Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004543 IMPLEMENTATION COMPLETION AND RESULTS REPORT IDA-49970IN ON A CREDIT IN THE AMOUNT OF US$45 MILLION EQUIVALENT TO THE REPUBLIC OF INDIA FOR A CAPACITY BUILDING FOR URBAN DEVELOPMENT PROJECT December 28, 2018 Social, Urban, Rural and Resilience Global Practice South Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective November 25, 2018) Currency Unit = Indian Rupee (INR) INR 70.655 = US$1 US$1.386 = SDR 1 FISCAL YEAR July 1 – June 30 Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager: Catalina Marulanda Task Team Leader(s): Vasudha Thawakar ICR Main Contributor: Vasudha Thawakar ABBREVIATIONS AND ACRONYMS AMRUT Atal Mission for Rejuvenation and Urban Transformation CAS Country Assistance Strategy CBUDP Capacity Building for Urban Development Project CDP City Development Plan CPF Country Partnership Framework DFID U.K. Department for International Development FM Financial Management GIS Geographic Information System GoI Government of India IA Implementing Agency IHSDP Integrated Housing and Slum Development Program ICR Implementation Completion and Results Report ISR Implementation Status and Results Report JNNURM Jawaharlal Nehru National Urban Renewal Mission M&E Monitoring and Evaluation MoHUPA Ministry of Housing and Urban Poverty Alleviation MoUD Ministry of Urban Development NRW Non-Revenue Water PAD Project Appraisal Document PDO Project Development Objective PMU Project Management Unit RFP Request for Proposal TA Technical Assistance ULB Urban Local Body VCF Value Capture Financing TABLE OF CONTENTS DATA SHEET ......................................................................................................................... 1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 6 A. CONTEXT AT APPRAISAL .........................................................................................................6 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION ................................................................9 II. OUTCOME .................................................................................................................... 13 A. RELEVANCE OF PDOs ............................................................................................................13 B. ACHIEVEMENT OF PDOs (EFFICACY) ......................................................................................14 C. EFFICIENCY ...........................................................................................................................21 D. JUSTIFICATION OF OVERALL OUTCOME RATING ....................................................................22 E. OTHER OUTCOMES AND IMPACTS (IF ANY)............................................................................23 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME .................................. 23 A. KEY FACTORS DURING PREPARATION ...................................................................................23 B. KEY FACTORS DURING IMPLEMENTATION .............................................................................24 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .... 26 A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................26 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE .....................................................27 C. BANK PERFORMANCE ...........................................................................................................28 D. RISK TO DEVELOPMENT OUTCOME .......................................................................................29 V. LESSONS AND RECOMMENDATIONS ................................................................................ 30 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 32 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 39 ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 41 ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 42 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 43 ANNEX 6. LIST OF OUTPUTS UNDER THE PROJECT ................................................................ 46 APPENDIX 1. IMPROVEMENT OF PROPERTY TAX COLLECTION ……………………………………..…………………..52 APPENDIX 2. IMPROVEMENT OF ADVERTISMENT TAX COLLECTION…………………………………………….…… 55 APPENDIX 3. REVIEW OF INDIVIDUAL CAPACITY BUILDING PROGRAM ……………………………………………..57 APPENDIX 4. ASSESSMENT OF NON-REVENUE WATER STUDIES ……………………………………………………..…59 The World Bank Capacity Building for Urban Development Project (P099979) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P099979 Capacity Building for Urban Development Project Country Financing Instrument India Investment Project Financing Original EA Category Revised EA Category Not Required (C) Not Required (C) Organizations Borrower Implementing Agency Ministry of Housing and Urban Poverty Alleviation, Department of Economic Affairs, Ministry of Finance, Ministry of Urban Development, Urban Local Bodies Government of India (ULBs) Project Development Objective (PDO) Original PDO The objective of the Project is to assist the Recipient in improving the systems and skills of select urban local government bodieswith respect to urban management and urban poverty reduction, as well as to support the Recipient’s implementation of various urbanpolicy and institutional reforms. Revised PDO The objective of the Project is to assist the Recipient improve planning for urban management in select urban local bodies and inthe roll out of national urban missions. Page 1 of 60 The World Bank Capacity Building for Urban Development Project (P099979) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 60,000,000 45,000,000 20,759,257 IDA-49970 Total 60,000,000 45,000,000 20,759,257 Non-World Bank Financing Borrower/Recipient 0 0 0 Total 0 0 0 Total Project Cost 60,000,000 45,000,000 20,759,257 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 21-Jul-2011 27-Jan-2012 16-Dec-2013 30-Jun-2016 30-Jun-2018 Page 2 of 60 The World Bank Capacity Building for Urban Development Project (P099979) RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 19-Dec-2013 .72 Change in Results Framework Change in Components and Cost Cancellation of Financing Change in Financing Plan Reallocation between Disbursement Categories Change in Procurement 07-Jul-2015 3.46 Change in Implementing Agency Change in Project Development Objectives Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Change in Financing Plan Change in Disbursements Arrangements Change in Legal Covenants Change in Institutional Arrangements Change in Implementation Schedule 07-Jul-2016 5.24 Change in Implementing Agency Change in Results Framework Change in Legal Covenants Change in Institutional Arrangements Change in Procurement Change in Implementation Schedule KEY RATINGS Outcome Bank Performance M&E Quality Unsatisfactory Unsatisfactory Modest RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 20-Jun-2012 Satisfactory Moderately Satisfactory 0 02 16-Dec-2012 Moderately Satisfactory Moderately Satisfactory .05 03 09-Feb-2013 Moderately Satisfactory Moderately Satisfactory .05 Page 3 of 60 The World Bank Capacity Building for Urban Development Project (P099979) 04 18-Sep-2013 Moderately Satisfactory Moderately Satisfactory .72 Moderately 05 03-Feb-2014 Moderately Unsatisfactory .72 Unsatisfactory Moderately 06 25-Aug-2014 Unsatisfactory 1.69 Unsatisfactory Moderately 07 16-Oct-2014 Unsatisfactory 1.72 Unsatisfactory 08 01-Jun-2015 Unsatisfactory Unsatisfactory 3.46 09 23-Dec-2015 Unsatisfactory Highly Unsatisfactory 3.92 10 16-Mar-2016 Unsatisfactory Highly Unsatisfactory 4.04 11 30-Dec-2016 Moderately Satisfactory Unsatisfactory 6.11 12 28-Jun-2017 Moderately Satisfactory Unsatisfactory 8.51 13 07-Jan-2018 Moderately Satisfactory Unsatisfactory 9.20 SECTORS AND THEMES Sectors Major Sector/Sector (%) Public Administration 100 Central Government (Central Agencies) 17 Sub-National Government 83 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Public Sector Management 33 Public Administration 33 Administrative and Civil Service Reform 10 Municipal Institution Building 23 Urban and Rural Development 67 Urban Development 67 Urban Infrastructure and Service Delivery 33 Municipal Finance 34 Page 4 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Environment and Natural Resource Management 62 Climate change 62 Mitigation 62 ADM STAFF Role At Approval At ICR Regional Vice President: Isabel M. Guerrero Hartwig Schafer Country Director: N. Roberto Zagha Junaid Kamal Ahmad Senior Global Practice Director: John Henry Stein Ede Jorge Ijjasz-Vasquez Practice Manager: Junaid Kamal Ahmad Catalina Marulanda Task Team Leader(s): Songsu Choi Vasudha Thawakar ICR Contributing Author: Vasudha Thawakar Page 5 of 60 The World Bank Capacity Building for Urban Development Project (P099979) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL 1. At the time of appraisal in 2009, India was undergoing a historic urban transition. Its cities and towns housed 316 million people, making it second only to China in the total number of urban residents. The number of urban residents in India was estimated to reach 590 million people by 2030. The impetus of economic growth and prosperity was attracting more activities and people to urban agglomerations and the Government of India (GoI) was becoming aware of the growing strategic importance of these urban centers from an economic, political, and social perspective. Politicians and opinion leaders who had traditionally focused their attention largely on rural development became very much alive to the urbanization process and its impact on India’s place in the world. 2. In this context, the national government launched the JNNURM, 1 a 2006–2012 program of urban policy reforms and investments. This policy-based program signaled the start of a long-run involvement by the national government in issues of urban policy. The program was managed by India’s Ministry of Urban Development (MoUD) and mandated reforms at the state and local level, in exchange for investment funding. The JNNURM marked a turning point in the national policy on urban development. The GoI’s continuation of large national-level urban programs signals a recognition by the Government of the need for urban sector reforms and that investment is directly and explicitly tied to the disproportionate share of GDP growth that will come from urban areas and that growth is contingent on the availability and quality of infrastructure and services. The explicit link of reforms and funding gives the national government a key point of entry into what is otherwise a subject of state jurisdiction. 3. The challenges involved in implementing urban sector reforms in India had been demonstrated by the slow implementation of the 74th Constitutional Amendment, 1993 (74th CA), which required state governments to devolve 18 select functions to urban local bodies (ULBs). Its implementation was, and still is, constrained by several core challenges, the key being the weak implementation capacities of ULBs; the lack of understanding at local level on ‘how to’ introduce and implement reforms; and the lack of systems and policy tools at the local government level to take strategic decisions, plan ahead, involve citizens, and monitor services. The project was designed to demonstrate how the aforementioned core challenges in select cities should be addressed, in support of the implementation of the policy and institutional reforms associated with the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). 4. The World Bank had long supported urban reforms and investments at the state and local levels in India. 2 Building on the national strategic interest in urban issues, the Capacity Building for Urban 1 Concurrently with JNNURM, the Government launched the Integrated Housing and Slum Development Program (IHSDP) under the Ministry of Housing and Poverty Alleviation (MoHUPA). Throughout the Implementation Completion and Results Report (ICR), references to JNNURM are understood to include IHSDP. The overall mandate of the MoUD was formulating policies and implementing programs for city planning, service delivery, and municipal functioning. The overall mandate of the MoHUPA was formulating policies and implementing programs related to housing including slums and low-income housing and poverty alleviation. The two ministries were sister ministries operating in different but complementary areas in the urban sector. The two ministries were merged in July 2017. 2 At the time of preparation of the CBUDP, the World Bank had urban projects in implementation in the states of Tamil Nadu, Andhra Pradesh, and Karnataka, largely focused on municipal finance issues, and a project in Karnataka piloting 24-hour water supply. Page 6 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Development Project (CBUDP) was designed to support the GoI’s flagship program to promote innovative reforms. The project was prepared under the framework of the World Bank Group’s FY9–12 India Country Assistance Strategy (CAS). Building institutions was one of the key thrusts of the CAS, as it recognized the importance of (a) sound governance and institutional arrangements and (b) capacity of local governments, which together promote an enabling environment for the provision of public services. The CAS prioritized strategic support to national programs as a key instrument to scale up impact. The CBUDP contributed directly to the CAS objectives by providing support for improved urban management at both the central and local levels. The project was also aligned with the GoI’s Eleventh Five-Year Plan (2007–12), which prioritized strengthening decentralization and empowering local governments for service delivery and improved governance. 5. Preparation of the project, however, took much longer than was anticipated. Project preparation began in 2006 as a US$40 million Credit to the MoUD, while a parallel US$20 million project was being prepared to support MoHUPA. The two projects were combined when their respective preparations were at an advanced stage, and the preparation of the combined project required an extending period; see section III. The project was negotiated and approved in July 2011, and became effective in January 2012, by which time the JNNURM was reaching completion (March 2012 3). Consequently, the CBUDP Project Development Objective (PDO) and activities were delinked from the JNNURM. However, the CBUDP activities remained largely unchanged as they involved supporting ULBs in better planning, implementation, and management of service delivery and poverty alleviation. These activities remained relevant and in demand. Theory of Change (Results Chain) 6. Figure 1 presents the results chain for the project as envisaged at the time of approval. The PDO was broad and overarching, making it difficult to link it meaningfully to the results indicators. The results indicators were output based and consisted largely of city plans, reports, and strategies. 3 The program was extended till March 2014 for states and ULBs to complete investments that had already commenced. Page 7 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Figure 1. Results Chain, At Approval Note: LT = long term; TA = technical assistance. Project Development Objectives (PDOs) 7. The PDO at approval was to assist the Recipient in improving the systems and skills of select urban government bodies with respect to urban management and urban poverty reduction, as well as to support the Recipient’s implementation of various urban policy and institutional reforms. Key Expected Outcomes and Outcome Indicators 8. Achievement of the PDO was to be measured in terms of the following outcome indicator: • 20 ULBs will be implementing: (i) at least two urban management reforms covering FM, urban planning, service delivery and governance; and (ii) urban poverty reduction strategy. Components 9. At approval, the project had three components with an estimated cost equivalent to US$60 million, as described below. 10. Component 1: Capacity Building for Strengthened Urban Management (US$37.5 million). This component was to be implemented by the MoUD and provide targeted and city-specific capacity building support to select ULBs in a demand-based manner. ULBs were provided a package of TA in four areas: financial reform, urban planning, service delivery, and governance. Page 8 of 60 The World Bank Capacity Building for Urban Development Project (P099979) 11. Component 2: Capacity Building for Effective Urban Poverty Alleviation and Monitoring (US$18.5 million). This component was implemented by MoHUPA and consisted of both central- and local-level support. The central support consisted of (a) creation of a practitioners’ network, (b) development of training materials, and (c) strengthening of MoHUPA. Local-level support consisted of (a) a Challenge Fund, that is, grant funding for innovative practices in urban poverty alleviation and (b) preparation of ULB-level poverty reduction strategies. 