In 2000-2001, the operational expenditures stood at Rs 130 million whereas the water charges were Rs 80 million, out of which only Rs 56 million was collected on account of collection inefficiency.
From January 2000, the corporation decided to give priority to completion of the scheme. The project cost was around Rs 130 million, which included the state government share of Rs 34 million. The corporation approached Housing and Urban Development Corporation (HUDCO), a central government financial undertaking, for a loan of Rs 96 million in 2001. On account of the good terms of the Mayor with the state political leadership, the state government immediately disbursed its share.
On submission of the project report, HUDCO asked for a guarantee from the state government for repayment and a unambiguous resolution from the Corporation indicating how water charges would be increased to ensure repayment. Though no systematic survey was conducted, the general perception through interaction with individual citizen revealed that the consumers were willing to pay more to get better water services.
The Corporation did not agree to any kind of an increase for residential consumers and only a token increase for commercial consumers, as they were afraid of repercussions of increased charges on their vote bank. The state government asked the corporation to reconsider its stand. This time the corporation agreed to an increase in water charges for commercial consumers but not for residential consumers.
In spite of the corporation’s stand, the HUDCO agreed to sign the loan agreement in October 2002 with the Municipal Corporation conditionally on the corporation securing the state government guarantee. The state government on pursuance by the Mayor gave the guarantee in January 2003.
HUDCO has started making disbursements from October 2003. The project is nearing completion now. However, water charges have not been increased in 2002-2003 or 2003-2004.