The World Bank Jhelum and Tawi Flood Recovery Project (P154990) REPORT NO.: RES51547 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF JHELUM AND TAWI FLOOD RECOVERY PROJECT APPROVED ON JUNE 2, 2015 TO INDIA URBAN, RESILIENCE AND LAND SOUTH ASIA Regional Vice President: Hartwig Schafer Acting Country Director: Hideki Mori (Acting) Regional Director: John A. Roome Practice Manager/Manager: Abhas Kumar Jha Task Team Leader(s): Hemang D. Karelia, Deepak Singh The World Bank Jhelum and Tawi Flood Recovery Project (P154990) ABBREVIATIONS AND ACRONYMS CERC Contingent Emergency Response Component DEA Department of Economic Affairs DRM Disaster Risk Management EA Environmental Assessment GoI Government of India GoJK Government of Jammu and Kashmir IAs Implementing Agencies IDA International Development Association J&K Jammu and Kashmir PDO Project Development Objective PIE Project Implementing Entity UT Union Territory The World Bank Jhelum and Tawi Flood Recovery Project (P154990) BASIC DATA Product Information Project ID Financing Instrument P154990 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 02-Jun-2015 30-Jun-2022 Organizations Borrower Responsible Agency Republic of India Project Development Objective (PDO) Original PDO The project development objective is to support the recovery and increase disaster resilience in Project Areas, and increase thecapacity of the Project Implementing Entity to respond promptly and effectively to an eligible crisis or emergency. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-56950 02-Jun-2015 21-Jan-2016 19-Apr-2016 30-Jun-2022 250.00 137.70 112.30 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Jhelum and Tawi Flood Recovery Project (P154990) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Background 1. In response to the 2014 floods in Jhelum and Tawi river basins, this IDA (International Development Association) financed project supports a resilient recovery in several infrastructure and livelihood sectors while building the Disaster Risk Management (DRM) capacities of the government agencies. The project is financing major infrastructure investments including roads, bridges, hospitals, schools, and drainage system improvements. 2. This is the only Bank funded project in Jammu and Kashmir (J&K) and it is crucially important for building disaster resilience in project areas that are highly vulnerable to disasters and improving flood protection infrastructure in Srinagar, the winter capital of J&K. There is a strong ownership of the Project by Government of Jammu & Kashmir (GoJK) and Government of India (GoI). This project is also part of the Indian Prime Minister’s Special Development Package for J&K. During June 2020, the project was granted a one-year extension of the closing date. In addition, to respond to the COVID-19 pandemic, the Contingent Emergency Response Component (CERC) was activated and US$50 million was reallocated to it to boost healthcare services in the state. 3. Subsequently in June 2021, in response to GoJK’s request for an 18-months extension of the closing date, a two-phase extension was agreed. As a result, in accordance with Waiver of Provisions of World Bank Directive for Investment Project Financing, Section III, paragraph 50, an initial extension of 12- months was granted (Memo cleared by OPSVP dated June 28, 2021), extending the closing date to June 30, 2022. Simultaneously, it was agreed at the time that subject to achievement of the Action Plan milestones as outlined in Supplemental Letter, dated June 29, 2021, a further extension of the closing date by six months i.e., up to December 31, 2022, could be considered. 4. The GoJK in its letter dated April 12, 2022, has requested the Department of Economic Affairs (DEA) for an extension of the current closing date of June 30, 2022, to December 31, 2022, in view of the Project’s importance for building resilient infrastructure, improving disaster risk management capacities, and supporting government’s COVID-19 response; and citing the improved performance of the project. GoJK also indicated no potential savings available for cancellation on account of the cost variations already received under several civil works contracts. This request would extend the original closing date by a cumulative total of 30 months. B. Implementation History and Challenges 5. From the beginning, the project has faced complex challenges due to political uncertainty, social unrest, volatile security situation, and frequent changes in leadership and staffing in all implementing agencies (IAs). The IAs’ lack of familiarity with Bank financed projects and weak contractor presence, capacity and participation added further delays in implementation. Overall, these cascading challenges The World Bank Jhelum and Tawi Flood Recovery Project (P154990) led to an effectiveness lag of 11 months and disbursement lag of 28 months (about 2 and a half years) early on. 6. The coalition Government collapsed during June 2018, and the state was placed under the Governor’s rule. Later, the special constitutional provisions related to J&K were revoked and the state was bifurcated during August 2019 changing the J&K’s administrative status to a Union Territory (UT). For a substantial duration after this, the Project areas experienced restricted communications and labor migration that disrupted the project activities. 7. The operating environment was further disrupted due to the COVID-19 pandemic from March 2020. The J&K was also hit severely from the second wave of COVID-19 during April-June 2021 and a brief spike in number of cases during January-February 2022. 8. While the COVID-19 related risk is now moderate due to high vaccination rates and improved pandemic response capabilities, the security related risk continues to remain high. C. Project Status 9. Despite continued challenges and disruptions, the project has significantly improved its performance over last two and half years with remarkable progress in transport, education, urban flood management, livelihood recovery, and disaster preparedness and response capabilities. CERC allocation of US$50 million has been nearly fully utilized and has augmented pandemic management capabilities and healthcare services in Jammu and Kashmir. 