Don’t bank on the unbankable

But first we have to break a few myths. It’s a myth that there’s no money in the financial market. Banks and financial institutions are basically starved of good projects and thus unable to lend money. There are very projects that are financially bankable and have a reasonable return. There’s too much money chasing these few projects.

In January last year, we at MSRDC went to the market to raise Rs 500 crore for the Mumbai-Pune expressway, 29 rail over-bridges and 50 flyovers. We raised Rs 1,200crore instead.

How was this money made available to us? The first and most obvious reason is, there was money in the market. Secondly, our projects were viable. And thirdly, the market was convinced they could be completed within a reasonable time, given Maharashtra’s record in completing fast-track projects.

On these grounds let’s see if the WB loan can be replaced by internal finances. The financial situation hasn’t changed even today. Money is still available. The MUTP-II railway projects are viable as the city’s suburban railway is in profit and therefore any expansion in carrying capacity and providing alternate routes will increase passenger load and profits. Thirdly it is also agreed there will be cess on rail fare which will be able to meet the requirements and make the projects financially viable.

Can these projects be implemented? Even with the WB loan, these projects will be implemented by government. We can raise around Rs 1,000 crore a year through internal borrowings over five years,providing an additional Rs 1,000 crore for cost escalation. All the conditions being imposed by the WB, like surcharge on passengers and commercial utilisation of railway land, can be done by us too instead of bending backwards to accommodate their demands. People in Mumbai are ready to pay a surcharge if you give them better train services.

There’s another myth that World Bank offers low interest rates. This doesn’t hold ground if we know the loan is to be returned in foreign exchange. Which means the recipient country will have to buy the dollar at whatever the price prevails at that time. Forex fluctuations are borne by the borrower. In the trend over the last four-five years, the rupee has depreciated by six to seven per cent every year against the dollar. We have to bear these fluctuations when we repay the loan.

Meanwhile, the so-called pre-project expenses of visiting WB missions and trips made by our officers to Washington are all being loaded onto the project, adding to ballooning costs.Since1986 we have already spent crores on project management consultants and surveys. Re-surveys were done on original surveys conducted in 1986.Though the project hasn’t been approved, and money hasn’t even started flowing, the WB has been dictating terms and we’ve been accepting them in the hope that money might come tomorrow. But that tomorrow hasn’t come. It hasn’t for the last 12 years since we have been waiting for the MUTP-II loan. The Maharashtra government hasn’t even received a reply from the WB in the last four months.

Our experience has been that the bureaucracy in the WB is worse than in any government. Then there are a lot of wings within the WB. Believe it or not, it’s not only the project division which examines the proposal, it’s also the India division, the South-East Asia division, legal and finance divisions.

Again, external factors like environmentalists have also started influencing them. Mid-project, if WB finds they missed a point, they may withdraw the money. If you are entirelydependent on a WB loan, you might fall into their trap. That’s what exactly happened a few years ago when they abruptly withdrew financing for the Narmada project.The World Bank has already deemed unacceptable the state government’s decision to rehabilitate all MUTP-II project-affected persons settled prior to January 1995. They say anybody living on railway tracks on the day of the project has to be rehabilitated. And they have to be moved in proximity to their earlier dwellings.

The same WB has financed projects in Shanghai where rehabilitation has taken place upto 30 kms away. One condition on China and another on India. Why are such radical dual rehabilitation policies being followed?And in yet another condition, the WB wants the entire rehabilitation work to be undertaken by NGOs. The loan we have given to them should be given to NGOs who should be allowed to spend the amount. As urban development secretary I said recovery of the loan should be made from them (NGOs) because if I’m not spending themoney, I shouldn’t be held accountable for repayment. In Mumbai we have the world’s biggest suburban railway system. Despite its inefficiencies, it still generates profits.

We might need high technology like powerful engines but not somebody to come and tell us how to run suburban trains. This is exactly what has been happening. The WB has led to foreign consultants imposing their views and systems, which are unsuitable to Indian conditions.

Who imposes these conditions? Most people in the World Bank are professors teaching in institutions with no socio-political concept of India. They find India a good field to experiment their theories. As with medicines which they experiment on Indians before introducing in the West.

To cite an example. As MD of CIDCO, I was dealing with the bank for MUTP-I projects. The bank wanted our designs for low-cost houses approved by their London-based designers. Three months later, they sent us the design modifications which would be excellent in cold countries but heattraps in a hot country like ours. The designer had obviously never visited a warm country.

Today the poorest, most mismanaged municipal corporation is the Navi Mumbai Corporation, a body set up at the instance of World Bank even before Navi Mumbai could fully establish itself. It’s just like a premature baby kept in an incubator.

It was set up under MUTP-I projects where the WB stopped the release of funds in at least three successive instances insisting that the corporation be set up.We had no option but to comply since we were at their mercy. The peculiarity of the loan is that first we have to spend the money we’ve scraped from various budgetary resources and we were then reimbursed by the WB. And they suddenly stopped payments saying we had not met certain conditions.

So in the context of the Rs 1,200 crore that MSRDC raised internally for its projects, I think the WB team which visited Mumbai last October was unhappy. Something was actually happening in Mumbai despite the MUTP-II loan not beingsanctioned.

We had been able to raise nearly 30 per cent of the loan they were proposing to give us, from the domestic market. They were shocked.Even if the loan is approved, can we depend on the WB? Remember what happened in the aftermath of Pokhran-II. Finance to the project entirely depends on whether the US President looks favourably towards India.

It indirectly means we are mortgaging our sovereignty. The WB instead of being a world bank has become a bank of a few rich nations. And as a proud citizen of the country, I’m not ready to compromise my sovereign rights nor have foreign and domestic policy be dictated by outside agencies.

So I had advised the state that some of these conditions were unacceptable, and left to the government to decide the matter.

R C Sinha is managing director of Maharashtra State Road Development Corporation MSRDC