The Hindu 09.09.2009

Government order provides relief to corporation

Staff Reporter

VIJAYAWADA: In what could be termed a glimmer of hope for the Vijayawada Municipal Corporation (VMC), a GO issued by the Government on Monday is likely to bring relief to the tune of Rs. 239.72 crores to it under housing projects.

The Government issued GO 549 stating that the entire loan component of the housing projects taken up by the urban local bodies under Basic Services for Urban Poor (BSUP), a sub-mission under Jawaharlal Nehru National Urban Renewal Mission (JNNURM), would be treated as grant.

Thus, it reversed the earlier decision taken through GO 394 issued on July 27, 2006, to convert 50 per cent of the total grant of the Central and State governments (70 per cent) into loan. The earlier GO created ripples in the Corporation as the officials kept it under wraps till this year. The ruling Congress found itself in the dock with opposition parties accusing it of “betraying” the people of the city.

However, the new GO still does not provide any relief on the cost escalation front, which is another point of concern for the VMC. The cost escalation in housing projects comes to Rs.134.78 crores.

The Corporation has taken up construction of 28,152 houses under JNNURM in six different projects/phases, with the total cost of these projects pegged at more than Rs. 530 crores. The VMC took up construction of 15,000 houses at a cost of Rs. 237.62 crores in phase-I; 6,752 houses at a cost of Rs.140 crores in phase-II; and 6,400 houses at a total cost of Rs. 153.64 crore in phase-III. The cost of each project varied from another due to variation in cost of each dwelling unit.

The total loan amount in each phase was Rs.118.18 crores (phase-I), Rs.56.89 crores (phase-II) and Rs. 64.02 crores (phase-III). Now that the entire loan would be treated as grant, the net benefit would be Rs. 239.72 crore.

Corporators of the Opposition as well as the ruling Congress earlier felt that treating the entire amount as loan would be a death blow to the Corporation in view of the enormous financial burden it involved. The Corporation would have to shell out more than Rs. 230 crores for repayment of the loan, and this does not include interest and other charges that would be levied over repayment period of 18-20 years. The loan and interest, officials said, would have crossed Rs. 450 crores by the time the loan was repaid. In view of this, the new GO would be a major relief, the officials said.