Document of The World Bank Report No. 16144-BD STAFF APPRAISAL REPORT BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT November 22, 1996 Infrastructure Operations Division Country Department I South Asia Region CURRENCY EQUIVALENTS (as of January 1996) US$ 1.00 - Tk 41.90 Taka (Tk) 1.00 = US$ 0.024 WEIGHTS AND MEASURES 1 centimeter (cm) - 0.394 inch I hectare (ha) = 2.47 acres 1 kilometer (km) - 0.621 mile 1 liter (1t) - 0.220 imperial gallon 1 cubic meter (m3) - 219.9 imperial gallons ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank ADP - Annual Development Program CAS - Country Assistance Strategy CIF - Cost, Insurance and Freight CCC - Chittagong City Corporation CWASA - Chittagong Water Supply and Sewerage Authority DANIDA - Danish International Development Agency DCC - Dhaka City Corporation DND - Dhaka-Narayanganj-Demra DOE - Department of Environment DPHE - Department of Public Health and Engineering DTW - Deep Tubewell DWASA - Dhaka Water Supply and Sewerage Authority EIA - Environmental Impact Assessment ERR - Economic Rate of Return EVZ - Elementary Urban Zones FFYP - Fourth Five Year Plan GDP - Gross Domestic Product GOB - Government of Bangladesh HSD - Housing and Settlements Directorate ICB - International Competitive Bidding IMGD - Imperial Gallons per Day IRR - Internal Rate of Return JICA - Japan International Cooperation Agency NCB - National Competitive Bidding LOI - Letter of Invitation LGD - Local Government Division LGED - Local Government Engineering Department LPD - Liters per Capita per Day MGD - Million Gallons per Day MGY - Million Gallons per Year MLD - Million Liters per Day Vice President: Mr. Joseph Wood (SASVP) Director: Mrs. Mieko Nishimizu (SA1DR) Division Chief: Mr. Marie Robinson (SAlIN) Task Manager: Mr. Jonathan Kamkwalala (SAIIN) MLGRDC - Ministry of Local Government, Rural Development & Cooperatives MOF - Ministry of Finance NGO - Non-Governmental Organization PAP - Project Affected People PCP - Project Concept Paper RAJUK - Rajdhani Unnayan Kattripakha (Capital Development Authority) ROW - Right of Way SOE - Statement of Expenditure SWTP - Surface Water Treatment Plant TOR - Terms of Reference TYRIP - Three Year Rolling Investment Program UFW - Unaccounted for Water UNDP - United Nations Development Program UNICEF - United Nations Children and Educational Fund WASA - Water Supply and Sewerage Authority FISCAL YEAR July 1 to June 30 I I BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Table of Contents Paze No. CREDIT AND PROJECT SUMMARY ...... .................. i I. THE WATER SUPPLY AND SANITATION SECTOR. 1 A. Sector Background. 1 B. Sector Organization. 2 C. Sector Financing. 3 D. Sector Issues and Constraints. 4 E. The Government's Sector Strategy. 5 F. Previous Bank Involvement in the Sector. 6 G. The Bank's Strategy and It's Role in the Sector 8 II. THE PROJECT AREA. 9 A. Urban Area and Features of Water Supply System 9 B. Level of Water Service .10 C. Level of Sanitation Service .11 D. DWASA's Investment Program .11 E. Groundwater Vs Surface Water Options .12 III. THE PROJECT .14 A. Project Origin .14 B. Project Objectives .14 C. Rationale for Bank Involvement .15 D. Project Description .15 E. Project Cost Estimates .18 F. Project Financing Plan .19 This report is based on the findings of an appraisal mission to Bangladesh in August 1994. Mission members were Messrs. Jonathan Kamkwalala (Sr. Financial Analyst, Task Manager), Robert McWilliam (Sanitary Engineer, Consultant), Marco Fierro (Economist, Consultant), and Mohinder Virdy, (Procurement Analyst). Messrs. Arun Banerjee (Senior Operations Officer, Resident Mission), Saibul Huda (Program Officer, Resident Mission), Alf Jerve (Anthropologist) and Zahed Khan (Resettlement Specialist) participated in the project appraisal. The project was re-appraisal in May 1996 by Jonathan Kamkwalala, and Ms. Helen Nankani (Private Sector Development Specialist) and Omar Hayat (Financial Analyst - Consultant) assisted in the revision of the project documents. Peer reviewers are Guillemo Yepes (Institutional Issues), Neil Boyle (Financial Issues), and Geoffrey Read (Technical Issues). The report has been endorsed by Ms. Mieko Nishimizu (Director, SA1). Ms. M. Robinson (Chief, SAIIN). Secretarial support was provided by Ms. Cindy Wong and Ms. Bina Duggal. Page No. IV. PROJECT EXECUTION .20 A. Status of Preparation .20 B. Project Implementation .20 C. Project Management .22 D. Project Supervision .22 E. Project Reporting .23 F. Procurement .23 G. Disbursements .25 H. Retroactive Financing .25 V. IMPLEMENTING AGENCY .26 A. Implementing Organization .26 B. Organization Structure and Management .26 C. Operations and Maintenance .27 D. Billing and Collections .28 E. Unaccounted for Water .29 F. Personnel Management and Training .30 VI. FINANCIAL ANALYSIS .32 A. Past and Current Financial Situation .32 B. Balance Sheet and Fixed Assets .34 C. Current Water and Sewerage Tariffs .35 D. Financial Projections .36 E. Performance Monitoring and Evaluation .37 F. Accounts and Audits .37 VII. ECONOMIC AND SOCIAL ANALYSIS .39 A. Project Benefits .39 B. Economic Rate of Return and Least-Cost Solution 39 C. Fiscal Impact .40 D. Impact on the Urban Poor .40 E. Environmental Impact .41 F. Affordability .42 F. Project Risks .42 VIII. AGREEMENTS TO BE REACHED AND RECOMMENDATION .43 Page No. TABLES 2.1 Water Demand, Supply and Capacity .10 3.1 Project Cost Summary .18 3.2 Project Financing Plan .19 3.3 Procurement