Kuidfc

Urban infrastructure financing company for the state of Karnataka.

1. KARNATAkA URBAN INFRASTRUCTURE DEVELOPMENT AND FINANCE CORPORATION

2. Introduction: KUIDFC incorporated as a public limited company under companies Act, 1956 on 02.11.1993: a State Government Company . Objectives: to prepare, formulate & implement projects, schemes, programmes relating to infrastructure development in urban areas Also provides technical, financial, consultancy & other services to ULBs including implementation of master plans . Appointed as Nodal agency of the state for implementation of various urban infrastructure development projects in state of Karnataka. Secured status of State Level Financial Institution (SLFI) from GoI .

3. Is the institution trying to solve a governance problem? Problems of Governance solved : Delay in implementation Corruption Proper & timely financing Capital financing for large infrastructure projects Expert & technical opinion in schemes, projects & programmes.

4. Do you think a separate institution was required to solve this problem? Yes . KN : rapidly urbanising state ( 1/3 rd population : 18 million live in urban areas) Gov. of Karnataka needed an agency to assess infrastructure needs of urban areas, formulate projects, act as nodal agency to implement government programmes & to raise finances for same. To full-fill these, KUIDFCL was formed in 1993: as a main arm of Karnataka government relating to urban infrastructure developmental projects Also to act as KN government’s interface with external leading agencies . And due to its performance: KUIDFC nominated state level Nodal agency for Pooled Finance Development Facility (PFDF) patterned on USA model by GoI .

5. Which urban service is this institution working for? Is it a capital-intensive service? Works in the service of providing infrastructure related to: Environmental management : Land development Sanitation Road management Transportation Water supply SWM Majority of these projects are capital intensive, requiring huge capital at one go , with no guaranteed returns. One example : GBWASP : Greater Bangalore Water & sanitation project : the project had very large capital expenditure with primary benefits of this expenditure flowing to households taking direct water connections (447.06 cr total cost of project)

6. Do you think Municipal government’s own finances were not enough to fund it? No, they are not, like any other state’s ULB, KN’s ULBs are not generating that much of revenue surplus to carry out capital intensive projects That’s why, KUIDFC has mandate to extend financial assistance by way of loans & advances to ULBs for their developmental schemes. Source: Karnataka SFC action taken reports.

7. How is this institution governed differently? Who are the stakeholders? Which legislations/policies enable it? Legislation: Companies Act, 1956 : Public limited company . Now, companies Act, 2013. Managed by managing director: IAS officer, assisted by team of professionals & officers from state cadre Under overall superintendence & control of Board of Directors ( total 10 in number: 8 male, 2 female: all IAS officers ): full Government control. Major stakeholders: Governor of KN, Principal officers of GoKN & chief executive officers of developmental authorities established by GoKN : no private party involved. Public Limited Company : Company that has limited liability and offers shares to the general public. It’s stock can be acquired by anyone, either privately through (IPO) initial public offering or via trades on the stock market.

8. Structure of Organisation: A state government company. Board of directors, decision making bodies : all appointed by state government & are either rofficials of center gov or state. Source: KUIDFC website

9. Financial structure of the institution: Authorised Share capital of company : Rs 100 million divided into 1 million equity shares of Rs 100/- each. Fully Paid up equity capital rs.806 million. 2,50,00,000 equity share of Rs 10/- each but not paid. The corporate expenses are charged and set off against the budgetary grants allocated by the GOK . Works on: “no profit, no loss” status. The short term and long term assets and liabilities, except corporate held assets, are held on behalf of GOK. SL No Share Holders No of Shares 1 Governor of Karnataka 606476 2 Chairman, Bangalore Development Authority, Bengaluru 200001 3 Additional Chief Secretary to Government, Vidhana Soudha , Bengaluru 1 4 Addl. Chief Secretary to Government, Urban Development Department, IV Floor, Vikasa Soudha , Bengaluru. 1 5 Principal Secretary to Government, Finance Department, II Floor, Vidhana Soudha , Bengaluru 1 6 Principal Secretary to Government, Housing Department, II Floor, Vikasa Soudha , Bengaluru 1 7 Secretary to Government, (M & UDA), Urban Development Department, IV Floor, Vikasa Soudha , Bengaluru 1 8 Secretary to Government, (Expenditure) Finance Department, II Floor, Vidhana Soudha,Bengaluru 1 9 Chairman, Bangalore Water Supply & Sewerage Board, Bengaluru 1 10 Metropolitan Commissioner, B.M.R.D.A., LRDE Building, Ali Askar Road, Bengaluru 1 11 Commissioner, Bangalore Development Authority, Bengaluru 1 12 Commissioner, Bruhut Bengaluru Mahanagara Palike , Bengaluru 1 13 Deputy Director, Town Planning, Bangalore Metropolitan Region Development Authority, Ali Asker Road, Bengaluru 1 Source: KUIDFC website.

10. Financial Structure of Project: Structure depends on type of project it is implementing and the role KUIDFC will be doing for the project/ scheme/ programme. For example, for GBWASP the structure will be: It managed trust : KWSPF Formulated project Managed finances & expenses Played role of PFDF. Debt/equity ratio for this project was 0.76. Source: KUIDFC annual report 2015-16

11. For project considered GBWASP: Financed through combination of Public & private sources. Municipal bonds floated: KWSPF: functioned as an financial intermediary between ULB & capital market. Fund secured by USAID 50% guarantee on principal. ULB property tax revenues placed in an escrow account served as a further safeguard. In 2005, the fund issued 1000 tax free municipal bonds at an interest of 5.95% , term of 15 years. KUIDC was in charge of managing the Karnataka water & sanitation pooled fund (KWSPF) Source: KUIDFC annual report 2015-16.

12. For NKUSIP : North Karnataka Urban Sector Investment Programme : The company is the nodal agency for implementation, monitoring and management of funds of the Asian Development Bank (ADB) assisted NKUSI Programme . Empowered Committee (EC) under the Chairmanship of the Additional Chief Secretary, Government of Karnataka with Additional Chief Secretary, Urban Development Department, Principal Secretary, Planning Department, Secretary (M&UDA), Urban Development, Secretary (Expenditure), Finance Department, Managing Director, KUW&SDB, Managing Director, KUIDFC and Director, Municipal Administration as members has been constituted for the programme . The EC enjoys the authority to take decisions pertaining to the programme implementation

13. Do you think that the project is financially sustainable in the long term? Is it generating enough revenues? Is there viability gap funding? How much is it? Is it justified Yes, it is financially sustainable. Feasibility report for project: estimated 35% (119,45Cr) will be coming from citizens themselves, till date 200cr has been collected. In the financial structure seen: no need for viability gap funding. This project tries to deploy: citizen as stakeholder Equates participation with financial contribution to new infrastructure investment.

14. What are the resultant user charges? Are they affordable? For project considered: The initial specified BCC in 2003 was a one-time flat rate of Rs 8,500 for domestic properties and Rs 17,000 for non-domestic users. This was later revised to a slab system of Rs 10,000 for the lowest slab for plots measuring up to 2,400 sq ft. Citizens were also required to pay a penalty in event of delayed payment: taken in order to pressure beneficiaries to contribute to the project.   Charges per property size (rs) <600 sq ft 600-1200 sq ft 1200-2400 sq ft >2400 sq ft Residential 2500 ( now waived) 5000 10,000 15,000 Commercial 5,000 10,000 20,000 Rs 8/ sq ft Penalty per month starting 1 august 2005 50 ( now waived) 100 200 300 Source: India environmental portal report, analysis of GBWASP Source: India environmental portal report, analysis of GBWASP