75782 April 2012 PPIAF Assistance in India Technical Assistance for India’s Water Supply and Sanitation and Solid Waste Management Sectors Indian utilities have attempted to improve the reliability and quality of water service delivery for over a decade, and a key ingredient of these efforts has been to assure the financial viability and sustainability of water service providers. Despite substantial investment by the central and state governments over the past decades, service levels have remained stagnant, and major cities have typically received a very limited time schedule of water supply on a daily basis. The problem continues to be exacerbated by tremendous increases in urban populations. PPIAF has provided assistance for capacity and awareness building, enabling environment reform, and transaction support in this sector. PPIAF has also provided support to state governments such as Orrisa, Delhi, and Maharashtra to explore options for public-private partnerships (PPPs) in wastewater services and solid waste management (SWM). Such activities have assisted in achieving consensus among various stakeholders on the way forward for private sector participation in the water supply and sanitation (WSS) and SWM sectors. National Government of India In one of its earliest instances of providing assistance to India, PPIAF supported a seminar on private sector participation in WSS services in New Delhi on February 7–8, 2000. The workshop was jointly organized with the Indian Ministry of Urban Development and the World Bank. Over 200 participants from the central and state governments, municipal authorities, private sector, and bilateral and multilateral agencies attended the seminar to discuss presentations on international and Indian experience with private sector assistance in the financing and managing of WSS investments. Nearly 40 experts from international agencies and private operators attended the seminar and discussed the experiences and success stories in Argentina, Chile, Côte d‟Ivoire, Senegal, and Philippines. Consensus was achieved on the five key elements for successful private sector participation: political support, financial feasibility, competitive and transparent contracting, incentivizing improved service, and the independence of regulators and tariff reform. The seminar concluded with eleven recommendations for participants to consider, including universal metering, identification of best practices in the sector, careful preparation of projects with private sector participation, and encouraging the use of innovative approaches to provide access to WSS services for the urban poor. Recognizing the need for WSS sector reforms to facilitate private investment in the sector, the World Bank initiated the Urban Water Sector Policy Initiative in 2000. PPIAF supported this initiative by providing technical assistance for the followings tasks: i) policy seminars for state- level decision makers and stakeholders focusing on barriers to reform; ii) information seminars for journalists and members of civil society to influence public awareness; iii) the production and dissemination of knowledge products, which included an evaluation of who benefits from subsidies in the sector; and iv) the development of a framework for implementing energy efficiency projects in water utilities. Toward that end, a seminar (Nagari) on tariffs and subsidies was organized on April 3–4, 2001 in Mumbai; and a seminar on private sector participation in WSS, managing the process, and regulation was organized in December 5–6, 2001 in Haryana. The events were highly participative, provided useful analysis (particularly on tariff and subsidies), and helped generate discussions on reforms and way forward for private sector participation in the WSS sector in India. In the seminar on private sector participation in WSS services, consensus emerged on the need for developing guidelines on the implementation of private sector participation with particular focus on regulatory and institutional frameworks. The Indian government has since formulated 1 guidelines on private participation in the WSS sector, with the assistance of the W ater and Sanitation Program (WSP) managed by the World Bank. PPIAF funding further supported a report on water tariffs and subsidies in Bangalore, India and Kathmandu, Nepal, which provided an analysis of the distributional incidence of water subsidies in South Asia. The study found that in both Kathmandu and Bangalore, the distribution of subsidies benefitted the non-poor to a greater extent than the poor. Over half the poor households were excluded from the subsidies as they did not have a private tap. While only 12% of the poor households were excluded in Bangalore from any subsidy, 33% were excluded largely due to an insufficient supply of public taps. The report illustrated the need for apportioning limited resources in a way that allows poor households better access to an essential commodity. The proceedings of the workshops, including the thematic discussions and case studies were compiled into publications that were distributed widely among members of the “Urban Think Tank� that comprises government officials, urban managers, researchers, consultants, and donor agencies. The publications for the April and December workshops are available on the WSP website. The final component of this activity was a diagnostic study on the strategic framework for implementing energy efficiency projects in water utilities, which examined the Delhi Jal Board as case