Financing for Development of Clean Water and Sanitation Schemes in India

Development Finance Impact Project – Digital Artifact

World Bank Group
Financing for Development 
                                                                      9th December 2015

Financing for Development of Clean Water and Sanitation Schemes in India

Clean Water and Sanitation for all is one of the 17 Sustainable Development Goals which the international community has committed itself to achieve by 2030.  Supplying clean water and building the necessary sanitation infrastructure in many of the villages, towns and cities in India poses huge challenges. It is the responsibility of the civic body i.e. panchayat, municipality, municipal corporation, development board etc. to supply clean water and provide sanitation services to the residents. Most of the civic bodies in India are not in position to meet the goal of clean water supply and sanitation to the swelling populations due to lack of financing for development of the infrastructures. The annual budgets of government and civic body allocate funds for water supply and sanitation; but, the provision in the budgets for this sector is too modest to provide standard services to the public. A vast population in India does have access to clean water supply in required quantity and also lacks hygienic sanitation facilities and its consequence is horrendous  – suffering and death of many people, particularly children, due to water-borne diseases. We need new approach and innovative financing to build clean water supply and sanitation infrastructure in India. The sector has got immense opportunity for private sector investment especially under Public-Private-Partnership (PPP) model. Next to air, water is the most primary requirement for living creature to survive. Water shortage is already affecting many parts in India. Therefore, it is high time to initiate building clean water supply & sanitation facilities across the villages, towns and cities in India. The most prudent approach for supplying clean water and sanitation would be PPP model where the public partner would be the local civic body. In order to finance the water supply & sanitation project, the civic body should be allowed to issue project specific tax free bond to raise money clearly mentioning the project for which the bond is being issued so that local residents, commercial establishments and industries who are the beneficiaries of the project become more interested to buy the bond. The money thus raised by the civil body can be given as loan to the private partner of the PPP project. The rate of interest of such loan should be more than the bond interest but less than the prevailing market rate of loan, so that it creates a win-win situation for the civic body and its private partner. The civic body being a government entity as well as a local body certainly is more trustworthy as investment destination than a private organization to the common people. If there is any allocation of budget of the civic body for the project, the same can be given as loan to the private partner in marginally lower interest rate than market rate. These mechanisms can help the private partner to access cheaper debt than the market rate while resulting in financial profit for the civic body too in addition to achieving the principal goal of providing clean water and sanitation facilities to the households, commercial establishments & industries. The users should be charged for the water consumption as well as sewage disposal. The civic body should not provide any subsidy to the users. If there is any requirement of affirmative action for the economically weaker sections of the area, the civic body may pay more interest to them if they buy bond issued by the civic body for the particular project. This arrangement may inculcate saving habits for the people of the area while helping to build an infrastructure which would benefit them directly. This initiative may be appealing to the local residents, commercial establishments & industries as they can reap the benefits of saving money and at the same time enjoying the benefits of the infrastructure their invested money has brought out immediately in their locality.

An open untreated sewerage channel in New Delhi, India