A development shell game

The Times of India feature, “KSUDP short of Rs 750cr ($112.5m) to meet targets” (June 30, 2016), shines light on the sorry state of development projects in Kerala.

The projects were launched in 2007 with deadline set in 2012, were extended twice and the final closing data was fixed on June 30, 2016. According to the report, “an amount of $45 million will remain unutilized by the loan closing date which is June 30, 2016. The packages comprised to improve roads, water supply and sanitation, solid waste management, sewerage network improvement and storm water drainage.”

It seems most of the effort was focused on getting the loan, but there was little attention paid to completing the projects. Understanding the reasons why there is so much interest in getting the loans, but not enough motivation in completing them would be an useful exercise. Because the failures point to systemic problems.

Reasons for project failures include “public resistance, non-availability of land and poor performance of contractors.” And, “four sewerage contracts in Kochi worth Rs 168 crore ($25.2m) could not be commenced due to public protest.”

With stopping of ADB (Asian Development Bank) funds, the only option before KSUDP (Kerala Sustainable Urban Development Project) to seek funds from the state government, which is unlikely to succeed due to the dire condition of the government finances.

The report also says, “The JICA (Japan International Corporation Agency) stopped the Rs 250cr ($37.5m) payment after the state failed to complete project within the stipulated time frame.” (“Irked by delays JICA had done an ADB before”)

In addition, “The project management unit of the KSUDP, which is struggling for funds, had paid close to Rs 70 crore ($11.25m) in consultancy fees alone for managing various projects” (“Consultants guzzled close to Rs 70 crore”). The report also adds, “As per the terms of agreement with ADB, projects can be implemented only with a panel of consultancies. Hence, even if it results in economic drain, we have to go by the terms.” an official pointed out.

The feature also reports about an interesting distracting activity. The report says, “At first, the plastic waste dumped in the various corners of the compound will be moved to one place. Then private firms will be roped in to beautify the remaining plot. The space for upcoming waste treatment plant and waste-to-energy plant will also be marked. A few firms have already come forward offering their corporate social responsibility (CSR) fund for the beautification.” (“Brahmapuram plant to get a green makeover“)

The proposed “beautification” proposal highlights skills deficit in the Kochi Corporation. The beautification plan is an attention diverting effort to salvage a half-baked plan for waste management. Instead of diversions, what is required is implementing a comprehensive waste management solution and implement it vigorously.

Putting all the pieces together, this is the picture that emerges:

KSUDP and other Kerala government agencies hire consultant(s) to prepare proposal documents to obtain loans, with minimal or no project execution preparations. Once the loan is secured, victory is declared. Since there were built-in deficiencies in capabilities for project execution, the project never takes off or flounders. The funding agency gets frustrated, and eventually stops further payments. The expenses incurred for partially implemented projects gets added to the state debt, worsening the budget deficits.

The reason for ADB requirement to include consultants in the ADB-funded projects need to be understood. Outsourcing project planning and management functions to consultancies inhibits developing mission critical skills within the project-sponsoring agencies. So why is the ADB interesting in requiring use of consultancies? Is it to promote scams like the one outlined? Or, to inhibit real economic development?

With the current financial crisis facing the state, maybe the Kerala government will be forced to adopt better project planning and financing methods.

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Topics and issues related to Kerala economic development challenges.