Mangaluru: A loan obtained nearly two decades ago by the Mangaluru City Corporation (MCC) for improving water supply and underground drainage infrastructure has grown to Rs 1,375.17 crore, including interest and penal interest, according to information obtained under the Right to Information Act.
The original principal amount released for the project was Rs 380.34 crore. However, the outstanding amount had increased to Rs 1,375.17 crore by April 2026 due to accumulated interest and a 2.5% penal interest component.
The loan period has now ended, but MCC has reportedly not paid even a single instalment towards the loan so far.
Loan taken for water supply and drainage
The loan was obtained from the Asian Development Bank (ADB) for infrastructure projects aimed at improving water supply and underground drainage facilities in Mangaluru.
The Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) was the implementing agency for the project. According to the RTI information cited in the report, the principal amount initially released to KUIDFC was Rs 380.34 crore.
Over the years, the outstanding liability increased substantially as interest accumulated. The addition of a 2.5% penal interest component further increased the amount payable.
By April 2026, the total liability had reached Rs 1,375.17 crore, significantly exceeding the original principal amount.
KUIDFC issued more than 24 notices
KUIDFC has reportedly issued more than 24 demand notices to MCC seeking repayment of the loan.
Despite the notices, the corporation is said to have not made any instalment payment so far.
The development has raised questions over how the loan obligation was handled over the years, particularly as the liability continued to increase because of interest and penalties.
The matter has also triggered questions from former members associated with efforts to monitor the implementation and repayment of the ADB-funded project.
Questions raised over sewerage cess collections
Former convener of an NGO task force associated with the ADB loan, Harsha D’Souza, questioned what happened to the money collected from the public through sewerage cess and other taxes if no instalment had been paid towards the loan.
D’Souza also questioned whether funds collected for related purposes had been diverted elsewhere.
These are questions raised by the former task force convener and do not by themselves establish that funds were diverted.
The issue has brought renewed attention to the financial obligations connected with the long-running infrastructure project.
MCC seeks complete loan waiver
MCC officials have offered a different explanation for the corporation’s position.
According to an MCC official quoted in the report, there is inadequate proof that all the works under the Karnataka Urban Development and Coastal Environment Management Project (KUDCEMP) were completed.
Based on this position, MCC has reportedly written to KUIDFC seeking a complete waiver of the loan.
The corporation is currently awaiting directions from the State Government on the matter, the official said.
Former mayors comment on repayment issue
Former mayor Shashidhar Hegde said the State Government generally acts as the guarantor for such loans.
Given the substantial amount involved, he said no one in MCC had taken steps to repay the loan in the past.
Another former mayor, Premananda Shetty, said budgetary provisions had reportedly been made for repayment of the ADB loan for several years, but the amount was not actually repaid.
He also said there had been a proposal to use grants received from the State Finance Commission towards repayment.
Shetty said the size of the current liability means the government would ultimately have to take steps to address the repayment issue.
Loan liability grows as repayment remains pending
The sharp increase from the original Rs 380.34 crore principal to Rs 1,375.17 crore highlights the impact of accumulated interest and penal charges over an extended period.
While the original borrowing was intended for infrastructure development, the repayment dispute has now become a major financial issue for the civic body.
MCC’s request for a complete waiver is based on its contention that there is insufficient evidence confirming completion of the project works. The final decision on the request will depend on the response from KUIDFC and the State Government.
Until then, the outstanding amount remains a significant liability associated with the corporation.
Government decision awaited
The ADB loan issue has resurfaced nearly two decades after the borrowing was undertaken. With the loan period ending in 2026 and the outstanding liability standing at Rs 1,375.17 crore, the matter now requires a decision on repayment, waiver or another settlement mechanism.
For Mangaluru, the outcome will have implications for the city’s civic finances and the corporation’s future budgetary commitments.
The immediate next step is expected to be the State Government’s response to MCC’s request for a complete waiver and clarification on how the outstanding loan will ultimately be addressed.