ADB to fund $350m devt project in N Karnataka

Commercial viability, long term vision for local bodies

The Asian Development Bank (ADB) is likely to fund a development project in North Karnataka with a "long gestation". It could cost between $350 million and $400 million, K P Krishnan, managing director of the Karnataka Urban Infrastructure Development Finance Corporation, told reporters here on Friday.

An ADB fact-finding mission will visit the state in June, and a detailed project report was before the state cabinet, Krishnan said, at a workshop here, on "sharing best practises on urban sector projects in India".

The eight year project, which also needs approval from the Centre, could start by the end of the year, he said.

In putting together this "North Karnataka Infrastructure Development Project", efforts had been made to address regional imbalances including taking inputs from the report submitted by the Nanjundappa Committee on Regional Imbalances in the state, he said. Some 25 towns will benefit from the project, he said.

The ADB had earlier funded projects in the state, including a $107 million loan for projects in Mysore, Mandya, Maddur, Channapatna, Ramanagaram and Tumkur and a $145 million loan for projects in 10 towns in coastal Karnataka.

Alex Jorgensen, head, urban development at the ADB India Mission, said, "In the long term, urban local bodies (ULB) should be able to approach commercial banks, float bonds and fund their own infrastructure projects."

In a five year period, "They should at least be able to raise user charges to the level where they breakeven on operations and maintenance costs."

From then on, charges should be set with the long term sustenance of the projects in view, he said. So, more realistic tariffs on various services the ULBs provide will be vital for long term management of utilities in towns and cities in the country, he said.

For instance, some 228 ULBs in Karnataka have a poor record of revenue collection, unable to even break-even on the operation and maintenance costs, with the charges they collect.

In a specific instance, one official said, "Even if Betegery, Gadag collects 100 per cent property tax, it will not be enough to even manage the water supply in the town.

So the ULBs will have to not only improve on this, but also invest in making their operations efficient. Involved in this are everything from direct recruitment of municipal commissioners, environmental engineers and accountants, to regulating unorganised water services, which are "pretty big" in the state.

Krishnan said, works undertaken with ADB funding involved the ULBs to make the minimum cash contribution under several phases. "What we wanted was for them to help with processes like getting municipal land," Krishnan said.

The ADB, on its part, was "streamlining its project processing procedures to reduce the lead time from conception to loan approvals and shorten implementation time," the bank said in a release.