ADB Financing to Improve Urban Infrastructure in Northern Region of India’s Karnataka State

Manila, Philippines – ADB will help the Indian state government of Karnataka rehabilitate existing and construct new urban infrastructure in the north of the state, through a multitranche financing facility of up to US$270 million.

The facility accounts for about 60% of a $440 million investment program supported by the state government and other agencies that are part of a $2.65 billion program to upgrade services across several sectors.

Rapid urbanization and underinvestment in infrastructure have resulted in environmental problems and concerns for public health in many of India’s cities. Although decentralization in the early 1990s brought about some improvements, service delivery remains largely inefficient, while inadequate investment to expand service coverage and lack of maintenance persists.

This is the case throughout Karnataka, but is more pronounced in the urban local bodies in the north of the State. There, water supply is often infrequent and water quality is usually poor. Sewerage coverage and drainage facilities are inadequate. Roads are generally unpaved and junctions inefficient. Slums exist in most towns in the north of the state, served by only the most basic water and sanitation services.

“While Karnataka remains largely agricultural, there are strong rural to urban migration pressures, and there is urgent need to improve urban infrastructure and services to accommodate newcomers and encourage growth of the local economy on an equitable basis,” says Keiichi Tamaki, an ADB Senior Urban Development Specialist.

“The ADB-backed program should help improve the quality of life for at least 4.3 million urban residents and bring new opportunities for jobs, incomes, and growth in the north of the state. This will in turn benefit other sectors, such as agriculture, industry and tourism.”

Investments planned under the program include water supply and sewerage systems, drainage, urban road resurfacing and junction improvements, and the provision of basic urban services. It will also introduce private sector participation in selected subsectors of some urban areas, and support reforms and training for local authority staff.

The multitranche facility, which will have an 8-year life to the end of 2015, will extend multiple loans to finance a range of subprojects, subject to a periodic financing request by the national Government. The specific terms of each loan will be based on the related periodic financing request with interest to be determined in accordance with ADB’s LIBOR-based facility.

The first loan is for $33 million to finance water and sanitation facilities in 3 urban local bodies, firefighting equipment in 23, tourism infrastructure in 6, plus geographic information systems and other hardware, consultancy packages, and administration costs.

The executing agency for the program will be the Government of Karnataka acting through its state-owned company, the Karnataka Urban Infrastructure Development and Finance Corporation, which has already been implementing 2 similar ADB-financed urban projects.

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