MEDIA RELEASE, 2 January 2007

Thiruvanathapuram and New Delhi


Even as the Politburo and Central Committee meetings of the Communist Party Marxist (CPM) commenced yesterday in Kolkata over 100 groups from across India, including social movements, trade unions and civil society organisations, called upon Kerala Chief Minister VS Achuthanandan to drop the controversial Asian Development Bank (ADB) loan.

In Kerala, the inking of the ADB funded Kerala Sustainable Urban Development Project (KSUDP) on December 8 2006 has spiraled into a major political controversy forcing the CPM to discuss the $316.1 million (Rupees 1422 crores) loan at the Central committee meeting, according to
party sources. The loan amount is to be disbursed to the 5 municipal corporations of Kochi, Kollam, Kozhikode, Thiruvanathapuram and Thrissur to shore up urban infrastructure and services.

The open letter to the Kerala CM, under the banner of Peoples Forum Against ADB, states that the ADB loan will not only fail to deliver on its stated goal of promoting sustainable development, but would instead undermine democracy in local governments and lead to furthering Kerala's burgeoning debt burden now estimated at over Rupees 40,000 crores.

'Chief Minister VS should stick to his stand that external loans with conditionalities that are anti people should be dropped. His government should not be taking decisions that will effectively push in privatisation of basic services such as water delivery, sanitation and waste disposal' said writer and activist CR Neelakandan.

Neelakandans views are not unfounded. The KSUDP loan agreement available from the ADBs website mentions several conditionalities the state government has to implement to avail the loan amount.

Page 19 of the proposed loan mentions, 'By not later than March 2007, the Government of Kerala will formulate a policy on conversion of standposts to individual metered house service connections and/or metering standposts, for the purpose of efficient demand side management and reduction of Non Revenue Water'. The ADB also spells outs its strategy to advance privatisation through the KSUDP which includes the creation of an enabling regulatory framework and implementation of charges and fees for urban services at 'reasonable' levels. The revision of the role of the Kerala Water Authority (KWA) to facilitate the private sector is an important deliverable to achieve this.

While this is the first ADB urban loan in Kerala, the letter underscores the experience of similar ADB loans in neighbouring Karnataka, as indicative of what is likely to be in store.

The letter mentions that, 'In all 14 ADB towns in Karnataka, projects are replete with design flaws, poor quality of construction, prolonged delays in completion and non-disclosure of project information to local councillors. There were several instances of ADB project managers coercing local municipal authorities into accepting terms and conditions that they were unable to justify to the public. The ADBs insistence that key operations of the project be prepared by expensive foreign consultancy companies added to the overall debt burden created by the project. The towns are grappling with repayment schedules due to erroneous estimates by ADB consultants on raising resources through new taxes and cost recovery in water distribution. The ADB project was out of purview of the Karnataka Transparency Act and hence affected people were unable to use the Right to Information to get vital information on the project'

Added T Peter from the Kerala Independent Fishworkers Union, 'The role of local elected representatives and public officials will be relegated to that of implementers of ADB policy. The ADB loan is a choice that will benefit some groups (such as consultants and technocrats) and impose risks on the people of Kerala who will have to repay the loan. When there are alternatives and choices available, democratic political processes should be at the centre of decision-making — not technocrats'

The groups said there was an urgent need for a democratic scrutiny of all conditionalities and documents related to the ADB loan, including consultant's reports. The signatories asserted that democratically elected representatives at the national, state and municipal corporation level should be the final arbiters of all economic policy.

That the 5 municipal corporations urgently need upgradation of existing infrastructure brooks no argument. But we also believe that any government must favour internal resources over institutions such as the ADB or the World Bank for urban development; this is not only the most democratic but also the politically correct option. The possibilities of internal resource mobilization are many in Kerala; they include commodity taxes on consumer expenditure, addressing tax evasion in the gold market, collection of tax arrears, under taxation of the tourism industry and mobilising the domestic savings of the state (including foreign exchange remittances) which run into thousands of crores of rupees, concluded Peter.

Other groups that comprise the Peoples Forum include Focus on the Global South, National Hawkers Federation, National Fishworkers Forum, Plachimada Solidarity Committee, New Trade Union Initiative, National Alliance of Peoples Movements, Indian Social Action Forum and National Forum of Forest People & Forest Workers.

For more information please call Benny Kuruvilla at 9820181191 - CR Neelakandan can be contacted at 944649332 -