12. Component 3: Implementation Support (US$4 million). This component consisted of a national Project Management Unit (PMU) for providing overall technical and managerial assistance to the two implementing ministries during implementation. B. SIGNIFICANT CHANGES DURING IMPLEMENTATION 13. The Credit became effective in 2012 during the closing stages of the JNNURM, the program that the CBUDP was originally designed to support. However, activities supported by the project—financial management (FM), planning, service delivery, governance, and planning for poverty alleviation— remained relevant for ULBs. There was a demand both from the Government and ULBs for the project to adhere to the original design. Consequently, by the end of the first year, the project had prepared a Procurement Plan, based on a demand from ULBs, which allocated almost half the Credit funds. However, the implementation structure of the project required coordination between two implementing ministries/agencies, and centrally managed procurement of many individual activities to be implemented at the local level – both of which led to significant delays in kick-starting project activities, which were underestimated in the project design and severely impacted implementation of the project. Several other factors affected implementation, some which were under the control of the implementing agencies and others which were exogenous. These factors are explained in section III. These resulted in slow progress of the project and eventually required reallocation of funds and activities. 14. The Government and the World Bank responded to the changing circumstances and needs by restructuring the project three times during the implementation period of 6.5 years. Additional cancellations of non-performing activities, as well as a cancellation of the entire Credit, were discussed in June 2017 but not implemented as, in spite of the efforts of the task team, the Government did not follow through with a request for cancellation. The scope of each restructuring is summarized in table 1. Further sections of this document provide additional details on their background, rationale and outcomes. Table 1. Summary of Restructurings Restructuring/Date Key Changes Level 2/December (a) PDO remained unchanged but PDO indicators were revised. 2013 (b) A partial cancellation of US$15 million was made across the two components. (c) Component 2 was revised to reflect the reorientation of activities by MoHUPA. Level 1/July 2015 (a) The PDO and PDO indicators were changed. (b) Deletion of Component 2 with associated changes in the Results Framework. (c) Change in implementation arrangements—deletion of MoHUPA as the implementing agency (IA). (d) Revision of intermediate indicators to measure new activities being funded under Component 1. (e) Extension of project end date to June 30, 2018. Level 2/July 2016 (a) Change in institutional arrangements—allowing decentralized procurement (b) Change in intermediate indicators Page 9 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Revised PDOs and Outcome Targets 15. The PDO remained unchanged in the first restructuring. The overall outcome targets were adjusted to reflect the reduced loan size and reorientation of activities under Component 2. 16. The PDO was revised in the second restructuring and was changed to “assist the Recipient improve planning for urban management in select urban local bodies and in the roll out of national urban missions.” This was done as the Government intended to use project funds for the implementation of the new national urban programs launched in May 2016: the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and Smart Cities. 4 Revised PDO Indicators 17. The PDO indicators were revised in the first and second restructuring. Table 2 notes the revisions to the PDO indicators and the rationale for the changes. Table 2.Changes in PDO Indicators during Restructurings Project PDO Indicators Rationale for Change Stage At approval ULBs implementing (i) at least two urban n.a. management reforms covering FM, urban planning, service delivery, and governance; and (ii) urban poverty reduction strategy First ULBs implementing at least two urban ‘Poverty reduction strategy’ dropped as these restructuring management reforms covering FM, urban strategies had been prepared under the planning, service delivery, and governance JNNURM and did not require further funding. ULBs whose urban management and urban The CSUs provided on-ground personnel poverty reduction capacity has been support to ULBs for effective implementation strengthened by the provision of City Support of day-to-day activities. These were estimated Units (CSUs) at almost one-third of the total project size. Second ULBs implementing at least two urban n.a. restructuring management reforms covering FM, urban planning, service delivery, and governance Number of ULBs with City Strategic Plans Smart Cities Mission was a national Financed Under the Smart Cities Mission competition for cities to apply to the MoUD through Smart City plans. The plans were competitively judged, and the selected plans were financed under the mission. The CBUDP opened its funding for preparation of these plans. Number of policy-level studies completed and These studies were national-level assessments disseminated and expected to contribute toward policy and reform decisions. 4AMRUT is a national urban program launched in June 2015 with the focus to establish infrastructure that could ensure adequate robust sewage networks and water supply for urban transformation by implementing urban revival projects. Smart Cities Mission, also launched in July 2015, is an urban renewal and retrofitting program by the GoI with the mission to develop 100 cities across the country, making them citizen friendly and sustainable. Page 10 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Revised Components 18. There was a revision to the components during the first and second restructuring. 19. During the December 2013 restructuring, both Components 1 and 2 were revised in terms of size as well as scope. The changes were the following: • A partial cancellation of US$15 million across the two components in an agreed ratio to reflect the likely savings estimated based on variation of exchange rates and reduction in the scope of activities under Component 2. • Component 1. Provision of training to municipal officials was included along with direct support to the MoUD for strengthening the ministry’s capacity. • Component 2. The component was amended to reflect the reorientation of activities proposed to be implemented by MoHUPA. Funding for poverty alleviation strategies was removed, as these had already been completed under the Government’s national poverty mission. 20. During the July 2015 restructuring, Component 1 was revised, and Component 2 was deleted. The changes were the following: • Component 2. The component was deleted, and remaining funds were transferred to Component 1. • Component 1. Funding of Component 1 was increased from the initial US$30.5 million to US$41 million. Component 1 was reoriented to support the rollout of the new national urban missions. The results indicators were modified accordingly. Other Changes 21. There were two additional changes to the project: during the July 2015 restructuring, the Credit closing date was extended by two years to June 30, 2018, to enable the ministry to complete the then ongoing activities and implement new activities to support the national programs; and during the July 2016 restructuring, decentralized procurement by ULBs was permitted for relevant activities. This is explained further in section III.B (Implementation) and IV (Procurement). Rationale for Changes and Their Implication on the Original Theory of Change 22. The first restructuring, in 2013, undertook a stock taking exercise of the activities which were envisaged under the original Project design and the revised priorities and needs of the Ministry and ULBs. Component 2 (to be implemented by MoHUPA) had been performing unsatisfactorily (since inception). This was largely due to the fact that several activities to be funded under the Project such as poverty strategies and development of training materials had been already undertaken by JNNURM. Also, MoHUPA had access to substantial funding for TA, which could fund both central and local level activities. Consequently, the ministry’s interest in the CBUDP reduced. (See Section III.) For Component 1, while several activities were underway, there were others like double entry accounting and city development Page 11 of 60 The World Bank Capacity Building for Urban Development Project (P099979) plans which had been undertaken by JnNURM. The restructuring, thus, was undertaken to realign the project both in terms of size and scope with the current requirements. Both the Components were downsized, and activities removed as well added. Overall, this reduced the project’s impact on the original Theory of Change. 23. By 2015, several activities had been undertaken under Component 1 both at the national and local level. However, implementation had not commenced under Component 2 and MoHUPA did not have plans for any activities. Another new development was the announcement of the two new national level programs of AMRUT and Smart Cities, which were to be rolled out by MOUD between 2016 and 2021. CBUD now had the opportunity to undertake activities which would support cities in accesses the larger pot of funds under the national programs. The studies undertaken by the Project also had the potential to be funded under the national programs. The second restructuring, in 2015 took place in the backdrop of this new scenario. The objective was to link the Project with the national programs (as originally envisaged at appraisal) and leverage them. Consequently, the restructuring deleted Component 2 and transferred its funds to Component 1. Component 1 was revised in response of the Government’s request to support the new national missions of AMRUT and Smart Cities by (a) providing access to ULBs to consultants to assist them in the planning exercises; (b) funding activities which enabled cities to increase own revenues (property tax, advertisement tax, and Value Capture Financing [VCF]); and (c) facilitating access to private finances through credit rating reports and transaction advisory support. These changes supported and contributed additionally to the Theory of Change as the activities funded were likely to be leveraged by additional funds under government programs. 24. Linking the Project to the national programs resulted in significant number of activities initially being considered by the Ministry to be undertaken by the Project. CBUDP funded 39 studies supporting the Smart Cities in the first few months of the restructuring. The progress tapered quickly as procurement under the Project was centralized under MoUD. This was in contrast to the national urban programs of AMRUT and Smart Cities, which though managed by the central Ministry by annual review of investment plans, are implemented at the state and ULB level. Thus, while the state and ULB interest in the Project was high, the implementation arrangement of the Project was not conducive towards rapid large-scale procurement. The third restructuring, in 2016 put in place a decentralized procurement system with the objective to allow ULBs to participate directly with the Project. ULBs were now actively involved in the selection of activities to be undertaken as well as in their procurement. This led to greater ownership which can be inferred from the increased demand in technical assistance from ULBs under the Project. Consequently, the Project went on to fund several activities like property tax studies, advertisement tax studies and credit rating reports in over 50 cities. Also, there was additional capacity building through learning by doing as the ULBs were trained and also provided hand-holding support for procurement. The decentralized procurement is explained in greater detail in section IV. 25. The changes through the restructuring altered the Theory of Change. While the long-term outcome remained the same, the Project looked towards achieving this by contributing to the better implementation of AMRUT and Smart Cities which had the same long-term vision. The Theory of Change for the current project after the restructurings is depicted in figure 2. Page 12 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Figure 2. Theory of Change, Current Project II. OUTCOME A. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating Rating: Substantial 26. Strengthening and empowering local governments to promote more equitable, effective, and sustainable basic service provision remain a key priority in India. Both the original and the revised PDO remain relevant to the World Bank Group Country Partnership Framework (CPF) for India for FY18–22 (Report No. 126667-IN), which places significant emphasis on strengthening public sector institutions (the CPF ‘How’). The current PDO contributes not only to the ‘How’ but also to achieving the objective (the CPF ‘What’) of improving the sustainability of cities under the focus area of promoting resource-efficient growth. 27. While under the current CPF the World Bank has shifted its focus to state governments through state partnerships that address priorities across sectors, maintaining an engagement in urban policy at the national level remains of critical importance. The national government, through its large urban reform programs, plays an important role in guiding the states and cities to undertake reforms and make policy changes. Thus, support to flagship programs can be an effective way to promote innovative reforms. The CBUDP made substantive contributions to inform Government’s overall urban strategy at the national and local (ULB) levels. At the national level, the project carried out several studies, which assisted the ministry in formulating frameworks and policies on land, municipal cadres, and individual capacity development. Page 13 of 60 The World Bank Capacity Building for Urban Development Project (P099979) At the ULB level, it undertook studies on planning and municipal finance, which enabled ULBs to better access and leverage funding from national programs. B. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome 28. This section assesses the efficacy of the two PDOs before and after the Level 1 restructuring in 2015. A significant number of activities were completed by end of June 2018. These can be broadly classified in three categories (i) studies at the national level (MoUD); (ii) studies which undertook a city level planning exercises; and (iii) studies which reviewed tax and service delivery implementation at local level, with the objective of raising revenues or reducing costs of municipalities. Annex 6 provides a summary of all the activities financed by the Project. While the following sections will show that in many instances the project achieved, or even surpassed the targets set for individual activities, the ICR will show that at the end of the project it is difficult to assess the efficacy of those outputs in relation to the development objectives of the project. In fact, most of the activities financed under the project led to output-level products – i.e. city-level studies, plans, guidance and recommendations. The actual implementation of these outputs will take time, will entail policy level reforms, and will involve changes financial, legislative and personnel structures at the ULB level. Many will also require changes in tax rates, and state level approvals. The long-term outcome-level results that these outputs will drive (e.g. increased in capacity, accountability, financial sustainability of ULBs) fall outside of the scope and ultimately outside of the influence of the project. Thus, the ICR can only assess in a limited way the efficacy of the impacts of activities financed by the project, towards the development objectives of the project. Assessment of Original PDO 29. The original PDO aimed to support the Borrower in (a) improving systems and skills of select ULBs in urban management, (b) improving systems and skills of select ULBs with respect to urban poverty reduction, and (c) supporting implementation of various urban policy and institutional reforms. 30. The original PDO was broad and the intended outcomes were difficult to measure with the single PDO indicator. Given this, an assessment has been undertaken of the specific set of intermediate indicators under each outcome. As explained above, the results indicators are largely outputs. Thus, the ICR tries to assess the final utilization of these reports in determining the achievement of each outcome. Outcome 1: Improving systems and skills of select ULBs in urban management. Rating: Modest 31. At the time of appraisal, city-level planning in India was largely limited to master plans. Comprehensive city-level planning in terms of service delivery, FM, or other aspects was minimal. Thus, the exercise of city-level planning and the subsequent plans and reports (which would in normal circumstances be considered as outputs) were, in the given context, intermediate outcomes. The JNNURM introduced the concept of City Development Plans (CDPs) to identify infrastructure requirements and priorities based on the city’s status as well as its future vision. CDPs were prepared for 63 cities in 2007– 08 under the JNNURM. These were updated for 30 cities under the project and were to form the basis for further plans. However, these Plans were dropped as requirements from the new national programs of Page 14 of 60 The World Bank Capacity Building for Urban Development Project (P099979) AMRUT and Smart Cities and thus not utilized by the cities in a manner initially envisaged. Thus, the intermediate indicators were partially met, the target and achievement have been listed in Table 3. 