By Azman Usmani
The Asian Infrastructure Investment Bank is pushing to scale up its water financing portfolio in India as worsening El Niño conditions push the country toward its driest monsoon since 2009.
The Beijing-headquartered multilateral lender wants to fund a broader pipeline of critical water infrastructure in the country and offer policy-based loans to support governance changes, Jang Ping Thia, acting chief economist at AIIB, told Bloomberg News.
India — the bank’s largest financing destination — can also come to AIIB for “policy-based lending to reform the water sector,” Thia said in an interview from New Delhi, where the AIIB leadership is attending the India International Water Week.
Since inception, the lender has approved $13.8 billion in financing for India, with direct loans for water projects accounting for less than 7 per cent. The bank is increasing its focus on the sector at a time when severe weather shocks are threatening growth in South Asia’s biggest economy. The country is facing a 15 per cent monsoon rainfall deficit this season. Maharashtra, its wealthiest state and home to financial capital Mumbai, has flagged drought-like conditions across districts as reservoir levels plunge. Karnataka, which has India’s tech capital Bengaluru, has also announced state-wide measures for drought relief.
AIIB’s broader infrastructure loans may also come with water-saving conditions, such as automatically shutting off solar irrigation pumps under a $1.1 billion program in Maharashtra. AIIB also wants to focus on financing water utilities, industrial wastewater recycling and groundwater recharge.
Treated wastewater reuse is a $35 billion opportunity, while micro-irrigation projects are potentially a $118 billion market, according to a report jointly published Friday by AIIB and climate think tank Council on Energy, Environment and Water.
Unlocking those investments will require drawing private capital to a sector 85 per cent funded by public tax dollars, according to AIIB.
Commercial private capex has lagged as most water projects are structured as public goods. This identified urban water utilities as the most promising entry point for non-state firms, citing smart metering and household billing as proven models for generating predictable cash flows.
Yet, that won’t solve the broader crisis. The agriculture sector is “decisive,” he said, as it consumes as much as 80 per cent of India’s freshwater.
