What is the progress under the new scheme of loans?
We've just committed $750 million to the Prime Minister's Sampoorna Gramin Rozgar Yojana (PMSGRY) under the scheme. Our target is to disburse $1 billion to ongoing projects and make fresh commitments of $2.2 billion next year.
How's the PMSGRY loan different from the past?
Earlier, we'd commit the full amount, and so the commitment charge would begin from day one. Now, the government can decide how much it wants in which tranche. This lowers commitment charges.
Have you started lending in rupees yet ... I believe various states are interested in rupee loans as this removes the currency fluctuation challenge.
We've just floated a $500 million bond in India and this money will be available for rupee loans. But no state government has approached us for loans ... the private sector has.
Your president is on record saying you'll be lending to states without Central government guarantees.
We've got no requests from states on such loans so far.
Aren't the number of project that the ADB itself defines as "at risk" going up? It was 15 per cent last year and is now over 25 per cent.
Under the current system, if a project doesn't get signed within six months of approval by the board, it is considered "at risk". We're now having tripartite meetings every two months "" us, the state and the finance ministry has appointed nodal officers in each state "" and we will help in even the preparation of the project report. So, the number of "at risk" projects will go down. In another two to three years, most such projects will be over.
But it isn't as simple as that. You have a West Bengal road project that was approved in December 2001, and was to be complete by June 2007, but just 15 per cent is complete. Only 45 per cent of the work is complete on the Rajasthan infrastructure project that should have been complete by June 2005 originally. It's 39 per cent in the case of the Karnataka urban development project, which was also due to complete by June 2005. A Calcutta environmental project, approved of in December 2000, has seen only a 19 per cent progress and is categorised as "at risk".
I don't want to criticise since everyone is doing their job, but sometimes things are beyond our control. The West Bengal project was conceived as a two-lane one, but now traffic has increased so the government felt a four-lane project is better "" as a result of the NHDP programme, too, all two-lane projects were to become four-lane ones.
This can't surely apply to the Gujarat earthquake loan where the original project was supposed to end by June 2004 (which has now been extended by two years) and just 65 per cent of the work has been done. (Last year, the project was not categorised as "at risk" but it has been categorised as "at risk" in the latest review.)
The government there wanted to expand a water scheme under the project that we didn't think was earthquake related. They've now withdrawn the request and we're going ahead.
Isn't there backtracking on reforms on the $200-million Madhya Pradesh power sector reforms project? It was supposed to be over in June 2006, but the progress is only about 42 per cent according to your report. (In last year's review, the project was not categorised as "at risk", but has been categorised as "at risk" in the latest review.)
There has been no backtracking on reforms and unbundling is happening. The sharp rise in steel and cement prices is affecting the project and so we've been seeing if we need to retender some of the components.
What has been your experience with state government loans? Are they reforming?
We've given loans to Madhya Pradesh, Gujarat, Kerala and Assam of around $250-300 million each. In Gujarat, where some components of the loans were unsatisfactory, in overall terms we were satisfied. The revenue receipts-to-GSDP ratio, for instance, rose by over around 2.5 percentage points. There was not much headway on privatisation, but this was suggested to reduce the drain on the exchequer and the government came up with ways to deal with that separately. You must realise that when we did the calculations for Gujarat, we didn't expect the Pay Commission to happen, so there was a huge hike in expenditures ... once we isolated the impact of this, we found the state had, in fact, done better than the targets. In Madhya Pradesh, too, the performance was on track, more so after you account for the loss due to the bifurcation of the state.
But isn't there an NIPFP study that says that loans such as yours to states actually make things worse since more funds means the states are that much less keen to reform?
That may be correct, but I don't think fiscal reforms can be done so fast "" the Central government has been doing it since 1991. The states do come forward for loans to relieve acute fiscal stress. Unless you go in for steps to cut expenditures drastically, you're not going to see results quickly, and we don't recommend that ... we look at whether the state is moving in the right direction. But even the finance ministry feels that such loans should be more of an exception than a rule, so you'll probably see more project-specific loans in the future.
The World Bank has stopped loans in the past, such as the one to Punjab for power reforms, when the state turned populist. Have you done such a thing?
We did this in Nepal once, but have never needed to do this in India.
