The Vadodara Municipal Corporation (VMC) stands on the precipice of a financial abyss, pushed to the brink by a colossal demand of Rs 5,082 crore in water usage dues, a crisis rooted in missing government files from the early 1970s. The Gujarat irrigation department insists the civic body must pay this staggering amount, which includes accumulated interest and penalties. If enforced, this payment would wipe out a devastating 85% of VMC's annual budget, crippling its operations.
The Heart of the Dispute: A Lost Partnership
This financial nightmare originates from a half-century-old partnership for the construction of the Panam dam on a tributary of the Mahi river. In 1971, VMC joined forces with three state public sector undertakings (PSUs)—Gujarat Refinery, Indian Petrochemicals Corporation Ltd (IPCL), and Gujarat State Fertilizers and Chemicals (GSFC)—and the state government. The agreement was straightforward: VMC would use water for domestic supply, while the PSUs would draw it for industrial use.
VMC officials state the corporation contributed Rs 3.84 crore to the project's capital cost and diligently paid monthly operation and maintenance (O&M) charges. This arrangement functioned without major hiccups until 1998. The trouble began when the state cabinet, in a meeting on April 23, 1997, decided to cancel the partnerships. After obtaining necessary approvals, the irrigation department formally terminated the partnership on February 26, 1998.
The Document Black Hole and Mounting Liability
The core of the impasse is a profound and costly ambiguity: neither VMC nor the irrigation department possesses the original partnership agreement or a signed Memorandum of Understanding (MoU). VMC argues the partnership was established in 1971, while the irrigation department claims it was 1974. Crucially, no conclusive document exists to settle the debate.
"The only document we have is a 1971 resolution of the elected wing approving an instalment of Rs 66 lakh for the Panam project. However, this is an internal record and not a document issued by the irrigation department or signed by both parties," revealed a VMC official. Sources indicate that even the irrigation department has been searching for paperwork from that era, suggesting files may have been misplaced or lost around 1997-98.
Following the 1998 cancellation, VMC continued paying only O&M charges, amounting to Rs 5.23 crore until March 2005. The shock arrived in 2007, when the irrigation department presented VMC with a retroactive bill of Rs 350 crore for water charges, interest, and penalties dating back to 1997-98. Since then, relentless compounding has inflated the demand to the current astronomical figure of Rs 5,082.08 crore.
Current Stalemate and Future Implications
Today, the two sides are locked in a rigid stalemate. The irrigation department contends that while the three PSUs now pay water charges at prevailing rates, VMC clings to the old partnership terms. VMC, however, maintains the partnership could not be unilaterally cancelled and has stuck to its position. In May 2008, the VMC general board passed a resolution stating it would pay only Rs 5.14 lakh per month towards O&M charges.
Municipal Commissioner Arun Mahesh Babu acknowledged the long-pending issue, stating, "We are trying to resolve it at the earliest." The matter now rests with the state government for a final decision. On the ground, the reality is a procedural dance: the irrigation department continues to send bills, and VMC continues to pay only O&M charges, confident it will not be forced to pay the full, budget-busting amount.
The water from Panam dam remains crucial for Vadodara, released into the Mahi river and drawn at Vasad-Fajalpur. VMC currently supplies 635 million litres per day (MLD) to the city, with 245 MLD sourced from this system. This dispute over lost files and a bygone agreement now casts a long, expensive shadow over the city's essential water supply and financial health.
