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The state government will provide a $124 million counterpart support for the project which is estimated to be completed by June 2022, ADB said.
The loan agreement for $275 million has been signed between ADB and the central government for the project that aims to improve urban services to about 3 lakh households in 64 small towns in Madhya Pradesh.
Urban population in the state is expected to increase from 28% in 2016 to 35% by 2026, ADB said in a release, adding that the project supports the government's priority to develop urban infrastructure.
It will develop sustainable, inclusive and climate resilient water supply in 64 small and mid-sized towns, said the Manila headquartered multi-lateral funding agency.
It will also provide integrated storm water and sewerage infrastructure in two heritage towns — Khajuraho and Rajnagar.
The loan pact was inked by Raj Kumar, joint secretary, Ministry of Finance and L B Sondjaja, deputy country director ADB India Resident Mission. Vivek Aggarwal, secretary, Urban Development Department, Madhya Pradesh inked the project agreement.
"Madhya Pradesh needs substantial investments to keep pace with its rapid urbanisation. Sustainable piped water supply will foster inclusiveness by giving more of the state's population easier access to basic services, especially for women and girls," Kumar said in the statement.
ADB's continued support to the state urban development through this project will improve further the quality, coverage, efficiency and sustainability of urban service delivery, stabilise and deepen institutional capacity, and improve long term water service management, Sondjaja said.