32. While overall city-level planning began under JNNURM, city-level service plans were still rare. City- level service plans are critical as they provide a comprehensive in-depth status, requirement, and gaps in terms of a given service. These are technical reports, which in a resource-constrained environment enable a city to stagger infrastructure investment in service delivery while maintaining cohesiveness. Several city- wide studies and municipal-level capacity-building activities were undertaken under the CBUDP: (a) Non-revenue water supply (NRW). In general, Indian cities manage water supply infrastructure poorly. Studies for reduction in NRW were completed in six cities 5 with the objective of assisting the cities in developing a strategy for reduction of NRW. All the six cities, developed and implemented performance-based contracts for water supply. The findings of these studies also became the model provided by the Ministry for the Request for Proposal (RFP) for water supply contracts under AMRUT. Thus, any of the 500 cities which proposed to fund water supply contracts under AMRUT were to follow guidelines of this RFP. (b) City-level sanitation plans. The study was undertaken for sixteen cities to conduct a comprehensive assessment of the status of sanitation services in the cities and undertake a city-wide sanitation planning exercise which can be incorporated in future investment plans. However, due to changing investment priorities of the cities, the sanitation plans remained largely unused. Activity 4 in Annex 6 provides a list of the cities. (c) Property tax assessment. The property tax assessment was conducted in six cities 6 with a view to improve property tax collection (without increasing rates of tax) through widening of tax base by detecting under-assessed and non-assessed properties and included improvements to tax administration by computerization of property tax records, introduction of online assessment and collection, and establishing a dispute redress mechanism. This exercise resulted in an average of 73 percent increase in the property tax base and an over 300 percent increase in the property demand. The assessment is attached in Appendix 1. All six cities implemented the reports under the state/central funds. Owing to its success and subsequent demand, the study was later conducted in over 50 cities under the Project. Activity 8 in Annex 6 provides a complete list of the cities. (d) Double entry accounting. Double entry accounting was a mandatory reform under the JNNURM; however, it was only partially implemented in most ULBs. The project implemented the system in eight ULBs and enabled their migration to the double entry accounting system. Activity 6 in Annex 6 provides a complete list of the cities. 33. Table 3 presents the status of the PDO and intermediate indicators relevant to this outcome. 5 NRW studies were undertaken in Solapur, Puri, Chindwara, Haridwar, Varanasi, Kurukshetra. 6 Property tax studies were undertaken in Haridwar, Nagpur, Dehradun, Puri, Cuttack, Chindwara. Page 15 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Table 3. Intermediate Indicators relevant to the outcome to Outcome 1, Original PDO* Indicator Target Outcome PDO indicator: Number of ULBs having improved their 20 22 systems in at least two of the areas (finance, planning, governance and service delivery) Number of ULBs having developed NRW strategies 5 6 Number of cities with up-to-date city development plans 30 30 Number of municipal/elected officers trained 2,500 2,200 Number of ULBs having migrated to double entry 15 8 accounting Number of ULBs with improved property tax systems 10 6 *Achievement as on July 2015. Outcome 2: Improving systems and skills of select ULBs with respect to urban poverty reduction. Rating: Negligible 34. The PDO indicator for this outcome was the preparation of urban poverty reduction strategies. Intermediate indicators relevant to measuring this outcome were: (a) ULBs receiving Challenge Fund awards for innovative practices, (b) degree of operationalizing of poverty reduction strategies, and (c) resource centers utilizing new curriculum prepared under the project. 35. This outcome was expected to be achieved by activities under Component 2. However, no activities were funded under this component. The Component was cancelled in the second restructuring. Thus, Outcome 2 was not achieved. Outcome 3: Support implementation of various urban policy and institutional reforms. Rating: Modest 36. This outcome was expected to be achieved by the formulation of urban sector policy and reform studies at the national level. Five such studies were funded by the Project end. Some of the studies formed basis of policy and reform framework documents of the central Ministry. However, Urban Development is a state subject in India (e.g. falls under the control of state governments) and central framework documents are only guidance documents for the states. The final adoption and implementation of these is to be done at the state and local level. The Project did not provision for support to assist states and ULBs roll out the outputs. Hence, while the Project provided guidance and inputs towards urban policy and institutional reforms, it did not support their implementation. 37. There was no PDO indicator for this outcome. The relevant intermediate indicator is listed in table 4. Table 4. Intermediate Indicators relevant to Outcome 3, Original PDO Intermediate Indicator End Project Target Achieved before Restructuring Number of policy level studies 5 4* completed and disseminated *An additional study, Livability Index was completed after the restructuring achieving the end project target of 5 studies. Page 16 of 60 The World Bank Capacity Building for Urban Development Project (P099979) 38. Four key national-level studies listed below were funded by the project prior to the restructuring. These had significant impact on further activities and also contributed to national urban policy and programs. The first two studies were selected by the MoUD to understand the status of personnel capacity and training needs in ULBs. The latter two studies were undertaken as the ministry identified these critical areas of intervention in which the Center should provide an overall policy framework. Summary of the scope of all the studies is provided in Annex 6. (a) Rapid Baseline Assessment of Urban Management Capacity. A detailed survey of 30 cities of varied sizes spread across states included assessments of the personnel, capacity status, and requirements in the cities. The report informed the ministry of the capacity gaps in these cities and areas of support by the ministry. The study was followed by the Training Needs Assessment. (b) Training Needs Assessment. The study surveyed 15 cities to identify the key areas of training for municipal personnel. This aimed to streamline and standardize training requirements across cities to enable the planning of large-scale training programs. The study eventually formed the basis of the ‘Integrated Capacity Building Framework’, which trained ULB personnel under the CBUDP (post restructuring) in municipal finance, planning, and governance. (c) Land-Based Fiscal Tools. The study was undertaken to understand how ULBs can leverage land and property to contribute further to their revenues. Most of the recommendations under the study were accepted by the ministry. The study became the basis of the Value Capture Finance Policy which was rolled out by the ministry in 2017 under AMRUT and provided ULBs with a framework to leverage land resources to finance infrastructure. (d) Municipal Cadre Study. This study prepared a framework and recommendations on forming a municipal cadre (personnel dedicated to ULB management) to improve the number and capacity of staffing in ULBs. A national-level workshop was organized by the ministry, which was attended by most states. The states provided comments based on which the municipal cadre report was finalized. This report was a template/model for states to form and roll out respective state-level cadres. By 2017, 21 of 29 states had formed municipal cadres based on the guidelines and recommendations from the CBUDP study. Based on the above discussion, while the first and third outcomes were partially achieved via several activities/their implementations and hence rated Modest, there was no progress on the second outcome. Thus, the achievement of the original PDO outcomes was Modest. Assessment of Revised PDO 39. The revised PDO aimed to support the borrower in (a) improving planning for urban management in select ULBs systems and (b) rolling out national urban missions. Page 17 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Outcome 1: Improve planning for urban management Rating: Modest 40. Three sets of activities contributed to this outcome: (a) training of municipal and elected officials, (b) assistance toward better financial planning and management, and (c) Livability Index. 41. Trainings of municipal and elected officials. A Trainings Needs Assessment was conducted and an ‘Integrated Capacity Building Framework’ was prepared by the MoUD. The framework detailed training in four key municipal areas: (a) Finance and Revenue, (b) Engineering and Public Health, (c) Town Planning, and (d) Administration. The ministry short-listed several institutes across states to conduct training in these areas. By the end of the project, about 28,000 ULB personnel against the original target of 2,500 had been trained under project. The National Institute of Urban Affairs (NIUA), prepared evaluation reports for all trainings conducted under the Project. A sample of these evaluation reports were reviewed. A summary of this is included in Appendix 3. 42. Assistance toward better financial planning and management. Better planning and management of finances. During the project’s midterm review, based on ULB demand and later based on the link with the national missions, it was agreed to focus ULB-specific activities on assistance for the improvement of property tax, advertisement tax, and NRW to enable them to plan and manage their finances better. The Project thus funded studies which undertook a current status assessment in these areas in the specific ULBs, provided recommendations on improvement in these areas and some handholding towards implementation. The following activities carried out under the project contributed to this objective: i. Property tax. The property tax studies provided undertaken in six cities resulted in significant increases in property tax base and demand and consequently resulted in overall increase in own source revenues of the ULBs (details in Appendix 1). Based on these results and demand from other ULBs, the project funded further assignments on property tax. Property tax assessment studies were implemented in 49 additional cities and most of the cities are expected to begin rollout of the recommendations. Bijapur, Yamuna Nagar, Chandigarh and Raipur have already issued notices for recovery of demand which is likely to result in significant additional revenue collection to the ULBs. Activity 7 in Annex 6 provides the full list of cities. ii. Improvement in advertisement tax. The project undertook studies in 88 ULBs for the preparation of comprehensive Advertisement Guidelines to improve revenues from advertisement tax. It also provided TA to ULBs in preparing and maintaining a computerized database of all advertisement sites. An assessment was conducted on a sample of five cities. This showed a median increase of 52 percent in advertisement tax revenue on the implementation of study recommendations. The assessment is attached in Appendix 2. Activity 8 in Annex 6 provides the full list of cities. iii. Non-Revenue Water Studies: Based on the NRW studies implemented prior to the restructuring, there was demand from additional ULBs to conduct similar studies. Thus, the Project undertook NRW studies for an additional 61 cities under the Project. Activity 2 in Annex 6 provides the full list of cities. An assessment of a sample of NRW reports is attached in Appendix 4. Page 18 of 60 The World Bank Capacity Building for Urban Development Project (P099979) iv. Credit rating reports. The project prepared detailed terms of reference and rolled it out across 300 cities under decentralized procurement. While all 300 cities commenced the credit rating activity under the CBUDP, eventually the project funded 117 reports. The remaining were funded by the cities out of their own funds, as they did not want to share the final rating reports with the ministry. Thus, while the project funded significantly fewer reports than initially envisaged, it did roll out the rating activity at a large scale and made many of the cities take stock and assess their financial and management status. Pune, Bhopal, and Indore, which undertook credit rating, issued municipal bonds in 2018. Activity 9 in Annex 6 provides the full list of cities. 43. Livability Index. The project funded a Livability Index calculation to rate and benchmark 116 major Indian cities. 7 The cities were rated on parameters such as local governance, social infrastructure, education, employment, health, safety, security, physical infrastructure such as housing, availability of open spaces, land use, energy, availability of water, solid waste management, and pollution. The objective of the index was to help ULBs determine their livability status and to improve their score on the index. The Livability Index is planned by the ministry as an annual exercise and incentive funds in AMRUT are linked to the improvement of the city in the index rankings. Table 5. Results Indicators Relevant to the Outcome 1, Current PDO Indicator End Project Achieved after Project End Status Target Restructuring PDO indicator: Number of ULBs with 20 22 22 completed plans in two areas of finance, service delivery, planning PDO indicator: Number of policy level 4 1 (Livability Index) 5 studies completed and disseminated Number of people trained 2,500 28,000 30,500 44. Based on the above discussion, outputs in terms of assessments and reports have been successfully produced under the Project. These were based on demand from the states and ULBs as communicated directly to the MOUD. Some reports have been utilized for further action. However, most are expected to require approvals and additional steps from states/ULBs for further implementation. This will be a long-term process, which will involve institutional and regulatory reform, that could not be influenced by activities financed under the project, and thus if achieved will only partly be attributed to the project. Thus, at this stage the achievement of Outcome 1 is rated as Modest. Outcome 2: Assist in rollout of national missions Rating: Modest 45. There were three key activities funded under the Project which were associated with the achievement of Outcome 2 – the Smart Cities Proposals, Transaction Advisory Support and Value Capture Financing. These are detailed below. Their overall contribution towards the outcome and the outcome rating is discussed at the end of the section. 7 This assessment was conducted along with the Economic Intelligence Unit of The Economist. Page 19 of 60 The World Bank Capacity Building for Urban Development Project (P099979) 46. Smart Cities proposals. The Smart Cities Mission was a competition-based program by the MoUD, in which 100 cities were invited to apply through a detailed proposal, that is, the City Strategic Plans. The ministry was to evaluate these plans. Those which were acceptable to the evaluation committee were to receive investment financing under the Government’s Smart Cities Mission for the implementation of the plans. The project short-listed several firms and allowed all ULBs to select the firm of their choice to prepare the City Strategic Plan. The objective was to provide an equal ground to all ULBs to avail the national finances. A total of 39 cities availed this facility (as against the target of 50 cities) under the project to prepare the City Strategic Plan and all were financed under the Smart Cities Mission. However, it was seen that eventually the Government financed almost all the 100 cities. Thus, the financing of the 39 cities with plans under CBUDP cannot be wholly attributed to the Project. 47. Value Capture Financing (VCF) 8. VCF was the next step of the Land-Based Fiscal Tools. The VCF policy framework was introduced by the MoUD in February 2017 to guide ULBs to implement Land-Based Fiscal Tools. The CBUDP provided TA to cities for developing a VCF framework (including procedural, legal, and institutional aspects), to effectively capture the additional land/property value being generated through their public investments under the Smart Cities Mission. At the time of preparation of the ICR, the VCF studies in 70 cities had been initiated under the project and the final reports were produced by June 2018. Ghaziabad has already implemented impact fees based on the VCF study. However, the activity was eventually not funded from the Project. 