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.