Ziraat Times Research Desk

Jammu & Kashmir’s State Administrative Council (SAC) on June 10 gave its approval for the ‘Elevated Corridor Option’ for Srinagar Mass Rapid Transit Corridor. Coming up at an expected cost of Rs 20,000 crore, the project is billed to address Srinagar’s transportation needs. However, there are several issues that need a broader public debate before final approval is given to the project:

This week Ziraat Times’ development team analyzed the critical issues related to the project and engaged with subject experts on questions of financial viability, technical expertise, project management capacity and the inherent operational limitations of the state administrative systems. 

THE BIG QUESTIONS

  1. Is Srinagar Metro – considering its huge cost (about Rs 20,000 crore) – economically feasible and viable? Has a detailed cost-benefit analysis been done? 
  2. Can Srinagar, and Kashmir, as a whole, afford the disruption to normal life and business in case the project stretches to over a decade? The unquantifiable loss to economic activities and human productivity in Srinagar as a consequence of the Rambagh-Jehangir Chowk flyover is estimated to be huge.
  3. The project is going to be built on a loan. Will it generate enough revenue for J&K state to repay the loan with acceptable repayment period and interest?
  4. Metro projects are known to be viable for cities with a population of not less than 4 million. Will Srinagar metro have the critical mass of users considering that the city population is about 1.5 million? 
  5. J&K’s  government administrative systems are known to have considerable limitations related to financial planning and management,  contracts management, coupled with the uncertain political and security environment. Does an agency like the ERA have the project management capacity to undertake such a huge project? Is there any big project of ERA which has been efficiently and timely delivered by it in Kashmir?
  6. Are there any better alternatives that could have been considered before going for this project?

THE 7 REASONS:

Reason 1

DPR preparation delay

RITES has been entrusted with the development of a Detailed Project Report (DPR) in April 2017. The DPR was expected to be ready by September 2017. 

It is June 2019, and the DPR is still not ready. Interestingly, while in 2017, the Srinagar metro project was estimated to cost Rs 15881 crore, there has been significant cost estimation overrun during these three years. It is inconceivable how a DPR based on 2017 project costs would be relevant for 2019. Moreover, such a big delay in the preparation of the DPR raises questions over the technical expertise of the company planning to undertake such a big project in Jammu & Kashmir.

Reason 2

Faulty assumptions

Urban development in Jammu and Kashmir is critical. So is the need for improved urban transportation. Lately, our development planning has been guided by some theoretically brilliant ideas. But these ideas have lacked sound rationale and logic. Take, for instance, a few urban cable car projects in Srinagar and Jammu. A simple cost-benefit analysis at the project design stage itself would have determined that these projects are economically unviable. It’s fundamental to any developmental project designed to generate revenue for sustainability reasons to clearly demonstrate financial sustainability. So, if we take a look at these cable car projects today, we see them defunct, with crores of taxpayers money having on down the drain. The planned Srinagar Rapid Transit Transport System seems to be conceived in a hurry. There are several sustainability issues, and also the methodology of design that needs a broader civil society debate. It’s not a good practice for on company to undertake a feasibility analysis without engaging in the credible and broad-based social consultation process.

Lately, several development projects in Jammu and Kashmir have been designed devoid of necessary consultations with the critical actors of the economic social and the political system. A number of such projects today are no better than the proverbial white elephants. Such development planning requires a serious rethinking.

The envisaged construction period and the project management system is based on multiple risks and assumptions. Those assumptions don’t seem to have fully factored in the project management deficiencies and the cycle of project inception, funds released, funds disbursement, project progress evaluation, multi-agency coordination mechanisms and so on and so forth.

Importantly, the company preparing the DPR has to demonstrate what learning it has drawn from other projects in Kashmir that have experienced cost and time overruns. The DPR must also demonstrate what consultations, and at what levels, have been done within the state in its preparations. 