48. Transaction Advisory Support. Further to credit rating, Transaction Advisory Support was provided to 40 cities for issuing municipal bonds. Bhopal and Indore have issued municipal bonds.9 Table 6. Results Indicators Relevant to Outcome 2, Current PDO Indicator End Project Target Project End Status PDO indicator: Number of ULBs with City Strategic Plans financed 5 39 under Smart Cities PDO indicator: Number of policy level studies completed and 5 5 disseminated Number of people trained 2,500 30,500 Number of ULBs with City Strategic Plans financed under Smart 50 39 Cities 49. The restructured project aimed to fund select activities which were likely to have a substantial impact on the ability of select cities to effectively implement the national missions. The Project underachieved its target of funding the preparation of 50 Smart Cities Proposals (39 were funded). While all 39 were financed by the National Mission, this cannot be attributed entirely to the Project. The Value 8 Value Capture Finance Policy Framework, MoUD, 2017: Value capture is based on the principle that private land and buildings benefit from public infrastructure and change in policy decisions of the Government (such as change in land use). Appropriate VCF tools can be deployed to capture a part of the increment value of the land and buildings. In turn, these can be used to fund projects set up for the public. 9 The issuance of municipal bonds has been limited in India with only 30 municipal bonds issued by 15 ULBs to date. This is due to lack of credit assessment and proper fiscal management. Of these 15 ULBs, the project has assisted three in the last one year. Page 20 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Capture Activity though initiated under the Project was not financed due to contract management issues. Thus, overall the achievement of the Outcome was Modest. Justification of Overall Efficacy Rating 50. While the PDO indicators were met, their achievement did not contribute to the achievement of the PDO. There are three key reasons for this. First, while the target number of plans in service delivery/planning/finance were met, majority of the results were primarily outputs at the end of the project period. Their implementation will require further action on part of ULBs/states towards achievement of the outcome as envisaged in the results chain. Secondly, financing of the City Strategic Plans under Smart Cities and cannot be attributed fully to the Project and the VCF studies were eventually not funded out of the Project. Lastly, improvement in urban planning is a broad outcome, the achievement of which will require assessment of the contribution of implementation of the studies funded under the Project. Taking the above analysis into account, achievement of the revised PDO outcomes was Modest 10. Based on the above discussion, the overall efficacy was Modest. 51. The overall split calculation of the ratings has been included in the section II.D. The disbursements along the project period are depicted in figure 3. Figure 3. Year-wise Disbursements as on December 20, 2018 11 C. EFFICIENCY Assessment of Efficiency and Rating 52. At appraisal, economic analysis was not undertaken, as the project was supporting studies and while the areas of these were outlined, no studies had been identified. Thus, no clear link could be established between costs and expected economic benefits. Because a typical economic assessment could 10 At the time of the final Implementation Status and Results Report (ISR) in January 2018, the PDO Rating was Moderately Satisfactory. This was because the select activities/studies had been initiated under the Project and were expected to achieve the results indicators by project end. Some of these activities like the Smart Cities Proposals and VCF were finally not funded under the Project. 11 Disbursements as per the World Bank portal as on December 27, 2018. Page 21 of 60 The World Bank Capacity Building for Urban Development Project (P099979) not be made, the ICR analysis took into consideration aspects such as efficiency in the use of project resources, project execution compared to plans, and the opportunity costs of delays and no execution. 53. Overall, the key elements to be highlighted are the following: (a) The relatively high management turnover in the ministry (there were four different Project Directors at the MoUD over 6.5 years) contributed to decisions around sector portfolio being changed frequently, thereby adding to the project’s accumulated delays. (b) There was no implementation under Component 2. (c) Procurement was overall challenging and time-consuming, given the inefficiencies arising from the coordination of a large number of activities. Considerable time and costs were expended in the technical preparation of ToRs and specifications during implementation, but these did not necessarily lead to successful procurement outcomes. (d) The original project period of five years was extended by two years. Despite this, less that 40 percent of the original Credit is expected to be utilized. (e) At completion, the project utilized less than 35 percent of the original Credit amount of US$60 million and 46 percent of the revised Credit amount of US$45 million (US$17 million 12): US$14.2 million under Component 1 (as opposed to the originally envisaged US$41 million) and US$6.5 million in Component 3. In view of the above, the overall efficiency of the project is rated as Negligible. Details are in Annex 4. D. JUSTIFICATION OF OVERALL OUTCOME RATING 54. The overall outcome of the Project is rated Unsatisfactory based on the split rating of efficacy for the original PDO and the revised PDO. The assessment is illustrated in table 7. Table 7. Assessment of Split Rating for the Project Original PDO Revised PDO Relevance of PDO Substantial Efficacy (PDO) A. Improving systems & skills of select ULBs in urban management Modest Not Applicable B. Improving systems and skills of select ULBs with respect to Negligible Not Applicable urban poverty reduction C. Support implementation of various urban policy and Modest Modest institutional reforms D. Improve planning for urban management in select ULBs Modest Modest E. Assist in rollout of national missions Not Applicable Modest Efficiency Negligible 1. Outcome rating and numerical value of outcome rating Highly Unsatisfactory Unsatisfactory (1) (2) 12 As on December 27, 2018. Page 22 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Original PDO Revised PDO 2. Disbursement US$3.4 million US$17.3 million 3. Share of disbursement 17% 83% 4. Weighted value of the outcome rating (1 × 3) 0.17 1.7 Outcome rating Unsatisfactory 0.17 + 1.7 = 1.87 (rounding to 2) E. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 55. Not applicable. Institutional Strengthening 56. Strengthening both national and local institutions toward better urban management was the core objective of the project and is captured in both the PDO and in the project design. The key interventions and outcomes are highlighted in section II.B. Mobilizing Private Sector Financing 57. The project funded several activities to assist ULBs to mobilize private sector financing. • Credit Rating Reports. As discussed earlier, the project financed the credit rating of 40 cities. Three of these cities have issued municipal bonds. • Transaction Advisory Support. Transaction Advisory Support was provided to 50 cities to assist them with activities and documentation required to float municipal bonds. Of these, two cities have already issued municipal bonds. Poverty Reduction and Shared Prosperity 58. The project had a component on Capacity Building for Effective Urban Poverty Alleviation and Monitoring to be implemented by MoHUPA. However, this component was deleted from the project as the work was carried out using other funding sources. As such, the project did not have any direct impact on poverty reduction in the urban sector. Other Unintended Outcomes and Impacts 59. Not applicable. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 60. Lessons learned from other projects were not incorporated in the design. The Project Appraisal Document (PAD) noted that TA projects have had mixed results due to overambitious design, weak links Page 23 of 60 The World Bank Capacity Building for Urban Development Project (P099979) to reforms program, and supply-driven TA. Nevertheless, the project had an ambitious design, spanning two ministries, which required coordinated implementation efforts and significantly diverse areas of support. By the time the project was approved, it had little linkages to the JNNURM, the national reform program it was intended to support. While the target ULBs were determined after consultations and a needs assessment exercise, procurement decisions on contracts were retained at the central ministry, resulting in little ownership at the local level. 61. Combining two separate projects with different IAs led to additional preparation time, coordination efforts, and change in implementation structure. As discussed in para 5, the CBUDP was the result of combining two separate projects that were being prepared with the MoUD and MoHUPA, respectively. The Government was initially reluctant to do so, as it was concerned about coordination issues. The efforts of the project to address coordination issues by (a) clearly earmarking funding and activities under different components, (b) agreeing on a set of 20 cities for the project, and (c) sharing a common PMU proved to be inadequate. 62. Project design did not adequately take into account the procurement capacity of the ministries. The two central ministries had inadequate capacity for procurement, which remained a key bottleneck during the project. A PMU was placed to assist the implementing changes and a manual for procurement was prepared. The procurement design did not take into account the lack of any substantial prior experience, as procurement was not part of their standard work, as well as the large number of contracts to be procured. As a result, while there was compliance with procurement guidelines, procurement was extremely slow. 63. The project was only partially ready for implementation at the time of approval. The project required two key inputs before any TA activity could commence: the two ministries had to agree on a set of 20 ULBs in which the project was to be implemented and a needs assessment was to be conducted in these cities to identify the consultancies to be funded in a demand-based manner. The list of ULBs identified for the original MoUD project was abandoned and a fresh exercise had to be undertaken to identify the cities. In addition, no terms of reference were prepared for the needs assessment exercise. The identification process of the ULBs under the combined project began only after approval. This was to be followed by commencement of procurement for the needs assessment exercise. Consequently, the first two years of implementation were mainly dedicated to startup activities, including finalization of the selection of participating cities by the implementing ministries, signature of memoranda of understanding with the cities, and hiring of consultants to provide TA to the ULBs. B. KEY FACTORS DURING IMPLEMENTATION Factors Subject to the Control of Implementing Entities 64. Grant funding to MoHUPA from other sources contributed to the ministry’s lack of ownership in the project. In parallel to the World Bank Credit, MoHUPA received a grant of US$19 million from the U.K. Department for International Development (DFID) for capacity building 13 that overlapped with the 13The World Bank was aware of the proposal at preparation and was a member of DFID’s Steering Committee for the project with the ministry since the Grant’s inception. Minutes of all Steering Committee meetings were shared with the World Bank. The DFID TA Grant was GBP 14.5 million, of which GBP 6.7 million was used to fund a dedicated PMU for MoHUPA. The remaining GBP 7.8 million was utilized for local-level activities. Page 24 of 60 The World Bank Capacity Building for Urban Development Project (P099979) CBUDP. This included grant funding for a PMU in MoHUPA and TA support at the local level. All procurement under this grant was done by DFID. MoHUPA thus prioritized the implementation of the DFID grant and did not undertake any activity under the CBUDP. 65. Coordination between the two ministries led to significant delay in commencement of activities. It took the two ministries six months after Credit approval to agree on a common list of target cities for which various TA activities would be undertaken. While the majority of the TA activities were to be implemented separately by the two ministries, the Zonal (State Level) and City Level Cells 14 contract (valued at approximately INR 120 crores/US$20 million) was to be implemented jointly by the two ministries. Although this contract was ready for award by June 2013, it was eventually dropped, wasting almost a year’s effort. Factors Subject to the Control of the World Bank 66. The World Bank made sustained efforts to ensure the project supported Government’s priorities through restructuring. The first restructuring realigned the project to enable it to fund support areas (such as City Level Cells) which the Government considered critical at that point. The second and third restructurings in 2015 and 2016 aligned the project to support the new national urban programs and implement a decentralized procurement system, respectively. After the second restructuring, there was a sudden demand for activities 15 that the project could fund. The aggregate number of these studies was over 300, and the ministry realized that it did not have the capacity (even with PMU support) to procure these contracts or monitor their quality and outputs. Consequently, the third restructuring put in place a decentralized procurement system with a clear division of responsibilities at the central and local levels, similar to a large extent to the mechanism envisioned at the Project Concept Note stage of the original MoUD project. 67. Cancellation of funds. The first restructuring in 2013 cancelled USD 15 million from the Project. The second restructuring in 2015 reallocated all funds from Component 2 to Component 1. It was expected that the given the large number of activities required to support the national programs, the Project would be able to utilize all the funds. By 2017, there was still a large amount of unutilized funds due to initial overbudgeting for contract values as well as the fall in the rupee. A second cancellation was discussed in June 2017 but not implemented as the Ministry had expected to use the savings for additional activities. These eventually did not materialize. Exogeneous Factors 68. Change in national government and consequent gap between national urban programs. The JNNURM was extended until March 2014 and its closure coincided with the formation of the new government at the Center in May 2014. After due assessments and strategizing, the new government launched the next round of urban programs in June 2015. The World Bank team worked with the ministry to ensure that the CBUDP was restructured in parallel to ensure that the project was ready to support the new programs as soon as they were launched. During the 6–9 months for the ministry to roll out these 14 Six Zonal Support Units (across states) and 34 City-level Support Units were to be established to hand-hold the city/towns’ ongoing projects/assignments through deployment of preferred professionals, with the objective of providing requisite technical and managerial support. 15 Smart City plans, credit rating reports, city support units, trainings, and VCF, among others. Page 25 of 60 The World Bank Capacity Building for Urban Development Project (P099979) programs and for the cities to identify activities which they wanted to implement under it, no significant activities were funded under the CBUDP for almost a year and half. 69. The continuous depreciation of the rupee led to the Credit becoming larger in INR terms and contributed to the Credit amount only being utilized partially even by the extended closing date. The Indian rupee depreciated by almost 50 percent from INR 44.22 per US$ (PAD estimate) to nearly INR 68.66 per US$ in June 2018. While the financing agreement was signed for USD 60 million, USD 15 million was cancelled in December 2013. Of the remaining USD 45 million, USD 24 million remained unutilized which will be returned by the Ministry to the Bank which will include the USD 12 million that accounts for the exchange rate loss that accumulated over the implementation period for the Credit resources that were disbursed at a lower exchange rate but documented at a higher exchange rate at different points in time. Accordingly, out of the total Credit of USD 45 million, approx. USD 21 million was utilized by the end of the Project. