Maharashtra ropes in World Bank arm for dam projects

The Maharashtra government, which is finding difficult to get investors for irrigation projects in the state, has now decided to rope in the International Finance Corporation (IFC), World Bank's lending arm for the private sector.

The World Bank arm will finance the dam projects at cheaper rates compared to market and will make it attractive for the investors.

The IFC has agreed to finance the project and is also willing to prepare bid document for it, said Sanjay Ubale, secretary special projects in the state government.

The state government, which is in dire need for funds to complete on-going irrigation projects, need around Rs 40,000 crore to complete the project and plans to raise around Rs 10,000 crore through private investment in the projects over next five years.

The state government wants to hand over the Neera-Deoghar dam project, located in Pune district, with a storage capacity of 10 thousand million cubic feet (TMC), to the private sector as a pilot project.

The state government has already spent around Rs 700 crore in building storage capacity but needs another Rs 700 crore for developing the distribution arm of the dam.

Private investors, which include Reliance Industries, ITC, Godrej and IL&FS, initially showed interest in the projects but now they have virtually backed off as they are finding the projects economically unviable.

The state government is offering the investors right to collect user charges of water, right to engage in contract farming, develop resorts and engage in other tourism-related activities and right to develop captive-hydel project in the dam area.

However, the fixing of water user charge by a regulator instead of the investor, and the state government's refusal to accept investors' demand to give large tract of land in the dam area is acting as a major hurdle in the success of the talks between the state government and prospective investors.