Arrangements .23 5.1 Past and Current Financial Statements .32 5.2 Projected Financial Statements .36 ANNEXES Annex 1.1 Water Supply and Demand Annex 1.2 Projected Deficits, Planned Capacity Increase and Investment Program Annex 2.1 The Institutional Reform Program Annex 2.2 General Operating and Financial Policy Statement Annex 2.3 Performance Agreement between the Government of Bangladesh and Dhaka Water Supply and Sewerage Authority Annex 2.4 Contracting out of DWASA Services Annex 3.1 Detailed Description of Proposed Water Treatment Plant Annex 3.2 Detailed Description of Institutional Strengthening, Loss Reduction and Technical Assistance Components Annex 3.3 Terms of Reference for a Strategy Study for Improvement in efficiency the Dhaka Water Supply and Sewerage Sector Annex 4.1 TOR for Improved Sanitation Services Annex 5.1 TOR for the Dhaka Water Resources Management Study Annex 6.1 Detailed Project Cost Estimates by Year Annex 6.2 Sumary of Project Cost Estimate Annex 7.1 TOR for Leak Detection and Loss Reduction Program Annex 8.1 TOR for Management and Operational Support (Twinning) Program Annex 9.1 Land Acquisition and Resettlement Annex 9.2 Procurement Arrangements Annex 9.3 Project Implementation Schedule Annex 9.4 Estimated Disbursement Schedule Annex 9.5 Indicative Supervision Mission Schedule Annex 9.6 Benchmarks for Assessing Progress at Mid-Term Review Annex 10.1 DWASA Current and Proposed Organization Charts Annex 11.1 Assumptions to the Financial Projections Annex 11.2 Actual and Projected Financial Statements Annex 11.3 Water and Sewer Tariffs Annex 12.1 Performance and Monitoring Indicators Annex 13.1 Economic Analysis Annex 14.1 Suimmary of Project Environmental Impact Assessment Annex 15.1 Selected Documents and Data Available in Project Files Mai: IBRD-27130 I i BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Credit and Project Summary Borrower: People's Republic of Bangladesh Beneficiary: Dhaka Water Supply and Sewerage Authority (DWASA) Amount: SDR 51.0 million (US$80.3 million equivalent) Terms: Standard, with 40 years maturity Commitment Fee: Standard (a variable rate between 0 and 0.5% of the undisbursed credit balance set annually by Executive Directors of IDA) On-Lending: Interest rate at 7.5% per annum, 25 years maturity, including five years of grace. GOB will onlend the proceeds of the credit to DWASA. Onlending rates and terms for the Government of France similar to IDA. The Japanese Government financing will be passed on to DWASA as a grant. Financing Plan: See para 3.11 of Staff Appraisal Report Economic Rate of Return: About 22% Poverty Category: Not Applicable Maps: IBRD No. 27130 Prolect Identification No: BD-PA-9482 I FOURTH DHAKA WATER SUPPLY PROJECT STAFF APPRAISAL REPORT I. THE WATER SUPPLY AND SANITATION SECTOR A. Sector Background General 1.1 Bangladesh is one of the world's poorest and most densely populated countries, having an estimated 1995 population of about 120 million people, with about 96 million (80%) living in rural areas. The country faces massive urban population growth challenges due to rural to urban migration, resulting from increased rural landlessness, lack of opportunities in rural areas and the effect of natural disasters in rural areas. It is estimated that between 1974 to 1981, the urban population growth rate was 10.6% per annum, declining to 5.4% per annum between 1982 to 1990, compared to a total population growth rate of about 2.4% annually during the later period. About 8.0 million of the urban population live in the Dhaka metropolitan area, representing about 30% of the total urban population. The disproportionate rise in the urban population has created severe pressure on existing infrastructure and services, including water supply, sanitation, solid waste collection and drainage services. The environmental conditions throughout most of the urban areas of Bangladesh are poor, with discharges of human and industrial wastes into river systems, possible contamination of groundwater from lack of adequate sewerage, and inadequate management of solid waste disposal. These problems are particularly severe in Dhaka, where the population growth rate is comparatively high and where it is estimated that about 45% of the households have incomes below the poverty line. The size of the urban population, combined with limited financial resources, puts constraints on the development of adequate urban infrastructure, particularly water supply and sanitation. Water Resources 1.2 Bangladesh is located in the Ganges-Brahmaputra river delta, one of the largest in the world. The hydrology of Bangladesh is characterized by three major rivers, the Brahmaputra, the Ganges and the tributaries forming the Meghna. The country experiences heavy rainfall during the monsoon, generally more than 1,500 mm annually. This results in abundant surface water, which is usually polluted and requires full treatment involving clarification, rapid sand filtration and disinfection. A very high incidence of diarrhoeal and other waterborne diseases reflects the extent of contamination in the surface water and the extensive use of untreated water from streams, rivers and shallow tubewells. Most of the country, however has underlying sedimentary deposits containing aquifers, which are the main source of groundwater. This water requires little treatment and is used by public water utilities and private institutions as a major source of supply. In the Dhaka metropolitan