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 70. The Theory of Change was not clear and the relationship between activities, outputs, results, and outcomes was not well established. The indicators were mainly outputs and it was not possible to link the impact of these to achievement of PDO. The PMU also submitted an annual report summarizing 12-month period progress on each activity including status of progress on each intermediate-level indicator under the project. M&E Implementation 71. The Project established a three tier monitoring structure: (i) Project Management Unit (PMU) provided day to day monitoring and oversight; (ii) a Project Steering Committee (PSC) chaired by the Project director from the Ministry met regularly at an interval of 3 to 6 months to review implementation; and (iii) the Project Management Board (PMB) provided macro level guidance on the project, meeting once a year. However, activities to be financed under the Project kept changing from inception until project closure. While the results indicators measured the outputs that were achieved, there was no critical analysis on (i) the quality of each output and utilization/impact, (ii) the reasons for outputs were not being produced, and (iii) measures to be taken for delivery of outputs and the effective utilization of these outputs. In summary, the monitoring structure and evaluation arrangements were ineffective. M&E Utilization 72. The results indicators and the annual PMU reports were designed as tools to assess project performance and efficient utilization of funds. The Annual Progress Reports were instrumental to some extent in identifying the weak areas in implementation and new activities and news areas for support. Based on feedback received through the M&E reports on training and financial management reports, support for the roll out of the new national urban missions was included in the revised PDO. However, given the weaknesses in M&E Design, the M&E reports could not be utilized to assess progress toward the achievement of the PDO. Page 26 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Justification of Overall Rating of Quality of M&E 73. Based on the above discussion, the quality of M&E is rated as Negligible. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environment and Social Safeguards 74. The project was assigned Category C at appraisal and did not trigger any safeguard policies. Procurement 75. Procurement remained a critical issue at preparation and throughout the implementation stage. The two central ministries were responsible for the entire procurement. They had poor capacity and procurement remained a key bottleneck throughout the project. Procurement design did not take account of the lack of prior experience of the two central Ministries were responsible for procurement. The joint procurement of the large Zonal (State Level) and City Level Cells contract had to be dropped eventually due to the lack of coordination. While a PMU was put in place to assist the ministries, the design was not consistent with their internal fiduciary systems. 76. The project followed the use of e-Procurement since July 2014 using the Central Procurement Portal of National Informatics Centre. While the ministry ensured one of the technical officials had received procurement training, it would have been beneficial for the ministry’s key fiduciary personnel to have obtained the training as well to resolve conflicts between the Government and the World Bank procurement guidelines which came up from time to time. Procurement was largely rated Unsatisfactory throughout the project. This was largely on account of the low levels of procurement during majority of the project period. The project tried to resolve this using a decentralized procurement system. 77. The decentralized procurement during the third restructuring in 2016 was a significant effort. It allowed states/ULBs to procure consultancies under the guidance of the ministry. Two sets of benefits were envisaged: (a) sharing of procurement responsibility leading to faster and greater number of activities to be funded under the project and (b) greater ownership of the ULBs/states on the final outputs. An Operations Manual was prepared, which clearly explained the different roles and responsibilities of the central ministry, states/ULBs, and the PMU across the different steps carried out in procurement of a contract. Provision of relevant training was mandatory before commencement of any procurement at the local level and provided by the Center. The PMU also provided hand-holding support. This had a positive impact and significant procurement was undertaken. However, it was difficult to decentralize procurement end-to-end at such an advanced stage of project implementation. Thus, the final verification of outputs and payment remained with the Center. The Center had to coordinate with ULBs and verify outputs to pay over 300 contracts. The PMU manpower remained the same and processing of outputs and payments took significant time. Thus, many ULBs that initially procured services under the World Bank project eventually opted out and made final payments out of other funding sources. Because there were a large number of contracts (approximately 312), many of them large and requiring prior review, monitoring required substantial efforts on the part of the World Bank procurement specialist. Page 27 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Financial Management 78. Overall, CBUD complied with the designed financial management systems and the fund flow mechanism in a satisfactory manner, albeit with delays. There was adequate FM staffing in the PMU and the internal Finance Department of the Ministry conducted additional checks. The project largely submitted accurate and timely Interim Financial Reports (IFRs) for Component 1 as per due dates, whereas those of Component 2 were delayed. The annual external audits were largely prepared on time and the submissions of external audit reports were mostly satisfactory. There were a few delays on account of MoHUPA, when the Project had two implementing agencies. The Bank followed up with the Ministry as well as DEA to resolve these. Audit observations in the external audit did not raise serious concerns. C. BANK PERFORMANCE Quality at Entry 79. CBUDP was the first Bank engagement with the Ministry of Urban Development after a series of discussions which began in 2004. The project was an opportunity to impact national level urban government programs under implementation and inform future programs and policy dialogue. Project preparation began with a large number of consultations at both national and local levels. However, while significant attention was paid to the design and to project components, insufficient attention was paid to implementation arrangements and funds flow. The project was under preparation for almost five years. The long preparation duration involved three Bank TTLs and several changes of the nodal point person at the counterpart Ministry resulting in a disjointed project. 80. There were significant issues related to project design, particularly risk assessment and the M&E arrangements. Project appraisal did not adequately assess the risks for the project. Most of the risks identified in the PAD were related to poor procurement capacity and contract management. The risks due to complexity of the implementation structure and change in government policies was undermined. The PMU was envisaged as a solution to the majority of the key issues raised, including the risks identified at appraisal. However, there should have been more dialogue with the ministries to carefully assess the risk associated with their commitment and accountability. The M&E arrangement, while extensive with several review committees and reports, did not adequately address the needs of a project which required dynamic monitoring of contracts, quality assessment, and learnings from a large number of reports. 81. At approval, the project was with two ministries and required them to agree on target cities and complete a joint Needs Assessment Exercise to begin with. This led to significant delays in commencing actual ULB-level work. Significant emphasis was given on the PMU as a solution to the majority of the key issues raised, including the risks identified at appraisal. However, greater dialogue should have been with the ministries to carefully assess the risk associated with their commitment and accountability. Overall, the quality of entry of the project was poor. Quality of Supervision 82. The project was closely monitored by the Bank team throughout the implementation period. The TTLs and all core team members were Delhi based for almost the entire duration of the Project. Thus, there were numerous meetings on key issues with the Implementing Agencies and the PMU. There were three TTLs for the entire project, all having been a task team member before. ISRs were regularly filed (13 Page 28 of 60 The World Bank Capacity Building for Urban Development Project (P099979) for the entire project duration) and all standard supervision practices followed. As reflected in the aide- memoires, supervision focused on procurement to get project activities underway. As procurement and consequently disbursement remained an issue throughout project duration, supervision continued to focus on expediting them. From 2014 onwards, implementation ratings in the ISRs continued to remain Moderately Unsatisfactory to Highly Unsatisfactory. 83. The mid-term term review was detailed. The Team responded to changing client requirements and the macroeconomic scenario by undertaking three restructurings during project implementation. All restructurings were significant: removal of an entire component and implementing agency, change in PDO and realignment of project activities, and change in the procurement arrangements. As procurement and consequently disbursement was an issue through the project duration, the supervision continued to focus on how to expedite these. The effort through supervision was to engage the project in urban policy and reform as actively as possible and leverage the project as an upstream assistance for further activities to be implemented on ground. 84. In January 2017, the Bank communicated to the Ministry that given the pace of implementation, it was unlikely that the project would be able to complete planned activities by the Credit closing date of June 30, 2018. It was agreed that MoUD would review progress against the revised work plan in mid-June 2017 and identify surplus funds that should be cancelled from the uncommitted balance under the Credit. MoUD expected to award contracts worth US$32 million by June 2017. MoUD did not wish to cancel the funds as it expected to award contracts worth US$32 million by June 2017. In the December 2017 review, the Ministry conveyed that it had committed almost all the funds. The Bank urged the Ministry to expedite the pace of implementation and payment towards closed contracts. However, during the grace period the Ministry realized that activities had been overbudgeted and a significant amount of the Project funds would remain undisbursed. 85. No safeguard policies applied to the project. The World Bank’s FM and procurement specialists provided extensive support and closely monitored the fiduciary compliance of the project activities with World Bank policies. The decentralized procurement in the third restructuring required significant discussions and continued engagement, including preparation of a procurement manual and trainings. This required intense and continued engagement from the World Bank on the procurement side. Post procurement reviews were conducted on an annual basis as per norms and compliance was monitored. On the FM side, compliance was monitored and reported. Justification of Overall Rating of Bank Performance 86. Based on the above discussion on overall quality of preparation and supervision, the Bank’s performance is rated as Unsatisfactory. D. RISK TO DEVELOPMENT OUTCOME 87. Strengthening urban management in local bodies and deepening the impact and efficiency of national programs is a long-term agenda and needs ongoing efforts to utilize current achievements and further the agenda. While the CBUDP has taken some steps toward this, a lot more remains to be done. The continuation of the national programs until 2021 (which the project supported) indicates that the Government’s commitment to the urban sector continues to be strong. Page 29 of 60 The World Bank Capacity Building for Urban Development Project (P099979) 88. The following risks have been identified to the development outcome: • Insufficient resources in funding projects for which technical activities were undertaken - While the project has funded, based on ULB demand, service delivery plans, plans for smart cities, property tax improvement plans etc., implementation of these require additional funding from other programs and sources. Some of these funding requirements are large and ULBs may not be able to raise these. • ULB Capacity - The Project has carried out a large number of trainings of central, state and ULB officials. However, routine rotation and reassignment of personnel may render them less useful in their new positions. The replacement staff will require additional training. • Change in central government priorities on key reforms - The Project funded key studies to provide inputs to central level policy which was expected to have a cascade effect on state guidelines. However, the importance of these might decline or they could remain unutilized if the successors of the Ministry’s current key personnel do not attach the necessary importance to these agendas. V. LESSONS AND RECOMMENDATIONS 89. Implementing a Project across two Ministries/Departments can require substantial coordination and lead to delays. While the two implementing agencies were both in the urban sector, were part of the central government and were co-located, and rolled out national programs simultaneously, they were - and consequently worked as - two separate Ministries. Having a project involving them both as implementing agencies led to: (i) requiring simultaneous approvals; (ii) the need for agreement on scope and size of key activities; and (iii) the two Ministries working with one set of PMC staff. This resulted in a longer and more complicated than planned implementation. If joint implementation is undertaken across Ministries/Departments, then a common Steering Committee should be constituted which should be headed by a high level official having overall leadership mandate of the agencies. Common learning workshops and events should be organized and used to cross learn and garner synergies. 90. Provision of grant funding is not a guarantee of interest on the part of local bodies to undertake capacity-building exercise. Given the large deficit in basic service delivery, ULBs are predominantly concerned with building infrastructure and the day to day service delivery. While officials may appreciate the long term positive impact on technical assistance they might not prioritize it. Knowledge exchange workshops should be organized at project inception as well as mid-implementation to explain to ULBs the benefits and incentives of undertaking technical assistance. Examples of such incentives would be— outputs enabling them to leverage other funds/programs, planning for service delivery which is critical to the city and for which investments have been identified, increase in own source revenues and trainings linked to current work programs. Being able to clearly identify such incentives has two benefits: (a) increase in the likelihood that TA activities will be in areas which are under or are prioritized for on-ground implementation and (b) World Bank-funded activities becoming upstream works which leverage further funding or enable ULBs to do so. Page 30 of 60 The World Bank Capacity Building for Urban Development Project (P099979) 91. There is a trade-off between complexity of fiduciary requirements and efforts and ownership of outputs produced. TA projects are expected to fund a large number of consultancies/studies. Consequently, there is a tendency to have centralized procurement as it simplifies fiduciary assessments during preparation and monitoring during implementation. The preparation of CBUDP evaluated different models of procurement and considered decentralized procurement in the initial preparation period. However, a centralized procurement system was selected to expedite preparation. This centralized implementation structure became a critical bottleneck. Eventually, the Project introduced the decentralized procurement. Post decentralized procurement, the project observed that ownership of outputs was higher when the ULBs (beneficiaries) were made a party to the procurement and also led to an increase in demand for TA as ULBs were able to customize contracts based on their needs. The downside of decentralized procurement was the increased need for monitoring the contracts. Thus, this trade-off between fiduciary requirements and demand and ownership for TA should be carefully assessed and implementation arrangements should be designed accordingly. If it is thought through up front, several innovative solutions are possible. The project attempted such a design. However, this should have been combined with increased PMU staff for fiduciary monitoring. 