Environment Support Group ®

S-3, Rajashree Apartments, 18/57, 1st Main Road, S. R. K. Gardens,

Jayanagar, Bannerghatta Road, Bangalore 560 041. INDIA

Telefax: 91-80-6341977/6531339

Email: esg@bgl.vsnl.net.in Website: http://www.altindia.net/esg/index.htm 

Regd. Post/Ack. Due

 

Mr. H. N. Sinor

Deputy Managing Director

ICICI Bank

Mumbai

 

                                                                                                                        19 June 2002

 

Reg.:  ICICI’s potential investment in the Bangalore Mysore Infrastructure Corridor Project

 

Dear Mr. Sinor,

 

According to The Economic Times dated   13th June 2002 (copy enclosed), Mr. Ashok Kheny, Managing Director, Nandi Infrastructure Corridor Enterprises (NICE) has stated that he “expect(s) the consortium of financial Institutions led by ICICI to release funds to the 2000 crores project upon receipt of the comfort letter allaying their reservations over various aspects to facilitate early financial closure.”  Keeping this in view we would primarily wish to confirm with you if this is true.

 

The reason for our suspicion is that NICE has been given to making several misleading, even erroneous statements, including to the press and the government, with regard to the BMICP.  To point just one instance, which would be of crucial importance in your decision, we would like to highlight how the MOU signed in 1995 and the Framework Agreement developed on its basis in 1997 is void ab initio.

 

The MOU and Framework Agreements are based on NICE’s claim that M/s Vanasse Hangen Brustlin (VHB), a Boston based design company, is part of the project consortium.  The Chairman of the Board of VHB, Mr. Richard Hangen, has categorically, and rather strongly, denied such involvement in an email correspondence with the undersigned (copy enclosed), and also dismisses any likelihood of VHB supporting the project.  Such claims of the involvement of VHB have also been made in litigation connected with this matter in the High Court of Karnataka.  Whether NICE claimed a role for VHB merely to promote an investment that is clearly not feasible, particularly in securing financial commitment, is an issue that is to be settled.  What is important to note, however, is that when a company is claimed to be part of the consortium, and that company denies such a role, it would amount to all agreements secured on such claims would be void ab initio.

 

With this in view we wish to enquire:

 

  1. If ICICI has in principle committed itself to participating in the project?  .
  2. If yes, what is the nature and type of funding towards this project?
  3. If techno-economic feasibility and due diligence studies relating to this project would be available for review.
  4. Also if you will share who will be other members of this consortium financially supporting the project.

 

In our understanding, it would require ICICI to rule out all doubts, before committing to finance this project.  From the gross in-transparency and human rights violations that have marked the clearances thus far for this project, it would reflect adversely on the reputation of ICICI to proceed with supporting the project, in case this news is really true, as reported by the press. 

 

Besides it would violate the letter and spirit of a recent Circular No. IECD No. /08.12.01/2001-02 dated 20 February 2002, issued by the Reserve Bank of India to all banks and financial institutions on “Financing of Infrastructure Projects”.  Para 3 of this Circular absolutely relates with the circumstances of the BMICP, and the same is reproduced here for your attention, especially with regard to the interest of your shareholders:

 

“3. In respect of infrastructure projects, where financing is by way of term loans or investment in bonds issued by government owned entities, banks/Financial Institutions should undertake due diligence on the viability and bankability of such projects to ensure efficient utilization of resources and creditworthiness of the projects financed. Banks should also ensure that the individual components of financing and returns on the project are well defined and assessed.  Lending/investment decisions in such cases should be based solely on commercial judgment of banks/Financial Institutions.  There should be no compromise on proper credit appraisal and close monitoring of the projects financed and banks should ensure that only projects that are intrinsically viable are financed.  State Government guarantees may not be taken as a substitute for satisfactory credit appraisal and such appraisal requirements should not be diluted on the basis of any reported arrangement with the Reserve Bank of India or any bank for regular standing instructions/periodic payment instructions for servicing the loans/bonds.”  (Emphasis not in original)

 

Mr. Kheny’s claim to obtaining a “comfort letter” from the State Government should not deter your judgment in complying fully with RBI’s rider.

 

Your earliest clarification in this regard will be deeply appreciated.

 

Thanking you,

 

Yours sincerely,

 

 

 

Leo F. Saldanha                                                                        Rajmohan Pillai

Executive Director                                                                      Research Coordinator

Environment Support Group                                                        (Infrastructure Finance)

 

 

Cc:  Smt. R. K. Makhija, General Manager, Reserve Bank of India