study. The report summarized municipal energy efficiency projects, provided an overview of the Indian energy service industry, and described alternative models for implementing energy efficient projects using performance contracting approach. The study also discussed investment grade audits for identifying and assessing energy efficiency improvement opportunities in municipal water utilities, outlined competitive bidding processes that could be used to enlist private participation, and discussed the implications of changing from an intermittent to continuous water supply delivery system. In addition, the report also described a methodology for monitoring and verification of energy savings, discussed the availability of carbon financing mechanisms, and presented a strategic framework for energy efficiency at the Delhi Jal Board. Key action items for a proposed strategic energy efficiency action plan for the Delhi Jal Board were also discussed in the report. The main actions included: i) establishing a management cell; ii) developing and implementing an effective internal information and communication program; iii) developing a comprehensive database; iv) establishing an energy consumption benchmarking program and major installations; v) identifying and prioritizing energy efficiency improvement options; vii) establishing a metering and monitoring program; and viii) developing a staff program to reward superior performance in reducing energy costs. A stakeholder consultation workshop was held in Delhi on April 27, 2005 to deliberate on the findings of the report. It provided a venue for discussions between various governments and utilities on the challenges relating to energy efficiency. The participation by energy service companies and equipment vendors further allowed an opportunity for informal discussions and brainstorming on actions that need to be taken to encourage energy efficiency. The report has been distributed widely among urban utility managers in India and regionally, energy service companies, government officials and donor agencies. Results of PPIAF’s Support to the Government of India in the WSS and SWM Sectors Category Outputs Enabling environment reform  Distributional Incidence of Water Tariffs and Subsidies in Analyses/assessments Bangalore, India and Kathmandu, Nepal, July 2002 prepared  Strategic Framework for Implementation of Energy Efficiency Projects in Water Utilities, July 2005 2 Capacity and awareness building  Seminar on Private Participation in Water and Sanitation held in New Delhi on February 7–8, 2000  Seminar (Nagari) on tariff and subsidies in Mumbai, April 3–4, 2001 Workshops/seminars  Seminar on private sector participation in WSS sector in Haryana, December 5–6, 2001  Workshop on strategic framework to implement energy efficiency projects in water utilities held in Dehli, April 27, 2005 Category Outcomes Capacity and awareness building  Consensus achieved on five key elements for successful private sector participation in WSS services, 2000  In the seminar on private sector participation in WSS Consensus achieved services, consensus emerged on the need to develop guidelines on the implementation of private sector participation with particular focus on regulatory and institutional frameworks, 2005 Gujarat In 2005, based on the discussions and seminars organized through the PPIAF-funded “Urban Water Policy Reform Initiative� and supported by programs such as the WSP, the government of Gujarat started to explore means of improving WSS services in Gandhinagar and Western Ahmedabad. Towards that end, the government sought assistance from PPIAF to assess the water supply and sewerage infrastructure, services, and institutions in the two cities. This activity also analyzed the legal and regulatory environment, costs, revenues, and current charging arrangements, and recommended appropriate institutional options to improve service delivery, including PPPs. A series of customer surveys and focus group discussions were organized as part of the study, and in July 2007 the government organized a stakeholder consultation workshop in Gandhinagar. The Gujarat Minister of Urban Development presided over the workshop, which was attended by over 130 participants, including senior government officials, civil society organizations, residents, representatives of women‟s groups and media. The deliberations were held in the regional language, Gujarati, which facilitated open and extensive discussions among the participants. The main findings of the study with respect to Gandhinagar included: i) a 24/7 water supply, if combined with metering, would offer overwhelming advantages in terms of better public health, customer convenience, better resource management, and ultimately lower overall long term cost; ii) the government of Gujarat should consider measures for strengthening the existing service delivery framework with a view to increasing accountability and transparency, such as establishing a dedicated WSS utility under public ownership; iii) the capital project (or any successor utility) would be in a significantly stronger position to meet the objectives of the sector if it was to form a partnership with the private sector; and iv) management contracts are the PPP model with the greatest potential to improve the quality, efficiency, and effectiveness of WSS sector. 