The inner core areas of Kolkata Municipal Corporation are characterised by a high population density (around 29,000 sq/km) and 140-year-old sewerage and drainage systems that are in need of immediate improvement. In the fringe areas, the sewerage and drainage infrastructure is grossly inadequate. Owing to Kolkata's dished terrain, storm water and sewage have to be pumped out. During the monsoon, flooding is exacerbated by undersized drains, drains blocked by uncollected solid waste, and silted canals. Frequent flooding increases exposure to pathogens from overflowing septic tanks, flooded garbage heaps and other sources. The situation is most severe in low-lying slum areas.

In 1998, the Government of India requested the Asian Development Bank (ADB) for financial assistance to reverse the environmental degradation in India’s largest cities. Once Kolkata was identified as the most appropriate location for a project. The Government and the Bank agreed that a Kolkata Environmental Improvement Project (KEIP) team should draw up a Municipal Kolkata Environmental Programme (MKEIP) and do feasibility studies for a Primary Project. In March 1999, the Bank appointed Egis Consulting Australia Pvt Ltd in association with Consulting Engineering Services (India) Ltd and Sinclair Knight Merz Pvt Ltd to support the Kolkata Municipal Corporation (KMC) for the MCEIP and feasibility studies. Those involved in producing the MCEIP were: Mayor of Kolkata; Member, Mayor-in-Council (Sewerage and Drainage); Department of Urban Development, GoI; Department of Economic Affairs, Government of India; Government of West Bengal Departments of Municipal Affairs, Environment and Finance; Municipal Commissioner; Chief Executive Officer, KMDA; Director General (Projects) KMC; Bengal Chamber of Commerce; Concern for Calcutta, NGO; officials from KMC, Egis Consulting Australia Pvt Ltd, Consulting Engineering Services (India) Ltd, Sinclair Knight Merz Pvt Ltd; and experts.

The MCEIP led to the creation of the Kolkata Environmental Improvement Project (KEIP), a priority component of the programme, to be funded by ADB, Government of West Bengal, and KMC. The loan agreement with ADB for KEIP was signed in 2001. The agreement became effective on 1 April 2002 with the final withdrawal of the loan set for December 2007.
Out of the total Project cost, 61 percent is to be funded by ADB, 19 percent will come from the Government of West Bengal and 20 percent from KMC. The funds are being used to revamp and upgrade the sewerage and drainage network in the added areas of KMC, improve solid waste management (SWM), and improve slums over the entire KMC area over a five-year period. ADB’s share is in the form of a 30% grant and a 70% loan. The cost of the project is at present estimated to be US$288 million with an added DFID component of US$42 million.
The Project has asked for a supplementary loan of US$113.6 million (INR 5112.03 Mn.), which has already been approved by ADB and it has been declared effective from 1st June 2007.

1.The KMC shall undertake a programme of metering all water consumers with 20mm ferrule size or more. The KMC shall also take account of ongoing World Bank studies in undertaking a programme of metering all water supply consumers with less than 20mm ferrule size based on consumption demand to be agreed with the Bank such that (a) 25 percent of all such consumers shall be metered by the end of Fiscal Year 2002/2003; (b) 50 percent of all such consumers shall be metered by the end of Fiscal Year 2003/2004; and (c) 100 percent of all such consumers shall be metered by the end of Fiscal Year 2004/2005. All consumers shall be metered by the end of Fiscal Year 2009/2010 (LA, Schedule 6, para 12).

2. The KMC shall implement property tax reform acceptable to the Bank by no later than the end of Fiscal Year 2003/2004 in accordance with actions agreed to between the State, KMC and the Bank under the Policy and Institutional Reform Agenda and amendments to the KMC Act under para 12(a) of Schedule 4 of this LA (LA, Schedule 6, para 13).

3. Excluding Garden Reach water supply treatment plants, the KMC shall adopt water supply and sewerage assets within its geographical boundaries under the control of the KMDA such that all such assets are adopted by KMC no later than the end of Fiscal Year 2004/2005 in accordance with actions agreed between the State, KMC and the Bank under the Policy and Institutional Reform Agenda (LA, Schedule 6, para 14).

4. The Borrower, State and KMC shall ensure that a Benefit Monitoring Programme (BME) shall be undertaken in accordance with the Bank’s project performance monitoring system (PPMS) (LA, Schedule 6, para 8).

5. The State and KMC shall ensure that for the purposes of the BME programme, the Project Management Unit shall submit a detailed implementation plan for monitoring benefits and preparing bench work information for the Bank’s review and concurrence within 6 months of the Effective Date (LA, Schedule 6, para 9)