According to the Srinagar Master Plan, as per CMP, only 12% of trips are more than 10 km in the planned Mass Rapid Transit System. As per CMP, the recommended PPHPDT for having a Metro system is 30,000 above. The maximum passenger demand is 9,100 – 14,400 PPHPDT on high capacity corridors for which Metro will be inefficient and very expensive. Also, 12% of trips are too few to be considered for a high capacity metro rail system for the city.

Reason 3

Financial Viability

The mode of finance for the Srinagar rapid transit system needs to be clearly articulated. Quite naturally, neither the state nor the union government would put its money into this kind of a project.

In other words, financial resources for this project will come from borrowing at a certain interest obligation and other conditionalities. There are ample feasibility studies that establish that such costly transportation system could be financially viable for cities with a population of over 4 million. Srinagar’s urban conglomeration consists of a population not more than 1.5 million. Even if we were to add a floating population of 500,000, the critical mass of potential users for this planned metro system does not seem to reach the desired level.

Under these circumstances, it is difficult to imagine how this project would raise the necessary revenue to cover not only the operational costs but also the resources required for the loan repayment.

Reason 4

Project management capacity

A detailed analysis of the project management capacities conducted by Ziraat Times for the Economic Reconstruction Agency (ERA) and other civil construction agencies has demonstrated a clear deficiency in the areas of –

  • detailed implementation plan development, 
  • roles and responsibilities matrices for both the lead agency and the collaborating agencies, 
  • financial management plans,
  • financial forecasting
  • human resource planning and management 
  • contracts management 
  • contingency planning 

Reason 5

Systemic deficiencies

A staggering amount of public funds – close to Rs 4000 crore – are said to have lapsed in Jammu and Kashmir in fiscal 2018-19. A close analysis of the factors that have contributed in the lapsing of these funds have something to do with the internal administrative systems and, partly, the external operating environment. 

Jammu & Kashmir’s government administrative systems today are not adequately fine-tuned to be able to undertake large projects efficiently and without cost and time overruns. A massive administrative reform is long overdue to enhance to state’s capacity to implement large projects with the desired efficiency.

Several administrative reforms initiated lately, that were intended to improve the systems and procedures, are yet to fully integrate with the traditional code of business of the government in Jammu & Kashmir.

Pay & Accounts Office (PAO) System: Still a long way to go

A major restructuring initiative, PAO system, was introduced in J&K as an alternative to the archaic system of Treasuries. 

The new system was expected to completely change the way government pays its bills of contracts and services. For contractors the onus of getting the bill cleared within a specific time was with the official for whom you worked. The new system has, in theory, devoured the very famous ‘drawing and disbursing authority’ of almost all, including the Deputy Commissioners, who will now be assisted by Payment Advisers.

But things are not working as expected. One of the biggest hurdles, as what officials say, is the lack of power and reliable Internet connectivity across districts and tehsil levels.

The PAO system was also expected to help manage better ratios. J&K government has traditionally been spending its entire budget under 29 grants. In order to see where the public expenditure is being made, the 29 grants are being grouped into five: Administrative Service, Social Service, Infrastructure Service, Economic Service and Financial Service. Corresponding to this structure, there will be administrative structure. The 29 grants would survive for administrative purposes. The social sector grants will include Social Welfare, Health, Education. Infrastructure grant will include Power, Roads & Buildings and Public Health Engineering.

The treasury was traditionally a central point for every government department in J&K where revenue is deposited, payments are made and even salary disbursed. Gradually, most of this activity has shifted to banks making Treasury Officer to pass bills only. All these news measures are going to make Treasury, a household name, a history in J&K.

Specific to geography, an official in particular treasury would traditionally deal with all kinds of bills related to different departments. According to the Economic Survey, 2017, the larger question is: If work is same, why should a payment officer be restricted to a particular geography? 

The PAO was expected to check if the bill is right, fulfilling all the codal procedures, and will make the payment. However, as things stand on ground, most of the payments continue to be done manually.

In the new system, “payment was expected to be done by the unknown face” on basis of the submissions made by the officer who is mandated to carry out the work and not the contractor. An officer will receive the bill, check it, converted it into GPF file and upload on the system and the competent authority will check it for all the procedures, and credit the liability to the bank account.

