Check alleged NICE fraud/irregularities in BMICP

BMICP @ a glance - An introduction to the Bangalore-Mysore Infrastructure Corridor Project, October 2002 (49KB)
The Bangalore Mysore Infrastructure Corridor Project (BMICP) consists of the construction of a 4-lane (convertible to 6) toll, walled expressway, 5 townships and associated link roads, power plant and supporting infrastructure.

The project is slated to cost upwards of Rs. 2000 crore (US$400,000,000).

The townships are planned to act as population counter-magnets to Bangalore, thus helping to decongest this burgeoning city.

According to project documents1, the project will not be financially viable without the townships, as they will provide a captive source of expressway tolls, being accessible mainly via the expressway.

There are 2 other existing roads between Bangalore and Mysore: State Highway 17 (SH-17 or Bangalore Mysore Road), and State Highway 86 (SH-86 or Kanakpura Road) and also a railway line with several trains running daily.

Furthermore there are several existing towns between these 2 cities, situated along the railway line: Ramnagaram, Channapatna, Mandya, Maddur, Srirangapatna to name a few.

The origins of this project can be traced back to the 1980s when the government of Karnataka was interested in expanding the existing SH-17 from a 2-lane road into an expressway.

They approached the Asian Development Bank, which upon commissioning a study found that SH-17 was not a candidate for conversion into an expressway due to developments along the roadside.

Based on a suggestion by the Karnataka Public Works Department that a road be built parallel to SH-17, tenders were called for and Nandi Infrastructure Corridor Enterprises (NICE) Ltd. were the only bidders.

NICE Ltd. is a consortium consisting of Kalyani Group (Pune), SAB Engineering (Pennsylvania, USA) and Vanasse Hangen Brustlin (VHB) (Boston, USA).

NICE conducted its own feasibility study, which included the construction of several townships (initially 7) and an expressway (initially 6-lanes).

This study was accepted by the government of Karnataka (GoK) and in 1995, a Memorandum of Understanding (MOU) was signed between the GoK headed by then Chief Minister, Sri. H.D. Devegowda and NICE for the construction of this infrastructure corridor.

A short note on the BMICP and, other project and campaign documents provide further information.

BMICP @ a Glance

An Introduction to the Bangalore-Mysore Infrastructure Corridor Project (BMICP)

The legal, environmental, financial and social issues surrounding the Bangalore Mysore Infrastructure Corridor Project (BMICP) are extensive, however in the interests of brevity, this note attempts to provide a background, and, highlight key issues that should be of concern to potential investors and the general public.

The BMICP envisages the construction of a 4-lane (expandable to 6) walled, toll expressway and 5 townships between Bangalore and Mysore.

A schematic view of the proposed expressway and townships, and existing road is available at: http://www.nicelimited.com/project.htm The BMIC Project requires its townships to cross-subsidise the expressway, for the latter is not financially viable on its own[i] and the townships are viewed as a captive source of expressway tolls, for they will mainly be accessible via the expressway.

A major justification for the project is the need to de-congest Bangalore, but without demonstrating by detailed analysis the willingness of people to pay and live in the proposed townships, or pay for travel on the expressway.

Furthermore viable alternatives for development of existing urban centers exist but have not been considered.

The project has been touted as being modeled on the City of Columbia in the State of Maryland, USA.

However, it is difficult to compare the economic and demographic profiles that support the Columbia experience and make this a model for the Bangalore-Mysore corridor.

It must be highlighted though that admittedly the Columbia, Maryland model is not as ideal and successful as claimed or envisioned.[ii]

Project Promoters

In 1995, a Memorandum of Understanding (MOU) was signed between the Government of Karnataka (GoK) headed by Sri. J.H. Patel and, Nandi Infrastructure Corridor Enterprises (NICE), a consortium consisting of Kalyani Group (Pune), SAB Engineering (Pennsylvania, USA) and Vanasse Hangen Brustlin (VHB) (Boston, USA).

In March 2001 however upon inquiries as to his company's involvement in the project, VHB Board Chairman, Richard Hangen, denied VHB was involved in the BMICP since 1995 and that he did "not know of the existence of any scope defining a future role for [VHB]."

This while project documents[iii] dated 1999 include VHB as a member of NICE, and NICE continues to claim on its website[iv] that VHB is the "lead engineer" for the BMICP.

Clearly a fraud is being perpetrated upon the people of Karnataka and potential investors, a fraud that 3 different state governments have perhaps chosen not to uncover.

SAB Engineering appears to be a small enterprise headed by Mr. Ashok Kheny (also Managing Director of NICE) and it is unclear what experience it brings to large projects such as BMICP or what its role would be.

It is not clear why the GoK is risking its credibility by engaging such companies and such fraudulent practices.

