To face water demand of growing population, underground water resource of Chandigarh is continuously extracted resulting in depletion of underground water level. Rural exodus, Demographic growth also adds to water scarcity of the region. Change of precipitation regime, Global Warming makes the situation even worse. To overcome the challenges, it was decided by Chandigarh Administration that current water supply system needs to be rejuvenated by establishing a water supply system that depends on surface water source only and is a pressurised 24X7 water supply system.
In 2016, The Union Territory of Chandigarh had signed a MoU with AFD wherein AFD agreed to provide technical support to Chandigarh for strengthening and management of Urban Services covering Water Supply, Sanitation, Waste Management etc. In order to rehabilitate existing Water Supply System of Chandigarh, MCC had provided AFD a Preliminary Project Report for a Water Supply Project. The report aimed at switching the municipal water service from discontinuous system to a 24X7 continuous water supply system utilising surface water source.
On 16th Dec 2020, AFD Board pursuant to a resolution no. C20201171 had in principal approved the sovereign loan for 48 Million Euros as well as Grant of 11.38 Million Euros. The total grant in aid for the value of 11.38 Million Euro had been awarded for the project by European Union Commission. On 14th Sep 2022, Credit Facility Agreement (CFA) was signed between The President of India and AFD. Subject to terms of the CFA, AFD makes available a facility in maximum aggregate amount of forty-eight million Euros for the project. Further On 29th Nov 2022, Grant Facility Agreement (GFA) was signed between The President of India and AFD. Subject to terms of the GFA, AFD makes available a Grant in maximum aggregate amount of eleven millions, hundred and eighty thousand Euros for the project. Subsequently, a Project agreement for execution of 24X7 water supply project (Chandigarh) was signed between AFD and MCC on 16th Dec 2022.