Asian Development Bank loan: 11-month long wait for Centre’s nod, Mamata Banerjee alleges ‘negligence’

The loan, said the state government, was approved by the board of ADB almost 11 months ago, after the completion of the first phase in which West Bengal carried out a slew of “people-centric fundamental reforms.

Written by Aniruddha Ghosal | Kolkata | Updated: September 20, 2016 4:00 pm
Mamata Banerjee, GST council meeting, West Bengal loan, West Bengal Amit Mitra, Asian Development Bank, Mamata Banerjee, India news, west bengal, west bengal news, indian express West Bengal chief minister. (PTI Photo)

During his trip to Delhi for the GST council meeting on September 22, West Bengal finance minister Amit Mitra is likely to take up the issue of Centre’s “delayed clearance” to the second phase of a loan from the Asian Development Bank (ADB), amounting to Rs 2,000 crore. This, chief minister Mamata Banerjee said, is “vital” to Bengal’s development and alleged continued “negligence” on the Centre’s part. The issue threatens to become the next flash point between the two governments.

The loan, said the state government, was approved by the board of ADB almost 11 months ago, after the completion of the first phase — in which West Bengal carried out a slew of “people-centric fundamental reforms.” While the state government maintained that the Centre had been quick in their approval of the loan in the first phase, the proposal is yet to be cleared 11 months after it was sent to the Department of Economic Affairs. During this period, the state finance ministry said, the government has written a number of letters to the Centre.

With the relationship between the BJP government at the Centre and the West Bengal government souring over the last few months, with Banerjee delaying the ratification of the GST bill in the state Assembly, the issue of the loan isn’t likely to improve matters. According to a TMC source, the issue had the CM “extremely displeased” and was one of the reasons behind her decision to delay the GST ratification and choosing to “wait and see” what other states were doing.

West Bengal CM Mamata Banerjee told The Indian Express: “We have been waiting for the approval of the loan for months. The government talks about pro-active governance, but in the case of West Bengal’s development, there is continued negligence.” Officials added that the loan was more crucial for a debt-ridden state like West Bengal because of its terms. “In the first phase, the loan has a moratorium, but afterwards it goes into a soft loan. The terms are very ideal for us. But in the absence of this money, we’re having to borrow from other sources. The cost of this 11-month delay is incalculable.”

The ADB loan is a tri-partite agreement and requires clearance from the screening committee of the Department of Economic Affairs under the finance ministry. Both Banerjee and Mitra have written repeatedly to the Centre to no avail. Sources confirmed that previously Mitra had written to the Union finance secretary regarding the issue and also spoke to him, when he was in Delhi previously. Recently, the state government has sent yet another letter to the finance secretary with further details about the proposed loan, seeking clearance of the same.

“However each time we write to them, the matter gets taken up and we’re sent yet another query. For 11 months, we’ve been receiving queries about the issue. But the Union government isn’t saying no to the proposal, nor are they clearing it,” said a senior official in the finance ministry.

The second phase of the ADB loan follows the “successful competition” of the initial phase in which the state government carried out reforms aimed at transparency and ease of governance. “West Bengal is the only state where payment is completely electronic. We are using an RBI portal, e-kuber and we were the first to start using this. This all came out of the ADB’s first phase loan,” said a senior official in the finance department.

According to the state government, the Centre has recognised and awarded the West Bengal government for three different reform measures taken by them, following the funding by ADB’s first phase loan. West Bengal was given the highest award in e-taxation, integrated central finance and for use of information technology by the excise department under the e-Abgari loan. “In fact, the award was given to us in Gujarat and the principal secretary of the finance ministry had gone to receive it last year. So the Centre obviously knows that we’ve done good work and has awarded us for it. But now that we’ve asked for further deepening of these reforms, the approved loan is not being cleared. There is no substantive reason for it,” an official said.

The loan, officials said, will seek to finance voluntary retirement schemes, particularly for the transport department which amounts to Rs 300-400 crore. The official explained: “The transport department has a number of sick PSUs. Yet, they employ a large section of the population. The idea is to restructure or revive these PSUs.”

Apart from this, officials added, the loan also aims at providing viability gap funding of Rs 600 crore — a grant aimed at providing support for infrastructure projects in the state.

The West Bengal government has alleged that the issue was a matter of “attitude” and the problem was not just limited to the ADB bank loan. Citing the instance of Mamata Banerjee’s recent trip to the Vatican City for the canonisation of Mother Teresa, an official said: “It was a month after the state government informed the Centre that Mamata Banerjee would be travelling to Vatican City after being issued an invitation from the Missionaries of Charity, that the approval was given”.

Writeback:

In response to this news item, the Union Finance Ministry has said: “The proposal for second phase of West Bengal State Finance Sector Development Programme, received from Government of West Bengal for a financial assistance of US$ 300 million from the Asian Development Bank (ADB), was approved by the Screening Committee of the Department of Economic Affairs (DEA), Ministry of Finance, Government of India on 19th May, 2015. Accordingly, ADB initiated its own procedures and due diligence related to the loan and obtained the nod of their Management Review Mission in January 2016. ADB communicated an offer of negotiation for the loan under reference, along with a policy action framework, in the last week of January 2016.

During the pre-loan negotiation meeting held in March 2016 with the Government of West Bengal and ADB, the Government of India had made certain observations with respect to the policy actions proposed under phase-II of the programme. It was pointed out that policy actions like Voluntary Retirement Scheme for identified State Road Transport Corporations and action plan on subsidies, which were to be executed as part of phase-I which was already sanctioned and disbursed, had again been made part of phase-II of the loan as well. Accordingly, DEA had requested Government of West Bengal to address these issues appropriately. The negotiations for the said loan, therefore, are yet to be held with ADB, and only thereafter, the proposal would be referred by ADB India Resident Mission to the executive board of ADB. Therefore, it is incorrect to say that the said loan was approved by the Board of ADB almost 11 months ago as stated in the news item. Further, the proposals for financial assistance from the multilateral development banks follow prescribed guidelines and procedures and undergo due diligence with a view to ensure that their design is in consonance with the objectives of the programme.

The Government of India has been constantly in touch with the Government of West Bengal with a view to strengthen the deliverables of this policy based loan and to eliminate the overlap between two phases of the loan. In the first week of August 2016, the DEA had held an extensive discussion with the Government of West Bengal on the issue, and had suggested certain modifications in the proposed policy actions under phase-II of the programme, with the sole objective to make them more specific and measurable in terms of their outcome.
The Government of India stands committed to extend all possible support to the Government of West Bengal to access loans from multilateral development banks like ADB. In the instant case, upon receipt of the revised document from Government of West Bengal, the matter would be processed further.”