The PAO offices were planned to be departmentally aligned and would deal with those Heads of accounts which are related to the function of their concerned departments only. This was expected to ensure better understanding of the department resulting in better forecasting, budgeting, accounting and reporting.

The original PAO system is equipped with a pre-check system which was expected to help in monitoring and controlling the purpose and objective of payments, budget sanctions, ceilings and proper classifications. However, that is rarely happening.

The physical submission of bills was expected to be fully replaced by computerized Integrated Financial Management System (IFMS). In the IFMS, bills were planned to be processed online at all levels viz generation of financial sanctions by the competent authority, generation of bill and passing and payment by the PAO. However, things are not happening that way, causing huge delays in the system.

PUBLIC FINANCIAL MANAGEMENT SYSTEM (PFMS)

The Public Financial Management System (PFMS), earlier known as Central Plan Schemes Monitoring System (CPSMS), is a web-based online software application. PFMS was initially started during 2009 as a Central Sector Scheme of Planning Commission with the objective of tracking funds released under all Plan schemes of GoI, and real time reporting of expenditure at all levels of programme implementation. Subsequently the scope was enlarged to cover direct payment to beneficiaries under all the schemes. 

Till now the process has been dependent on the physical authorizations but due to enhanced technological interventions, it has become now more feasible at Central Ministry and at the State Government levels to carry out certain processes under e-governance ecosystem.

Is it working in J&K?

PFMS has been implemented across J&K in all the Ministries. The fund flow of various CSS is now being monitored through the PFMS portal. 

What PFMS was expected to achieve:

  • Tracking of flow of funds to the lowest level of implementation.
  • On line information of bank balances to facilitate “just-in-time” provision of funds to implementing agencies.
  • E-Payment to ultimate beneficiaries.
  • Decision Support System for all levels of programme managers.
  • Dissemination of relevant information to citizens.
  • Enhance transparency and accountability in public expenditure.

Bank and Treasury Interface Module

Treasury Interface enables sharing State Treasury data with PFMS for tracking utilization of funds for all Central Schemes and CSS. PFMS – Core Banking Solution (CBS) interface helps tracking of funds transferred from Central Ministries at each successive stage, starting with the initial release to the level of actual realization. PFMS-Core Banking Solution Interface facilitates online validation of beneficiaries, and Agencies bank account details. Electronic payment files are generated through PFMS for three modes of payments, viz. Print payment Advice (PPA), Digital Signature Certificate (DSC) and Corporate Internet Banking (CINB).

PFMS has a multi-tiered project organizational structure which was planned to achieve the following:

State Advisory Committee (SAC) at apex level

The State Advisory committee is headed at the apex level by the Chief Secretary of the State. The State Advisory Body has been formulated to monitor progress under implementation of PFMS in the State of Jammu and Kashmir. But this committee meets rarely. There are no records available in public domain to suggest the findings and corrective measures taken at such review meetings.  This body is expected to address the infrastructural and systemic deficiencies of the system.

State Project Management Unit (SPMU) at State level

State Project Monitoring Unit has been created in the State and manpower to administer the SPMU has been provided by the Government of India, Ministry of Finance and also rest of the staff is augmented by the State Government.

District Project Management Unit (DPMU) at district level

District Project Management Units are small group of people positioned at the District level to oversee training and co-ordination. Personnel required for the DPMU need to have skill- sets in the areas of training, handholding. SPMU is empowered to provide the manpower through outsourcing as the need arises to DPMU.

Challenges:

Various impediments are coming forth in the expenditure monitoring part due to classification and mapping issues.

The implementation was expected to better cash management for government, transparency in public expenditure and real-time information on resource availability and utilization across schemes. This is not happening due to a general interim in the public administrative system that has clogged the state.

Budget Estimation Allocation Monitoring System (BEAMS)

In 2017, Government of Jammu and Kashmir introduced what it called the Budget Estimation Allocation Monitoring System (BEAMS) with the objective of facilitating easy co-ordination among the Drawing and Disbursing Officer, Head of Departments, respective Departments, Finance Department and State Treasuries/PAO offices through an Electronic Platform. The BEAMS is an online computerized system to distribute the budget and to authorize expenditure.

