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FM intervenes, WB gives Baalu time to set NHAI projects in order

Following Finance Minister P Chidambaram’s intervention, the World Bank has given Road Transport & Highways Minister T R Baalu...

Written by Amitavranjan | New Delhi | November 20, 2008 12:06:07 am

Following Finance Minister P Chidambaram’s intervention, the World Bank has given Road Transport & Highways Minister T R Baalu a fortnight to set NHAI projects in order before it reconsiders suspending its funding.

The Bank, in a letter dated November 18, agreed to give time till December 3 for the National Highways Authority of India to address the slow progress in bank-funded projects. However, it has set preconditions that have to be met for the funding to continue.

Under the ‘actions taken’ specified by the Bank, the NHAI has to address the safety issue, take ‘legal action’ against the non-performing contractors, support variations in projects with documents, and agree to ‘restructuring’ of the financing packages in four out of the 12 segments on the Lucknow-Muzaffarpur highway where land is yet to be acquired (The Bank wants NHAI to use these commercial interest rates fund in other projects).

The patch-up came after Chidambaram wrote to Bank’s Managing Director Ngozi Okonjo-Iweala last week assuring him that the NHAI was being ‘forced to improve its performance’ and that the Bank could consider deferring the suspension by two weeks till then.

The World Bank has lent close to $400 million in national highway projects. While there are three loans for the Golden Quadrilateral stretch on NH2 for widening the Agra-Dhanbad section, the WB funded 12 packages on the Lucknow-Muzzafarpur highway of which five packages recorded dismal outcome with less than 20 per cent progress.

Trouble started brewing in September when the World Bank, after repeated reminders for expediency, shot off a letter to NHAI threatening shutting off lending unless the progress was improved. The Bank’s main grouse is that the NHAI awarded contracts in the Lucknow-Muzzafarpur highway project even before land acquisition was done.

A month later, when there was no response from the NHAI, it wrote to the Finance Ministry. Later, though there was assurance from Baalu’s ministry and the NHAI to improve the compliance, the World Bank on November 5 wrote to the Finance Ministry conveying its decision to discontinue funding.

Chidambaram has also written to his colleague Baalu to take the Bank’s concerns seriously and improve NHAI performance “immediately”.

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