Centre yet to sanction Rs 2,000 crore ADB loan to West Bengal

The loan is a tri-partite agreement and requires clearance from the screening committee of the department of economic affairs under the Union Finance Ministry.

Written by Aniruddha Ghosal | Kolkata | Updated: September 19, 2016 6:42 pm
Asian development bank loan, bjp, TMC, west bengal loan, loan to west bengal, amit mitra, finance, bengal development, India news, Bengal news Both Mamata Banerjee and Amit Mitra have written repeatedly to the Centre, but to no avail.

During his trip to the national capital for the Goods and Services Tax (GST) council meeting on September 22, state Finance Minister Amit Mitra is also likely to take up the issue of the Centre’s “delayed clearance” to a Rs 2,000 crore loan from the Asian Development Bank (ADB). This amount is the second installment of the loan granted to West Bengal.

This, Chief Minister Mamata Banerjee said is “vital” to Bengal’s development and alleged continued “negligence” on behalf of the Centre. The issue threatens to become the next flash point between the two governments.

The loan was approved by ADB’s board almost 11 months ago, said the state government, after the successful completion of the first phase in which Bengal carried out a slew of “people-centric”, “fundamental”, “reforms” aimed at “transparency”. But while the state government maintained that the Centre had been quick in their approval of the loan in the first phase, the proposal for the second installment is yet to be cleared 11 months after it was sent to the finance ministry’s department of economic affairs. In this time period, they had written a number of letters to the Centre, the state finance ministry said.

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

Mamata 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 ADB loan was even more crucial in the case of 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, as a result, very ideal for us. But in the absence of this money, we are having to borrow from other sources. The cost of this 11-month delay is incalculable,” they said.

The loan is a tri-partite agreement and requires clearance from the screening committee of the department of economic affairs under the Union Finance Ministry. Both Mamata and Mitra have written repeatedly to the Centre, but to no avail. Sources confirmed that Mitra had written to the Union finance secretary earlier regarding the issue and also spoken to him when he was in Delhi. Recently, the state government had 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 are sent yet another query. For 11 months, we’ve been receiving queries about the issue. But the Union government is neither saying no to the proposal, nor are they clearing it,” said a senior official of the finance ministry.

The second phase of the loan follows the “successful competition” of the first, 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 were the first to use an RBI portal, e-Kuber. All this came out of the ADB’s first phase loan,” said a senior official of the finance department.

According to the state government, the Centre has in fact recognized and awarded it for three different reform measures taken, 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. “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 have done good work and has awarded us for it. But now that we have asked for further deepening of these reforms, the approved loan is not being cleared. There is no substantive reason for it,” said an official.

The loan, officials said, will seek to finance voluntary retirement schemes, particularly for the transport department which amounts to Rs 300-400 crore.

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The official explained, “The transport department has a number of PSUs which are sick. Yet, they employ a large section of the population in the areas where they are operating. The idea is to restructure or revive these PSUs.” Apart from this, officials added, the loan aims at providing viability gap funding of Rs 600 crore, a grant aimed at providing support for infrastructure projects in the state which are economically justified, but are presently falling short of financial viability.

A senior TMC leader said, “There are a number of clarifications still pending. Mamata is very angry about the issue. There are stories about Tripura and how the Prime Minister talked to an IAS officer directly. But in the case of Bengal, why does a simple clearance take this long?”

The state government alleged that the problem was not just limited to the loan. Citing Mamata’s recent trip to 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 that the approval was given.”