No money, take bonds: MKVDC to contractors

Set up in January 1996 to implement the Krishna Water Disputes Tribunal Award, MKVDC plunged into a financial crisis in January 2000 due to cost overruns and delays in implementation, which prevented it from making payments to contractors.

Leading politicians from Maharashtra promptly swung into action to save the crisis-ridden body. As a result, Housing and Urban Development Corporation, Life Insurance Corporation, General Insurance Corporation and the Mahanagar Telephone Nigam Limited purchased MKVDC bonds, contributing an estimated Rs 10,000 crore to clear the bills. The Sunday Express on April 27 had reported how then ministers, Pramod Mahajan and Manohar Joshi, bent rules to clear MTNL’s Rs 250-crore investment in MKVDC.

However, despite the ‘generous’ investments by these Public Sector Undertakings, MKVDC was unable to bridge the fund requirements. Outstanding bills stood at Rs 1,000 crore as on April 30, 2003.

MKVDC then floated bonds to raise Rs 300 crore, but only succeeded in collecting less than Rs 9 lakh. The Corporation, meanwhile, also encouraged leading contractors to rope in some financial institutions to invest in the bonds. As per a February 3, 2002 order, 70 per cent of the amount invested was to be given to a contractor who was able to sell the bonds, for clearing his own outstanding bills.

When this scheme too did not work, MKVDC took a decision to issue bonds to the contractors themselves to clear their pending bills. ‘‘The bonds were not sold directly to the contractors. Instead, the contractors were asked to approach the lead arrangers, submit the application forms to the prescribed bank, to issue the bonds. The entire transaction is on paper as per rules prescribed by the lead arrangers,’’ a senior MKVDC official said.