French agency suspends 24x7 water supply project for now

French agency Agence Francaise De Developpement (AFD) has temporarily suspended activities under the 24x7 pan-city water supply project for Chandigarh.

The MC has provided the information in the status report of the project to be placed before the General House at its meeting on November 28. The report was sought by the House during the previous meeting.

The status report highlighted the difficulties in continuing the project as its cost is likely to increase three times and will burden the consumers. The final decision on the project will be taken by the House after considering all aspects.

According to the status report, on September 17, an email was received from the AFD regarding the temporary suspension of project activities. On October 24, a reminder email was received from the AFD requesting the civic body to take immediate follow-up actions in response to the temporary suspension of the project activities. The agency also asked the MC to submit required clarifications.

The MC had signed a credit facility agreement (CFA) with the French agency in New Delhi on September 15, 2022, for the implementation of the project. As per the agreement, the AFD was to provide Rs 413 crores for the project in the form of a loan to be repaid in 15 years. In addition, the European Union promised to give a grant of Rs 98 crore. The project has a financial outlay of Rs 591 crore and is expected to be completed by 2027. However, no significant progress has been made on the project ever since the agreement was signed.

The status report stated that the tariffs proposed in 2019 were already more than the twice the prevailing rates at that time, signalling a significant upward revision in cost recovery expectations. The project cost has further escalated, necessitating an additional increase in tariffs beyond the 2019 proposal to ensure long-term sustainability of operations. This implied that consumers will face a compounded financial burden, not only absorbing the initial doubling of tariffs but also the subsequent increase driven by revised staffing costs and operational overheads.

Without tariff cost containment or phased implementation, the public acceptance of the project may be at risk, read the status report. The MC re-evaluated the detailed project report and identified the need for continuous improvement in water supply infrastructure along with large-scale activities for awareness on water conservation among residents.

According to the report, if the loan was cancelled at this stage, 2.5% of the loan shall be imposed as a penalty as per the agreement. In such a case, approximately Rs 15.15 crore would be payable to the AFD and the EU. In addition, there are dues of Rs 4.58 crore as claimed by the consultant. The total financial liability would be Rs 19.73 crore.

The project aimed at modernising the city’s water distribution system, improving service reliability and reducing non-revenue water through upgraded infrastructure, advanced monitoring and efficient management practices. However, the experience from the Manimajra pilot project and subsequent technical and financial reviews highlighted the need for a more realistic and data-driven approach to ensure sustainable implementation. The revised estimates and re-evaluation underline the importance of comprehensive planning, inclusion of all essential components such as full pipeline rehabilitation, adequate road restoration, robust metering and proper community engagement.

The MC stated that the project was taken forward carefully with updated studies and proper financial planning so that Chandigarh could achieve a continuous, clean and fair water supply for all its residents in an effective and sustainable manner.