Sucheta Dalal :Maharashtra's fast-road to death (22 July 2002)
Sucheta Dalal

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Maharashtra's fast-road to death (22 July 2002)  

It’s no news that Maharashtra, once India’s best-administered and prosperous State, is broke. But the speed at which it is hurtling into financial chaos is still astonishing. Last week, one rating agency downgraded 10 government units which had delayed interest payments, while the other issued warnings about high level of guarantees to State undertakings. This follows a downgrade of the State by both rating agencies last month. As they point out, Maharashtra’s fiscal position has deteriorated from a primary revenue surplus of Rs 1,446 crore during 1996 to a deficit of Rs 2,579 crore during 2001. It has overshot its borrowing targets and cannot seem to curb rising debt and falling revenues.

More worrying, instead of reducing wasteful expenditure, the government is squeezing people dry for more taxes. Property taxes, stamp duty and sales-tax have reached a level where they are killing investment and commerce. Even the trick of milking automobile users through the sale-tax on petrol has probably been played out. Maharashtrians, especially Mumbaikars, pay the highest petrol and diesel rates in the country.

A study by the Confederation of Indian Industry shows that out of 3,330 industrial units in the TTC-MIDC area, 60 per cent have closed down. This industrial sickness, it says, is spreading to Nashik, Aurangabad, Nagpur and other parts of the State. But the politicians are oblivious. They continue to exploit key PSUs by having them press ahead with grand expansion plans as though there were no crisis.

Recently the CII, ‘saddened by the continued downgrading of the State’ jumped in to help it ‘combat industrial sickness’. It really means that industry is beginning to panic at the government’s lack of direction. CII has correctly identified power, infrastructure and small-scale sector manufacturing as its focus areas. Unfortunately, the solution lies in the political will to reform rather than CII-style ten point programmes and quick-fix solutions.

Let us look at some big problem areas. The most obvious problem is power. The controversial Dabhol Power Company (DPC) had pushed all other power related issue to the background for over eight years. We are now discovering that basic issues such as improper metering, crumbling infrastructure, poor pricing and thefts can lead to a bigger crisis. For instance, it needed the recent serial blackouts to get disintegrating transmission equipment replaced. We then realised the State was ill-equipped to handle power shortage and peak demand; but the politicians in charge are more focussed in fixing the tendering process for purchase of meters rather than worry about transmission issues. Two separate committees identified and offered solutions for Maharashtra’s power problems but their recommendations including the trifurcation of the Maharashtra State Electricity Board (MSEB) have been mothballed.

The Maharashtra State Road Development Corporation (MSRDC), which successfully decongested Mumbai’s traffic and built 36 flyovers funded by privately-placed bonds will be the next problem. MSRDC did raise Rs 2,140 crore to fund projects including the Mumbai-Pune Expressway, but ever since the Congress-NCP government has come to power it seem bent on destroying the MSRDC and making its projects unviable. The government went back on promises made in the bond document, and cancelled land and other assistance promised.

Two townships, one at Chowk (760 hectares) and another at Dehu Road (300 hectares), were cancelled without compensating MSRDC, making the Mumbai-Pune Expressway way unviable. No attempt was made to build/develop infrastructure such as petrol pumps, food courts and restrooms or to raise money through advertising. Government also failed to pass on the fuel cess that was collected to fund the flyovers, or extend the budgetary support assured to it.

Yet, MSRDC is being made to push ahead with expensive, unsequenced projects that are patently unviable and have no clear funding plan. The Worli-Bandra link across the sea in Mumbai is an example. Over Rs 150 crore has been spent on the project based on fanciful traffic projections without resolving how traffic will flow into South Mumbai. Unless the Pedder Road/ Tardeo viaducts are cleared and completed simultaneously with the sea-link, it will only lead to disaster.

MSRDC has started this expensive and elitist project (meant only for car owners) on the claim that it will be financed by grateful users through toll payments, or through bond issues and not by the exchequer. That is pure nonsense. MSRDC’s financial mess makes it incapable of raising private funds anymore. So the money for the sea link has to come from the MMRDA (Mumbai Metropolitan Regional Development Authority) and HUDCO with a small amount financed by Canara Bank. These institutions have no business financing a patently unviable and expensive sea-link instead of focussing of mass transport that will benefit the common man. But nobody is asking any questions.

Finally, Maharashtra’s biggest problem today are probably the state-guaranteed irrigation projects, which show no signs of completion, but have continuously raised bonds. Maharashtra has Rs 2,564 crore of such bond programmes, which are all on a rating-watch after Maharashtra Krishna Valley Development Corporation (MKVDC) defaulted on some payments. While the four irrigation corporations have paid interest until June 30, 2002, nobody is willing to bet on the future and huge principal repayments coming up in the next few months.

Maybe it is time the so-called Congress high command led by Sonia Gandhi takes some interest in the state. Instead of gloating about the 14 States ruled by the Congress, she should worry about their non-performance. Otherwise, angry and desperate voters will be ready to boot the Congress out of the states by the time the next general election is due.

-- Sucheta Dalal