Journalism of Courage
UT rethinks 24/7 water supply project as costs soar
The project aimed at modernising the distribution network, improving service reliability and cutting non-revenue water was originally valued at Rs 412 crore.
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The administration is expected to take a final view after the House discusses the status report later this week.
The Chandigarh Administration is reconsidering its pan-city 24×7 water supply project after costs jumped by more than Rs 225 crore, prompting concerns over a steep financial burden on residents. A status report on the project will be tabled in the Municipal Corporation’s General House meeting on November 28.
A senior UT official said growing public resistance and rising costs have forced a rethink. “Several representations have gone to the UT Administrator. People want clean water, not 24-hour water. They fear the entire city will be dug up to lay new pipes and that the pits will never be properly filled. They also worry about the additional financial burden on residents, so the project is being reconsidered. The status report is being placed before the House,” the official said.
Cost escalation and viability concerns
The project aimed at modernising the distribution network, improving service reliability and cutting non-revenue water was originally valued at Rs 412 crore. Loan repayment calculations were based on a six-month EURIBOR (Euro Interbank Offered Rate) of 0.26% and a fixed interest rate of 1.58%, with an effective interest rate of 1.84%. Under those assumptions, the total repayment obligation stood at Rs 471.38 crore.
As of 2025, however, the exchange rate has risen to Rs 102.75 per Euro, pushing the loan value to Rs 493.20 crore. The EURIBOR has also climbed to 2.113%, raising the effective interest rate to 3.673%. “Consequently, the total repayment obligation has increased to Rs 638.08 crore, an escalation of over Rs 166 crore compared to the 2019 projection,” the status report states.
The administration has also cited lessons from the Manimajra pilot and subsequent technical and financial reviews, which flagged the need for a more “realistic and data-driven approach”.
French agency suspends project
On September 17, 2025, AFD, the French development bank funding the project, formally communicated a temporary suspension of all project activities. A reminder email was issued on October 24, asking the Municipal Corporation to provide clarifications and follow-up actions.
Higher tariffs likely
The report warns that residents would face a compounded tariff hike if the project proceeds. Tariffs proposed in 2019 were already more than double the then prevailing rates.
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“With the project cost escalating further, an additional increase in tariffs beyond the 2019 proposal will be required to ensure long-term sustainability,” the report notes. Revised staffing costs and operational overheads would add to the burden. “Without tariff containment or phased implementation, public acceptance of the project may be at risk.”
The MC has now re-evaluated the DPR and suggested focusing instead on continuous improvements in water supply infrastructure and large-scale awareness campaigns on conservation.
Penalty if loan is cancelled
If the loan is cancelled in full or in part, the borrower must pay a 2.5% cancellation indemnity on the cancelled amount. “This amounts to approximately Rs 15.15 crore payable to AFD and EU,” the report says. An additional Rs 4.58 crore is pending as dues claimed by LTTA, taking the total liability to Rs 19.73 crore.
The administration is expected to take a final view after the House discusses the status report later this week.
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