Karnataka Health Systems Development Project (KHSDP-II) has been granted an aid amounting to $206.5 million from the World Bank for the development of maternal and child welfare service in terms of reach and coverage in all the 27 districts in the State. The World Bank's board of directors approved the project in Washington during the last week of August. The Karnataka government and the Bank will sign an agreement in New Delhi within three weeks for implementing the five-year project, which spans between 2006 and 2011.

The aid comes in as a big relief to the KHSDP project assignments after allegations by the World Bank against the outcome of earlier of fund utilizations. In the event the Bank had suspended loan to KHSDP-II project and other four projects of the Union Ministry of Health and Family Welfare. Sources stated that such investigations are conducted by the Bank's department of Institutional Integrity and it was specifically related to the irregularities in the implementation of the Reproductive and Child Health (RCH) Project I where investigations revealed grave faults in the procurement procedures. However, the Union government took note of the issue and submitted a report to the World Bank after rectifying the same.

For the approval of the Project, the Bank has laid down that the condition that the State should increase the expenditure on health to an average of five per cent of the government spending every year. The government has agreed to invest about $50 million on reforming the sector while the rest on the providing medical equipment to hospitals across the State.

The primary objective of the KHSDP project II is to augment the operation of essential health services, which includes curative, preventive and public health in the backward regions and thereby promote the acceleration of the achievements of heath-related Millennium Development Goals. The project also support innovations in service delivery and increase spending on infrastructure development. This apart it supports the improvement in services in 10 areas like equipment up-gradation, provision of ambulances, appointment of doctors and reforming the sector.

From the allocated amount of $206.5 million, the state government will share $64.7 million while the Bank will contribute $141.8 million. The credits from the International Development Association, the World Bank's concessionary lending arm carries a 0.75 service fee, a 10-year grace period and a maturity of 35 years, informed the KHSDP.

Karnataka sought Rs 790 crore aid as a separate loan, from the World Bank in 2003. The earlier loan of Rs. 540 crore was for the improvement of infrastructure of the 243 small and medium sized medical centres for the period spanning 1996-2004.

The Bank appreciated that over last 10 years, the State has been one of the fastest growing ones in the country and increase in per capita has led to better standards of living and improvement in the priority health outcomes.