely remember that the authorities planned to have regular work in progress meetings with all the official concerned and as well as the stake holders. I haven't followed the activities after that meeting as I was involved only in the data collection for the Baseline study carried out in the four cities under that same loan scheme viz., Ramanagaram, Mysore, Tumkur and Channapatna.

I assume that as a stake holder, one person from the general public was attending the work in progress meeting scheduled.

These meetings were never highlighted anywhere..

It was during the same time when the work on contour road in Gokulam was stopped for sub-standard work..

The point I am driving at is that such meeting/adalat did happen... but the outcome wasn't favourable.. or noticed by the general public

GVK said...

i don't seem to have made my point. 'Town-hall hearing' I had in mind is a mandatory mechanism by which the local authorities are required to elicit public opinion/objections on a proposed public works before implementation. Elsewhere in some towns such practice is so institutionalised that the authorities are obliged to seek public response before taking up work such as road-widening/diversion, location of public conveniences, or even fixing traffic lights on road-crossing (as they are now doing at MUDA circle). Seeking an ADB loan is a major issue.