Despite contributing over 65% to India’s GDP, urban local bodies receive less than 1% of it in intergovernmental fiscal transfers. This stark imbalance highlights a deeper challenge - how WASH (Water, Sanitation, and Hygiene) is financed in India. Having crossed major strides in improving water and sanitation access across India through the Jal Jeevan Mission and Swachh Bharat Mission, a hidden issue threatens long-term success: how the finances are managed. WASH financing remains highly centralised and rigid, leaving local governments with limited authority to tailor solutions to the specific needs of their communities.
Access to clean WASH is a fundamental human right and a critical factor in ensuring public health, economic growth, and social equity. As India undergoes rapid urbanisation and population growth, the pressure on its WASH infrastructure is intensifying. Yet cities and towns—India’s engines of growth—remain financially constrained in addressing basic infrastructure needs.
Experts argue that a shift towards decentralised funding mechanisms, enhanced institutional capacity, and innovative financial models is crucial for ensuring the long-term success of WASH initiatives. Without such changes, India risks falling short of its ambitious public health and sustainability goals.
These themes came into sharp focus during a recent online panel moderated by Ansu Susan Cherian of BORDA South Asia, which reflected on the Union Budget 2025-26’s WASH allocations. The conversation raised questions around regional disparities, fiscal priorities, and the actual on-ground impact of flagship schemes like Jal Jeevan Mission and Swachh Bharat Mission.
Integrated WASH financing: Good in theory, but what about practice?
India is trying to bring together different funding sources for WASH to use money more effectively. This makes sense because managing resources across many schemes can be complicated. But while building infrastructure like toilets and water systems is important, it’s just as important to make sure they keep working well over time. Without enough support for maintenance, skilled staff, and strong institutions, these programs may not last or deliver the results people need.
Why cities need more flow in WASH funding
Tikender Panwar, former deputy Mayor of Shimla argues that the current financial allocation model needs an overhaul. The union government retains substantial control over urban infrastructure projects, deciding on aspects such as the number of toilets, sewage treatment plants (STPs), and water supply schemes for cities. Instead, he suggests that local bodies should be empowered to plan and implement solutions based on their unique challenges.
“This is India’s era of urbanisation, and cities must be given the financial tools to address their own problems. The wealth being generated in cities should be reinvested locally, rather than being dictated by a centralised authority,” Panwar stated.
A comparison with other nations highlights India's lag in devolved financial resources to cities. Countries such as Brazil (5.1% of GDP) and South Africa allocate a higher percentage of intergovernmental transfers to urban development, whereas India's allocation remains at a meagre 0.5%. Panwar advocates for a structural shift, recommending that at least 70% of urban development funds be transferred directly to municipal governments to encourage localised, need-based planning.
Human resource strengthening in WASH
A major concern raised by V R Raman, a public policy expert, is the inadequate human resource capacity at the local level. Many rural and urban local bodies lack the technical personnel required to efficiently manage WASH services. “At the panchayat level, particularly in northern India, many villages operate with just one or two administrative staff. How can we expect proper sanitation planning with such limited human resources? Institutional strengthening is key,” said Raman.
He further emphasised that while policies and financial commitments exist, execution remains a challenge due to a lack of skilled personnel. Capacity-building initiatives, including training programs for local administrators and engineers, should be prioritised.
Infrastructure Is not enough—We need ongoing services
While infrastructure investments have accelerated under large-scale programs, concerns persist about whether financial allocations prioritise infrastructure at the expense of sustainability. Swachh Bharat Mission, for instance, initially received unprecedented funding, but allocations have since stabilised at levels that experts argue are insufficient to sustain previous gains.
“Sanitation and hygiene should not be seen as one-time infrastructure projects but as continuous public health services. The challenge is not just building toilets or water pipelines but ensuring their long-term functionality,” Raman added.
Another critical issue is the rigidity of funding mechanisms. Local implementation plans often become secondary to pre-determined national allocations, preventing cities and rural areas from addressing their unique challenges effectively.
Shreshtha Saraswat of Janaagraha emphasised the urgent need for municipal finance reforms to improve WASH services. “The current urban infrastructure investment heavily relies on central and state governments, limiting local bodies' financial autonomy,” she said. Saraswat advocated for volumetric water tariffs and periodic tariff revisions to address financial inefficiencies and revenue losses. She also stressed the importance of improving collection efficiency and exploring commercial financing options like municipal bonds and public private partnerships.
"Without financial reforms, local bodies will always be stuck in a resource-constrained environment. They must be empowered to generate and manage their own funds,” Saraswat asserted."
She also recommended mobilising commercial financing for WASH infrastructure. By treating sanitation and water management as investable sectors, the government can attract private capital while freeing up public funds for projects that lack commercial viability.
Bridging regional disparities in WASH financing
The current allocation of WASH funds leads to significant regional disparities. Metro projects receive increased funding, while basic sanitation programs like Swachh Bharat Urban face underutilization (56%), especially in small and medium towns. This misallocation results in resources being wasted and local needs going unmet. There is need to shift to need-based funding to address these challenges
A bold reform proposal: Direct fund transfers to cities
One of the boldest recommendations that emerged from discussions is the direct transfer of WASH funds to city administrations. Tikender Panwar proposed eliminating centrally sponsored schemes for WASH and instead transferring lump-sum amounts to municipal governments.
“Stop managing WASH at the central level. Let the cities decide. Direct fund transfers will allow municipalities to address real problems instead of complying with generic guidelines,” Panwar stated.
Rethinking urban planning for sustainable WASH services
Urban planning plays a pivotal role in WASH sustainability. Many Indian cities, including Delhi, are planning to source water from distant locations, increasing operational costs and energy consumption. Similarly, cities like Shimla, due to their geographical constraints, face exorbitant costs in water distribution—up to Rs 170 per kiloliter.
“Cities must rethink their entire water and sanitation approach. Decentralised management, rainwater harvesting, and wastewater recycling should be prioritised to reduce the dependency on costly, long-distance water supply systems,” Panwar suggested.
Decentralised WASH financing is crucial for India. Cities need financial autonomy for local projects and investments in human resources to ensure long-term operational sustainability.