[sustran] SHELVE BMIC - The "Enron" Of Road Development- Press Release - July 04, 2002

[ESG, INDIA]

Press Release - July 04, 2002

SHELVE BMIC – The "Enron" Of Road Development

GoK should Immediately Implement the Expansion of SH-17 and Doubling of
Railway

According to recent press reports, the Government of Karnataka (GoK) has
opted to expand the existing Bangalore-Mysore highway (State Highway-17)
from its present 2 lanes, to a 4-lane highway at the cost of Rs. 331 crores.
Karnataka Road Development Corporation (KRDCL) officials have confirmed that
the expansion project has the following specifications: 2-lanes measuring 7
metres wide in either direction; a 2 metre median strip; shoulders and
embankments on either side. The total "right of way" would be 45 metres.
Although the width of the road and median will come to only 16 metres, it is
important to note that the shoulders will allow ease of passage to
pedestrians, farmers, bullock carts and the like, thus mitigating accidents
and ensuring a smoother flow of traffic. Total land acquisition between
Bangalore and Mysore would be only 65 acres.

It is well established that the majority of accidents on the existing road
are primarily due to bends that are hard to negotiate. The planned
expansion, according to KRDCL officials will ensure that road geometry is
also addressed and the expanded road will be straighter, safer and easier to
travel. Most importantly it would require negligible acquisition of
agricultural land and marginal acquisition of existing commercial zones to
prevent "ribbon development". A combination of this project and the doubling
of the railway line between Bangalore and Mysore (approx. a distance of 140
kms.) will be viable economically, and more acceptable environmentally and
socially. In comparison to other existing proposals to develop transport
corridors between the two cities, expansion of the existing highway is far
more affordable.

Considering this situation, the question looms as to why the
Bangalore-Mysore Infrastructure Corridor Project (BMICP) is still being
considered. According to reports, the Asian Development Bank has assessed
that the traffic volume between Bangalore and Mysore does not justify an
expressway of the type proposed in BMICP and is significantly less than
international standards for expressways. Of the options available then, to
improve safe traffic flow between Bangalore and Mysore, BMICP has the
greatest adverse impact, the highest financial outlay, and the most
uncertain returns. Not only will it involve a 6-lane expressway which
apparently requires over 7000 acres of land, but would demand the
acquisition of over 14000 acres of land for 5 gated townships developed
clearly to extract real estate value, so as to ensure the expressway becomes
financially viable! It is very doubtful if the real estate projections of
the BMICP are believable given that several similar housing, recreational
and corporate facility developments in and around Bangalore have failed. In
other words there is simply no demand for expensive, exclusive even, housing
developments between Bangalore and Mysore. Most importantly this extravagant
proposal costs over Rs. 2,000 crores. Nandi Infrastructure Corridor
Enterprise, promoters of BMICP, has also failed to comply with a string of
compliance conditions in the clearance issued by the Karnataka State
Pollution Control Board and the Ministry of Environment and Forests.

Keeping this in view, we must call into question the reported commitment of
HUDCO to both the expansion of SH-17 and the in-principle support to BMICP.
Even if HUDCO had all the money to fund both projects, the moot point would
be if it were at all required to have two new highways between Bangalore and
Mysore. Such mockery of "development" cannot be sustained in the claim to
delivering the objectives of wider public interest. ICICI and the consortium
of financiers must consequently withdraw financial support to BMICP, as with
the expansion proposal and the doubling of the railway line, the BMICP would
be the "Enron" of Road Development. The Reserve Bank of India is clear that
projects such as BMICP should not be easily supported by financial
institutions and has even released a Circular No. IECD No. /08.12.01/2001-02
dated 20 February 2002, extracts from which state that:

"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 utilization 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."

The BMIC project has repeatedly claimed that project financing is based on
GoK guarantees. In view of the RBI circular, it would seem the GoK is
supporting an economic disaster against RBI advice, to say the least.

Keeping the expansion of SH-17 in view, we urge the GoK to stop investing
wastefully its time and resource in being a part of the BMICP, and focus on
assuring the quick implementation of the SH-17 expansion. In addition,
doubling the existing railway line alongside, at a reported cost of Rs. 276
crores would help decongest Bangalore and develop Mysore while boosting the
economy of Mandya and Chamrajnagar districts, thus reducing regional
imbalances. Furthermore, reviving the shelved proposal of developing housing
at important railway stations, will surely meet the growing demands of
providing all sections of society affordable housing and safe travel
options. This way Bangalore can be protected from the ugly sprawl as
proposed in the BMICP.



Leo F. Saldanha Nagini Prasad Rajmohan Pillai

Coordinator -ESG Campaigns Coordinator Coordinator (Infrastructure Finance
Research)

For more information on the BMICP please visit
http://www.indiatogether.org/campaigns/bmic

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Environment Support Group (R)

S-3, Rajashree Apartments

18/57, 1st Main, SRK Gardens

Bannerghatta Road, Jayanagar

Bangalore 560041

Telefax: 91-80-6341977

Tel: 91-80-6531339

Email: esg at bgl.vsnl.net.in

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