Kashmir’s turbulence affects its credit worthiness
ADB refuses to release Rs 1410 Cr urban development loan to J&K
Citing serious organizational problems, poor technical expertise and failure to achieve disbursement targets, Asian Development Bank (ADB) has refused to release second installment of Rs 1410 crore loan to Economic Reconstruction Agency (ERA) towards implementation of Jammu and Kashmir Urban Sector Development Investment Program (JKUSDIP).
The bank has rebutted claims of ERA and said that the agency has not only failed to meet the set targets but also lacks visionary leadership and capacity to undertake major developmental initiatives. Bank has made these observations in a report prepared by its contact mission comprising of urban economist Hiroyuki Ikemoto and Project Implementation Officer (PIO) Saugata Dasgupta.
The team was in Jammu and Kashmir from July 14 to 17, 2010 to review ERA’s performance vis-à-vis release of first installment of around Rs 200 crore by ADB in June 2007 for the implementation of urban sector development investment program. It also had to evaluate ERA’s preparedness for the proposed second periodic financing request for carrying forward the developmental program.
In the report the team has observed that ERA’s cumulative contract award was Rs 128.78 crore i.e. 64 per cent of the loan between 2008 and 2010 while as disbursement achieved during the same period was Rs19.364 crore, which is just 8 per cent of the actual loan amount sanctioned for the programme. Refusing to buy security and climate of the State for slow progress in project implementation, ADB report has held human factors responsible for this.
“Delay in ERA internal decision making procedures, delay in payments, weak monitoring of consultants’ performance and contractor’s work resulting in dishonesty, preciseness, logical thinking, communication, punctuality amongst consultants, lack of attention to remedial measures advised by review missions and limited participation of contractor and consultants in bidding due to perceived business risks,” the ADB report observes.
Considering ERAs’ past performance, the team of ADB assessed that current absorptive capacity of ERA for subsequent loans is not more than Rs 235 crore, unless ERA takes major initiative for its business process reengineering. “ERA failed to prepare institutional audit report with the assistance of Project Support Consultancy (PSC) before arrival of the Mission,” the report adds.
Further, of the ten new projects proposed by ERA for financing, ADB has after appraisal of the project documents observed that only four sub-projects costing around Rs 75.2 crore are ready for processing adding that this amount does not meet the minimum loan size criteria of the bank which is around Rs.206.8 crore of a periodic financing request (PFR).
The project proposals, which ADB team has earmarked for rejection include rehabilitation and strengthening of water supply system at Jammu city, elevated express corridor from Jehangir Chowk to Rambagh Natipora in Srinagar city, construction of storm water drains in adjoining areas of NH Bypass in Srinagar city, parking facility near Lal Chowk in Srinagar, construction of Flyover from Vikram Chowk to Green Belt crossing at Jammu and construction of ERA office complex in Jammu and Srinagar
The projects , which have been marked down for execution include rehabilitation and channelization of storm water drains at Diagiana, Gangyal, Rampur, Nai-Basti and Vikram Chowk at Jammu, rehabilitation and channelization of storm water drains at Sainik Colony and Channi Himat at Jammu, procurement of mobile water tankers and operation and maintenance (O&M) equipments for Public Health Engineering Department in Srinagar City and procurement of solid waste management equipment for Srinagar Municipal Corporation (SMC).
ADB team has in its report maintained that design and supervision consultancy (DSC) and project support consultancy (PCS) have failed to deliver as per expectation due to poor quality of the experts and weak monitoring by ERA.
Report affirms that ERA has re-tendered the DSC (Kashmir) package, as contract negotiation with sole technically qualified consortium failed in the first round of bidding. Report has further outlined that as per Para 21 (a) of schedule 5 of the loan agreement, ERA’s was supposed to prepare quarterly progress reports and submit the same with the review mission whenever asked. However, ADB has said that despite repeated reminders, ERA has failed to submit any progress report to ADB since loan inception.
The report has categorically stated that ADB will resume loan processing only when ERA undertakes major business process reengineering to improve supervision of consultants and contractors, and institute quick decision making.
Further, it has asked ERA to achieve 90 percent of the disbursement targets in 2010, and subsequent quarterly targets; and award all contracts under tranche 1 by February 2011.
Jammu and Kashmir Economic Reconstruction Agency (JKERA) is a society registered under the Act VI of 1998 (1941 A.D) with the Registrar of Societies Govt. of J&K under registration No.4645-S of 2004. The society (J&K ERA) came into existence as a result of Cabinet decision No. 105/6 dated 17-07-2004 vide Govt. order No. 60-PD of 2004 dated 16-08-2004.
(Kashmir Times)