Kejriwal, along with Union Jalshakti Minister Gajendra Singh Shekhawat, laid the foundation stone for India's largest sewage treatment plant (STP) in Okhla.
During the event speaking on the groundwater depletion in the country, Kejriwal said Delhi does not have its own source of water.
"There are only two solutions before us at this juncture: water recycling and recharge. Delhi's population is growing very rapidly and we do not have our own source of water. Together with the Centre, we are working on a massive groundwater recharge programme on the floodplains of the Yamuna."
He thanked the Central government for its support and said Delhi's problem of multiplicity of agencies can be overcome when "we all work together".
The plant in Okhla will treat 56.4 crore litres of waste water per day, he said.
"This is a major step towards the clean Yamuna campaign. I want to thank the Central government for its support in this project. Not only is the Centre providing 85 per cent funding for this project, it has also been a supportive partner along the way," he added.
During his address at the function, Shekhawat said the water that the plant will generate is a huge resource and it should be ensured it is used productively and not wasted.
"We need to start using new water (treated water) for agricultural and industrial purposes. Towards this, CM Kejriwal's proposal is very good and I will consider it seriously."
At present, the Okhla Sewage Treatment complex comprises of six existing STPs, namely Phase-I (136 MLD), Phase-II (55 MLD), Phase-III (205 MLD), Phase-IV (168 MLD), Phase-V (73 MLD) and Phase-VI (136 MLD).
The first four plants are old and have outlived their life, so a new STP is being constructed with the combined capacity of the four old STPs.
"The new plant will also have provision of online monitoring of quality parameters of effluent, power generation from biogas and sludge management," an official statement said.
"Disposal of sludge in a scientific manner will address environment-related issues. The plant is being constructed under Yamuna Action Plan III for which 85 per cent funds are being provided by central government from loans received from Japan International Cooperation Agency (JICA) and remaining 15 per cent by Delhi government. The plant will be the biggest STP ever built in India," it added.
( With inputs from IANS )