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| ADB penalizes J&K, stops 2nd installment of Rs 1410 cr loan | | "ERA incapable of handling mega projects" | | Early Times Report
Jammu, Aug 31: Asian Development Bank (ADB) has stopped second installment of Rs.1410 crore loan to Economic Reconstruction Agency (ERA) on account of leadership crisis, lack of technical expertise, failure to achieve set disbursement targets and inability to complete projects within scheduled timeframe.
The loan was meant for implementing Jammu and Kashmir Urban Sector Development Investment Program (JKUSDIP). ADB has already intimated the state government about its decision and urged the officials of ERA to gear up the machinery for the release of loan installment for the upcoming financial year 2011-2012.
Sources said that Chief Minister Omar Abdullah has already directed ERA authorities to ensure completion of the projects within scheduled timeframe. They added that since the agency is headed by B.B. Vyas who is also Principal Secretary to the Chief Minister, projects being taken up for execution by ERA are now being directly monitored by the CM's office.
Sources further said that taking strong note of the reservations expressed by ADB in extending second installment of loan to ERA, Chief Minister has also asked the CEO of ERA to prepare detailed note on the performance of officials serving in ERA including the agencies hired by it for the execution of the projects. These steps have been taken only after report of ADB team comprising of urban economist Hiroyuki Ikemoto and Project Implementation Officer (PIO) Saugata Dasgupta on the performance of ERA was received by the state government.
The team visited 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. The team also evaluated ERA's preparedness with regard to its request for second periodic financing of the developmental program.
The team has refused to buy the most favourite argument of bureaucrats that situation was not conducive for carrying out the desired developmental works. Not the security scenario but the delay in ERA's 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 are the factors which ADB has identified as reasons for ERA's failure.
Further, ERA's cumulative contract award was Rs. 128.78 crore i.e. 64 percent of the loan between 2008 and 2010 while as disbursement achieved during the same period Rs. 19.364 crore which is just 8 percent of the actual loan amount sanctioned for the programme. 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. It has said that ERA failed to prepare institutional audit report with the assistance of Project Support Consultancy (PSC) before arrival of the Mission.
Mission has opined that ERA needs to take proactive role to obtain information and views of the Housing and Urban Development Department, Public Health Engineering Department and the Pollution Control Board (PCB) to facilitate completion of institutional audit report within extended deadline set in September 2010.
Further, of the ten new projects proposed by ERA for financing, ADB has after appraisal of the project documents observed that only four subprojects costing around Rs. 75.2 crore are ready for processing while 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).
It has further affirmed that in the absence of capacity building program proposal, proposal for release of second installment for comprehensive assistance program is incomplete. The project proposals which the ADB team has said are not ready for consideration rejected include Rehabilitation and strengthening of water supply system at Jammu city, elevated express corridor from Jehangir Chowk to Rambagh Natipora in Srinagar city and 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 ADB found ready for consideration included 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 report has further noted with anguish that there are three consultancy contract packages, two design and supervision consultancy (DSC) and a project support consultancy (PCS) contracts while adding that DSC for Jammu and PCS were already engaged and fielded. ADB team has in its report maintained that both the consultants 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. ADB has said that despite repeated reminders, ERA has failed to submit any progress report to ADB since loan inception. Even on this account, mission has threatened ERA that failure to comply with the loan agreement might result in complete suspension of the loan by ADB.
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.
It has also directed ERA to finalize all appraisal report by incorporating revisions, assessments and analysis besides finalizing all project sites, legal ownership, and successfully concluding consultations with legal owners with written agreements. It has emphasized upon the ERA for developing a capacity building program based on the institutional audit report. |
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