10. During FY21 and FY22 the disbursements have leapfrogged compared to earlier years. Of the total US$138 million disbursed so far, US$57 million were disbursed in FY21 and US$58 million in the three quarters of FY22. A Withdrawal Application of US$10 million has been submitted on June 22, 2022, which takes the FY22 disbursement to US$68 million and total disbursement to US$148 million. Current Implementation Progress is rated at Moderately Satisfactory while the Achievement of Project Development Objective (PDO) is rated Moderately Unsatisfactory as several civil works contracts are still ongoing and, as a result, corresponding results targets will not be achieved by the current closing date. However, with the proposed six-months extension of the closing date, the PDO can also be upgraded to Moderately Satisfactory. 11. The project has fully achieved or exceeded the Agreed milestones set under the Action Plan for an additional 6-month extension, as illustrated below: JTFRP ACTION PLAN Status (For further extension of closing date by 6 months) 1. Achieve disbursement of an additional US$12 Milestone achieved million in FY21 Achieved additional disbursement of US$13.7 million in June 2021 2. Share, by July 15, 2021, an updated status of Milestone achieved: cumulative number and value of contracts  Information shared accordingly on July 15, awarded as of June 30, 2021; No new 2021. A total of 214 contracts valued at The World Bank Jhelum and Tawi Flood Recovery Project (P154990) contracts to be procured and/or awarded US$226 million were awarded by June 30, thereafter for financing under the Credit. 2021.  No new contracts were awarded after the due date. 3. Disbursement of: Milestone achieved (a) US$15 million or higher in Q1-FY22; and (a) US$18.1 million (b) US$20 million or higher in Q2-FY22. (b) US$ 19.7 million 4. (a) GoJK and DEA to finalize an assessment by Milestone achieved March 31, 2022, of the likely savings under the  GoJK completed the assessment on project credit (the funds that would potentially remain commitments and likely savings. unutilized by December 31, 2022) factoring in:  GoJK informed DEA on April 12, 2022, that (i) the implementation progress; (ii) contract based on their assessment there will be no variations; (iii) exchange rate variations; and potential savings for cancellation*. (b) submit a request through DEA for cancellation of the identified savings under the credit by April 15, 2022. 5. Physical completion of at least 60 percent of Milestone achieved the awarded contracts under the Credit by 132 (62%) out of total 214 contracts awarded May 31, 2022. are completed as of May 31, 2022. *Need for canceling uncommitted credit has been discussed with the counterparts since FY20. Based on the current level of progress and performance outlook on a few high-value civil works contracts, the team estimates about US$20 million may remain unutilized by the new proposed closing date of December 31, 2022. The Bank team will continue close supervision with monthly review of the project. 12. A Joint DEA-World Bank Project Review meeting was organized on June 3, 2022, to assess the overall progress on the Action Plan and reach a decision whether to recommend a 6-months extension. GoJK indicated that about US$5.5 million remains uncommitted under the Project which they are keen to utilize for (i) scaling up CERC activities for COVID management/boosting healthcare services; (ii) supporting further expansion of the Bone and Joint Hospital since its original building was fully destroyed by a fire in March 2022; and (iii) accommodating the cost variations received on several civil contracts. In addition, GoJK requested an additional 6-month extension till June 30, 2023, as a few important and high-value sub-projects including two hospitals and Emergency Operations Center will require more time beyond December 31, 2022, to reach completion. 13. In view of the Project’s importance for building resilient infrastructure, improving disaster risk management capacities, and supporting government’s COVID-19 response; and citing the improved performance of the project, DEA has concurred with the extension request with no cancellation, and deferred the decision on the partial-cancellation to FY23 given the availability of an additional financial year to reprogram cancelled IDA, if such cancellation would indeed be necessary. DEA recommended a 6- months extension of the closing date till December 31, 2022 via its letter to the Bank dated June 20, 2022. D. Rationale for Restructuring 14. Despite the complex challenges due to COVID-19 and difficult operating environment, the Project has attained remarkable progress on advancing the implementation, as evident from the achievement of The World Bank Jhelum and Tawi Flood Recovery Project (P154990) the agreed Action Plan. This extension would allow the Project to continue the positive implementation momentum and progress towards satisfactory achievement of its PDO. II. DESCRIPTION OF PROPOSED CHANGES 15. The proposed restructuring will reflect the following changes: a. Extension of Closing Date from June 30, 2022, to December 31, 2022. b. Component cost allocations revised to reflect the final scope of the project. c. Revised disbursement estimates and implementation schedule for the extended project duration. III. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Loan Closing Date(s) ✔ Disbursement Estimates ✔ Implementation Schedule ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ The World Bank Jhelum and Tawi Flood Recovery Project (P154990) Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Reconstruction and Reconstruction and strengthening of critical 60.00 Revised strengthening of critical 46.00 infrastructure infrastructure Reconstruction of roads and Reconstruction of roads and 80.00 Revised 62.00 bridges bridges Restoration of urban flood Restoration of urban flood 50.00 Revised 40.00 management infrastructure management infrastructure Restoration and strengthening of Restoration and strengthening 15.00 Revised 7.00 livelihoods of livelihoods Strengthening disaster risk Strengthening disaster risk 25.00 No Change 25.00 management capacity management capacity Contingent Emergency Contingent Emergency Response 0.00 Revised 50.00 Response Implementation Support 20.00 No Change Implementation Support 20.00 TOTAL 250.00 250.00 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications 30-Jun-2021, 30-Jun- IDA-56950 Effective 30-Jun-2020 31-Dec-2022 30-Apr-2023 2022 The World Bank Jhelum and Tawi Flood Recovery Project (P154990) OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 0000 0.00 0.00 2015 0.00 0.00 2016 0.00 8,239,250.00 2017 0.00 16,980,500.00 2018 3,307,094.00 3,307,094.00 2019 9,141,416.48 9,141,416.48 2020 14,000,000.00 14,000,000.00 2021 60,000,000.00 60,000,000.00 2022 0.00 60,000,000.00 2023 0.00 50,000,000.00 .