The watchdog said water utility Aya has enough income to cover operational, administrative and maintenance expenses this year.
The amount represents what the health system could save if all the population had full water and sanitation services.
Over 30,000 residents had to be evacuated from the capital of Putumayo department, while damage was reported to houses, bridges and water systems.
The approval comes right when the city is facing severe water scarcity problems.
The plant would treat the seaweed that accumulates in large quantities on the Mexican resort city's beaches.