92. The World Bank should consider funding of ‘wholesale’ TA versus ‘retail’ TA. Most state-level urban projects in India have TA components and these have been formulated as comprehensive studies which are implemented across all ULBs in the states. The impact is thus deep and sustained. Many of them have similar scope to what the CBUDP intended to fund double entry accounting, geographic information system (GIS) mapping, e-governance systems, property tax enhancement, city level service planning, and trainings to name a few. Consequently, the contracts are large, implemented across a range of ULBs to enable cross-learning and coordination, and anchored in a department which not only sees clear benefits to implement such programs but also has the mandate and capacity to do so. If working directly with ULBs, TA assistance could provide a ‘package’ of assistance to few ULBs versus several dispersed studies to a large number of ULBs. 93. There should be a provision of PMC support till the completion of the grace period. The project funded a large number of activities, many of which were completed by the project closure date. Undertaking such a large effort internally is difficult for the IA. This work is significant not only to meet the fiduciary requirements but also to ensure that there is a complete stock-taking of the work funded by the World Bank project. The PMC had critical personnel which had supported the Project through implementation and would have been able to assist the Ministry in more efficient processing of contract management and payments during the grace period. Thus, there should be a provision for continuation of PMC staff who are critical to such efforts. Currently, there is an expectation that the Government will procure the required staff through their internal funds post project completion. However, this might not be possible due to internal procurement procedure and variation in pay scale. To mitigate this, there should be a government counterpart funding provision at design stage to cover such costs so that World Bank funds are not required post project closure. These funds should be used to cover PMC costs for post- completion activities. . Page 31 of 60 The World Bank Capacity Building for Urban Development Project (P099979) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: Improved planning for urban management in select ULBs Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of ULBs having Number 0.00 20.00 20.00 22.00 improved their systems in at least two of the areas 27-Jan-2012 30-Jun-2018 30-Jun-2018 20-Dec-2016 covered (Finance, planning, governance and service delivery) Comments (achievements against targets): 30 Cities completed Cities Development Plans. In addition these cities also completed below: 8 Cities - Accounting reforms completed. 6 Cities - Property Tax reforms Completed. 14 Cities - Service Delivery. Objective/Outcome: Assist in role out of national missions. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of ULBs with City Number 0.00 0.00 5.00 39.00 Page 32 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Strategic Plans financed 01-Jun-2015 02-May-2016 30-Jun-2018 20-Dec-2016 under the Smart Cities Mission. Comments (achievements against targets): 39 cities prepared the city strategic plan under this project. All were financed under smart city mission. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of policy level Amount(USD) 0.00 5.00 5.00 5.00 studies completed and disseminated. 01-Jul-2011 30-Jun-2018 30-Jun-2018 15-Dec-2017 Comments (achievements against targets): Five Studies were formed under the Project. Two studies i.e. Training Need Assessment and Rapid Baseline Assessment were undertaken to understand the status of the personnel capacity and training need in ULBs . Additional two studies i.e. Land Based Fiscal Tools and Municipal Case were identified areas of intervention. The fifth and last study i.e. Livability Index rated major Indian cities. 1.Livability Index 2.Trainings Need Assessment. 3.Land Based Fiscal Tools. 4.Rapid Baseline Assessment. 5.Municipal Case. A.2 Intermediate Results Indicators Component: Capacity building for strengthened urban management. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of cities for which Amount(USD) 0.00 50.00 50.00 117.00 credit rating exercise and financial improvement plan is 01-Jul-2011 30-Jun-2018 30-Jun-2018 15-Dec-2017 Page 33 of 60 The World Bank Capacity Building for Urban Development Project (P099979) completed and approved by MHUA Comments (achievements against targets): Credit rating reports were made for the ULBs on the following States: 1. Rajasthan (25 Cities). 2.Haryana (17 Cities). 3.Uttar Pradesh (36 Cities). 4. Punjab (15 Cities). 5.Jharkhand (7 Cities). 6. Kerala (9 Cities). 7. Odisha (8 Cities). Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of Municipal Amount(USD) 0.00 2500.00 2500.00 28000.00 Official/ Elected Representatives trained on 01-Jul-2011 30-Jun-2018 30-Jun-2018 15-Dec-2017 issues of Urban Governance/ Management Comments (achievements against targets): This was a part of Individual Training plans wherein 6 Institutes were shortlisted by the ministry and States/ULBs who sent their officials for training on need basis. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of ULBs with up-to- Number 0.00 20.00 20.00 30.00 date City Development Plan 27-Jan-2012 30-Jun-2018 30-Jun-2016 20-Dec-2016 Comments (achievements against targets): Work has been completed for 30. Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Formally Revised Completion Page 34 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Target Number of participating ULBs Amount(USD) 0.00 15.00 15.00 151.00 having prepared plans for improved delivery of 01-Jul-2011 30-Jun-2018 15-Jun-2018 15-Dec-2017 financial systems- property tax/ double entry accounting. Comments (achievements against targets): Property Tax Contracts were implemented across 55 cities in 12 states. Advertisement Tax was implemented across 88 cities in 11 States. Double Entry was implemented across 8 cities in 5 states Component: Capacity building for strengthened urban management. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of City Strategic Amount(USD) 0.00 50.00 50.00 39.00 Plans prepared and approved by ULBs and MHUA to 01-Jul-2011 30-Jun-2018 30-Jun-2018 15-Dec-2017 support national Smart Cities Mission Comments (achievements against targets): City strategic plans were made for Aligarh, Allahabad, Lucknow, Namchi, Pasighat, Shillong, Moradabad, Rampur, Ujjain, Dahod, Coimbatore, Erode, Kochi, Rajkot, Madurai, Salem, Agra, Bareilly, Chennai , Tumakuru, Warangal, Tirupati, Biharsharif, Oulgaret, Thoothukudi, Tiruppur, Jhansi, Varanasi, Diu, Kavaratti, Port Blair, Tirunelveli, Vellore, Saharanpur, Sagar, Thanjavur, Thiruvananthapuram, Surat and Gandhinagar. Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 35 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Target Completion No. of procurement activities Number 0.00 25.00 25.00 312.00 completed 27-Jan-2012 30-Jun-2018 30-Jun-2018 20-Dec-2016 Comments (achievements against targets): This is combined procurement by Ministry and under decentralized procurement. Unlinked Indicators Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of participating ULBs Number 0.00 20.00 20.00 93.00 having prepared plans for service delivery- water/ 27-Jan-2012 30-Jun-2018 30-Jun-2018 20-Dec-2016 sanitation/drainage. Comments (achievements against targets): Out of these the reports were prepared in following areas (i) Non-revenue Water; 67 cities (ii) City sanitation; 16 cities (iii) City wide drainage; 1 city (iv) Solid Waste Management; 9 cities. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of cities having Amount(USD) 0.00 30.00 30.00 0.00 completed GIS mapping and approved by ULBs 01-Jul-2011 30-Jun-2018 30-Jun-2018 15-Dec-2017 Comments (achievements against targets): This activity was dropped from the project. Page 36 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of MoUs signed Amount(USD) 0.00 30.00 30.00 29.00 between MHUA and ULBs for implementation for TA 01-Jul-2011 30-Jun-2018 30-Jun-2018 15-Dec-2017 activities undertaken under the Project. Comments (achievements against targets): Page 37 of 60 The World Bank Capacity Building for Urban Development Project (P099979) B. KEY OUTPUTS BY COMPONENT Objective/Outcome 1: Improve planning for urban management in select ULBS 1. Number of ULBs with completed service delivery plans (water, solid waste, Outcome Indicators sanitation) 1. Number of cities with credit rating reports Intermediate Results Indicators 2. Number of elected/municipal officials trained 3. Number of cities with city development plans 1. Service delivery plans (water, solid waste, sanitation) Key Outputs by Component 2. Credit rating reports (linked to the achievement of the Objective/Outcome 1) 3. Livability Index Objective/Outcome 2: Assist in rollout of national missions. 1. Number of ULBs with City Strategic Plans Financed under Smart Cities Outcome Indicators 2. Number of policy level studies completed 1. Number of City Strategic Plans Completed Intermediate Results Indicators 2. Number. of procurements completed 1. City Strategic Plans Key Outputs by Component 2. VCF Reports (linked to the achievement of the Objective/Outcome 2) 3. Transaction Advisory Activities 4. Policy studies - Land Tools, Trainings Needs Assessment Page 38 of 60 The World Bank Capacity Building for Urban Development Project (P099979) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Abha Joshi-Ghani Task Team Leader(s) Richard L. Clifford Task Team Leader(s) Songsu Choi Task Team Leader(s) Barjor E. Mehta Task Team Raghu Kesavan Task Team N. VV Raghava Task Team Vasudha Thawakar Task Team Anand Kumar Srivastava Procurement Specialist(s) Priya Goel Financial Management Specialist Krishnamurthy Sankaranarayanan Financial Management Specialist Vikram Raghavan Legal Counsel Mamta Baruah Team Assistant Supervision/ICR Vasudha Thawakar Task Team Leader(s) Augustin Maria Task Team Leader(s) Bernice K. Van Bronkhorst Task Team Leader(s) Barjor E. Mehta Task Team Krishnamurthy Sankaranarayanan Financial Management Specialist Neha Dhoundiyal Gupta Financial Management Specialist Anantha Krishna Karur Financial Management Specialist Swayamsiddha Mohanty Procurement Specialist(s) Anand Kumar Srivastava Procurement Specialist(s) Jorge Luis Alva Luperdi Legal Counsel Jyoti Sriram Senior Program Assistant Sumit Gulati Team Assistant B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY06 2.400 11,250.24 Page 39 of 60 The World Bank Capacity Building for Urban Development Project (P099979) FY07 60.854 292,530.38 FY08 24.788 178,080.10 FY09 79.099 841,924.65 FY10 46.311 268,939.38 FY11 18.582 118,202.24 FY12 17.432 33,354.58 Total 249.47 1,744,281.57 Supervision/ICR FY07 0 0.05 FY12 46.245 252,263.46 FY13 47.300 183,048.71 FY14 48.071 201,941.98 FY15 39.250 137,714.59 FY16 27.634 64,587.78 FY17 33.750 89,850.77 FY18 45.351 146,325.11 FY19 11.100 31,387.00 Total 298.70 1,107,119.45 Page 40 of 60 The World Bank Capacity Building for Urban Development Project (P099979) ANNEX 3. PROJECT COST BY COMPONENT Amount at Actual at Project Percentage of Components Approval Closing (US$, Approval (US$, million) (US$, million) million) Capacity Building for Strengthened 37.5 38.50 102.66 Urban Management Capacity Building for Effective Urban 18.5 0.00 0 Poverty Alleviation and Monitoring Implementation Support 4.00 6.50 162.5 Total 60.00 45.00 75 Page 41 of 60 The World Bank Capacity Building for Urban Development Project (P099979) ANNEX 4. EFFICIENCY ANALYSIS 1. At appraisal, economic analysis was not undertaken, as the project was supporting studies and while the areas of these were outlined, no studies had been identified. Thus, no clear link could be established between costs and expected economic benefits. Because a typical economic assessment could not be made, the ICR analysis took into consideration aspects such as efficiency in the use of project resources, project execution compared to plans, and the opportunity costs of delays and no execution. 2. Overall, the key elements to be highlighted are the following: (f) The relatively high management turnover in the ministry (there were four different Project Directors at the MoUD over 6.5 years) contributed to decisions around sector portfolio being changed frequently, thereby adding to the project’s accumulated delays. (g) Component 2 that was supposed to be implemented by MoHUPA could not take forward even one procurement in almost 24 months. Therefore, this component had to be ultimately deleted from the project. (h) Procurement was overall challenging and time-consuming, given the inefficiencies arising from the coordination of a large number of activities. Considerable time and costs were expended in the technical preparation of ToRs and specifications during implementation, but these did not necessarily lead to successful procurement outcomes. During the second restructuring in 2015, there was a decision to streamline the Project’s activities and scope by selecting fewer and more impactful activities linked to the national programs. Following this, implementation of activities picked up to a limited extent. (i) The original project period of five years was extended by two years. Despite this, less that 40 percent of the original Credit is expected to be utilized. (j) At completion, the project utilized less than 35 percent of the original Credit amount of US$60 million and 46 percent of the revised Credit amount of US$45 million (US$17 million 16): US$14.2 million under Component 1 (as opposed to the originally envisaged US$41 million) and US$6.5 million in Component 3. (k) The project funded a number of activities and some of them proved to be quite effective, e.g., 39 Smart City proposals. Activities like value capture financing, credit rating reports, and transaction advisory support had very limited short term impacts (one city has implemented Impact Fees, three cities have issued municipal bonds), although over the medium term there could be greater impact. 3. In view of the above, the overall efficiency of the project is rated as Negligible. 16 As on December 27, 2018. Page 42 of 60 The World Bank Capacity Building for Urban Development Project (P099979) ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS 1. It appears that the Implementation Completion and Results Report, on World Bank assisted Capacity Building for Urban Development Project, shared with the Ministry is the old draft, as it does not contain the updated data. The un-updated data will give poor reflections of achievements of the project. Unfortunately, the Ministry has been asked for comments on the draft containing old data. Further, on preliminary reading of the draft shows various discrepancies as the figures shown in the table (s) is at variance from the ones mentioned in the descriptive paragraphs of report. 2. As the Ministry has been provided a grace period till December 31, 2018 to make the disbursements under the project, it is expected that the disbursements made till the last date of grace period will be taken into consideration to arrive at conclusions on outcomes and achievements. As on December 27, 2018, a number of proposals are under process and still in the pipeline for disbursements. The physical and financial figures, which form the basis of the ratings and final outcomes are, therefore, likely to change substantially by the time all disbursements are made. Ideally the Ministry should have been given time of at least one week after December 31, 2018 to provide its comments on the ICR containing updated data. 3. However, given the time constraints the comments of the Ministry on the un-updated draft ICR are provided below. 4. The Ministry does not agree with the “Modest” rating given for achievements of PDOs (Efficacy). A number of discrepancies have been noted in the documents. In case of NRW, in table below para 31 it has been stated that study was carried out in 6 cities whereas at Sl. No. 23 of Annexure ‘6’ it has been stated that 27 contracts have been signed. In- fact the study for reduction in Non- Revenue Water was initiated in 95 cities under CBUD. Similarly, in Para 39 it has been stated that improvement in property tax collection was started in 50 more cities, however as per the Ministry’s record this assignment was initiated in 78 additional cities. Similarly, the spending till date is about 20 Mn USD and another 2 Mn is likely to be disbursed by December 31, 2018. 5. The reading of the ICR clearly indicates that achievements were much higher than the targets given in the PDO. Additionally, in para 51 of the ICR it has been stated that: - “Strengthening both national and local institutions towards better urban management was the core objective of the project and is captured in both the PDO and the project design. The mutually reinforcing approach of provided technical assistance grants based on initially needs assessment resulted and later demand worked well, especially when linked to implementation of national programs” 6. All the above factors show that the achievement of outcomes (efficacy) was “highly satisfactory” and not “modest” as rated in the ICR. A careful reading of the findings of the ICR related to outcomes (efficacy) do not match with the rating given. 7. The rationale for giving split rating is also not agreeable as the objectives of restructured project were broadly similar and consolidated rating should have been given. Page 43 of 60 The World Bank Capacity Building for Urban Development Project (P099979) I PROJECT CONTEXT ANND EEVELOPMET OBJECTIVES 8. Ministry broadly agrees with this assessment as the same is based on the facts. II. OUTCOME B) ACHIEVEMNT OF PDOs (Efficacy) - Modest 9. The Ministry does not agree to the ´Modest’ rating given to achievements of outcome indicators defined under original PDOs and revised PDOs. The reason being that the achievements of outcomes cannot be taken in silos for different phases of the project. 