Public money down the drain?

INDIA'S leading financial institutions had an uneasy lunch hour on May 31. Some 400 slogan-shouting protesters arrived at the head offices of six financial bodies in South Mumbai. Most of them were project affected people from the banks of the Narmada and members of the Narmada Bachao Andolan. They were there to challenge investments made by these institutions in the Maheshwar hydro-power project on the Narmada in Madhya Pradesh. Their demands were basic - that these institutions be more transparent in their dealings and accountable to the public.

"Do not fund the Maheshwar project - the Enron of Madhya Pradesh," said one banner carried by the protesters. "Financial institutions wake up! Don't drown public money" said another banner in Hindi. The protest was directed at the Industrial Development Bank of India (IDBI), Industrial Finance Corporation of India (IFCI), Unit Trust of India (UTI), State Bank of India (SBI), Life Insurance Corporation of India (LIC) and General Insurance Corporation (GIC). These institutions together form a consortium that is funding the Maheshwar project.

This protest opens several possibilities. One, it puts the Narmada Bachao Andolan on a new plane. Two, it serves as an example to millions of small investors whose life savings are in the hands of these financial institutions and now threatened by mismanagement within these bodies.

Three, it creates the potential for linking the concerns of project affected people in the Narmada valley with the worries of the urban small investor. Consequently, four, there is a glimmer of hope for a growing variety of public pressure to check corruption and mismanagement in the financial sector.

Till about three years ago, the NBA's struggle was entirely focussed on the Sardar Sarovar mega-dam, an irrigation and hydro- power project in Gujarat. The survival-struggle of the thousands of people being displaced by this project has been headline news for over ten years. The Andolan has also made a case to show that the Sardar Sarovar Project (SSP) has a poor cost-benefit ratio. However, this dimension of the campaign never got as much public attention as it should have.

In the case of the Maheshwar project, the NBA's attention was initially focussed on its social and ecological costs. However, it soon discovered that the project is unviable in conventional business terms. Its protests and campaigning across the world resulted in four international investors withdrawing from the Maheshwar project.

This project is being promoted by a private company, S. Kumars. However, according to the NBA, almost 90 per cent of the over Rs. 2,000 crore project is to be funded by the public sector financial institutions. Thus the Andolan is concentrating its energy on compelling these institutions to withdraw from the project.

The NBA offers the following reasons for its assertion that the financial institutions' decision to invest in the Maheshwar project is inexplicable. One, the power produced by this project will be about Rs. 7 to Rs. 10 per unit as compared to the Rs. 1.25 per unit cost of the Madhya Pradesh Electricity Board (MPEB) and Rs. 1.67 per unit cost of the National Thermal Power Corporation (NTPC). Two, the MPEB is already virtually bankrupt and unable to pay for such expensive power.

The NBA's case against Maheshwar has been strengthened by the self-evident failure of the controversial Enron power project at Dhabol in Maharashtra. The high cost of power generated by the plant of this American multi-national company, has precipitated a crisis in the Maharashtra State Electricity Board (MSEB). The financial disaster of Enron has turned out to be more severe than predicted by social activists who campaigned against the project from its inception.

Thus, when the NBA now takes its agitation to the doors of the financial institutions, it is no longer speaking for just the project affected people of the Narmada valley. It is a warning that the public will not tolerate such cheating.

Its demand is that the institutions immediately declare a moratorium on all further lending to independent power projects and evolve a more efficient and transparent system for assessing the viability of such ventures.

Of course, independent power projects are only one of several examples of financial institutions not applying their mind, says Sucheta Dalal. An independent investigative journalist, Dalal is known for exposing various financial scams. She was recently called to depose before the Parliamentary committee examining the latest stock market scam.

For many years now, Dalal has despaired the lack of collective public action against individuals and institutions that mismanage or siphon off public funds. This inaction has partly contributed to creating a situation where people have reason to fear that their life savings may not be safe even in as large and reputable an institution as the UTI. Thus, Dalal welcomes the street-level protest against the financial institutions but warns that this is not enough. The demand for accountability from the financial institutions will also have to be pursued through the courts, urges Dalal.

The NBA has issued legal notices to all the financial institutions demanding answers for why they have sunk money in a project that has been deemed unviable by several different studies. At present, the officials at IDBI have promised to call a meeting of all the institutions involved in the Maheshwar project and even to send a team of officials to investigate issues relating to rehabilitation and resettlement in the affected villages.

However, the NBA's greatest gain here is that it has shown that a project it opposes is not only damaging for the affected people but is also a bad business deal in which the citizens of India could be cheated.

Can this serve as an inspiration and example to the millions of middle class investors who are today justifiably worried about the security of their savings even in these large financial institutions? Unless there is active citizen's pressure to demand accountability from these institutions, there is every likelihood that thousands of crores of rupees will continue to be lost because of poor project appraisal or the grossly flawed manner in which these institutions have been juggling money.

By itself, the NBA's protest may prove feeble. But if the cause of the project affected people can be linked to the anxieties of the small investor, then this combined strength could have a far- reaching impact. These efforts would also benefit from the burgeoning right to information campaign all over India.

Yet all this together represents a faint hope for checking corruption and mismanagement in the financial sector - unless large numbers of people actively join such protests. Plus there is a vital role to be played by some individuals, at the core of the financial system, who have the courage to join this fledgling mobilisation against corruption and inefficiency.

RAJNI BAKSHI

Send this article to Friends by E-Mail

Section  : Features
Previous : The world of dais
Next     : Thoughts from wild places