Country water actions are stories that showcase water reforms undertaken by individuals,communities, organizations, and governments in Asia-Pacific countries and elsewhere.
Country Water ActionsIndia: Testing Innovative Financing
No risk is too big where one’s future is at stake. Discoverhow India is using ADB’s multitranche financing facility toimprove its water future.
India, has increasedits loans from theAsian DevelopmentBank (ADB) in thepast couple of years,more than any of itsAsian neighbors,after beingintroduced to thebank’s new financingmodalities. Inparticular, Indianstates are keenly tapping ADB’s multitranche financingfacility (MFF), with its reduced commitment fees and flexiblelong-term management set-up.Already ongoing are four MFFs for urban developmentinvestment programs in North Karnataka (US$862 million),Jammu and Kashmir (US$1,260 million), Rajasthan (US$450million), and Uttarakhand (US$1,589.2 million). Included inthese MFFs are major investments for the development of urban water supply and sanitation services.Out to become India’s hydropower state, Himachal Pradeshalso tapped US$800 million worth of MFF for clean energyadvancement, including the development of four medium tolarge hydropower projects. In agriculture-dependent Orissa,one of the country’s poorest states, an MFF of US$188.2million is promoting investments to modernize irrigationinfrastructure and water resources management systems.Besides these, 6 more MFFs are financing infrastructuredevelopments and investment programs on energy, roads,and railways. More are being processed, and others arebound to be proposed in the next few years as the deadlinefor the Millennium Development Goals draws near.
CITIES IN NEED
India’s deplorable infrastructures, such as those for watersupply, give it more than enough reason to borrow fromADB. Ground-level reality shows that India badly needsinfrastructure developments.Many cities in India suffer serious environmental and healthproblems, often directly caused by rapid urbanization,under-investments in infrastructure, and poor managementand operation of public services. Many urban households,particularly the poor, have limited access to potable waterand improved sanitation facilities. These services are besetby inefficiencies in service delivery plus inadequate funds tomaintain and expand service coverage. India needs better urban infrastructure and services toattract more investors, but the scale of the investmentsneeded is so massive that even pooling governmentresources with multilateral and bilateral financing will not beenough.
ADB’s investments in the water sector over the last 15 yearshave been modest, to say the least, and not nearly enoughto address the burgeoning water problems of the Asia-Pacific. To close this gap, ADB launched theWater FinancingProgram (WFP) to double investments in the sector between2006 and 2010. ADB aims to invest roughly $12 billion of its own resources to deliver specific outcomes on drinkingwater, sanitation, irrigation, flood management, integratedwater resources management, and water governance.ADB’s new financing products, which include the MFF,subsovereign and nonsovereign public sector lending, localcurrency financing for the public sector, refinancing, andothers, complement this drive to increase waterinvestments. Among these products, the MFF is seen to beopening wider doors for development, and India has enteredthose doors.The MFF is a flexible financing framework that allows ADB tofinance, using future loans and guarantees, an agreed andinterrelated investment program. In India’s case, theinvestment program is derived from a sector roadmapdesigned by the local or state government, and theseroadmaps identify the most urgent investment requirements.MFF’s loans and guarantees are spread over time in “slices” or tranches. The tranches are committed only asprogrammed investments become ready for financing. Assuch, commitment fees are only applied on committedamounts, rather than on the total value available under thefacility. To avail of MFF, a country requires:an existing policy frameworka client-owned sector roadmapan investment program and financing planIndia’s water sector meets these criteria.