A nearly two-decade-old loan to Mangaluru City Corporation (MCC) for water supply and underground drainage infrastructure is under increasing pressure, and the outstanding amount of such debt is reported to be as high as ₹1,375.17 crore, including interest and penal costs.
At a time when civic bodies are also in financial crisis, these issues have attracted attention also in Karnataka. According to the Right to Information Act, the original amount of the project principal would have been around ₹380.34 crore, but the unpaid amount had grown several times by April 2026.
The loan was used in the building of infrastructure to improve water supply and underground drainage in Mangaluru. The Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) was the implementing agency. According to recent reports based on RTI information, the original principal was ₹380.34 crore. However, as repayments were not made over the years, interest and a reported 2.5% penal interest component greatly increased the amount outstanding. By April 2026, the total liability had reached ₹1,375.17 crore.
One of the most striking aspects of the issue is the reported absence of repayment instalments. According to the information available, it is said that MCC has not paid even a single instalment toward the loan, even after the repayment period ends in 2026. KUIDFC is also reported to have issued more than 24 demand notices seeking repayment. As interest and penalties keep accumulating, what was originally a ₹380-crore loan has now turned into a liability of more than ₹1,375 crore.
The problems don’t end with the size of the debt. Questions are also raised about the status of the infrastructure work for which the borrowing was undertaken. MCC officials have maintained that there is no documentation or proof that all the works under the project were completed. Based on this position, the Corporation is now hopeful of getting an ultimate waiver of its loan from KUIDFC and is waiting for direction from the state government.
The reported financial liability has raised questions from former civic representatives and others involved in the project. One issue raised publicly is the way the money collected through sewerage cess and other taxes was used when no instalments were paid toward the loan. These questions are just suggestions and concerns raised, and do not in themselves prove that money was diverted or misused. Such claims would need documentary evidence and an official investigation.
Mangaluru City South MLA Vedavyas Kamath has also raised questions about the extent of the corporation’s liability. Kamath has said the ADB liability of ₹1,375 crore may not be the entire financial burden and wants records of other loans and obligations examined. He has also criticised the state government’s financial support to the civic body and says grants are inadequate for MCC. These are political claims by the MLA and his view of the problem. Recently, he has also mentioned the ADB loan as well as other financial commitments for Mangaluru.
The issue has also drawn attention to the role of the state government. The state government is the guarantor of such borrowing arrangements, and MCC officials are seeking a decision on their request for a loan waiver, the report said. Former civic representatives also pointed to the role that the government played in guaranteeing the loan and said that the size of the liability meant that a government-level solution would be required.
The controversy is important to Mangaluru residents because of the original borrowing to pay for basic urban infrastructure. Water supply and underground drainage are essential civic services, and how the project is financed and how that debt is paid off is in turn important for municipal finances. If there is a large amount of debt outstanding, they might not be able to use the money for future infrastructure, maintenance and public services.
The case also shows how long-term interest accumulation can dramatically increase the cost of an unpaid loan. The rise from ₹380.34 crore in principal to ₹1,375.17 crore shows the financial consequences of prolonged non-repayment, particularly when penal charges are added.
With the loan period coming to an end in 2026, we all wait to see what happens now. MCC is seeking a full waiver, and we are waiting to see the state government’s response. The final solution might be repayment, restructuring, waiver or some other way of settling. The ₹1,375.17 crore liability is still a big money problem for Mangaluru’s civic administration, and it is likely to remain in the public’s eye as well.
