The Vadodara Municipal Corporation (VMC) has taken a significant step to resolve a long-standing financial dispute. On Friday, the standing committee approved a Rs 1,039 crore payout to the state government, closing a five-decade disagreement over charges for water from the Panam river. This water source supplies nearly half of the city's drinking water.
Payment Plan and Background
The settlement will be paid in 12 installments. The first installment of approximately Rs 200 crore will be released immediately, followed by 11 more tranches. The dispute originated from the Panam water supply scheme, which has been providing water to Vadodara since the early 1970s. Water from the Panam dam flows into the Mahi river and is extracted through French and infiltration wells before distribution. Currently, the scheme meets 50% of the city's water requirements.
Stakeholders and Dispute
The project was developed with four stakeholders: VMC, Indian Petrochemicals Corporation Limited (IPCL), Gujarat Refinery, and Gujarat State Fertilizers and Chemicals (GSFC). Over time, disagreements arose between VMC and the state's irrigation authorities regarding water charges, leading to a substantial financial claim. The irrigation department demanded Rs 5,329 crore, including charges, interest, and penalties. VMC contested this, arguing it had contributed to the project and regularly paid operation and maintenance costs.
Breakthrough and Settlement
Documents presented to the standing committee revealed that VMC had contributed Rs 3.88 crore towards the project's capital cost and paid over Rs 523 crore for operation and maintenance over the years. The breakthrough came when the Narmada, Water Resources, Water Supply, and Kalpsar department reviewed the matter and agreed to waive interest and penalties. After recalculation, VMC's liability was set at Rs 1,039 crore, representing the principal amount. The standing committee's approval formalizes acceptance of the state's settlement formula, ending one of VMC's oldest financial disputes.