area, about 95% of the water supplied by the Dhaka Water Supply and Sewerage Authority (DWASA) is from groundwater sources. However, over-abstraction in places, e.g. Central Dhaka, is causing water tables to decline rapidly, resulting in increased abstraction costs, limited water availability in the dry season in some areas, and widespread failure of shallow tubewells. As a result, there is an increasing need to supplement groundwater sources with treated surface water sources. In addition to these water sources, analysis of oil well logs has demonstrated that there is a high probability of finding fresh water in several deep artisan aquifers underlying Dhaka and other areas in Bangladesh at depths of about 2,000 meters (6,560 feet). Potentially, these aquifers could provide partial water supply f or Dhaka. Investigations as to the existence of these aquifers have not been undertaken, and it is believed that initial development costs could be substantial. Nevertheless, the Government regards this source as a possible long-term alternative to current water supply sources in Dhaka and the rest of Bangladesh. Water SuPplY and Sanitation Coverage 1.3 Although accurate data is not readily available, most of the existing water supply services in Bangladesh are not capable of meeting demand requirements. It is estimated that in the urban areas, about 42% of the population has access to reasonably safe water, but the remaining 58% depend on contaminated traditional sources. In rural areas, it is estimated that 77% of the population has access to improved water supply through handpumps. Coverage is higher in rural areas because of an intensive tubewell installation program supported by UNICEF (para. 1.8). 1.4 With regard to sanitation, waterborne sewerage has been introduced only in parts of Dhaka, but elsewhere, there is general use of unsanitary latrines, direct disposal of sewage in open fields and to a limited extent, pit latrines and septic tanks. In urban areas, it is estimated that about 40% of the urban population has access to sanitary waste disposal services. The rural sanitation situation is much less satisfactory, with only 6% of the rural population having access to sanitary waste disposal facilities. Because of the limited sewerage systems and the inefficient sanitary waste disposal facilities, untreated or poorly treated domestic sewage is a major source of water pollution, and the morbidity/mortality rate due to waterborne diseases in Bangladesh is among the highest in the world. B. Sector Organization 1.5 The statutory responsibility for the water supply and sanitation sector is under the Ministry of Local Government, Rural Development and Cooperatives (MLGRDC). The Ministry, together with the Planning Commission share the tasks of sectoral resource allocation, funding and policy decisions, as well as project appraisal, approval, evaluation and monitoring. All projects in the sector are processed through the Ministry. The Ministry's Department of Public Health Engineering (DPHE) is responsible for planning, construction and operating water supply and sanitation facilities in smaller towns and rural areas. In Dhaka and Chittagong, the Government established Water Supply and Sewerage Authorities (DWASA and CWASA) as autonomous agencies responsible for provision of water supply and sewerage services. These authorities also come under MLGRDC as public utilities. DWASA is also responsible for stormwater drainage in Dhaka. In the two cities, the Dhaka and the Chittagong City Corporations (DCC, CCC) are responsible for all other sanitation activities other than waterborne sewerage. Additionally, the Local Government Engineering Department (LGED), also under the Ministry, is responsible for providing technical assistance to sanitation and other municipal services to district towns that do not have municipal corporation status. DPHE and LGED assist local governments to construct water supply and sanitation facilities, either through donor or Government financing. The -3- mandates of these two agencies are not very clear, and their responsibilities overlap at the district and town level. DPHE lacks adequate manpower and the institutional capacity to provide support to the projects it implements in district towns. As a result, most of its schemes are not sustainable. LGED has better implementation capacity; however, its focus has been on physical implementation aspects rather than improvement of the institutional capacity of the municipalities. C. Sector Financing 1.6 Sector development in Bangladesh has mainly been financed by donor assistance, which has been mainly responsible for the tenfold increase (from a low base) in availability of water supply. Although the Government has declared its intention to develop safe water supply and sanitation, the level of investment in the sector has remained very low due to funding constraints. Between 1973 and 1990, public outlays for water and sanitation steadily dropped from 2.48Z, 2.14% to 1.25% of development expenditures in the first, second and third five-year plans respectively. This is significantly below allocations in other comparable countries in Asia, e.g., Sri Lanka (6.0%), Nepal (4.0%) and Myannmar (2.9%). In the Fourth Five-Year Plan (1990-1995), allocations to the sector were budgeted to be 1.41% of the development expenditure, which is too low even to meet the physical targets of the plan. The most recent three-year rolling investment program (TYRIP) for FY95-97, however, shows a reversal to this trend. Allocations for this period were 4% of the total expenditure. 