The Union Government has inked $84 million loan agreement with Asian Development Bank (ADB) for improvement and expansion of water supply in Bhagalpur and Gaya towns in Bihar. The loan has 25-year term, including grace period of 5 years with annual interest rate determined in accordance with ADB’s lending facility based on London interbank offered rate (LIBOR) and commitment charge of 0.15% per year.
This agreement is for tranche 2 loan, part of $200 million multi-tranche financing facility (MFF) for Bihar Urban Development Investment Program that was approved in 2012 by ADB. The program aims to provide sustainable urban infrastructure and services in four towns in Bihar –Gaya, Bhagalpur, Darbhanga and Muzaffarpur.
The project 2 will improve access to better quality and sustainable water supply, for people of Bhagalpur and Gaya towns. It will help two towns to achieve national urban service goals or match many of national averages for urban service delivery performance in India. The investment program will assist urban local body (ULBs) in designing affordable tariffs for operation and maintenance (O&M) cost recovery.
Significance of project
The project will promote better water management practices that will result in a citywide coverage with 24-hour uninterrupted supply of treated water of 135 litres per capita per day in both cities. The loan finances will support civil works subprojects and will benefit 1.1 million people in two project towns with increased coverage of treated water supply by 2021. It will also train 400 urban local body (ULB) staff in management and O&M of water supply systems and help ULBs improve technical and financial management of water supply operations.