3 A similar approach with respect to the Ahmedabad Municipal Corporation was recommended and the main findings included recommendations that the corporation proceed with a pilot project to introduce a 24/7 water service combined with metering. The report also concluded that the corporation should consider establishing a dedicated WSS utility to improve accountability and transparency, and should separate WSS fees from property taxes to provide the utility with its own revenue stream. Finally, the report also recommended a management contract for Ahmedabad Municipal Corporation, as this option has the potential for greater knowledge transfer and increased long-term sustainability. The Ahmedabad Municipal Corporation is planning to undertake several water projects in the city to augment water supply. In 2011, 57 projects were planned, and work on 34 projects was initiated by the corporation‟s water supply and sewerage management committee. Results of PPIAF’s Activities in Gujarat’s WSS and SWM Sectors Category Outputs Enabling environment reform Analyses/assessments  Options for Service Improvement in the WSS Sector in prepared Gandhinagar and Western Ahmedabad, December 2007 Capacity and awareness building  A diagnostic workshop to introduce the study, December 18, 2006 Workshops/seminars  Stakeholder consultations to discuss draft findings of the report were held on July 10, 2007 with about 130 participants Category Outcomes Enabling environment reform  Gujarat Department of Urban Development and Urban Institutions created or Housing Development strengthened, 2007 strengthened  Ahmedabad Municipal Corporation technical capacity enhanced, 2007 Orrisa In 2009 the government of Orrisa started to explore options to improve services in the SWM sector in the state. It had initiated the identification and acquisition of land in the vicinity of urban local bodies for the purpose of establishing treatment and disposal facilities. Toward that end, the government, through the Ministry of Urban Development, requested PPPIAF assistance in exploring the possibility for a PPP in the establishment and operation of a shared treatment and disposal facility for municipal solid waste for the twin cities of Bhubaneswar and Cuttack. The PPIAF activity included an assessment of municipal finances and existing SWM systems for Bhubaneswar and Cuttack, and an evaluation of PPP options for the two cities. Technical and financial assessments of the preferred PPP options were conducted, and an integrated municipal SWM system, including the collection, transportation, processing and disposal of solid waste, was presented to the Bhubaneswar Corporation and Cuttack Municipal Corporation. The Orissa Municipal act was also reviewed in this activity, and several model legal documents were prepared including: i) Draft Model Concession Agreement for Design, Financing, Development, Constructing, Operation, Maintenance, Management and Transfer of a Regional 4 Municipal Solid Waste Facility; ii) Project Implementation Agreement for the Design, Financing, Development, Construction, Operation, Maintenance, Management, and Transfer of Regional Municipal Solid Waste Facility in the State of Orrisa; iii) Draft Participation Deed, Schedule V to Project Implementation Agreement; and iv) Draft Supplementary Agreement to Project Implementation Agreement for Supply of Municipal Solid Waste for Designated Transfer Stations. Stakeholder consultation workshops were held in Bhubaneshwar and Cuttack in August and December 2009 to discuss the status of SWM in the two cities. In 2010 the government of Orissa provided clearance for setting up the first shared treatment and landfill facility for municipal solid waste on a PPP basis. The Orissa Industrial Infrastructure Development Corporation was appointed as the transaction advisor to undertake a selection of a private operator that will be responsible for designing, building, financing, and operating the facility for the concession period. The concession contract was tendered in September 2011. Results of PPIAF’s Activities in Orissa’s WSS and SWM Sectors Category Outputs Enabling environment reform  Assessment of Orissa Municipal Act, 2008  Analysis of present SWM systems of Bhubaneswar and Cuttack Municipal Corporations, 2009  Financial assessments of Bhubaneswar and Cuttack Municipal Corporations, 2009 Analyses/assessments  Financial projections for Bhubaneswar and Cuttack Municipal Corporation, 2009 prepared  PPP options for proposed shared treatment and disposal facility, 2009  Assessment of potential benefits from an integrated SWM processing facility, 2009  Note on Orissa State Level Company for municipal SWM and other municipal services, 2010  Proposed framework for implementation of regional municipal solid waste projects in Orissa, 2009 Plans/strategies prepared  Proposed shared treatment and disposal facility for municipal SWM for Bhubaneswar and Cuttack, 2009  Proposed collection and transport system for Bhubaneswar and Cuttack Municipal Corporations, 2009 5 Project cycle-related assistance  Note on project development and implementation management for municipal SWM projects in Orissa, 2009  Note on structure for proposed Bhubaneswar and Cuttack shared municipal SWM facility, 2009  Financial model for proposed SWM facility, 2010  Model Concession Agreement for Design, Financing, Development, Constructing, Operation, Maintenance, Management and Transfer of a Regional Municipal Solid Transaction support Waste Facility, 2010  Project Implementation Agreement for the Design, Financing, Development, Construction, Operation, Maintenance, Management, and Transfer of Regional Municipal Solid Waste Facility in the State of Orissa, 