1.7 IDA has been the main donor in the urban water supply sub-sector, having financed a total of five projects, (two in Chittagong and three in Dhaka), for a total investment of US$108 million. The basic objective of these projects was to improve the level of water supply services in the cities of Dhaka and Chittagong and the efficiency and performance of the utilities. The Asian Development Bank (ADB) has been involved in financing water supply and urban infrastructure in secondary towns and districts. In addition, ADB has also been involved in an Urban Infrastructure Improvement Project in Dhaka, which includes a component being implemented by DWASA, to provide water supply in low cost housing areas. The Netherlands Government has also assisted the Government with two projects (12 District Towns Project and 18 District Towns Project) to improve water supply and sanitation focusing on extension of hygiene education, service expansion and community involvement. 1.8 In the rural water supply and sanitation sub-sector, development activities have been supported by the UNICEF, the World Health Organization, the UNDP/World Bank Sanitation Program, Danish International Development Agency (DANIDA) and the Swiss Development Corporation. Although these donors' focus has been rural, some of their work has extended to urban slum and peri-urban areas. Most of the assistance in this sub-sector has financed the development and installation of handpumps in rural areas and low-cost sanitation facilities (i.e., latrines). UNICEF's program has been very successful in increasing water supply coverage in rural areas. Continued assistance by UNICEF, however, is now being limited due to funding constraints. Most UNICEF assistance expired in FY95, with no funding allocated for FY96. Total allocation for rural water supply in the TYRIP was 12, which is clearly inadequate. 1.9 Although DWASA and CWASA are supposed to be commercial and autonomous, their capacity to generate financial resources to finance their own investments has been limited. Donor resources for financing investments in the sector have normally been supplemented by Government equity contributions and grants. For operations and maintenance, tariff levels have generally been inadequate to fully meet all operating costs and cover debt servicing costs. The resulting deficits are usually financed by the Government indirectly by not servicing debt and interest. D. Sector Issues and Constraints 1.10 A number of issues hinder sector development and performance. These include problems related with inadequate funding of investments and poor resource mobilization; the Government's management of the sector, lack of commercial orientation in operations; and a weak planning capacity. Fundina of Investments and Resource Mobilization 1.11 The availability of local funds to support investments in the sector is generally inadequate. Government counterpart funds, even when budgeted for, are not always made available when required, due to competing demands, thus delaying project execution. Inadequate tariffs, poor revenue collection and a high level of systems losses in the sector institutions (DWASA and CWASA) hamper the mobilization of adequate internal resources to finance capital expenditures for water and sanitation. In the municipalities, revenues are totally inadequate to finance development and operating expenditures. A 1986 analysis of 42 district towns shows that revenues on average covered only 29Z of current expenditures. Foreign assistance through multilateral sources accounts for about 80Z of investments in the sector. Sector Manazement 1.12 Overall sector management is characterized by Government control and interference in the planning and operation of the water sector entities. While DWASA and CWASA are supposed to be autonomous, most management decisions, including tariff reviews and adjustments, staffing and investment decisions have been controlled by the Government through MLGRDC. There are no clearly defined guidelines for sectoral development or mandates for DWASA and CWASA's operations. As a result, the WASAs have never had real commercial or management autonomy, which has significantly hampered their performance. In addition, management and staff of these sector institutions lack the necessary skills, experience and training to effectively manage, operate and maintain the systems. Lack of Commercial Orientation 1.13 DWASA and CWASA also suffer from a lack of commercial orientation and accountability, poor management systems, and shortage of trained and motivated staff. Poor billing and collection practices, a high level of unaccounted-for- water, and high accounts receivable arrears are typical examples of this lack of accountability. In a local zone serviced by DWASA, it was estimated that the level of unaccounted for water was as high as 53% in FY93, thus reducing revenue significantly and resulting in higher tariffs for the population paying the bills. Of this, a large percentage (about 35%), is attributable to technical losses while the remaining losses are classified as commercial or administrative losses, e.g. under-billing as a result of unmetered connections, illegal connections, inaccurate and tampered meters and rent-seeking activities of the meter inspectors. Weak Plannina Cai,acitv 1.14 Development in the