This system owes its origin from the Government of India’s National e-governance Plan (NeGP) to support budgeting process more efficiently, improve cash flow management, promote real time reconciliation of accounts, and strengthening management information systems.

Although, in theory, this system is an excellent way of improving budget estimation, allocation and spending monitoring, frequent changes in the political-executive landscape and a general accountability-deficit environment of the state administration has failed the original purpose of BEAMS. 

As soon as the budget is released, the Administrative Departments can allocate funds to their Controlling Officers / Drawing and Disbursing Officers through this system. All the expenditure is thereafter not only checked for budget availability before the bills can be submitted, but also the monthly cash flows are controlled against pre-determined targets. 

Due to lack of proper skills among its users in the governments, infrastructural deficiencies like power and Internet, parallel reliance on paper-based systems is not allowing this system to work as per its core design and purpose.

One of the important features of this system is that it provides a limited facility to modify cash flows. Discretionary modification of cash flows has been a serious systemic challenge in J&K. Although this new facility was expected to help in addressing this issue, the system is yet to work to its full potential. 

In 2017-18, after the implementation of BEAMS, funds to each department under the revenue component were released through BEAMS. The departments further allocated funds through this route only. In furtherance to it, budget estimates for the next financial year 2018-19 and revised estimates for the current financial year 2017-18 were also received online using BEAMS application. 

However, this system is failing now, as could be gauged from the extent of the funds that are said to have lapsed in 2017-18.

Reason 6

Land acquisition

As per the details available, two corridors have been planned by Srinagar Development Authority (SDA) for the Srinagar metro project.

Corridor 1: Gallandar-Pampore-Sumarbugh-Panthachowk-Sonawar-Dalgate-Lal Chowk-Jehangir Chowk-Batamaloo-Bemina-JVC-Parimpora-Zainakote-Lawaypora-Narbal Crossing.

Corridor 2:  Nowgam Railway Station-Bagh e Mehtab-Chanapora-Natipora-Rambagh-Mehjoor Nagar-Jawahar Nagar-LD Hospital-Jehangir Chowk-Barbarshah-Baba Demb-Khanyar-Nowhatta-Hawal-Alamgari Bazaar-Bagh-e-Ali Mardan Khan-Nowshera-SKIMS-Soura Buchpora-Pandach-Ganderbal – Manasbal-sumbal – hajj house (hajj express line) – Airport express line there might be inclusion of other stations also. The majority of stations will line in districts of Ganderbal and then Srinagar. The metro is also expected to cover SKICC Mughal gardens.

Land acquisition for public projects in Kashmir is quite tricky. A metro passing through these areas would entail significant land acquisition.

The experience from the Srinagar Semi-Ring Road Project is not so encouraging. The project has hit roadblock for the tussle over compensation money between government and land owners. Land acquisition for Srinagar metro project could be even more daunting considering the much higher land cost in the city and its suburbs.

Reason 7

Srinagar Master Plan 2035 — what it says

Srinagar Master Plan categorically stipulates the priority for improving the transportation system in Srinagar. According to its analysis, Mass Rapid Transit System should have third priority in terms of development preference.

Srinagar Master Plan 2035

  • 1st Priority: High Capacity Bus System
  • 2nd Priority: Bus Rapid Transit System
  • 3rd Priority: Mass Rapid Transit System

Initially, the Government should procure a fleet of low floor high capacity buses and introduce the same on important city corridors replacing the present mini-buses in a phased manner. In order to improve the efficiency and quality of public transport in the city, sustained efforts should be made to facilitate people to switch over from present IPT system (Mini-buses and shared cars like Sumos) to High Capacity Bus System (HCBS) on below-listed routes.

The Master Plan besides envisaging the augmentation of bus fleet significantly proposes the rationalization of bus routes as High Capacity Bus Corridors in North-South and East-West directions.

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