$500 Million ADB Loans to Improve Urban Services in India's Rajasthan State

Jan 02, 2015

The Asian Development Bank (ADB) approved two loans worth half a billion dollars to help the government in India’s largest state of Rajasthan to better manage essential urban services and finance water and sewerage upgrades.

"For the first time in India, we have coupled a policy loan to support urban sector reforms with a project loan for infrastructure development to ensure that improvements to urban services like water and wastewater can be maintained over the long term," said Fei Yue, Director of the South Asia Urban and Water Division of ADB. "Reliable urban services will improve health, the quality of life and, ultimately, support economic growth in India’s towns and cities."

The $250 million policy loan will be used to help the Government of Rajasthan finance the creation of a new corporate-style state body to oversee urban services development and an independent utility in Jaipur to oversee water and wastewater operations in the state capital.

The reforms include delegating water and sewerage operations from the state government to the municipal bodies. They will also rationalize water tariffs and property tax to ensure the institutions have a fair and sustainable revenue stream to finance urban services and improvements.

Rajasthan, like other states in India, has seen rapid urban population growth and rising demand for water, wastewater, and other urban services in recent years. Urban centers in India contribute close to two thirds of the country’s gross domestic product. Inadequate infrastructure and services is one of the main binding constraints to more inclusive economic growth.

The $250 million project loan will support water system improvements in five cities— Hanumangarh, Jhunjhunu, Pali, Sri Ganganagar, and Tonk—which currently have low piped water coverage and high losses. These upgrades will include nearly 200,000 new house connections with proper metering to cut losses. Around a third of the connections will be in low-income households. Moreover, in those five cities, plus Bhilwara, sewer pipelines and treatment plants will be upgraded and expanded, wastewater recycling schemes put in place, and sludge will be used to generate electricity.

The full program—expected to be completed by the end of 2019—aims to expand water supply in the cities from just 2 hours a day to 24 hours by 2019, as well as sharply increase the collection and treatment of sewage and septage waste.

On top of ADB’s $500 million in loans and a $1 million grant from its Technical Assistance Special Fund to finance capacity building in state institutions, there will be a $2 million grant from the Sanitation Financing Partnership Trust Fund, supported by the Bill and Melinda Gates Foundation. The trust fund will finance innovative sanitation improvements, including septage management and decentralized wastewater treatment, in non-sewered areas for low-income households in two of the cities.

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