10. The project was twice restructured during the implementation and PDOs were changed during the second restructuring. The outcomes achieved in the first phase as depicted in the table under para 31 led to their wider coverage and number of other cities in next phases. Therefore, the rating of achievement of outcomes should have been based on the final outcomes achieved at the closure of the project. 11. At the end of the project the achievements were much higher than the targets, and this fact is substantiated by the figures given in the table below paragraph 42 and 46 and also details given in paragraphs 36 to 46. 12. Further Section ll E – OTHER OUTCOMES AND IMPACTS (IF ANY) also appreciates that activities relating to “Institutional Strengthening” and “Mobilizing Private Sector Financing” also worked very well (refer para 51 and 52). 13. Based on the above facts, according to the Ministry the achievements of outcomes of original PDOs i.e. Outcome 1 -Improving systems and skills of select ULBs in management; Outcome 3- Support implementation of various urban policy and institutional reforms and achievements of outcomes and under revised PDOs i.e. Outcome 1: Improve planning for urban management; Outcome 2: Assist roll out of national mission are “Highly Satisfactory” instead of ‘Modest” as given in the ICR. 14. The Ministry, however, agrees with the achievement of Outcome 2: Improving systems and skills of select ULBs with respect to urban poverty reduction. This activity was not taken up as the Ministry had adequate alternate sources of funding. C. EFFICIENCY- Negligible 15. Ministry does not agree to the ‘Negligible’ rating assigned to the efficiency because the rating is based on old data. Till now despite the constraints discussed in the ICR, the Ministry was able to disburse around USD 20 Mn and another 2 Mn are also likely to be disbursed till December 31, 2018. Further if the appreciation of Dollar is considered, the disbursement will be much higher. D. JUSTIFICATION OF OVERALL OUTCOME RATING 16. The methodology adopted for rating is not agreeable. The Ministry does not agree with the overall “Unsatisfactory” rating of project, for the reasons explained in the preceding paragraphs. Based on the achievements of outcomes discussed in paras 31 & 34 to 46 and 51 & 52 of the ICR, and also the fact that Page 44 of 60 The World Bank Capacity Building for Urban Development Project (P099979) the project has been able to achieve its core objective of “strengthening both national and local institutions towards better urban management” as captured in both the PDOs the Ministry is of an opinion that rating of the achievements of outcomes in the following areas were “Highly Satisfactory”: - A Improving system and skills of select ULBs urban management C Support implementation of various urban policy and institutional reforms D Improve planning for urban management in select ULBs E Assist in roll out of national urban missions III KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOMES A - KEY FACTORS DURING PREPARATION 17. The Ministry agrees with the assessment. B – KEY FACTORS DURING IMPLEMENTATION 18. The Ministry largely agrees with the assessment in the ICR with the following points: • There was nothing wrong with the approach of MoHUPA. Since it had received grant funding of USD 19 Mn from DFID and WB was aware of this at preparation stage, this component should have been reviewed at that stage itself. • However, despite delays attributing to defective design, lack of coordination and exogenous factors like introduction of new urban missions, the project had contributed significantly in strengthening individual and institutional capacity of the selected ULBs across all the States and achieve core objective of the project. IV- BANK PERFORMANE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTOME 19. The Ministry largely agrees with the assessment subject to the following points: “Urban” in India is a State subject and role of the Union Government is limited to developing policy framework, providing technical support and funds, but the actual implementation is with the States/ULBs. It is, therefore, very difficult to measure impacts of the technical support provided to the States/ULBs. For example, technical support provided to the six select cities in the areas of property tax reforms brought out potential of additional revenues that can be tapped by the ULBs without increasing rates of tax. However, it is now the prerogative of the State/ULB to implement these recommendations and improve their tax revenues. Therefore, impact of the project can only be limited to the output of the technical assistance provided to the willing States/ULBs. 20. It is also not correct to say that Monitoring Structure and Evaluation arrangement were not effective and deserves “Negligible” rating. There was regular monitoring of the project. There was no major change in the activities financed under the project. Whatever changes were brought in the activities financed under the project were within the PDOs and directly contributed to strengthening individual and institutional capacity of the ULBs. V- LESSONS AND RECOMMENDATIONS 21. The Ministry agrees with assessment of lessons and recommendations. Page 45 of 60 The World Bank Capacity Building for Urban Development Project (P099979) ANNEX 6. LIST OF OUTPUTS UNDER THE PROJECT This section summarizes the types of studies/activities undertaken in the Project. The below table lists the activities and the number of cities in which each of these was undertaken. Further sections provide a brief on the scope of each study/activity type and provides a detailed list of the cities in which these were conducted. Table: List of Studies Under the Project S.No Activity Number of Cities 1. City Development Plans 30 2. Study on Non-Revenue Water 67 3. Study on Solid Waste Management 9 4. Study on Sanitation and Sewerage 16 5. City Strategic Plans (for Smart Cities) 39 6. Study on Double Entry Accounting 8 7. Study on Property Tax 55 8. Study on Advertisement Tax 88 9. Credit Rating Reports 117 10. Transaction Advisory Support 65 11. National Level Studies 5 studies Total 499 Details on Each Activity 1. Activity: City Development Plans Scope: The work entailed profiling the present status of the city, giving an in-depth analysis of its demographic, economic, financial, infrastructure, physical, environmental and institutional aspects. Based on the above analysis, the consultant developed a perspective and a vision for the city, which would be prepared in consultation with its relevant stakeholders. In order to achieve the vision, a formulation strategy for bridging the gap between where the city is at present and where it wishes to was prepared. Table: Cities in which City Development Plans were prepared S. No. Cities No. of Cities 1 Kurukshetra, Jammu, Dehradun, Haridwar, Shimla, Allahabad, Varanasi, 30 Gangtok, Shillong, Aizwal, Guwahati, Yamuna Nagar, Chandigarh, Puri, Cuttack, Ranchi, Panaji, Bharuch, Nagpur, Sholapur, Udaipur, Guntur, Hubli, Vishakhapatnam, Kollam, Jabalpur, Dewas, Chindwara, Raipur, Siliguri 2. Activity: Study on Non-Revenue Water (NRW) – “Strategy for reduction in NRW” Scope: The objective of this technical assistance was to support selected ULBs in developing a strategy for reduction of Non-Revenue Water (NRW). The study involved making a comprehensive assessment of NRW for the selected six cities water systems and prepare a holistic, integrated and phased approach for Page 46 of 60 The World Bank Capacity Building for Urban Development Project (P099979) NRW reduction program. This will include studying the existing water supply system, preparing a Water Balance, conducting NRW assessment, understanding commercial and physical losses and developing the overall strategy to reduce NRW. In developing the “Strategy for reduction in NRW” guidance can also be taken from a toolkit prepared by the MoUD for NRW reduction. Table: Cities in which NRW Study was undertaken S. No. State Cities No. of cities 1 Andhra Vijaywada, Eluru, Anathapur, Kadapa, Chittoor, Guntur, Rajahmahendravaram, 40 Pradesh Kurnool, Srikakulam, Nellore, Ongole, Vizianagram, Machilipatnam, Kavali, Tadepalligudem, Bhimavaram, Gudiwada, Tenali, Tirupati, Narasaraopeta, Chilakaluripeta, Madnapalli, Dharmawaram, Hindupur, Nandayal, Guntuk, Adoni, Khammam, Warangal, GVMC, Tadipatri, Uryapet Siddipet Nizamabad Nalgonda, Miryalaguda, Adilabad, Mehbubnagar, Proddatur and Srikalahasti 2 Chhattisgarh 8 Korba, Bilaspur, Raigadh, Ambikapur, Durg, Bhilai, Rajnandgaon, Jagdalpur, 3 Orrisa Berahampur, Rourkela, Baripada, Bhubaneshwar, Cuttack, Balasore, Puri, Bhadrak 8 4 Madhya 3 Chindwara, Jabalpur and Ujjain Pradesh 5 Uttar 3 Lucknow, Agra and Varanasi Pradesh 6 Maharashtra Solapur 1 7 Chandigarh 1 Chandigarh 8 Haryana Kurukshetra 1 9 Himachal 1 Shimla Pradesh 10 Uttarakhand Haridwar 1 Total 67 3. Activity: Study on Solid Waste Management Scope: The objective of the study was to analyze and identify deficiencies of the existing Solid Waste Management System, review the various engineering & environmental problems faced and to review the existing project / concept reports, if prepared for the remedial improvements to rehabilitate the existing Solid Waste Management system on technical feasibility and environmental compatibility and to redesign the system, duly considering innovative technological options and taking into account the recommendations on modernization for benefits and environmental facilities as per norms wherever necessary with revised drawings and cost estimates etc. Table: Cities in which Solid Waste Management was undertaken S. No. Cities No. of Cities 1 Solapur, Kollam, Kurukshetra, Siliguri, Gangtok, Vizag, Devas, Bharuch and 9 Chindwara Page 47 of 60 The World Bank Capacity Building for Urban Development Project (P099979) 4. Activity: Study on Sanitation and Sanitation Scope: The objective was to prepare a draft City Sanitation Plan that is comprehensive and citywide with respect to access to sanitation for all, and the safe collection, transportation, treatment and disposal of both solid and liquid wastes. The plan aimed to detail out various technological options and their feasibility from the standpoint of Corporation and other financial resources. The analysis of options included costs of capital investments, operation and maintenance, monitoring, and evaluation. Table: Cities in which Sanitation Plans was undertaken S. No. State No. of Cities 1 Dehradun, Guntur, Panaji, Kurukshetra, Solapur, Kollam, Siliguri, Gangtok, 16 Vizag, Devas, Bharuch, Aizawl, Shillong, Yamuna Nagar, Chandigarh and Chindwara, 5. Activity: City Strategic Plans Scope: The Smart City Proposal (SCP) or City Strategic Plans consisted (depending on the city) Plans for Area Developments based on the three typologies: (a) area improvement (retrofitting) (b) city renewal (redevelopment) and (c) city extension (greenfield) and one City-wide (Pan-city) initiative that applies Smart Solutions to the physical, economic, social and institutional infrastructure. The Plan was the mandatory requirement for cities to apply for funds under the central Smart City Mission. Table: Cities in which Smart City/City Strategic Plans was undertaken S. No. Cities No. of Cities 1 Aligarh, Allahabad, Lucknow, Namchi, Pasighat, Shillong, Moradabad, Rampur, 39 Ujjain, Dahod, Coimbatore, Erode, Kochi, Rajkot, Madurai, Salem, Agra, Bareilly, Chennai , Tumakuru, Warangal, Tirupati, Biharsharif, Oulgaret, Thoothukudi, Tiruppur, Jhansi, Varanasi, Diu, Kavaratti, Port Blair, Tirunelveli, Vellore, Saharanpur, Sagar, Thanjavur, Thiruvananthapuram, Surat and Gandhinagar 6. Activity: Double Entry Accounting Scope: While a number of ULBs have initiated process of migration to Accrual Based Double Entry Accounting System, significant handholding was required for the complete implementation of the system. The objective of the assignment was the preparation of opening balance sheet, fixed asset inventory and valuation, handholding and capacity building of the ULB staff to sustain Accrual Based Double Entry Accounting System. Table: Cities in Double Entry Accounting was Undertaken S. No. Cities No. of Cities 1 Yamuna Nagar, Kurukshetra, Puri, Cuttack, Chindwara, Haridwar, Nagpur and 8 Dehradun Page 48 of 60 The World Bank Capacity Building for Urban Development Project (P099979) 7. Activity: Property Tax Studies Scope: The objective of the study was to improve the revenue of the ULB from Property Tax by identifying underassessed and un-assessed properties, computerization of Property Tax records, putting in place an on-line system for assessment and collection of Property Tax, and recommend measures to achieve significant increase in Property Tax collection by improved tax administration including an effective collection mechanism along with a grievances redress system. Table: Cities in which Property Tax Work was Undertaken S. No. State Cities No. of cities Vijaywada, Eluru, Anathapur, Kadapa, Chittoor, Guntur, Rajahmahendravaram, Kurnool, Srikakulam, Nellore, Ongole, Andhra Vizianagram, Machilipatnam, Kavali, Tadepalligudem, Bhimavaram, 1 30 Pradesh Gudiwada, Tenali, Narasaraopeta, Chilakaluripeta, Madnapalli, Dharmawaram, Hindupur, Nandayal, Guntukal, Adoni, Tadipatri, Proddatur, Srikalahasti and Tirupati 2 Haryana Yamuna Nagar/Jagadhri 1 Uttar Aligarh, Allahabad, Bareilly, Ghaziabad, Jhansi, Kanpur, Meerut, 3 11 Pradesh Saharanpur, Lucknow, Varanasi and Agra 4 Tamil Nadu Madurai 1 5 Telangana Karimnagar 1 Madhya 6 Vijaypur 1 Pradesh 7 Goa Panaji 1 8 Maharashtra Pimpri Chinchwad, Pune 2 9 Chandigarh Chandigarh 1 10 Chhattisgarh Raipur 1 11 Puducherry Puducherry, Oulgaret, Karaikal and Yanam 4 12 Karnataka Tumakuru 1 Total 55 8. Advertisement Tax Studies Scope: The objective of the assignment was to assist ULBs achieve potential of advertisement revenue by making a policy for destination specific potential having dynamic pricing module. The scope of work included preparation of a Comprehensive Advertisement Guidelines, an Advertisement Tax and Licence Fee Structure with roadmap for periodical updating and a computerized data base of Advertisement Records. Page 49 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Table: Cities in which Property Tax Work was Undertaken S. No. State Cities No. of cities Vijaywada, Eluru, Anathapur, Kadapa, Chittoor, Guntur, Rajahmahendravaram, Kurnool, Srikakulam, Nellore, Ongole, Vizianagram, Andhra Machilipatnam, Kavali, Tadepalligudem, Bhimavaram, Gudiwada, Tenali, 1 31 Pradesh Narasaraopeta, Chilakaluripeta, Madnapalli, Dharmawaram, Hindupur, Nandayal, Guntukal, Adoni, GVMC, Tadipatri, Proddatur, Srikalahasti and Tirupati Alwar, Bharatpur, Dholpur, Awaimadhopur, Hindaun City, Gangapur, Bhiwadi, Baran, Jhalawar, Jaipur, Kota, Ajmer, Udaipur, Hanumangarh, 2 Rajasthan 29 Sriganganagar, Bikaner, Churu, Sujangarh, Jhunjunu, Sikar, Tonk, Jodhpur, Pali, Beawar, Nagur, Kishangarh, Bhilwara, Chittorgarh and Bundi Ludhiana, Amritsar, Batala, Patiala, Khanna, Barnala, SAS Nagar and 3 Punjab 8 Malerkotla Uttar 4 Lucknow, Varanasi and Agra 3 Pradesh Bhilai, Bilaspur, Korba, Rajnandgaon, Raigarh, Jagdalpur, Ambikapur and 5 Chhattisgarh 8 Durg 6 Telangana Karimnagar, Warangal 2 8 Goa Panaji 1 9 Maharashtra Pimpri Chinchwad, Pune and Solapur 3 10 Sikkim Namchi and Gangtok 2 11 Nagaland Kohima 1 Total 88 9. Activity: Credit Rating Reports Scope: The objective of this assignment was to undertake a detailed credit assessment of the ULB to assign credit rating for their proposed General Obligation Debt to facilitate issuance of municipal bonds where feasible. It consisted of assigning credit scores to ULBs based on agreed common indicators (in consultation with credit rating agencies) to enable ULBs understand the impact of their managerial decisions and performance on their credit quality and facilitate credit decision by lenders to ULBs / ULB projects (both public and PPP). Table: Cities in which Credit Ratings were undertaken State Cities No. of cities Rajasthan Dholpur, Bharatpur, Hindaun, Sawai Madhopur, Gangapur, Sriganganagar, 25 Hanumangarh, Bikaner, Churu, Sujangarh, Jaipur, Kota, Udaipur, Ajmer, Jhalawar, Baran, Bhilwara, Chittorgarh, Bundi, Alwar, Bhiwadi, Sikar, Jhunjunu, Nagaur, and Ganganagar Page 50 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Haryana Gurugram, Hisar, Panchkula, Panipat, Rohtak, Karnal, Sonipat, Ambala, Yamuna Nagar, 17 Bahadurgarh, Bhiwani, Rewari, Kaithal, Jhind, Palval, Sirsa and Thanesar Odisha Berhampur, Sambalpur, Rourkela, Puri, Baripada, Balasore, Bhadrak and Cuttack 8 Jharkhand Ranchi, Jagdalpur, Raipur, Bilaspur, Bhilai, Durg and Rajnandgaon 7 Kerala Thiruvananthapuram, Kollam, Thrissur, Kozhikode, Kochi, Kannur, Alappuza, 9 Guruvayoor and Palakkad Punjab Amritsar, Hoshiarpur, Jalandhar, Pathankot, SAS Nagar, Patiala, Malerkotla, Ludhiana, 15 Khanna, Barnala, Abohar, Batinda, Ferozpur, Moga and Muktsar UP Badaun, Shahjahanpur, Pilibhit, Bareilly, Amroha, Chandausi, Shambhal, Moradabad, 36 Rampur, Banda, Orai, Lalitpur, Sitapur, Etawah, Farrukhabad cum Fatehgarh, Hardoi, Lucknow, Lakhimpur, Umrao, Azamgarh, Balia, Maunath, Fatehpur, Jaunpur, Mughalsarai, Ghazipur, Mirzapur-cum-Vindhyachal, Bahraich, Gonda, Sultanpur, Akbarpur, Ayodhya, Faizabad, Gorakhpur, Deoria and Basti Total 117 10. Transaction Advisory Support Scope: The objective of the assignment is to provide technical assistance to the ULBs to understand the options for financing their projects from the markets, specifically of municipal bonds. Table: Cities in which Transaction Advisory was undertaken S. No. State City No. of Cities 1 Andhra Pradesh Tirupati, Vijayawada, Eluru, Anantapur, Kadapa, 31 Chittoor, Guntur, Rajahmundry, Kurnool, Srikakulam, Nellore, Ongole, Vijianagaram, Machilipatnam, Kavali, Tadepalligudem, Bhimavaram, Gudivada, Narasaraopeta, Chilakaluripeta, Madnapalli, Dharmawaram, Hindupur, Nandayal, Guntukal, Adoni, Tadipatri, Proddatur, Srikalahasti, GVMC, Kakinada 2 Chhattisgarh Bhilai, Corba, Bilaspur and Rajnandgaon 4 3 Goa Panaji 1 4 Jharkhand Ranchi 1 5 Kerala Kochi 1 6 Madhya Pradesh Bhopal, Indore and Jabalpur 3 7 Maharashtra Pimpri Chinchwad 1 8 Odisha Bhubaneshwar, Puri, Bhadrak, Berhampur, Cuttack, 9 Rourkela, Sambalpur, Balasore, Baripada 9 Puduchchery Puduchchery, Oulgaret and Karaikal 3 10 Punjab Ludhiana 1 11 Rajasthan Ajmer, Jaipur, Jhunjhunu, Bhiwadi, Kishangarh, 7 Udaipur and Kota 12 Telangana Adilabad, Karimnagar and Warangal 3 Total 65 Page 51 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Appendix 1: Improvement in Property Tax collection 1. The GoI, MoUD under the World Bank-aided CBUDP had undertaken an assignment for improvement in property tax collection (without increasing rates of tax) through widening of tax base detected under-assessed and non-assessed properties. The assignment also included improving tax administration by computerization of property tax records, introducing online assessment and collection, and establishing a dispute redress mechanism in select six cities. Key Achievements and Critical Success Parameters 2. Table 6.1 describes the key achievements of the project from the activities. Table 6.1. Key Achievements S. No Key Achievements Benefits 1 Computerization of all existing property tax Ability to view and manage all existing demand and data on a single platform that were available collection data that are available with the municipality. in hardcopy formats or in different systems Moving forward, the data can be updated periodically. 