Loan to upgrade urban infrastructure and municipal services in India

The Asian Development Bank has approved a $175 million loan for the Karnataka Urban Development and Coastal Environmental Management Project to improve urban infrastructure and municipal services in 10 urban centres along India's west coast.

The loan will be spent on improvements in water supply and sanitation facilities, solid waste and wastewater management, roads and traffic management. In most of India’s west coast cities, there is only limited piped water and the quality of well water is deteriorating due to a lack of underground drainage systems and saline intrusion.

The project is part of the Indian government’s strategy to shift the responsibility for municipal management from states to cities.

Karnataka’s west coast has rich natural resources of fisheries, forests and minerals. Urban and industrial growth is concentrated along a narrow coastal strip bounded by the steep slopes of the Western Ghats on the east and the Arabian Sea on the west.

Growth has far exceeded the capacity of infrastructure and services and the strain has adversely affected the quality of life. In addition, inadequate environmental management measures have contributed to a significant degradation of valuable natural resources.

The total cost of the project is estimated at $251.4 million. The ADB loan will come from its ordinary capital resources with a variable interest rate and repayments made over 25 years, including a grace period of 5 years. The balance of the cost will be borne by the Indian Government.

The Karnataka Urban Infrastructure Development and Finance Corporation of the Government of Karnataka will be the executing agency for the project, which is due for completion by end 2004.

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