The Government of India and The Asian Development Bank (ADB) signed a $84 million loan today for improvement and expansion of water supply in Bhagalpur and Gaya towns in Bihar.

The tranche 2 loan is part of the $200 million multi-tranche financing facility (MFF) for the Bihar Urban Development Investment Program that was approved by ADB in 2012 to provide sustainable urban infrastructure and services in four towns in Bihar – Bhagalpur, Gaya, Darbhanga and Muzaffarpur.

“The Project 2 will improve access to better quality and sustainable water supply, for the people of Bhagalpur and Gaya towns. It will also promote better water management practices that will result in a citywide coverage with 24-hour uninterrupted supply of treated water of 135 litres per capita per day in both cities,” said Shri Sameer Kumar Khare, Joint Secretary (Multilateral Institutions), Department of Economic Affairs, Ministry of Finance, who signed the loan agreement for Government of India.

“The loan finances will support civil works subprojects and would benefit 1.1 million people in the two project towns with increased coverage of treated water supply by 2021; train 400 urban local body (ULB) staff in the management and operation and maintenance (O&M) of water supply systems, and help ULBs improve technical and financial management of the water supply operations,” said Mr Kenichi Yokoyama, Country Director of ADB’s India Resident Mission who signed the agreement for ADB. The project agreement was signed by Shri Vipin Kumar, Resident Commissioner on behalf of the Government of Bihar.

The two towns under the project would achieve the national urban service goals or match many of the national averages for urban service delivery performance in India. The investment program will assist ULBs in designing affordable tariffs for O&M cost recovery.

The loan will have a 25-year term, including a grace period of 5 years, an annual interest rate determined in accordance with ADB’s lending facility based on the London interbank offered rate (LIBOR), and a commitment charge of 0.15% per year.

Development loan secures expanded treated urban water supply in Bihar, enabling continuous citywide service and institutional capacity building. A multilateral development loan to finance tranche two of a multi tranche facility will fund civil works for water supply improvements in Bhagalpur and Gaya, support citywide continuous treated water service, train urban local body staff in operation and maintenance, and assist utilities with technical and financial management and tariff design for O&M cost recovery; the tranche features a long term tenor with an initial grace period, market linked interest under ADB terms, and a commitment charge.