By Tish Sanghera

Mumbai, Oct 1 (IndiaSpend/IANS): A 65 per cent shortfall in subsidies is affecting Maharashtra's push to ensure a toilet in every urban household under the Swachh Bharat Mission, the nationwide cleanliness campaign, according to a study by CEPT University, Gujarat.

The cost of building a basic toilet with water and a septic tank in Maharashtra is estimated to be around Rs 35,000. Under the Swachh Bharat Programme for Urban Areas (SBPUA), the Centre provides a subsidy of Rs 4,000 per household. This is supplemented by a state subsidy of Rs 8,000.

The total subisidy extended to households thus is Rs 12,000 -- only 35 per cent of the construction cost.

To increase the number of individual household toilets, it is important to ensure that additional finance be available through credit options, the study said.

Micro-finance institutions (MFIs) have traditionally led the way in sanitation credit, largely in rural areas, but commercial and cooperative sector banks, credit societies and housing finance institutions (HFIs) also need to recognise it as a viable lending stream, said the study.

In 2015-16, 10.5 per cent of urban households practised open defecation; 14.9 per cent used toilets where waste comes into contact with humans and 6.1 per cent used shared facilities, according to the National Family Health Survey data of 2015-16.

Part of the SMBUA's objective is increasing the coverage of households with individual toilets and ensuring that waste is safely and properly managed. Shared facilities, whilst used by over 761 million people globally and an improvement on open defecation, are not an acceptable alternative to individual household latrines.

Improving sanitation levels is a key factor in reducing the spread of infectious diseases such as cholera, diarrhoea, dysentery and hepatitis A. For children under five, diarrhoea is the second leading cause of death.

CEPT conducted a survey in two cities of Maharashtra: Sinnar, around 30 km from Nashik, and Wai, 85 km from Pune. The survey showed that 30 per cent of households in Wai and 35 per cent in Sinnar do not have toilets. But over 80 per cent were keen to install a toilet if they could overcome financial and space constraints.

In Sinnar, seven per cent of the total population of 65,000 lives in slums (4,500) and lacks access to individual toilets. In Wai, 97 per cent of the total population of 339,500 owns a home, but many of them share community toilets built by the government and run by a local NGO.

"Everyone in our house resorts to open defecation," said a respondent. "Our relatives do not visit us because of this. We feel it is very important to have a toilet and are willing to take a loan to build one."

Only 50 per cent of potential applicants in Sinnar and 12 per cent in Wai have actually applied for the SMBUA scheme despite the demand for toilets and the local government's outreach to create awareness. Cost was cited as one of the main reasons for this gap.

Those who build toilets under the scheme get 50 per cent of the subsidies at the start of the project and the remaining on completion. This means sanitation credit is needed to not only plug the funding gap but also to support construction costs.

Local municipal councils in Wai and Sinnar provide an additional Rs 5,000 -- bringing the total subsidy to Rs 17,000 -- but even with this additional sum, only 48 per cent of the total cost gets covered.

Building a toilet is perceived as an "aspirational" project: Once households decided to build a toilet, they usually add bathing facilities and upgraded fixtures to make the exercise worthwhile, the study found. This usually took the total cost to Rs 45,000, necessitating a loan.

"We had to walk a long distance to reach community toilets [and] it is not possible to use these at night," said one respondent. "We have left our home and moved to a rented house with a toilet because we cannot afford to spend Rs 40,000-45,000 at once. We pay a rent of Rs 3,000 instead."

Commercial and cooperative banks and credit cooperative societies in Wai and Sinnar have no experience providing loans for sanitation projects. But cooperative societies were found to be more willing to explore sanitation finance options, lending unsecured amounts up to Rs 50,000 with a four- to five-year payment model, according to the study.

Housing finance companies did offer home improvement loans in both cities at competitive rates but their demand for documentation, insurance and processing fees intimidated the target socio-economic group. Also, most people in this group are not in a position to offer the bank the detailed documentation required for loans.

Additionally, MFIs, who tend to have the most experience in lending to this sector, had limited presence in the two cities (with the exception of one, Grameen Koota, in Sinnar). Self-help groups (SHGs) in both Wai and Sinnar found banks reluctant to lend to them due to earlier repayment delays.

Empowering SHGs to approach financial institutions might be a workable strategy, said the study. Building on their established links with banks and leveraging support from urban councils and different government programmes, this approach can be replicated across other cities and states.

Lenders who do mobilise resources for sanitation credit, however, can benefit from an increased client base, the study suggested.

Banks can also include sanitation loans under the Priority Sector Lending (PSL) category. This helps banks meet Reserve Bank of India requirements on lending 40 per cent of their total loan amounts to sectors that boost development in agriculture, micro credits, education, social housing and so on.

Access to finance may remain an issue even after lenders come forward to extend sanitation credit, especially because such loans are seen as a "non-income generating activity" -- a particular problem for MFIs under current RBI regulations. Currently 50 per cent of the total aggregated loans disbursed by MFIs has to be used on an income-generating venture.