World Bank loan for MP water project

The World Bank has approved a $ 396 million in form of 'specific investment loan' (SIL) to Madhya Pradesh (MP) government.

The loan is for the MP Water Sector Restructuring Project to improve water productivity in 4,95,000 hectare for sustainable growth and poverty reduction in selected focus river basins of Chambal, Sindh, Betwa, Ken and Tons, benefiting more than 2 million people.

The project implementation period has been set at 6 years with the expected date of closing on March 31, 2011.

Government of India would open a special account with the Reserve Bank of India (RBI) to receive the initial deposit and thereafter reimbursement from the bank and would make the fund available to MP under additional central assistance (ACA) mechanism.

The estimated financial rate of return (FRR) is 24.6 per cent with net benefits accumulating to Rs 17.2 billion and economic rate of return (ERR) is 21.6 per cent yielding net benefit worth of Rs 11.12 billion at 2004 prices during the project cycle of 25 years.

The expected intensification and diversification in farming activity is supposed to generate employment opportunities around 36.63 million person days equivalent to 1,22,100 rural farm jobs per year.

In addition the incremental benefit from the increased agricultural production per year beyond completion of the project is expected to be around Rs 8.65 billion.

The project targets an increase in irrigated area of 2,42,277 hectare would benefit over 1 lakh 92 thousand farm households directly pulling more than 73 thousand above the poverty line.

At the state level, state water resources agency (SWaRA) and state water tariff regulatory commission (SWaTReC) and at basin level , the Sindh basin development and management board ( SBDMB) and Tons basin DMB would be created to support establishment and operationalization of the proposed planning, allocation and regulatory institutions and instruments.

In addition, the loan will finance institutional reforms and measures related to delivering irrigation services at reasonable cost , rehabilitation and modernization of selected existing irrigation and drainage assets, provision of supplies and extension service for agricultural intensification and diversification, and coordination of project implementation activities.