[sustran] FW: Action Alert: Major Cabinet Decision on Bangalore Mysore Infrastructure Corridor

[Paul Barter]

Forwarding without comment. Paul.

-----Original Message-----
From: ESG India [mailto:esg at bgl.vsnl.net.in] 
Sent: Wednesday, 2 October 2002 8:58 PM
To: sustran at po.jaring.my
Subject: Action Alert: Major Cabinet Decision on Bangalore Mysore
Infrastructure Corridor 
Importance: High


Dear Friends,

The Government of Karnataka (GoK) is expected to take a major Cabinet
decision 
on the Bangalore-Mysore Infrastructure Corridor Project (BMICP) in the
next few 
days.  Over the last few months there has been documented evidence that
the GoK 
is attempting to rush clearances for this project.  In addition to the
existing 
questionable aspects of this project, the Reserve Bank of India (RBI)
filed a 
case against ICICI, a major financier of BMICP in September 2002, as
ICICI and 
potentially the Government of Karnataka are in violation of a binding
RBI directive 
on financing of infrastructure projects.  In view of these serious
unresolved 
issues, and in order to ensure the wider public interest, we request you
to write 
to the Chief Minister of Karnataka at the earliest urging him not to
give the 
green light to the BMICP.  Individually written letters are ideal,
however, a 
sample letter is provided below.  Please write/email letters to the
Chief Minister 
of Karnataka with copies to other officials as indicated, giving your
full name 
and mailing address.  Information on the BMICP campaign is archived at
http://www.indiatogether.org/campaigns/bmic

Kindly ensure that you mark a copy of your letter/email to us.

Sincerely,

Leo Saldanha and Nagini Prasad
Environment Support Group
S-3, Rajashree Apartments
18/57, Ist Main, SRK Gardens
Bannerghatta Road, Jayanagar
Bangalore 560041. INDIA
Telefax: 91-80-6341977/6531339
Email: esg at bgl.vsnl.net.in

Encl:
1.  Letter to Chief Minister of Karnataka
2. Article in Deccan Herald dated 29 Sept 2002

------sample letter-------

Shri. S.M. Krishna
Chief Minister
Government of Karnataka
Vidhana Soudha
Bangalore - 560001
cm at kar.nic.in

October 2, 2002

RE: Upcoming GOK Cabinet decision on Bangalore-Mysore Infrastructure
Corridor 
Project (BMICP)

Dear Shri. Krishna,

This is with reference to an article in the Deccan Herald ("RBI studying
ICICI's 
funding of BMIC project", September 29, 2002 - enclosed) raising
concerns over 
the Karnataka Government's continuing support for the Bangalore-Mysore
Infrastructure 
Corridor Project (BMICP).  This in light of the possibility that the
project 
developers and financiers are violating a binding directive of the
Reserve Bank 
of India (RBI) and that your Government may be a party to this
violation.

The Reserve Bank of India (RBI) specifically warns financial
institutions from 
supporting projects that have not been thoroughly reviewed for financial
and 
economic viability, and particularly NOT TO FINANCE projects that have
been promoted 
on the basis of "State Government Guarantees".  The express reason for
such direction 
is the spate of financial scams that have hit the country's economic
security 
of late, particularly considering that State Governments have been a
major reason 
for backing projects that were inherently unviable, pressurizing banks
to release 
funding.  Enron's Dabhol project is a classic illustration of such a
project, 
and it would not be an exaggeration to treat the BMICP as an "Enron" of
road 
development.  You will recall that the Karnataka Government just about
managed 
to scrape out of potential liabilities by canceling the Cogentrix
project, thanks 
to your sound decision soon after you became Chief Minister. 

The BMICP characterizes a scheme that is simply too grandiose, and not
reflective 
of the real transport and housing needs demanded in the Bangalore-Mysore
region. 
 Existing towns and cities along this corridor have demonstrated
economically 
and culturally vibrant, and well integrated by the existing road and
rail network. 
 Your Government has quickened the pace of widening the existing
Bangalore Mysore 
Highway (SH-17), and the Southern Railways are keen to develop a second
rail 
track between Bangalore and Mysore.  The expansion of this road to four
lanes 
will only require 65 acres of land in all, and there is no need for any
land 
acquisition for doubling the rail corridor.  Existing urban areas may
benefit 
immensely from the combined impacts of these developments particularly
if incentive 
is provided for development of high-density self-contained townships in
and around 
existing urban areas between Bangalore and Mysore, which is affordable
to a wide 
section of society.  People are likely to prefer living in such urban
areas, 
considering that several have already well developed networks of social,
educational 
and health infrastructure, and would not have much handicap traveling to
Bangalore 
on high speed rail links.

Contrast this with the BMICP, which will involve five new township
developments, 
all of which will only be serviced by the proposed expressway, that
which has 
been reduced now to only a 2-lane road from the original 6 lane
expressway.  
Given now that many housing and corporate development schemes have
sprung up 
successfully around Bangalore, especially along the "IT Corridor", the
potential 
for development of the BMIC towns is rather bleak.  Financially,
therefore, the 
project is almost certain to fail.  This notwithstanding the fact that
the project 
has very serious environmental and social impacts, especially given that
it will 
involve acquisition of 14,000 acres of farm land and transfer of over
7,000 acres 
of Government land in the nature of forests, "wastelands" and wetlands,
potentially 
dislocating over 200,000 people.  In addition, as you may agree, water
is a major 
limiting factor in this region.  Despite the ongoing Cauvery River
dispute, the 
1997 Framework Agreement for BMICP questionably commits 2 thousand
million cubic 
metres of water per annum to BMICP from Cauvery waters.

