Fissure in Kerala's ruling coalition over ADB loan

By R K Srinivasan
Published: Thursday 15 February 2007

in kerala, the ruling coalition, the Left Democratic Front, is divided over the Asian Development Bank's (adb) loan for urban improvement. An agreement was signed between the government and adb on December 8, 2006, for a sum of Rs 1,061 crore for the Kerala Sustainable Urban Development Project. Chief minister V S Achuthanandan claims that the deal was struck without his knowledge and lacks cabinet approval.

The project will cost about Rs 1,422 crore. A bulk of it would come from the loan, while the state government will contribute Rs 269 crore. Municipal corporations of Kochi, Thiruvanthapuram, Thrissur, Kollam and Kozhikode will raise the remaining amount. The money will be spent to improve water supply, sewerage, drainage system, roads and transportation in these cities.

The deal will help adb make inroads into the functioning of local bodies.It will approve selection of contractors and consultants. The agreement emphasises that the property tax should be increased. By March 2007, the state shall also have to formulate a policy on metering stand-posts (public water spouts) as also their conversion to metered individual house connections. The aim is to encourage efficient demand side management and reduction of non-revenue water.

All municipal corporations have to pass a resolution by March 2008 to introduce service tax for municipal services to fund operations and maintenance of the expanded water supply. Metered stand-posts will increase financial burden on families below the poverty line.

Another document on the adb website, the "Report and Recommendations of the President" (rrp), rrp ind 32300, recommends a year-wise increase of tariff for water and sewage services. rrp is a detailed project document that the adb 's board uses to decide whether to approve the loan or not. It actually lays out the terms for the loan But T M Thomas Isaac, finance minister Kerala, says "Irrelevant references from the rrp is being cited in the media."

The agreement will now be discussed by the Kerala cabinet.

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