Kerala became the first state to enter into a state partnership with World Bank based on their new Country Partnership Framework 2018-22. The partnership is for a development policy loan of USD 500 million (Rs 3500 crore). The support will be for Resilient Kerala Initiative to enhance the state’s resilience against the impacts of natural disasters and climate change.
The loan is in context of rebuilding Kerala after the 2018 flood which destroyed property, infrastructure, and the lives and livelihoods of people. The loan is given under the development policy loan facility, which contains conditionalities with an impact on not just the project but the overall governance itself. According to a study conducted on the development policy operations of the world bank for the year 2017, it was found that there were about 503 conditions for 53 DPOs. The study also found World Bank’s strategic approaches and ideological preferences, including its private finance first approach reflected it in the loan conditions.
The loan conditions for the Resilient Kerala Initiative are given in the program document, which spells out prior actions and triggers for the program. The prior actions are pre-disbursement conditions, whereas the triggers are planned actions that will become the basis for establishing the prior actions for later operations.
In the loan, the prior actions, among others are introduction of a new flood cess, establishing a cross-sectoral State-level committee to draft a River Basin Conservation and Management Authority Act, establishing a River Basin Conservation and Management Authority, establishment of five agroecological zones, and the reorganization of the Agriculture Department along agroecological zones etc.
The Chief Minister of Kerala has said that some of the work with this loan will involve strengthening water supply and sanitation services and their resilience to disasters and impacts of climate change, reorganising network of core roads, and awarding performance-based contracts to insure roads against damage, establishing a committee to revise the master plans of cities, opening green corridors across the state, among others.
The loan conditionalities do not limit to these changes. They direct the government of Kerala on the share of the budget allocated for the core road network. Surprisingly, the conditionality is also about reduction in Non-Revenue water and recovery of O&M costs.
One does not know how cost recovery and reduction of non-revenue water, the arguments which World Bank has been pushing leading to water privatisation in many cities, have crept into this loan conditionality.
Furthermore, if one wonders why a communist chief minister went to London Stock Exchange to ring its opening bell in the and why Kerala Infrastructure Investment Fund Board has become the first state-level firm in India to be listed on the London Stock Exchange. It is in line with the conditionality target agreed in the development policy loan to mobilise USD 500 million of public and private finance through cess, masala and Diaspora bonds to finance the recovery of resilience programs.
The Bond sale was challenged by the opposition in Kerala Assembly for the lack of transparency and clarity and for pushing the state into a debt trap. Congress legislator K S Sabarinathan, who moved an adjournment motion over the issue, said the interest rate of KIIFB’s masala bonds was 9.72 per cent, the highest of 44 such bonds listed at the LSE in the last two years. However, it can now be assumed that the government has taken this step based on the World Bank condition.
Kerala has willfully given its policymaking to World Bank by accepting this development policy loan and what is ironic is that it is being done when the communist government is in power.