sector tends to be adversely affected by optimistic and ambitious goals that do not take into account the physical and financial capacity of the sector institutions to carry out investments programs. Sector development activities are planned on a project by project basis, without a guiding framework. In addition, lack of a clear operation and maintenance programs and funding makes planned investments unsustainable. As an example, in DWASA and CWASA, planned maintenance is limited to pumping stations and does not include regular checks on distribution system mains for leaks. E. The Government's Sector Strategv 1.15 The Government recognizes the urgent need to improve water supply and sanitation in Dhaka and other areas. The Government also acknowledges the poor performance of the water supply utilities, and how this performance has affected efficient provision of water and sanitation services. The Government's sector objective is to improve health and human productivity through the development of services that are affordable and sustainable to as many people as possible, while improving the efficiency of the sector institutions. The Government's policy and strategy for water supply and sanitation sector development as seen in the context of the national development strategy outlined in the Fourth Five-Year Plan emphasizes, among other things, a "gradual shift of public service delivery agencies from being providers of service to facilitators", and to encourage the mobilization of local resources. Such a shift implies a move by the Government from public provision of services to that of setting policy, while increasing the role of the private sector in providing such services. Local resource mobilization is especially important because the Government's efforts to improve water supply and sanitation services in Dhaka and other areas are constrained in part, by a lack of adequate resources. In addition, investments in the sector are usually lumpy, requiring significant financial resources to implement planned capacity additions. IDA's 1989 Country Economic Memorandum (Bangladesh: Public Expenditure Review, Public Resource Management during the Fourth Five-Year Plan, (FFYP) FY91-95) identified major investments on the order of $350 million as being necessary for the water supply sector during the FFYP period. Because of resource constraints, the Government's medium terms strategy is to emphasize the rehabilitation of existing systems, where possible together with improvements in efficiency, operations and maintenance. This rehabilitation would need to be followed with carefully planned expansion of selected new systems, to provide acceptable service to the rapidly expanding population. Such programs would have to be accompanied by institutional strengthening, institutional and policy reforms to bring about efficiency in operations and improvements in service levels at the least cost possible. The proposed project follows this strategy. The proposed new investments represents less than 50% of the investments identified for the FFYP, but with efficiency gains expected from policy and institutional reforms, substantial benefits would be achieved in service provision. The project follows from the Third Dhaka Water Supply Project, which financed substantial rehabilitation of the existing distribution system. - 6 - F. Previous Bank Involvement in the Sector 1.16 IDA's lending to the water sector supply dates back to the 1950's. A review of IDA's experience in lending to the water supply and sanitation sector was recently undertaken with the objective of ascertaining the impact of Bank involvement and refining some of the lessons of the experience (Water Supply and Sanitation Projects, The Bank's Experience - 1967-1989). The report highlighted several areas where IDA assisted projects had failed to achieve stated objectives. The most persistent problems include inadequate pricing, high unaccounted-for-water, poor financial management and cost recovery. Other principal areas of concern include the lack of autonomy from the central authority, continuous political interference, lack of continuity of top management, and poor incentives. The lessons learned from this study were: (i) institutional performance, particularly in the areas of operations and maintenance, unaccounted-for-water and human resources management, has been good only where there was autonomy in utility management and an arms-length regulatory system; (ii) sector organizations have relied too much on Government involvement and public finances; (iii) the environmental impact of water projects were not well documented, and the environment may have suffered as a result of weaknesses in sector institutions and key policies, like pricing; and (iv) project components, and related financial and operational covenants, did not specifically address broader policy or development objectives, thus contributing to poor sustainability. 