US$ 200 million ADB loan for urban development in India's North East

By Richard High26 June 2009

The Asian Development Bank (ADB) is to provide up to US$ 200 million to improve infrastructure in five state capital cities of North East India, the first time it has extended large scale assistance for urban sector development in one of the country's most underdeveloped regions.

The ADB's multi-tranche loan for the North Eastern Region Capital Cities Development Investment Program will be used to upgrade basic infrastructure and sanitation in the state capitals of Shillong (Meghalaya), Aizawl (Mizoram), Kohima (Nagaland), Gangtok (Sikkim) and Agartala (Tripura), benefiting an estimated 1.2 million people. The program represents one of the largest externally-funded infrastructure investments ever seen in the region.

According to the ADB, North East India has suffered from a dearth of investment because of its remote, mountainous location, long distance from markets, high levels of poverty and unemployment, and limited private sector interest.

However, plans for transport projects to link the capital cities and India's drive to increase trade with neighbouring states offer it new opportunities for development.

The funds will be used for a variety of subprojects that improve water supply, sanitation and solid waste management in the cities, with a special emphasis on those that benefit the urban poor. There will also be support for reforms, and staff skills development to raise the efficiency of municipal services and to increase citizen participation in decision-making over municipal matters.

Commenting of the financing Kunio Senga, director general of ADB's South Asia Department, said, "This program not only brings improved urban services to the homes of the residents in the North Eastern Region capital cities, but is also a prime example of sustainable investment in infrastructure development in prioritized areas, which is a cornerstone of our strategy in India and part of ADB's long term Strategy 2020 to reduce poverty in the Asia-Pacific region."

The loan facility from ADB's ordinary capital resources will be made available in three or more tranches over the duration of the program implementation period from 2009 until 2015. The loans will be priced in accordance with ADB's LIBOR-based lending facilities.

The Government of India and state governments will provide an additional US$ 85.7 million for a total estimated program cost of US$ 285.7 million.

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