The Hindu : Drinking water supply scheme evokes guarded response

Online edition of India's National Newspaper
Wednesday, Feb 04, 2004

Tamil Nadu

Tamil Nadu - Chennai

Drinking water supply scheme evokes guarded response

By Our Special Correspondent

CHENNAI, FEB. 3. The Union Finance Minister Jaswant Singh's announcement of an accelerated drinking water supply scheme for mega cities has evoked a guarded response from Chennai water managers.

Describing the proposed scheme as realisation of their long-standing demand, the managers, however, say they would like to see in fine print how far the scheme will be beneficial to the cities. "As there are already a few schemes in place for urban water supply projects, we have to wait and see whether the new scheme will be an improvement over them," says a manager.

Notwithstanding their caution, they say that "certainly this is a positive development as we will be able to access more funds now." Moreover, they point out that though several State Governments, including Tamil Nadu, have been asking for Central support for long, the Chief Minister's recent plea to the Prime Minister to release Rs. 700 crores has "given a greater push" to this matter. The managers say the State Government favours the Centre meeting the cost of the city water schemes totally as grant.

"If one were to go by the Finance Minister's announcement, it seems that there will be a loan component. It may even include both - grant and loan. Let us wait how much will be the grant and how much the interest," says the manager.

At present, under the Mega Cities Fund, 50 per cent of the cost of projects is given as grant to be met equally by Central and State Governments. For the remaining 50 per cent, the agency authorised to fund such schemes, Tamil Nadu Urban Finance and Infrastructure Development Corporation in the case of this state, will give low-interest-rate loans. For sewer projects, the rate is five per cent and for water supply, six per cent. Besides, the Life Insurance Corporation gives loans at a rate of nine per cent for projects falling under the Plan component.

Pointing out that tax-free bonds have already been in place for water supply schemes, the managers say there is a ceiling in the bond scheme as only one-third of the project cost or Rs. 50 crores, whichever is lower, can be mopped up under this arrangement. This has to be raised, the mangers argue.

The rationale behind the States' request for Central help is that huge capital has to be invested for implementing water supply schemes or sewer systems whereas it was not possible to make a heavy cost, recover costs to any substantial extent from users.

The problem assumes greater proportion, given the `poor' financial health of urban local bodies and water agencies. In respect of the four cities (Delhi, Bangalore, Hyderabad and Chennai) mentioned by the Finance Minister in the budget, exclusively-formed organisations take care of water supply and sewer system.

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