World Bank funds Tamil Nadu’s urban water program with $300 million

CHENNAI, Tamil Nadu: The World Bank has approved a $300 million loan for a program that will aid two million residents of Tamil Nadu in accessing better water and sewerage services in cities.

The Tamil Nadu Climate Resilient Urban Development Program seeks to help 21 Urban Local Bodies (ULBs) upgrade their delivery systems and provide high-quality and efficient water supply and sewerage services to consumers. Tamil Nadu, with its growing population, is facing the impacts of climate change, making it critical to establish access to essential services like water and sanitation to build resilient urban centers.

 Auguste Tano Kouame, the World Bank’s Country Director for India, emphasized the significance of strengthening urban infrastructure in the wake of India’s urbanization trend.

Kouame said, “By 2030, almost 70 per cent of India’s new jobs will be generated in cities and more than 18 million people will move to cities. As centres of economic growth, it is critical to strengthen their ability to cope with the impacts of climate change and ensure continuity in basic service delivery.”

The program goes beyond addressing immediate water and sewerage needs; it also focuses on creating green spaces and parks within designated areas, contributing to enhanced urban living conditions.

Moreover, the initiative plans to engage the private sector through performance-based contracts, issue municipal bonds, and facilitate urban governance reforms to fortify the financial health of ULBs.

“This Program aims to leverage the private sector by introducing performance-based contracts. In addition, it will issue municipal bonds and support urban governance reforms to improve the fiscal health of ULBs and secure the future needs of the urban population. Communities, especially women, will also play a key role in designing and supporting effective climate action plans for cities”, said Raghu Kesavan, the Task Team Leader for the project.

The financing structure for the program involves a USD 300 million loan from the International Bank of Reconstruction and Development (IBRD), utilizing the blended financing instrument of Program-for-Results (PforR) with Investment Project Financing (IPF).

This approach links fund disbursement directly to the achievement of results while providing technical assistance. The Program loan carries a maturity of 32 years, including a grace period of 7 years.

Over the past two decades, the World Bank has collaborated with Tamil Nadu and ULBs to establish and scale up a state-level urban institution, functioning as a public-private partnership facility, to mobilize diverse sources of finance for urban infrastructure projects in cities.