1.17 IDA's experience in South Asia, and in particular in Bangladesh, reflects this experience. In Bangladesh, IDA has assisted the Government in the water supply and sanitation sector since 1963, having financed five water supply projects in the cities of Dhaka and Chittagong. The First Dhaka Water Supply Project (Credit 368-BD, 1973) was initially approved in 1963 as Credit 41-PAK for US$26 million. This was later reduced to US$13 million, and financed groundwater development involving tubewells and strengthening and extension of the existing sewerage system. Implementation of this project was delayed due to the political events that led to Bangladesh's independence from Pakistan. The Second Dhaka Water Supply Project (Credit 941-BD) approved in 1979 (US$20.5 million) helped finance more tubewells, water distribution system improvements, elevated service reservoirs, service connections, training and consulting services. The Third Dhaka Water Supply Project (Credit 1734-BD), approved in 1986 (US$35 million) and completed in March 1994, helped finance the upgrading and expansion of the water supply and sanitation facilities in Dhaka and the surrounding areas. In Chittagong, the First Chittagong Water Supply Project (Credit 367-BD, 1973) approved as Credit 42-PAK in 1963 provided US$20 million to finance groundwater development, extension of the distribution system, metering and technical assistance. The Second Chittagong Water Supply Project (Credit 1001-BD) of US$20 million financed the development of a surface water treatment plant and the extension of the distribution system. 1.18 While physical objectives of these projects were basically met and the water supply increased substantially, the financial and institutional objectives were not fully met. A review of the performance of the Third DWASA Project provide a good example. The project development objectives were to improve DWASA's operational and financial performance, to strengthen sectoral training and sectoral planning and to address immediate needs for additional supplies of water and sanitation services. Some of the specific objectives were to: (a) continue the institutional development of DWASA emphasizing operational efficiency, cost recovery and manpower development; (b) further develop Dhaka's groundwater resources in order to increase cost-effectively the supply of potable water and expand distribution of water to areas where service is poor or non- existent through additional connections; (c) strengthen DWASA's control of leakage and unaccounted-for-water, and rehabilitate parts of DWASA's distribution system; and (d) extend secondary sewer to areas in which conventional sewerage is affordable to maximize the existing waterborne sewerage system. A review of progress against original project components at project completion showed that DWASA exceeded original physical targets, and increased water production by 42% beyond the targets in the appraisal report, and provided water to an additional 100,000 people. 1.19 Financial and institutional performance was, however, not fully satisfactory. Although DWASA's revenues during the project period were close to appraisal estimates, DWASA was unable to meet financial covenants set under the project. Several reasons explain this performance. First, the financial and institutional objectives established in the project were not supported by actual components to address identified problems or to provide monitorable indicators. There were no specific components in the project to improve financial and institutional performance, or to help DWASA meet financial covenants. As a result, DWASA did not have a clear perspective of why its performance was considered unsatisfactory especially since actual results were in line with projected performance. Even if DWASA had fully met physical and financial covenants, its institutional and operational performance would still be weak, since issues like poor management performance, system losses and poor efficiency were not particularly addressed under the project. Secondly, DWASA's poor performance was also caused by excessive control of the institution by GOB which created obstacles to good performance. Lack of commitment to financial objectives resulted in GOB's refusal to authorize required tariff increases to compensate for increases in operating costs. In general, implementation was delayed due to problems associated with political transition in the earlier projects and procurement problems, primarily in the appointment of consultants. Lessons Learned 1.20 The implementation issues of the Third DWASA Project indicates clearly that it is not sufficient to concentrate on financial and operational covenants, financial results, and related tariff adjustments to bring about sustainable changes in the institutions' operating practices. A more sustainable reform program must address the underlying institutional arrangements, or more specifically the relationship between the Government and the operating authority. A more sustained policy dialogue with the Government on the need for reforms prior to project processing is also necessary to ensure Government commitment to required reforms. In addition, project objectives need to be clearly reflected in specific actions and programs in the project components, with monitorable targets and output indicators. 