The setting up of the Watershed Development Fund was announced by the Finance Minister during the budget 2000 speech.

Add to this, the DM12 million (approx Rs 25 crore) financial assistance Nabard received for the first phase of Indo German Watershed Development Programme that ends in December 2000. The funds were made available from Kreditanstalt fuer Wiederaufbau (KfW).

With the help of Government of Maharashtra and some 39 non-government organisations, these funds have been disbursed through Nabard for some 80 projects in Maharashtra covering approximately 80,000 hectares of land. Given the promising results, KfW is expected to extend further DM26 million (approx Rs 56 crore) for the second phase ending 2005. "We can avoid the recurring draught-like conditions in various states, if the watershed programme is implemented in water deficit regions", said Nabard's general manager Vinu Wadgaonkar.

The success in Maharashtra has prompted Nabard to identified some 12 states to implement integrated watershed development programmes jointly with the respective state governments. These states are Rajasthan, Gujarat, Andhra Pradesh, Madhya Pradesh, Tamil Nadu, Bihar, Uttar Pradesh, Haryana, Himachal Pradesh, West bangal and Jammum & Kashmir. According to Wadgaonkar, all the state governments have issued necessary circulars to integrate the activities of the three important departments -- water and agriculture "to attain close coordination and smooth implementation" of the project. Each state government have set up their respective watershed development team which will act as the state-level NGO for disbursement of the funds.