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Financiers, speak up.
Grave questions continue to plague the Bangalore Mysore expressway project,
and the financiers are silent. An India Together report on the happenings of
June 2002.
July 2002:
For around two years, India Together has been chronicling the many twists and turns
of the Bangalore-Mysore Infrastructure Corridor (BMIC) project controversy.
Financial closure is an extremely critical milestone for large, politically and environmentally
risky infrastructure ventures like the BMIC project. And financial closure for BMIC has
always remained in question. Throughout 2001 and much of early 2002, press statements
have continually made by the promoters and the state government to the effect that the
project will commence in a few months. Only very recently has there been any sign of
the state government issuing an ultimatum to the promoters to get their act
together.
In mid-June, the newest twist emerged in this saga. The Economic Times dated
13th June 2002, reported Mr. Ashok Kheny, the Managing Director,
of Nandi Infrastructure Corridor Enterprises (NICE) as stating that he “expect(s) the consortium of
financial Institutions led by ICICI to release funds to the tune of 2000 crores project upon receipt of
the comfort letter allaying their reservations over various aspects to facilitate early financial
closure.”
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ESG's letters to various financial institutions including
ICICI and UTI are available here
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While the press has been carrying these sorts of claims for over a year, opposition to
the clearances given to this project has been and continues to
be strong. The Environment Support Group (ESG), a public interest research and advocacy NGO
based at Bangalore immediately dashed off letters to several financial institutions purported
to be financing the Bangalore Mysore Infrastructure Corridor Project (BMIC). In it's letter
to the ICICI and other institutions, ESG refers grimly to per a Reserve Bank of India circular
issued on February 20, 2002, to all banks and financial institutions on
“Financing of Infrastructure Projects" -
"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.”
ESG further states in their letter that Mr. Kheny’s claim to obtaining a “comfort letter” from the
State Government should not deter the judgment of the financial institutions in complying with
RBI’s rider. Simultaneously, ESG wrote to the International Finance Corporation [IFC is the World Bank's
private sector lending arm] about their interest in the Bangalore-Mysore Infrastructure Corridor
Project. The IFC has since faxed a response to ESG, that it "does not have any involvement in the
financing of the BMICP project”.
There has been a marked silence from the financial institutions on their interest in
this project. Perhaps that indicates where this
project is really headed. Meanwhile, BMIC remains on shaky waters on the environmental angle as
well. The Times of India, on June 12, 2002, reported Mr. Ashok Kheny stating that the project will
start ”in a month”. Readers following this controversy will note that the environment clearances give
to the expressway project by KSPCB [Karnataka State Pollution Control Board] and the MoEF,
[Union Ministry of Environment and Forests, MoEF] was made on several conditions. That all
the conditions are met under ongoing scrutiny, is critical to ensuring the public interest.
In fact, when the MoEF accorded it's conditional clearance to the expressway component of the
project in Aug 2001, it stated that "A six-monthly monitoring report shall be submitted to the
Regional Office of this Ministry at Bangalore regarding the implementation of the stipulated
conditions.” Also, as per the Ministry's own notification these reports have to be made
available to the public.
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ESG's letters to the statutory environmental authorities are available here
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Not surprisingly, ESG, along with the Mysore Grahakara Parishat [MGP, Mysore Consumers Forum]
had requested the Southern Cell of the MoEF at Bangalore for a copy of the compliance report
submitted by the promoter (NICE). However the regional office held that the report could only be
obtained from the office in New Delhi. ESG has since written to the MoEF, pointing out that "it could
be inferred that access to this document in particular, and such documents in any given case,
would be impossible, as most organisations or individuals would not have the capacity to travel
to Delhi only to inspect a document." Not stopping there, ESG has written to the KSPCB and the
MoEF asking several detailed questions regarding the fulfillment of the conditions, based on which
clearances were granted.
Further, the environmental NGO has requested the Ministry to issue a direction to all Regional Offices
and Pollution Control Boards, that all compliance reports for any project must be made available to
the public, including even through the district environment offices or local offices of the Pollution
Control Boards.
While it is not clear what will happen next, it certainly is high time that the one silent party
to this whole controversy - the financial institutions - looked the evidence in the eye and
made their position clear. Whether they will call the promoters' bluff or continue to remain silent,
or what's worse, make the mistake of plunging into a highly unviable project, remains to be seen.
Subramaniam Vincent
July 2002
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