1.21 In preparing the proposed project, this approach has been followed in designing the reform program to enhance DWASA's efficiency. The strategy involves public enterprise reform and contracting out some services. At the same time, the Government would develop a strategy for mobilizing finance and increasing efficiency. The scale of investment requirements means that this strategy will require greater private sector participation, probably through a concession. Under the public sector reform strategy, the institutional reform program and its components address the broader sector objectives and draws on the lessons learned as follows: (i) the comprehensive modification of the WASA -8- Ordinance and the establishment of a Policy Statement, aimed at reducing Government interference in DWASA operations and increasing its autonomy; (ii) the proposed leak detection and rehabilitation program, the Twinning Program, the plan to contract out DWASA services and the Crash Meter Installation Program will reduce unaccounted-for-water and improve operations and maintenance; (iii) pricing issues are being addressed under a program to revise the tariff structure, based on Tariff Study undertaken as part of project preparation; (iv) environmental issues and the need for strategies in water resources management that strike an adequate balance between competing uses of water are being addressed under the Water Resources Management Study and the strategic sanitation program in the project; and (v) necessary studies would be carried out for identification of the specific privatization alternatives, and identification of changes needed in the legal/regulatory framework. G. The Bank's Strategy and It's Role in the Sector 1.22 The Bank's objectives for lending to the water supply and sanitation sector seeks to achieve four objectives. First, the Bank seeks to assist the government to achieve the least-cost solution to providing water supply and sanitation services. Second, the Bank seeks to foster institution building, including the ability by the Government to plan and facilitate national or regional programs by mobilizing adequate resources necessary for sector development, through multilateral and private sector participation, and establishing a sound regulatory and pricing framework including adequate pricing. Third, the Bank seeks to act as a catalyst for attracting increasing amounts of investment finance. Finally, the Bank seeks to ensure the availability of a minimum supply of safe water and sanitation facilities to an increasing share of the population, particularly lower income groups. 1.23 The Bank's role in the sector is to assist the Government in implementing its sectoral program through the provision of much needed financial resources and in gradually resolving the sectoral issues and constraints mentioned above. The Bank's involvement in the sector has been instrumental in helping the Government to develop and implement feasible and least cost water supply and sanitation investments in urban areas in Bangladesh. More recently, the Bank has been instrumental in helping the Government gradually develop institutional and financial reforms and policies for the sector. This is consistent with the overall public sector reform strategy as defined in the FY96 country assistance strategy (CAS). The CAS emphasizes reduction of public sector losses and increasing their efficiency as urgent priorities, particularly for public enterprises, like DWASA. The proposed reforms under the project which involve commercialization of DWASA through introduction of private sector participation, leading to privatization arrangements during implementation, are consistent with the CAS strategy for reforming state owned enterprises. The proposed program under this project is considered the first phase of sector reform. It will be followed by a water supply and sanitation sector study that will focus, inter alia, on overall sector reform, using Dhaka as a case study. The sector work will cover needed changes in the legal and regulatory framework, the roles of the public and private sectors in meeting investment needs and achieving operational efficiency and will provide an action plan for facilitating private sector entry. Provided that agreement is reached with the Government on such an action plan, the Bank would expect to support sector restructuring through future operations. - 9 - II. THE PROJECT AREA A. Urban Area and Features of Water Supply System Background 2.1 The City of Dhaka is the administrative, commercial and industrial center of Bangladesh. Dhaka's population has grown rapidly in recent times, the highest growth rate (12.5%) being achieved between 1971 and 1985. It is estimated that the metropolitan Dhaka's current population is about 8.0 million, approximately 30% of the total urban population. By the year 2000, it is estimated that Dhaka will have a population of about 9.6 million. It is estimated that about 45% of Dhaka's population lives below the poverty threshold. The greater Dhaka area includes the township of Narayanganj, located on the southwest part of the city. 2.2 Dhaka and Chittagong are the major economic centers of Bangladesh, and approximately two thirds of the current employment in these two cities is in the informal sector. Dhaka's economic growth depends on the small scale, manufacturing industry, which accounted for 80Z of its GDP in 1993. The city's strategy is to encourage the growth of processing and manufacturing, including garment manufacturing, food processing and jute processing which together account for one-third of the workforce. Manufacturing and the informal sector will be critical to future labor absorption and provision of the bulk of the employment to the urban poor in Dhaka, which has 36% share of the national large scale manufacturing activity. The Water Supply and Sewerage System 2.3 Up to 1989, the service area of DWASA was confined within the metropolitan area. At the beginning of 1990, the Narayanganj area was included within the jurisdiction of DWASA. At present, the service area extends in the north