After experiencing delays and reduced funding in FY25, companies involved in rural water supply infrastructure anticipate improved operations following increased budget allocations and program extension to 2028.
25 Apr 2025 | 828 Views | By Angitha Suresh
India Ratings and Research (Ind-Ra) reports that companies focused on Jal Jeevan Mission (JJM) projects experienced significant challenges in FY25, with slowed construction pace affecting revenue growth and elongating working capital cycles. However, prospects appear brighter for FY26-FY27, supported by enhanced central budget allocations, the program's extension until 2028, and ...
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India Ratings and Research (Ind-Ra) reports that companies focused on Jal Jeevan Mission (JJM) projects experienced significant challenges in FY25, with slowed construction pace affecting revenue growth and elongating working capital cycles. However, prospects appear brighter for FY26-FY27, supported by enhanced central budget allocations, the program's extension until 2028, and expected normalization of state government spending following the election season.
The JJM initiative, launched in 2019 with an original budget of INR3.6 trillion, aims to provide functional tap water connections to every rural household in India. The central government had initially committed INR2.08 trillion toward achieving 100% tap water coverage by December 2024.
According to Vijay Babu Konda, Associate Director of Corporate Ratings at Ind-Ra, "JJM recovery is widely expected, given the time extension, higher budgets and unlocking of stuck working capital, which should improve the credit profiles of sector players in FY26." However, he cautions that "uncertainty on increased costs and lack of clarity on sharing of spending could result in a moderation of credit profile."
The program operates through a partnership between central and state governments, with funding contributions varying by region. The central government provides 100% funding for union territories without legislature, 90% for North-Eastern and Himalayan states, and 50% for other states.
As of March 2025, the program has achieved 80.4% nationwide coverage, providing tap water to 155.7 million households compared to just 16.7% coverage when the mission began. Several states lag behind the national average, with Kerala, Jharkhand, West Bengal, Rajasthan, Madhya Pradesh, and Andhra Pradesh showing coverage below 75%.
The execution pace slowed considerably in FY25, with new connections falling below 10 million compared to the previous average of 20-30 million annually between FY22 and FY24. Against the central budget allocation of INR702 billion for FY25, estimates suggest only INR227 billion was spent, partially attributed to funding delays during the election period.
Cost escalation presents another challenge, with the revised program cost estimated at INR9.1 trillion, requiring additional central government support of approximately INR2.79 trillion. For FY26, the government has allocated INR670 billion to the program.
Companies operating in this sector experienced subdued revenue growth of just 3% year-over-year during the first nine months of FY25, down from 19% in the comparable period of FY24. Profit margins also decreased to 10.3% from 11.1%, leading to reduced interest coverage ratios.
The JJM program represents a cornerstone of the government's efforts to ensure universal access to safe drinking water across rural India, addressing a critical infrastructure gap that affects millions of households.