Financial Irregularities

The BMICP will reportedly cost upwards of Rs.2000 crores (US$400,000,000).

For several years it was unclear who would be financing the project, however, in a 13th June 2002 Economic Times report, Ashok Kheny, Managing Director of NICE claimed that he "expect(s) the consortium of financial Institutions led by ICICI to release funds to the 2000 crores project upon receipt of the comfort letter allaying their reservations over various aspects to facilitate early financial closure."

Apart from ICICI, HUDCO, Life Insurance Corporation, Punjab National Bank and Bank of India are reported to be financing BMICP.

Unit Trust of India and General Insurance Corporation may also be involved in the consortium financing the project.

In August 2002, the Reserve Bank of India filed a case against ICICI for its potential violation of an RBI directive on "Financing of Infrastructure Projects".

It instructs not only financing institutions to be wary of project viability, but also State Governments, that their guarantees (or comfort letters) are not a substitute for reliable appraisal of viability.

Especially given the use of public assets to finance this project (for instance, HUDCO financing and the giveaway of government [public] land to NICE at Rs.10/acre/year), this RBI case against ICICI assumes importance.

Clearances and Legal Violations

On August 1, 2000, the Karnataka State Pollution Control Board (KSPCB) issued a No Objection Certificate to the project, contingent upon NICE's compliance with several conditions.

Several of these conditions are yet to be met.

On August 8, 2001 the Ministry of Environment and Forests (MoEF) issued a conditional environmental clearance for the expressway component of the project.

Several of these conditions are also yet to be met, and the MoEF is investigating this matter.

Clearances accorded have been based on faulty Environmental and Social Impact Assessments and farcical Public Hearings.

For instance, one socio-economic assessment asked just 3 questions: the name of the respondent, the address of the respondent and the name of the surveyor, and another was based on faulty statistical sampling.

Such "studies" clearly do not present a picture of the social and economic conditions of the affected population, and, do not even satisfy the guidelines of the MoEF's Environmental Impact Assessment Manual.

The Public Hearings, in particular, were marked by human rights abuses, a matter that was raised before the National Human Rights Commission.

Basic public domain documents and studies about the project have been kept confidential, on grounds that they compromise corporate interest.

In such a situation, the public has little or no opportunity of making a reasoned assessment of the costs and benefits of the BMIC project.

For a project that has such significant and wide impacts, there clearly is no responsibility attached in terms of public accountability, an approach that may well become a liability for potential customers.

Social and Environmental Aspects

Total land acquisition for the project will amount to about 21,000 acres, consisting of agricultural wetlands, and forest land, and according to various reports, the project will affect almost 200,000 people, mostly agricultural laborers and farmers.

Of these, only those owning land and who can show proof of title will be eligible for cash compensation, and these constitute a minority of the total affected population.

Environmental surveys are based on out-of-date records and out-of context reasonings.

For instance, what was once termed "wasteland", may have been developed by local farmers into productive agricultural lands.

Yet the BMICP Environmental Impact Assessment continues to retain the claim to such land as "wasteland" without actually verifying the quality of land presently.

Furthermore, government land (i.e. public land) is being given away to NICE at Rs. 10/acre/year for 30 years, yet this land yields more than this amount to those now cultivating it.

Many of the farmers whose lands would be acquired were not informed of the acquisition by government authorities.

For some whose land will be sliced by the expressway, they will be forced to walk about 1km to reach the other side of their land (as underpasses are proposed every 500 metres).

Water: a major limiting factor

The issue of water is critical, and presents a major limiting factor in this region.

With the ongoing disputes between Karnataka and Tamil Nadu over Cauvery River water supply, and with Bangaloreans suffering from erratic and insufficient supply, it is unclear on what basis the GoK has in the BMICP Framework Agreement (1997) permitted NICE "to draw 2 thousand million cubic (tmc) feet of water per annum from the Cauvery River allocation."

A statement by the then Law and Parliamentary Affairs Minister D.B. Chandre Gowda that "Bangalore will go without water if we release additional water to Tamil Nadu" is further evidence of the present dire situation.

Alternatives

Recent press reports (June/July 2002) have indicated that the GoK is pursuing expansion of the existing Bangalore-Mysore State Highway (SH-17) and doubling the railway track.

The former is estimated at Rs. 331 crore (US$ 66,200,000) and reportedly requires acquisition of only 65 acres of land, and the latter is estimated at Rs. 276 crore (US$ 55,200,000) and requires minimal land acquisition as most of the land required is railway land.

Both these options are considerably cheaper and involve a great deal less land than the BMICP.

Furthermore, reviving the shelved HUDCO-Southern Railways proposal of developing housing at existing railway stations and towns in the Bangalore Mysore region, will surely meet the growing demands of Bangalore, provided all sections of society affordable housing and safe travel options, rather than the urban sprawl proposed by BMICP.