2010  Model Participation Deed, 2010  Draft Supplementary Agreement to Project Implementation Agreement for Supply of Municipal Solid Waste for Designated Transfer Stations, 2010 Capacity and awareness building  Stakeholder workshops to discuss the current status of Workshops/seminars SWM in Bhubaneswar and Cuttack, August and December 2009 Category Outcomes Capacity and awareness building  Bhubaneswar Municipal Corporation technical capacity Technical capacity enhanced enhanced, 2009  Cuttack Municipal Corporation capacity technical capacity enhanced, 2009 Maharashtra The government of Maharashtra places a high priority on improving urban infrastructure services and living conditions in the cities. Within the context of municipal service delivery, the government of Maharashtra has identified three service areas to be of critical concern to the population (water and sanitation, SWM, and city roads) and considers PPPs to be an important arrangement to bring investments and improve municipal services in the state. The Municipal Corporation of Brihan Mumbai is responsible for water supply and wastewater services in Mumbai. While its performance with regards to water production, transmission, and wastewater collection and treatment is at acceptable levels, the corporation‟s water distribution suffers from many deficiencies including intermittent supply, low pressure, and high levels of non- revenue water. The municipal corporation‟s goal has been to bring safe, 24/7 water supply to all of Mumbai within the current bulk water availability, through substantial rehabilitation and reconfiguration of the distribution system, followed by an active leakage management program. In 2006 the municipal corporation identified the “K-East� Ward for pilot testing of an arrangement that would involve a PPP arrangement to reduce water losses. Toward that end, the government of Maharashtra requested PPIAF assistance to procure suitable consultants for the preparation of bid documents and for pre- and post-qualification of bidders for the implementation of 6 management contract in K-East Ward. Lessons learned from the pilot were to be incorporated into future bid and contract documents. PPIAF supported technical assistance helped the government evaluate various PPP arrangements and select the option most suited for Mumbai to improve water distribution system. Extensive stakeholder consultations were held spread over three years to discuss the concerns of service delivery, PPP options and role of private sector, and potential ways forward. The PPIAF funded activity also assisted in collecting and analyzing baseline information on water and wastewater services in the pilot area, updating the investment program and financing plan, reviewing the legal and institutional framework for private sector participation, assessing alternate PPP options to improve service, and preparing bidding documents and best practice guidance on bid process management. During the extensive course of consultations it became clear that the management contract option was not as clear-cut as previously believed, and other PPP option discussions needed to be discussed amongst the various stakeholders. In 2009 the government of Maharashtra requested assistance for another PPIAF activity to formulate an appropriate framework and guidelines to facilitate and strengthen PPP in the municipal SWM sector. This activity reviewed the existing municipal SWM services in Maharashtra, examined the relevant legal and regulatory frameworks for PPPs in the sector, and developed a toolkit for the implementation of PPPs in SWM. The PPIAF-funded diagnostic report‟s main suggestions for creating an enabling environment for private sector participation at the state level included: i) modifying legal frameworks; ii) assisting urban local bodies to identify and acquire land for setting up of treatment and disposal facilities; iii) encouraging and facilitating the development of regional landfills; iv) developing suitable state level guidelines and incentive structures in line with guidance issued by Ministry of Urban Development; v) promulgating policies and guidelines for stakeholder inclusiveness; vii) setting up appropriate mechanisms to address private operator‟s concerns on timely and adequate payments; viii) undertaking capacity building activities for various stakeholders and dissemination of best practices; and ix) strengthening the PPP Cell with support on technical and commercial knowledge of the SWM transactions. A toolkit was also prepared and describes the step-by-step process for assessment of the current service delivery levels, comparison of costs for various modes of implementation; and the matrix for selection of an appropriate PPP structure by the urban local bodies. The toolkit provides „data sheets‟ that enable the urban local bodies to assess service delivery, estimate project costs, and carry out the financial viability assessments. The purpose of the toolkit is to provide a knowledge base to the municipal authorities that are interested to consider PPPs in municipal SWM, highlight the advantages and potential pitfalls of PPPs in the sector, provide detailed modules for engaging private sector; achieve PPPs through transparent and robust bidding process; and ultimately achieve value for money by ensuring highest degree of cost efficiencies in MSWM through the PPP process. The intended impact of the toolkit is to enhance awareness on how to undertake PPPs and increase adoption of PPP for municipal WSM by