2 Development of GIS-enabled property This will help the municipality in the following areas: database in the pilot wards which was 1. Estimate and identify the under-assessed and non- decided at the inception of the project. The assessed properties, which were fairly significant in GIS database created as a part of the project all the municipalities where this project has been (through satellite imagery) was backed up by implemented. advanced online survey methods for the 2. Ability to view the data spatially in the map that will collection of owner and property details help the municipality in taking key decisions. (such as use, occupancy, year of 3. Provisions for improving the revenue by widening of construction, structure type) that are key for tax base, which is one of the key objectives of the assessment. project. 3 Integrate the sample assessment data This will help the municipalities in understanding the collected through project with the existing trends, gaps, and the ways of improving the collection demand and collection data fully efficiency for the pilot wards. This work can be later computerized under the project. extended for the entire city during the hand-holding and capacity-building phase. 4 Provide recommendations for simplifying The simplified, taxpayer-friendly, and transparent the tax calculation rules (within the limits of methods of assessment will encourage the tax-payers to the municipal act) that will eventually help pay the property taxes more regularly which will in reducing the tax evasion and in eventually help in the revenue growth. Nagpur Municipal augmentation of tax revenue. Corporation, Chindwara Municipal Corporation, and Nagar Nigam Dehradun have implemented the new assessment methodology. Haridwar Nagar Nigam has also initiated the process to revise their assessment rules. 5 Provide an online system for viewing the This will help the municipal staff in getting a transparent GIS-enabled property data, with options for way of enhancing the collection that will eventually lead online payment for the citizens. The system to better collection efficiency. also has the provision for incorporating offline payments made at the municipalities and reconcile them with all the collection data. This part of the system implementation is currently in progress. Page 52 of 60 The World Bank Capacity Building for Urban Development Project (P099979) S. No Key Achievements Benefits 6 The online assessment and collection system This will reduce the likelihood of having a number of non- will have the provision for registering the assessed and under-assessed properties in the long run property data online for a new property or and keep the assessment data up to date. change in the details of an existing property. Puri Municipality has directed us to integrate this application and data through their online portal (ICICI) so that the collection efficiency is improved, and more transparency is imparted in the system. Nagar Nigam Dehradun and Chindwara Nagar Nigam are working on similar lines. 7 The online system will have an option for Number of grievances and objections currently handled recording grievances and address them through manual process of hearing will decrease by a through a well-structured and documented great extent so that the efficiency of the municipal staff is workflow, which otherwise is mostly done enhanced, and the entire system is IT enabled. This will manually. also help in reducing avoidable litigations. Key Findings 3. Based on the pilot assignment in six cities, it is observed that there is potential to increase the property tax base. City-wise count of properties is given in table 6.2. The highest increase in number of properties is observed in Puri and Cuttack. Table 6.2. Increase in Property Tax Base Properties Increase in Properties Identified ULB ULB Survey (% of ULB records) Dehradun 7,205 11,051* 53 Haridwar 4,955 9,001 82 Puri 3,522 9,443 168 Cuttack 4,720 10,445 121 Chindwara 8,305 11,177 34 Nagpur 8,760 8,898 2 4. The revised demand for property tax shows the following trends. Table 6.3. Percentage Increase in Demand % Increase in City ULB (INR) Survey (INR) Demand Dehradun 61,83,577 3,67,63,458 326 Haridwar 28,51,655 2,78,58,457 877 Puri 31,48,982 167,98,415 433 Page 53 of 60 The World Bank Capacity Building for Urban Development Project (P099979) % Increase in City ULB (INR) Survey (INR) Demand Cuttack 28,83,544 56,66,341 96 Chindwara 72,52,040 2,20,22,147 204 Nagpur 4,50,58,126 9,10,54,913 102 5. Based on the success of the above pilot, a model RFP was prepared for the AMRUT/Smart Cities to undertake this exercise. Till now 61 cities have engaged consultants to carry out the assignment for improvement in property tax. The exercise will focus on widening of the tax base by detecting non- assessed and under-assessed properties. Under the assignment, the property tax records of the cities will also be computerized, where they have not been computerized. The property tax data will also be integrated with the GIS system in the cities where a GIS system is already available. In the cities where a GIS system is not in place, property tax data will be made compatible so that the same can be easily integrated with the GIS system. Page 54 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Appendix 2: Improvement in Advertisement Tax collection Govt. of India, Ministry of Urban Development under World Bank aided Capacity Building for Urban Development Program had undertaken an assignment for Improvement in Revenue from Advertisement Tax through Widening of Tax Base by identifying new assets and amending the advertisement tax policy in the city. The assignment also included to drafting the policy for the city administration/state government, as the case may be and providing handholding support to the city administration. Key Achievements and Critical Success parameters Following are the key achievements from the project from the activities: S Key Achievements Benefits No 1 Identification of new assets The new assets identified would result in enhancing revenue generation for the city. This will also result in regularisation of the various advertisement spaces in the cities, which may be already there, but are not revenue generating assets. 2 Rationalisation of the Advertisement Tax Rates The rationalisation in rates brings parity in prices as well as bring transparency in the working of the city administration. 3 Rate analysis with the trend in the industry The rates suggested by the consultant are based on the prevailing rates in the neighbouring cities or the states. This gave concerned authorities a good amount of idea for fixing rates while formulating the policy. 3 Drafting of the Advertisement Tax Policy and This will help state/city to immediately go for approval and standardization of forms. implement the policy. Policy once approved, can be replicated in various neighbouring cities, as well. Standardization will help in working efficiency. 4 Handholding Support This will help the municipal staff in getting a transparent way of enhancing the collection that will eventually lead to a better collection efficiency. Key Findings 1. Based on the analysis of few of the reports, it is observed that there is a huge potential to increase the advertisement tax revenue. City wise count of available outdoor media spots is given in the table below. Page 55 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Increase in Outdoor Advertisement Spots Outdoor Spots Increase in Outdoor spots ULB Existing After Proposal (% of Existing Spots) Kohima 135 183 36% Ludhiana NA NA NA Jodhpur 2548 3033 19% Bhilwara 293 988 233% Bikaner 1009 1320 31% 2. The proposed revenue from advertisement tax shows the following trend: Percentage Increase in Revenue CITY Existing Estimated % Increase in (Rs. Lakhs) (Rs. Lakhs) Revenue Kohima 11.80 15.43 31% Ludhiana 117.34 635.08 441% Jodhpur 382.00 581.00 52% Bhilwara 101.00 149.00 48% Bikaner 203.00 432.00 113% These data showed findings from only five cities. 29 contracts were awarded to consultants to carry out the assignment for improvement in advertisement tax in 89 cities. Similar types of result have been achieved in other cities. Page 56 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Appendix 3: Review of the Individual Capacity Building Program Individual Capacity Building program was designed to provide training to the Municipal Staff, State Staff, and Elected Representative etc. to cover all the aspects of AMRUT and SBM. 35 training entities were empaneled by MoUD to provide training in various states. Each state was allowed to sign MoU with any number of agencies. Upon successful completion of training and recommendation of the State/City, the payment was released by MoUD. Training was of two types i.e. class room training as well as site visits. The training to municipal staff was required to be provided in three capsules. National Institute of Urban Affairs was appointed nodal agency for the same. NIUA was also entrusted with a task to pick sample from the trainings provided by each agency every quarter and carry out assessment based on the telephonic feedback of the participants. These assessment reports were submitted to the Ministry for final release of the payments to the training entities. As per MoU condition, in case any of the training was not satisfactory, the training entity was required to provide one more capsule of training on its own cost. Based on some of the assessment reports, following observations have been made: COVERAGE OF SUBJECT AND PEDAGOGY • The Orientation programs covered subjects like good practices in water supply and sewerage, GIS, waste management, street lighting, land management, urban best practices and e-governance. • Hard and soft copies of material were shared with the participants. • The programs contained field visits to STPs and green buildings • The custom programs were well customized to the needs of the audience. The program for town planning officers focused on subjects like real estate regulation, master plan preparation using GIS, house numbering etc. • Similarly the program on engineering focused on subjects like planning and implementing strategies for ODF, water supply, SLBs and sewerage. • Overall the programs were found to be well structured and well rated in terms of coverage of topics, pedagogy as well as confidence to apply the learnings. • Most of the programs have been rated well in the range of 4 to 4.5 out of 5 points. LEARNING OUTCOMES • Most participants reported gaining knowledge and acquiring a good platform for networking through the programs. The aspect of ‘Improved understanding’ has been rated well across all programs. • On an average around 90% participants felt confident to apply the knowledge gained with or without further revision. Page 57 of 60 The World Bank Capacity Building for Urban Development Project (P099979) TRAINING FACILITIES • Training facilities were found to be satisfactory across most of the programs. SUGGESTED AREAS OF IMPROVEMENT • Covering too many subjects may not yield required learning outcomes. The custom programs can be made more focused on particular subject areas rather than covering all sub-sectors of relevance. This will allow more focus on case studies, discussions, audio- visuals and meetings with implementers. • There was a demand for conducting decentralized programs within close proximity of the participants city. Training entity may consider a mix of decentralized and “at campus” trainings to meet the need. • It was suggested that the custom modules should be focused on a maximum of 1-2 theme areas, allowing focused learning outcomes. For example, focus on accounting related issues for a batch almost entirely comprising of accounting staff. Avoid including general financial topics, which may be covered in earlier more generalized capsules. This will also allow more focus on related operational aspects and lead to better detailing of sub-topics involved. • It was recommended that custom modules be made more hands-on through inclusion of more exercises for improving specific skills and understanding of sub-topics. • Project videos or documentation may also be used to improve learning outcomes. • In addition to detailed subject-wise lectures (as were already included in the programs) the training entity may consider inviting successful project implementers/champions to have a discussion with participants. Page 58 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Appendix 4: Assessment of Non-Revenue Water Studies Govt. of India, Ministry of Urban Development under World Bank aided Capacity Building for Urban Development Program had undertaken an assignment to carryout study on Non-Revenue Water situation in cities and strategy to be implemented to achieve service level benchmarks. The assignment also included drafting the policy for the city administration/state government, as the case may be and providing handholding support to the city administration. Key Achievements and Critical Success parameters Following are the key achievements from the project from the activities: S Key Achievements Benefits No 1 Evaluation of current production, This evaluation helped each city know its current transmission and distribution service situation of production, transmission and performance distribution network and its efficiency vis a vis international standard. 2 Develop strategy (3 to 5 years) for The get to know the exact plan which needs to be progressive reduction of NRW with action implemented and cost impact thereof. This helps plan and estimation of cost involved in accurate budgeting and better planning for other urban services. 3 Evaluation of options for implementation Consultants experience with international of NRW reduction strategy practices helps cities get various options for reduction of Non-Revenue Water and their cost impact. 3 Providing a roadmap for rationalization of Once the strategy is chosen, city gets roadmap for user charges and improvement in current NRW reduction and how to go about rationalizing the system to reduce NRW tariffs. 4 Preparation of terms of reference for Consultant’s expertise helps the city preparing performance based NRW reduction custom made ToR for awarding contracts. framework Page 59 of 60 The World Bank Capacity Building for Urban Development Project (P099979) Key Findings 1. Based on the analysis of few of the reports, it is observed that there is a huge potential to increase the revenue collection from water supply. Water supply, which is a loss proposition as off now can result in source of revenue, once suggestion to reduce NRW and tariff rationalization is implemented. Some examples are given in table below Increase in % of Revenue collection against cost of water supply Revenue Collection against cost ULB After implementation of Existing Proposal Jabalpur >50% 156% in 2033 Khammam >45% 131% in 2033 Jagdalpur >25% N.A. Rajnandgaon >63% N.A. Warangal >52% 109% in 2033 2. The proposed water supply coverage to be achieved in the city is reflected in following table: Percentage Increase in Revenue CITY Existing % Proposed % Coverage Basis point Coverage (after 10 years) increase in 10 years Jabalpur 70% 99% 2900 Khammam 47% 100% 5300 Jagdalpur 62% 100% 3800 Rajnandgaon 59% 100% 4100 Warangal 71% 100% 2900 These data showed findings from only five cities. 29 contracts were awarded to consultants to carry out the assignment for Non-Revenue Water Study in 95 cities. Similar types of results are expected to have been achieved in other cities. Page 60 of 60