Date:23/06/2006 URL: http://www.thehindubusinessline.com/2006/06/23/stories/2006062302061900.htm

Back Water project: TN seeks $500-m World Bank aid

Our Bureau

CM clear on carrying ongoing projects forward

The State Government seeks funding for upgrading irrigation structures, rehabilitation of water bodies and for a rural drinking water project.

MR MICHAEL CARTER

Chennai , June 22

The Tamil Nadu Government has sought $500-million assistance for a water resources management project, according to Mr Michael Carter, Country Director, World Bank.

In a brief interaction with journalists after meeting the Chief Minister, Mr M. Karunanidhi, he said that the State Government had sought the funding for upgrading irrigation structures, rehabilitation of water bodies and for a rural drinking water project.

The State Government was looking at implementing the project within a year, he said. This would be in addition to the ongoing projects. Mr Carter said they also discussed the World Bank projects that were now on. The bank's funding in Tamil Nadu was about $1.3 billion (Rs 7,000 crore). The Chief Minister was clear on carrying these projects forward.

Fiscal reforms

When asked for the World Bank's opinion on the State's effort in fiscal reforms, Mr Carter said that Tamil Nadu had done well on its revenue performance. The Government had expressed strong commitment to medium-term fiscal reforms. He declined to commit further. "I am sorry but I don't know the latest (on fiscal reforms)," he said

VAT issue

It may be recalled that fiscal reforms, expenditure control and tax reforms, including shifting to Value Added Tax (VAT) had been a point of debate between the World Bank and the State Government. The World Bank had declined a structural adjustment loan for the previous Government, after the State back tracked on reforms, particularly on free power to agriculture.

The World Bank last year expressed concern about State taxes and their adverse impact on investment and recommended a shift to VAT. Over 63 per cent of the State's revenue was from sales tax, entry tax, resale tax, additional tax and surcharges that impose a high tax on inputs with no rebates and boost manufacturing costs, it had pointed out.

Projects awarded

Last year, the Tamil Nadu Government was awarded two World Bank assisted projects, including $120 million for poverty alleviation and a $300-million loan for urban development. It also has major programmes for those affected by the Tsunami in December 2004.

The urban development project is for the Third Tamil Nadu Urban Development Project (TNUDP-III) to improve urban infrastructure and strengthening the capabilities of urban local bodies to improve service delivery. The $120-million loan is for a comprehensive empowerment and poverty reduction programme that is expected to benefit 1.2 crore people.

According to a press release from the State Government, the Chief Minister requested the World Bank to clear a Rs 3,900-crore assistance for upgrading irrigation facilities in the State.