urban local bodies. A stakeholder consultation workshop was held on January 20, 2011 to discuss stakeholder concerns and frame a roadmap to improve the enabling environment for private investment in the sector. The workshop was chaired by the Secretary to Government, Maharashtra Department of Urban Development, and the participants included Municipal Commissioners of various Urban Local Bodies, engineers from the local governments, representatives from various private companies in the field of SWM and sanitation, and representatives from WSP. A detailed presentation was made to the audience on the analysis carried out, the framework for enabling PPP and the toolkit prepared for assisting urban local bodies to implement SWM services using PPPs. Consensus was achieved on key issues, which included: i) the essential nature of tipping fees in SWM projects; ii) need to evaluate technology options at the time of bidding and prior to opening of financial proposals; iii) weighing bidding parameters depending on 7 how critical it is to each local government; iv) using a threshold score in the technical proposal to identify the successful bidder rather than the quality and cost-based selection method; and v) providing financial/ monetary support to the private developer should be in the form of tipping fees/ annuity rather than a grant. Results of PPIAF’s Activities in Maharashtra’s WSS and SWM Sectors Category Outputs Enabling environment reform  Mumbai K-East Ward Initial Background Information Review Report, 2006  Customer Service and Technical Report, 2007 Analysis/assessments prepared  Design of a Program Management Contract for the Mumbai Water Distribution Improvement Project, 2009  Framework for PPPs in Municipal SWM in Maharashtra, 2011  Communications strategy for the Mumbai Water Distribution Improvement Project, 2006 Plans/strategies prepared  Technical and Management Strategies for Improving Water Service in K-East Ward, 2007 Project cycle-related assistance  Bidding documents for the Water Distribution Transaction support Improvement Project, 2009 Capacity and awareness building  Stakeholder consultation meetings to discuss the Mumbai Water Distribution Improvement Project held from May Workshops/seminars 2006-June 2009  Stakeholder consultation workshop, January 20, 2011 Knowledge products  Toolkit – Implementation of SWM through PPPs, 2011 disseminated Category Outcomes Capacity and awareness building  Understanding and technical capacity of municipal staff to Technical capacity enhanced address water distribution improvement issues enhanced, 2009 Consensus achieved  Consensus on key issues in SWM, 2011 Delhi In 2010 Delhi Jal Board began exploring options for PPPs in wastewater services as part of its strategy to expand access to waterborne sewerage and to meet its environmental obligations. The Delhi Jal Board sought assistance from PPIAF to fund a diagnostic study on various PPP 8 options available to the city to improve its wastewater management for both current and planned activities and attract private sector investment to such projects. The objective of the diagnostic was to summarize the current wastewater management activities and set the context for planned future interventions. The PPIAF-funded report on wastewater management options for the Delhi Jal Board identifies the most relevant PPP models and discuss some of the advantages and risks associated with these models. The report does not make specific recommendations as to which options should be applied, but specifies that such decision will need to be taken after a detailed evaluation of diverse factors including financial feasibility, affordability, legal consideration, the private sector appetite for risk, and the type of government guarantees available for projects. The report also proposed a broad strategy for creating a successful long-term PPP program, including the establishment of a contracts management unit, consultations with the state government to identify options for guarantees, and the identification of pilot projects. It further proposed determining the locations of pilot projects on the basis of simplicity and their potential attractiveness to the private sector, as these factors would create the most favorable conditions for a successful pilot project. The final report also addressed questions raised by the Delhi Jal Board during the consultation process and provided additional guidance on issues such as contract length, the use of price adjustment mechanisms, and asset risk mitigation. A stakeholder consultation workshop was held in June 2011 to present the findings of the PPP options report. During the course of the discussions, the Delhi Jal Board indicated that whilst its overarching objective was to use PPP to improve the quality of wastewater services, the timetable for introducing PPP projects with private financing was yet to be determined. Its vision is to introduce PPP into wastewater services progressively and evolve into a “contract management� organization over the next ten to fifteen years. Results of PPIAF’s Activities in Delhi’s WSS and SWM Sectors Category Outputs Enabling environment reform Analyses/assessments  Delhi Jal Board Wastewater Management PPP Options prepared Study, 2011 Capacity and awareness building Workshops/seminars  Stakeholder workshops to present the findings of the PPP options report, June 8, 2011 Category Outcomes Capacity and awareness building Technical capacity enhanced  Technical capacity of the Delhi Jal Board enhanced, 2011 9