Furthermore, in what may be a cannibalistic move, HUDCO is not only financing BMICP but also reportedly financing the expansion of SH-17.

Given the more equitable and financially sound options available, it is unclear why the GoK and financial institutions continue to support the BMICP.

Furthermore, a key justification for the BMICP was that SH-17 could not be expanded, which as has turned out was an absolutely incorrect assumption.

Given the ongoing work by GoK to expand SH-17 with HUDCO financing, it raises questions whether BMICP is required; and more fundamentally if it is viable at all.

In conclusion

NICE appears to be canvassing the NRI diaspora to encourage investment in property along this corridor.

It is critical that potential investors have complete and accurate information about all aspects of their investment.

Given the large-scale adverse social, environmental and economic affects of the BMICP, when viable and less damaging alternatives exist, BMICP stands out as an extremely controversial project not only in the eyes of residents of Karnataka, but also of people around India and the NRI community.

Seven years have passed and yet the project is nowhere near financial closure, if that is some evidence.

But for a large section of potential investors who would perceive the project as only an investment opportunity, the likelihood of seeing their money grow seems rather remote presently.

Probably the best evidence for this would be the fact that the 6-lane expressway of the BMICP is unlikely to take off, as the Minister for Public Works of GoK has confirmed lately that only 2 lanes would be developed presently, and not all the way to Mysore.

The issue of whether the townships will ever take off hangs fire.

For more information on the BMICP including representations, reports, letters and press articles/releases please visit http://www.indiatogether.org/campaigns/bmic

Avenues for Action

Unless a critical mass of public pressure is placed upon project promoters and decision-makers to critically evaluate the viability of the project, it is likely that the GoK may support BMICP shrouded in secrecy, and thus inherit the greatest financial disaster from an urban infrastructure project.

The burden would be borne physically and economically by the project affected forever, and financially by citizens of the State.

It is only appropriate that the Hon%u2019ble Chief Minister of Karnataka comes clean on this deal, and Mr. Ashok Kheny, MD of NICE Ltd. provides clear evidence to the viability of this project.

Raising awareness in various public fora such as newspapers and magazines would be fundamental to precipitating such highly desired changes, and bringing some transparency and accountability into the decisions on the BMICP.

Some key issues that may be raised include:
o        Given the passing of the Right to Information Act why is basic information about BMICP still not available to the public?
o        Why is the Government of Karnataka supporting BMICP when more equitable options for development of this corridor exist, from both a transport and housing angles?
o        Why does the Government of Karnataka continue to support the project despite its violations of the Environmental Protection Act (1986)?For instance, public hearings were not conducted as per the provisions of the Act and Environmental Impact Assessment and Socio-economic Assessment were not conducted satisfactorily.
o        Why is the Government of Karnataka promoting high risk and flamboyant investments, particularly by questionable companies? (VHB claims non-involvement while NICE claims VHB is "Clead engineer"; SAB Engineering is a very small enterprise which may not have experience of large projects such as BMICP)
o        If VHB is, as it claims, not involved in BMICP, then the Memorandum of Understanding signed in February 1995 is null and void, thus how can the project go ahead?
o        Why is the Government of Karnataka giving away public land at Rs. 10/acre/year?  Where this government land is under cultivation by local farmers, the income earned by them would be greater than the rate charged to NICE.
o        Has the Government of Karnataka considered that it may be violating a binding RBI directive by wrongly issuing high risk State Guarantees in lieu of satisfactory assessment of financial viability?
o        Has NICE considered that as per a binding RBI directive, financiers cannot fund BMIC based on comfort letters (State Guarantees)?
o        Why are public funds being used (HUDCO is a public sector enterprise) for a private project for which the public have/has not been satisfactorily consulted, and for which public domain documents have not been released?
o        How can the Government of Karnataka guarantee (as per the Framework Agreement) 2 thousand million cubic (tmc) feet to a privileged 500,000 people in BMICP townships while 6,000,000 Bangaloreans have an erratic and insufficient water supply, particularly in the context of the ongoing battle over Cauvery waters?
o        Why is the GoK committing so much land to this project, when NICE Ltd. has been unable to even deposit the small security amount required per the land acquisition process?
o        Also, why is this projected exempted from providing rehabilitation to affected families?
o        Finally, is BMIC required now that SH-17 is being expanded, and the Bangalore-Kanakpura-Coimbatore/Mysore road is being upgraded as a 4 lane National Highway?
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This petition's been addressed to:

Hon'ble Supreme Court (SC) of India, President, Prime Minister (PM), Chief Minister (CM), Ministry of Environment & Forests (MoEF), Ministry of Urban Development (MoUD), Reserve Bank of India (RBI), Karnataka State Pollution Control Board (KSPCB) & National Human Rights Commission NHRC.