French Funding Agency Puts Chandigarh's Ambitious Water Project on Hold
In a major setback for Chandigarh's infrastructure development, the Agence Française de Développement (AFD), the French funding agency, has temporarily suspended the pan-city 24x7 water supply project. This decision comes after six months of complete inaction from the Municipal Corporation (MC) and non-payment of fees to crucial technical staff.
Immediate Clarifications Sought by French Agency
The AFD has formally written to the municipal corporation seeking immediate clarifications, revised technical documentation, and updated financial details to determine the project's future. The agency first communicated the suspension on September 17, followed by a reminder on October 24, urging the MC to act swiftly to resume project activities.
The suspension directly results from the non-functioning of the Long-Term Technical Assistant (LTTA), who was responsible for submitting progress reports and other essential documentation to AFD. With the LTTA not operational, project progress has been significantly delayed, creating a standstill situation.
Financial Burden Escalates Alarmingly
Adding to the urgency of the situation, the financial burden of the project has witnessed a sharp escalation. The repayment obligation has skyrocketed from Rs 471 crore in 2019 to Rs 638 crore in 2025, marking an increase of over Rs 166 crore according to MC reports.
This dramatic rise is primarily driven by two key factors: a significant surge in the Euro exchange rate and higher interest rates under EURIBOR. When initial viability calculations were made, they were based on a six-month EURIBOR of 0.26% and a fixed interest rate of 1.58%, resulting in an effective rate of 1.84%.
At that time, the loan value stood at Rs 412.80 crore when the Euro was valued at Rs 286, with total repayment projected at Rs 471.38 crore. By 2025, the Euro climbed to Rs 102.75, pushing the loan value to Rs 493.20 crore. The EURIBOR now stands at 2.113%, raising the effective interest rate to 3.673%.
Lessons from Pilot Project and Future Requirements
The MC report highlights crucial lessons learned from the Manimajra pilot project and subsequent reviews, emphasizing the need for a realistic, data-driven approach. Revised estimates stress the importance of comprehensive planning that includes:
- Complete pipeline rehabilitation throughout the city
- Proper road restoration following pipeline work
- Robust metering infrastructure implementation
- Active community engagement programs
Officials acknowledge that the situation demands urgent decision-making. If Chandigarh intends to achieve its goal of providing continuous, clean, and fair water supply for all residents, the project must move forward with updated studies and sound financial planning. Without immediate action, rising costs and stalled progress could jeopardize the city's long-term water security.
The MC report specifically stresses that future implementation should include all essential components supported by updated technical and financial studies to ensure sustainability. The clock is ticking for municipal authorities to respond to AFD's concerns and revive this critical infrastructure project that affects every resident of Chandigarh.
