India : Karnataka Integrated Urban Water Management Investment Program

The Karnataka Urban Water Management Investment Program (the Program) aims to improve water resource management in urban areas in a holistic and sustainable manner. Investment support will be provided to modernize and expand urban water supply and sanitation (UWSS) while strengthening relevant institutions to enhance efficiency, productivity and sustainability in water use. Innovative instruments such as public-private partnership (PPP) will also be explored and implemented. The Program will specifically seek to support ADB's 'greening' and inclusiveness agendas, as it targets assistance to more fragile environments increasingly affected by water resource degradation, often located in Karnataka's more economically lagging regions. The Program will also support ADB's climate change strategic prioritites by promoting climate-resilient development, capacity-development and policy implementation conducive to adaptation. It progress a multiprolonged approach combining:

(i) improved planning and monitoring through: (a) city-level water sector master-planning, (b) improved water/effluent monitoring (quantity and quality), (c) integrated water/sewage treatment and full-service coverage, and (d) promotion of water accounting and water conservation system.

(ii) more efficient water infrastructure through (a) non-revenue water reduction and appropriate service delivery standards, and (b) testing of integrated urban-urban and urban-rural bulk water supply systems, where appropriate.

(iii) improved sewerage infrastructure and services to (a) rehabilitate and/or extend the distribution network and treatment capacity, prevent raw sewage discharge and improve (river) downstream quality; and (b) reuse of wastewater treated effluent for industry/irrigation/groundwater replenishment purposes.

(iv) enhanced institutional performance through: (a) private sector participation, particularly through performance-based management contracts; (b) piloting of regional water operator SPVs; (c) improved demand management and tariff setting; and (d) introduction of regulatory mechanisms.

Karnataka (the State) is one of the most water-stressed states in India. Issues include surface water over-abstraction; deteriorating river water quality resulting from industrial and raw sewage discharge and poor watershed management. Groundwater is also over-utilized in 40% of the districts. Yet the State's annual water use is forecasted to further rise by up to 40% by 2025, threatening sustainable economic growth and poverty reduction. The impact of climate change, anticipated to exacerbate droughts and floods, may further reduce water availability. Effective and integrated water resources management and regulation are critical to meet the State's growing needs. Karnataka's economic development agenda for 2020 prioritizes the sustainability of the State's environment and natural resources (including water) and anticipates increasing urbanization and industrialization. Providing safe drinking water and sanitation is a high priority in the State's water and poverty reduction agendas. About 84% of the population has access to drinking water, and 38% has access to sanitation facilities. However, there are higher unmet demands: only 25% of urban local bodies (ULBs) can supply per capita requirements while only 11% have a functioning sewerage system. Most ULBs distribution systems are inefficient and unaccounted for water levels are high (30-70%). Meeting the rapidly rising urban and industrial water demand, protecting water bodies, and effectively treating, discharging, and reusing the effluents remain critical challenges.

The State has developed appropriate policy frameworks to address these challenges, including the 2002 State Water Policy (under review and the 2002 Urban Drinking Water Supply and Sanitation Policy. At the national level, India's draft National Water Policy 2012, India's Urban Sanitation Policy (2010) and Service Level Benchmarks (2010) have set targets nation-wide. The Program is aligned (i) to the government's 12th Five Year Plan (2012-2017), and (ii) priorities of a likely second phase of the Jawaharlal Nehru National Urban Renewal Mission.

Lesson learned from on-going and completed ADB and World Bank projects have highlighted the importance of (i) involving the community and local NGOs during implementation, (ii) conducting targeted awareness campaigns aimed at changing behaviors, (iii) progressively introducing private sector participation with clearly delineated performance targets, (iv) setting up a fully staffed project management unit and launching advance action for timely implementation, (v) progress reforms for long term sustainability. The program builds on the above lessons and incorporates ULB willingness to reform its structure and design.

The project will be implemented using the multi-tranche financing facility (MFF). The MFF is well suited for this investment as it is the most effective modality to (i) maximize and measure project results in localized geographical areas; (ii) provide efficiencies associated with economies of scale as additional municipalities join regional utilities; and (iii) blend capacity development, assistance for policy implementation and infrastructure provision. The MFF will enable the client to programmatically implement a well-structured road map combining clearly defined criteria and a process that values demand and ULBs' willingness to progress reforms. The modality is well suited given (i) the State's sound record in the sector and willingness to undertake reforms and (ii) the executing agency's (EA's) proven capacity. Supplementary Appendix A outlines constituents for this MFF and provides a matrix explaining why the MFF is more suited for this program than other instruments and modalities.

Improved sustainable water security in selected river basins in Karnataka.

Improved water resources management in urban areas in selected river basins in Karnataka

Expanded and upgraded UWSS infrastructure.

Improved water resource planning, monitoring and service delivery.

Strengthened operational and administrative capacity of KUIDFC and ULBs

1. Under Tranche 1, water supply works completed in Harihara and Byadgi. Works at Davangere are at the advanced stage of implementation. Under Tranche 2, water supply works at Kundapura have been completed and system commissioned. Works ongoing at Puttur, Udupi and Mangalore.

2. Reforms related to UIF, service delivery and rolling out of IT modules are at advanced stage of implementation.

3. Operational and administrative capacities of the project ULBs and KUIDFC are being progressively strengthened.