Government of India & AIIB sign agreement for

USD 145 million to improve irrigation services and flood management in West Bengal

The Government of India, the Government of West Bengal and the Asian Infrastructure Investment Bank(AIIB)today signed a loan agreement for a US$145 million project to improve irrigation services and flood management in the Damodar Valley Command Area (DVCA) in West Bengal.

The West Bengal Major Irrigation and Flood Management Project will benefit about 2.7 million farmers from five districts of West Bengal across 393,964 ha area with better irrigation services and improved protection against annual flooding to mitigate the impact of climate change.

The agreement was signed by Shri Sameer Kumar Khare, Additional Secretary, Department of Economic Affairs, Ministry of Finance on behalf of the Government of India; Shri Krishna Gupta, Principal Resident Commissioner, on behalf of the Government of West Bengal and Shri Rajat Misra, Director General (Acting) on behalf of the AIIB.

“India is adopting a strategic growth path that uses and manages its water resources more efficiently," saidShri Sameer Kumar Khare, Additional Secretary, Department of Economic Affairs, Ministry of Finance, Government of India. “This project will assist in improving irrigation and agriculture in the Damodar Valley Command Area, by optimizing the use of surface and groundwater and strengthening flood management, which will help boost agricultural productivity and increase incomes in rural areas.”

The DVCA is over 60 years old, and in need of modernization. Key challenges include degradation of infrastructure and inadequate irrigation management, including poor quality of service delivery, inefficient irrigation and the failure to serve the middle and tail parts of the canal network with surface water. Tail end farmers are compelled to extract groundwater, which increases the costs of cultivation and undermines the sustainability of the scheme. Between 2005 and 2017, the number of semi-critical blocks increased from five to 19 (out of a total of 41 blocks).

The Lower Damodar basin area is historically flood-prone. On average, 33,500 hectares of the cropped area and 461,000 people are affected annually. This downstream part of the project area lacks the infrastructure to protect against recurrent flooding. The project will invest in measures to reduce flooding, including strengthening of embankments and desilting.

“This investment is focused on improving the livelihood of farmers and boosting the regional economy. The project will help thousands of farmers get adequate water by improving the irrigation efficiency through infrastructure rehabilitation and modernization” said AIIB Vice President, Investment Operations Shri D.J. Pandian.“Furthermore, the investment also includes flood protection measures that will significantly reduce damages endured by farmers’”.

To deal with these challenges, several institutional reforms are planned under the project. These include introduction of a modern Management Information System (MIS), benchmarking and evidence-based decision making, promotion of conjunctive use of surface and groundwater, introduction of rational asset management and improving transparency through citizen engagement. Irrigation Service Providers will be recruited on a performance basis to improve the quality of irrigation services.

The total value of the project is $413.8 million, co-financed between the AIIB ($145 million), IBRD ($145 million) and the Government of West Bengal ($123.8 million). The $145 million loan from the AIIB has a 6-year grace period, and a maturity of 24 years.

Loan agreement for irrigation and flood management combines infrastructure finance with institutional reforms to improve water services. A multilateral loan agreement was executed to finance modernization of irrigation and flood management in the Damodar Valley Command Area, rehabilitating infrastructure, strengthening flood protection, and optimizing surface and groundwater use. The project bundles capital investments with institutional reforms - a modern Management Information System, benchmarking, conjunctive water use, rational asset management, citizen engagement, and performance based Irrigation Service Providers - to improve irrigation service delivery, reduce flood damage, and enhance agricultural productivity and sustainability.