In this context, the news that your Government has provided "State
Guarantees" 
to the BMICP is shocking indeed.  Nandi Infrastructure Corridor
Enterprise (NICE) 
and Nandi Economic Corridor Enterprise (NECE), the proponents of BMICP,
have 
no demonstrated financial worth reflected in their inability to deposit
Rs. 400 
crores ( US$ 80 million) for land acquisition.  The likelihood of this
project 
thus becoming a burden on the State Exchequer and your Government
mortgaging 
land and other resources by issuing "comfort letters" on the request of
ICICI 
and other financial institutions, is not only against the principles
advocated 
in the RBI directive, but simply put, against the wider public interest.

It is reported that the decision on the BMICP is due to be discussed in
the Cabinet 
soon.  It is sincerely hoped that your Government will put public
interest ahead 
of all else, and finally close the BMICP as an unviable and irrational
urban 
development choice.

Thanking you,


<name>
<full mailing address>



Cc:
1.Shri T. R. Baalu, Union Cabinet Minister (Environment & Forests),
Government 
of India - (mef at envfor.delhi.nic.in, mef at menf.delhi.nic.in) 2.Shri. P.
V. Jayakrishnan, IAS,  Secretary, Ministry of Environment & Forests, 
Government of India - (secy at menf.delhi.nic.in)
3.Shri. S. Rajagopalan, Jt. Secretary (IA), Ministry of Environment and
Forests, 
Government of India (raja-g at nic.in)
4.Dr. Sathya, Addl. Director (Scientific), Ministry of Environment &
Forests, 
Southern Cell, Bangalore (romoefsz at kar.nic.in)
5. Shri. Gokul Ram, IAS, Principal Secretary, Dept. of Ecology,
Environment and 
Forests, Government of Karnataka (sececoenv at kar.nic.in)
6. Shri. Upendra Tripathy, IAS, Chairman, Karnataka State Pollution
Control Board 
(u_tripathy at hotmail.com)
7. Environment Support Group (esg at bgl.vsnl.net.in)


------------Deccan Herald Article-------------

DECCAN HERALD 
Sunday,  September 29, 2002  

RBI studying ICICI's funding of BMIC project

By Visvas Paul D Karra
DH News Service
BANGALORE, Sept 28

The Reserve Bank of India (RBI) is looking into a complaint against
ICICI Bank 
over financing the Bangalore Mysore Infrastructure Corridor Project
(BMICP) after 
a complaint registered by a greens group about banking violations.

According to reports, ICICI is leading a consortium of financial
institutions, 
which includes among others HUDCO and LIC, to release funds for the Rs
2,000-crore-project 
being developed by NICE (Nandi Infrastructure Corridor Enterprise). The
RBI, which is the country's banking regulatory authority, has taken
cognisance 
of a complaint by Bangalore-based NGO Environment Support Group (ESG)
which said 
that the financing of BMICP based on State Guarantees would be in
violation of 
the RBI circular issued to all financial institutions in February on
"Financing 
of Infrastructure Projects."

Para 3 of the circular states: "In respect of infrastructure projects,
where 
financing is by way of term loans or investment in bonds issued by
government 
owned entities, banks/ financial institutions should undertake due
diligence 
on the viability and bankability of such projects to ensure efficient
utilisation 
of resources and creditworthiness of the projects financed. 

Banks should also ensure that the individual components of financing and
returns 
on the project are well defined and assessed. Lending/ investment
decisions in 
such cases should be based solely on commercial judgment of banks/
financial 
institutions. There should be no compromise on proper credit appraisal
and close 
monitoring of the projects financed and banks should ensure that only
projects 
that are intrinsically viable are financed. State government guarantees
may not 
be taken as a substitute for satisfactory credit appraisal and such
appraisal 
requirements should not be diluted on the basis of any reported
arrangement with 
the Reserve Bank of India or any bank for regular standing instructions/
periodic 
payment instructions for servicing the loans/ bonds."

When contacted, officials of the RBI's Department of Banking Supervision
in Mumbai, 
informed Deccan Herald that based on the ESG complaint, a letter had
been sent 
to ICICI Bank seeking clarifications. But all efforts by Deccan Herald
to elicit 
a response from the "Infrastructure Project Group" of the ICICI's Mumbai
office 
failed. 

The ESG referred to press statements made by NICE that the BMICP's
financial 
closure was based on "comfort letters" (guarantees) issued by the
Government 
of Karnataka, and said this was in gross violation of RBI's February
circular. According to State government officials, two "comfort letters"
had already been 
issued to NICE and a third letter for an experimental two-lane
expressway would 
be handed to the project developer after a Cabinet decision.

When contacted, Mr Ashok Kheny, managing director of NICE, said there
were no 
financial guarantees involved in repayment of loans to ICICI Bank by the
State 
government.

Mr Kheny, further wondering about the true intentions of ESG, said "NICE
is puzzled 
as to why ESG keeps misrepresenting facts to the public."

Says ESG Coordinator Leo Saldanha, "We raised this issue of clear
violations 
in the financial closure with the financial institutions but they have
not responded."

Mr Saldanha asserts that the RBI is clearly trying to stop financial
scams which 
have rocked the nation's economy. "In this case it is like stemming the
rot before 
it sets in.