ADB Providing $188.2M Multi-Tranche Loan Facility for India | Asian Development Bank

ADB Providing $188.2M Multi-Tranche Loan Facility for India

News Release | 18 September 2008

MANILA, PHILIPPINES - The Asian Development Bank (ADB) has approved a $188.2 million multi-tranche lending facility to help modernize the irrigation infrastructure and management systems in one of the poorest states in India.

The investment program will focus on four northern river basins and a part of the Mahanadi River Delta in the state of Orissa, located on the east coast of India. The irrigation systems in the target areas have deteriorated and have limited integration with agriculture support services and marketing systems. The project will ensure efficient water use, boost agricultural productivity, and accelerate economic development in the area.

"Bottlenecks in water resources are increasingly seen as a major threat to India's economic growth. There is pressure on many river basins, while water quality is deteriorating. Being the largest user of water, a more efficient irrigation is crucial for both accelerating rural growth and conserving water resources," said Kenichi Yokoyama, Principal Water Resources Management Specialist of ADB's South Asia Department.

The ADB loan will provide the bulk of the $268.8 million funding needed to get the program underway. The balance will be covered by the Orissa State Government, which will provide $73.4 million, and the beneficiaries who will contribute $7.2 million in cash or in kind. The ADB loan will be made available in four tranches over a period of eight years. Its first tranche loan, amounting to $47.2 million, will be provided upon signing of the loan agreement.

Aside from renovating and extending existing irrigation systems, the investment program will promote the increased participation of water users through water user associations (WUAs) by involving them in consultations while ensuring safeguard requirements are met. It will also provide agriculture and related support services including livelihood projects for the poor. The operation and maintenance responsibilities will be progressively transferred to WUAs.

Agriculture is the backbone of Orissa's economy, employing 60% of total labor. Out of the 39 million people living in Orissa, the ninth largest state in India, 46% are living below the poverty line as of 2005. About 85% of the state's poor live in rural areas.

While Orissa has relatively high rainfall, with an annual average of 1,500 millimeters, it relies much on irrigation, as 80% of annual rainfall takes place June to September in an erratic pattern.

But the weak performance of its irrigation infrastructure has seriously constrained Orissa's agricultural productivity and diversification. While 45% of the state's agricultural land has irrigation facilities, over 30% of the designed irrigation area hardly receives any irrigation and the rest have irregular water supply due to old system design, inefficient operation, lack of field channels and limited accountability in system management to farmers, and insufficient maintenance.

The investment program will be supplemented by a $250,000 grant from the Multi-donor Trust Fund under ADB's Water Financing Partnership Facility, which will help Orissa's government initiate steps to introduce integrated water resources management at the state and selected river basin levels through consultative approach.