In recent days some citizens and politicians have called for termination of the JUSCO contract. Is termination of the JUSCO contract beneficial to our city? We believe that the whole affair is quite messy with no simple answers.
Let us begin at the signing of the contract. The JNNURM-funded project to upgrade Mysore's water supply infrastructure was divided and two tenders were floated for the works. The first one was to build major overhead tanks all over Mysore and supply them with water from the water treatment plants through large underground pipes. Nagarjuna Construction Company won this tender for Rs. 77 crores. The second tender was for doing all the work required to make the present intermittent non-pressurized water supply system into a continuous pressurized 24x7 water supply system and maintaining the system for 6 years. Twelve companies participated in the tender process. JUSCO won the tender with the lowest bid of Rs. 162 crores. Ranhill Water Services made the second lowest bid of Rs. 256 crores, Larsen & Toubro made the third lowest bid at Rs. 305 crores and the highest bid was Rs. 882 crores by Jain Irrigations Systems. So JUSCO's bid was by far the lowest bid.
The JUSCO bid was based on the figures (117,000 connections and 911 km-long pipeline network) given by Mysore City Corporation. Within a year of the beginning of the contract, JUSCO was supposed to carry out a survey, arrive at the actual number of connections and the length of the network and submit a revised estimate based on these figures. According to JUSCO, there were 175,000 connections (an excess of 50% over the MCC figure) and 1911 kms of pipeline (an excess of 110% over the MCC figure). Based on the new numbers, JUSCO submitted a revised estimate of Rs. 212 crores. According to the terms of the contract (Sec. 3.2.7), if the government did not suggest revisions to it within a month, the revised estimate was deemed to have been approved. It appears that the government responded with changes after 3 months and the changes were not acceptable to JUSCO. That is where we stand now. Negotiations are going on between JUSCO and the government in this regard, but nothing concrete has come out. In the meanwhile, JUSCO is finishing up the work covered by the original bid amount and is not taking up any new work. This will leave about half the city without upgradation of the pipeline network and installation of new meters.
In this scenario, let us see what might happen if the JUSCO contract is cancelled. JUSCO will surely approach an arbitrator as provided in the contract (Sec. 24.2). JUSCO might have botched up many things, but the government has also messed up by not rejecting the revised estimate within the specified period and thus becoming liable for the revised estimate of Rs. 212 crores. So the arbitrator may not decide against JUSCO. Even if the decision goes against JUSCO, the remainder of the work has to be tendered again. Based on the original bids, it will be in all likelihood far more costly than the Rs. 50 crores demanded by JUSCO to finish the remaining work. Is the quality of JUSCO work so bad that it is worth paying much more money to another company to finish the work? MCC will have to make this decision. If the quality of JUSCO work is really bad, should the work already done by it be redone by another company? MCC will have to make this decision also.
There are a lot of problems with this project, which should have been anticipated but were not. Some of them are:
1. Splitting the project into two: Nagarjuna Construction Company was given the contract of building the major overhead tanks and JUSCO was given the contract for laying pipes from these tanks to the consumers. If the location of the tanks is not proper, it is not possible to supply water to all consumers at the required pressure. As a result, if water is not being supplied to all consumers at the required pressure, it could be because the design of the pipe network is defective (which would be JUSCO responsibility) or because the location of the tanks is not proper (which would be the responsibility of Nagarjuna). JUSCO and Nagarjuna would blame each other and it would be hard to pin the blame. Such non-accountability should not have been allowed. Tenders should have been called for the combined works and not separately.
2. Making bulk water supply MCC's responsibility and distribution JUSCO's responsibility: The goal of the project is to provide Mysore 24x7 water supply. Dividing the supply responsibility into two again encourages non-accountability. If 24x7 supply is not achieved, JUSCO and MCC will blame each other and it will need an arbitrator to pin the blame.
3. Competence of government: The project was given to private parties because the government felt that its agencies are not competent to do it. If government agencies are not competent to design and execute the works, can they be competent to monitor and control the quality of work done by private agencies? This seems a basic problem with PPP (Private Public Partnership) projects. We have seen in the case of ADB-funded projects a decade ago numerous badly designed and poorly executed works which were approved and passed by the same government agencies as a result of which enormous amounts of money were spent with little lasting value for the city. We routinely see in road repair contracts and irrigation canal repair contracts poor substandard work passed by government agencies. If the competence of government agencies falls below a certain level, even PPPs will not help.
4. Defects in contract: There are numerous defects in the contract. One example is the condition that JUSCO should provide the new water connection to a spot 1 meter inside the customer's property. It is the responsibility of the property owner to lay the pipes from there to the water meter. It is very difficult to get labour for such a small job. Even if labour can be found, the payment demanded is huge. It is amazing that the framers of the contract did not anticipate this problem. They could have fixed the rates for doing this job and given the option of getting the job done by JUSCO or any other contractor to the customer himself. Another example is the common complaint that roads that have been dug up for laying new pipes have not been properly repaired leading to hardship for the locals. Filling the trenches with soil, compacting and resurfacing of the road in a definite time frame could all have been.
V Mahesha, MGP