Idf To Consider Ways To Deal With Problem Of Unutilised Sanctions

The two-day meeting of the India Development Forum, which began in Paris yesterday, is expected to explore ways to overcome the problem of unutilised credit sanctions by the Indian government.

Representatives from India may have to assure multilateral and bilateral funding agencies that the government will make budgetary provisions for counterpart funds. The lack of matching grants, known as counterpart funds, is one of the major reasons for the non-utilisation of funds sanctioned by international funding organisations.

Over 40 per cent of the total funds committed to India by different multilateral and bilateral agencies like the World Bank, the Oversees Economic Co-operation Fund of Japan and the Asian Development Bank have remained unutilised.

 

A team of senior finance ministry officials led by finance secretary Montek Singh Ahluwalia are now in Paris to discuss the extent and mode of assistance to be granted to India.

Besides the size of the assistance to be committed by different institutions, the talks will also focus on: the process of disintermediation which allows an international agency to lend directly to the public sector company handling a specific project instead of the traditional system of routing all aid through the Union government;

a review of the projects in both infrastructure and social sectors to ensure proper and better utilisation of aid;

an appraisal of the monitoring and execution agencies involved in aided projects. This will be crucial in view of the decision taken by the World Bank to review all its ongoing schemes to ensure that there is no leakage or misuse of funds;

causes for non-utilisation of a large quantum of credit allotted to India. The causes include procedural delays at the government level, litigations and problems at the implementation levels like disputes with contractors.

For instance, delays are caused in power projects because of the time taken by the Central Electricity Agency (CEA) and the environment ministry.

The meeting is also likely to examine the effectiveness of the transfer procedure introduced by certain agencies like the OECF a few years back. Under this procedure, OECF passed on the soft loan directly to the suppliers of machinery and raw material used in a project.

It bypasses both the government of India and the execution agency, which could either be a state government or a public sector company. But, the aid is transferred only after the amount to be paid is certified by the execution agency.

Till March 1996, the undisbursed aid committed by international institutions stood at Rs 8,066 crore, according to estimated published by the Reserve Bank of India (RBI) in February.

The total amount of undisbursed loans and grants committed by both international organisations and foreign countries stood at Rs 64,067 crore.