Fed up, WB may pull out of Kerala project

After stalling several National Highway upgradation projects for months on account of them being toll-based...

After stalling several National Highway upgradation projects for months on account of them being toll-based, the Kerala Government’s stiff opposition to World Bank-funded Kerala State Transport Project has put it in jeopardy. The Rs 1,513-crore project aims to improve traffic flow and road safety on the main road network of the state, provide heavy maintenance to some 1,000 km of road and strengthen the institutional and financial capacity of key transport sector agencies. It has 76 per cent funding (Rs 1,224 crore) from the World Bank as per original estimates. With progress on the project far slower than anticipated, and the loan closure date of December 31, 2007 fast approaching, the Bank is planning an exit from the project.

“While pulling out of the project may be a possibility, a decision has not been taken yet. We have been in talks with Kerala and the Government of India is also talking to them about the project. In December 2006, we had come out with a seven-point action plan that Kerala had to comply with for extension of the loan beyond the closure date. While they have met six of these points, one still sticks out as per which a contract to widen some 127 km road length between Thiruvananthapuram and Kochi has to be upgraded mostly to two-lane and four-lane in other places. If Kerala does not manage to revive this by year-end, as per the understanding we have with them, World Bank will move out of the project,” said Arnab Bandhopadhyaya, team leader for the project approved in March 2002.

There were two pending contracts with Kerala under this project. While the Government has revived one of these, the other still remains in limbo. Pati-Bel, the contractor for the stalled Phase I project, had left it mid-way alleging non-cooperation by the Government. In fact, the project came to a standstill after the LDF Govt took over in 2006. The Chief Minister and the Finance Minister alleged that there were high-level corruption behind the project. When Pati-Bel abandoned the work, the Government re-tendered it but of no avail. The re-negotiations with Pati-Bel started after that but have not yet borne fruit.

The latest World Bank report on ‘Status of Projects in Execution’ in this financial year says that the overall progress on the project “can be considered as slower than expected” with progress on upgradation works at about 65 per cent for Phase I. The report further reads that “completing of all Phase II upgradation works originally planned under the project within the scheduled loan closure period is also highly unlikely”. Country Director Isabel M Guerrero even e-mailed Kerala Chief Secretary last month calling for urgent measures to settle the issue failing which the loan would be closed on December 31 this year with an overall unsatisfactory project development outcome. World Bank has warned the Government earlier also of not extending the loan further.

PWD Principal Secretary Matthew C Kunnunkal, however, said there was nothing to worry. “It is not correct that World Bank is considering a pull-out. We are talking to the World Bank and they have not given any such indications. There are some problems and bottlenecks, but we hope to resolve them before the December 31 loan closure date. We have even written to their country director on the issue and we are positive we will be able to sort out outstanding Phase I issues,” he said.

The government had already used around Rs 880 crore, out of the Rs 1,225 crore loan amount from World Bank for the KSTP. The State had to bear Rs 388 crore out of the total project cost of Rs 1,513 crore. If the project is abandoned, the state will also have to pay a penalty.