The sector development program (SDP) will complement past and ongoing efforts of the Government of Rajasthan to improve water supply and wastewater services to the residents of the state of Rajasthan. The SDP comprises (i) a program, financed by a policy-based loan, to support policy reforms, including institutional development and governance improvement in the urban sector in the state; and (ii) a project, financed by a project loan, to invest in the water distribution network in five project cities and sewerage systems in the six project cities.
The SDP modality will support both the infrastructure needs and the reform program, which focuses on strengthening institutions and adjusting the policy, institutional, legal, financial, and regulatory framework. The policy-based loan will provide financial support to the state government to implement reforms that will unlock the potential of various stakeholders, including municipal bodies, individual households, and private sector investors. The project loan will support catalytic investments that enhance productivity and leverage finances from various other sources in the project cities. The project will also introduce innovations in water supply and wastewater management, such as continuous water supply, and long-term O&M embedded construction contracts for nonrevenue water (NRW) reduction and sustainability of operations. If implemented successfully, the SDP may play a demonstrative role for urban sector operations in India.
|Project Rationale and Linkage to Country/Regional Strategy
Urban centers have been driving economic growth in India, led by services and manufacturing, placing cities at the forefront of the country's economic transformation. According to recent estimates, the urban sector contributes about 63% of India's gross domestic product (2009 -2010); this share is projected to increase to 75% by 2021. Similarly, while India's urban population currently constitutes about 31% of the total population, it is expected to grow to 43% by 2031. Increasing urbanization has aggravated the already deficient urban infrastructure and poor services. The country partnership strategy, 2013- 2017 of the Asian Development Bank (ADB) for India identifies the urban infrastructure deficit as one of the most important binding constraints to inclusive growth. The SDP fits well with the priorities identified in the strategy, and will address the country's urbanization challenge, including plans for urban renewal and development of smart cities. The proposed investment is included in ADB's country operations business plan, 2013- 2015 for India.
Rajasthan, with a population of 68.6 million and an area of 342,239 square kilometers, is the largest state in the country. About 25% of the population is urban, this percentage is increasing rapidly at 2.9% per annum. Since 2000, the state government has successfully implemented two multisector urban investment projects, which benefitted more than 5 million residents of six major cities under the first project and more than 2 million residents of 15 secondary cities under the second project. Important lessons from the projects have been incorporated in the SDP design, including (i) consultations on project design, last-mile connectivity, cost recovery, user charges, and timely induction and capacity building of counterpart staff are crucial for sustainability; (ii) contracts should be grouped into fewer packages with long-term operation and maintenance (O&M) provisions; and (iii) advance actions for procurement should be undertaken to enhance project readiness. Another important lesson, reiterated in the review of the country partnership strategy, 2009- 2012, is that investments have to be coupled with sustainable and vibrant institutions and effective governance systems to sustain and maximize their impacts.