to Mirpur and Uttara, and to Narayanganj in the south. Water supply to the greater Dhaka area has increased ten-folds since the 1960's. However, the quantity of water produced per capita has not increased much because of the rapid population growth of the city. Current water production is estimated at 768 million liters per day (mld) (166.0/IMGD). Out of this total, 729 mld (95%) is produced from about 181 tubewells in Dhaka City and about 8 mld (1%) from 9 tubewells in the Narayanganj area. The Chandnigat Water Treatment Plant, located in Dhaka produces about 16 mld (2%), while two treatment plants located in Narayanganj produce 15 mld (2%). In 1995 gross requirements for water were estimated to be about 1,150 mld, and expected to grow to 2,482 mld by 2000. The total forecasted demand and supply of water from DWASA is shown in Annex 1.1 and summarized in Table 2.1 below. The forecast is based on the projected growth in the population of Dhaka and increased water consumption. The supply outlook is based on the implementation of the phases of DWASA's long-term investment program. Even with the planned additions to DWASA's capacity, Dhaka is going to continue to face water shortages during the investment program period (1996- 2020). - 10 - Table 2.1 Water Demand. Supply and Capacity 1995 2000 2010 2020 Total Requirements (IMGD) 262 302 388 546 Installed DWASA Capacity (IMGD) 192 266 386 503 Production (IMGD) 166 256 375 491 Water Shortage (1I4GD) 96 46 13 55 2.4 At present, DWASA has about 160,080 service connections, of which 110,177 are metered. The present water supply distribution system extends over some 1,260 km with diameters ranging from 450 mm to 75 mm, and pipe materials comprising asbestos cement, poly-vinl chloride (PVC) and mild steel of various ages and quality. However most of the system is reported to be of steel, over 50 years old, corroded in many places and in need of repairs, in particular, the secondary distribution system which consists of pipes made from materials that have been phased out. All operating deep tubewells are connected to this distribution system, but supply is localized to the area in which the tubewell is located. The pressure is generally low, ranging from 2 to 4 meters in the south and central part of the city, with slightly higher pressures in some parts of the city. There are supply deficiencies throughout the city, prompting complaints from consumers. A total of 35 elevated storage reservoirs are provided in the system, but because of the large demand for water and the low pressure in the system, the water is pumped directly into the distribution system, by-passing the elevated reservoirs. The project will provide an expansion of the distribution system network, expected to provide water to an additional 500,000 people, as well as reducing suppressed demand over the whole DWASA area. 2.5 Dhaka's sewerage system extends over 450 km, and consists of lateral and trunk lines, interceptors and lift stations. Due to the flat terrain of the city, sewage flows by gravity to lift stations, until it reaches the Pagla Treatment facility, from which the treated effluent is discharged into the Buriganga River. Currently there are about 40,790 sewer service connections, covering only 29% of the population served by DWASA water supply. Waterborne sewerage is expensive and the investments involved are beyond DWASA's resource capability. With the increasing population, it will be necessary for DWASA to pursue less costly on site sanitation alternatives, including rehabilitation of the existing system to ensure that the majority of the population has access to safer sanitation services. B. Level of Water Service 2.6 At present, it is estimated that the population served by the DWASA water service is 4.1 million, representing about 65Z of the total population of DWASA's service area, and only 50Z of the population of the metropolitan Dhaka area. Actual production is estimated at 166 IMGD, while total billed consumption in FY95 was estimated to be 80.0 IMGD. Of the total population served, approximately 92%, equivalent to 3.6 million are supplied through house connections while the remaining population (300,000) is supplied through 1,680 - 11 - standposts located in high density areas throughout the city. Presently, the population served through house connections is estimated on the basis of 24.4 people per connection, while the population per hydrant is estimated to be 175 people per hydrant. This is considerably higher than other countries, but reflects the crowded conditions of most housing areas in Dhaka, the tendency in Dhaka to live in high rise apartments, and the high population growth rate. The projections further assume that the average number of households per connection is 2.4. 2.7 About 7%-12Z of DWASA's customers in Dhaka (excluding Narayanganj) are classified as commercial and industrial. Commercial customers include hotels, office building and restaurants, while manufacturing and processing industries, e.g., tanneries are classified as industrial. Most industrial and large commercial concerns have a private supply, usually obtained by installing a deep tubewell. This explains the lov level of industrial and commercial consumption from DWASA's supply. Until recently, such private tubewells were unregulated, leading to excessive groundwater abstraction and wasteful water use practices and threatening the availability and sustainability of groundwater as a long-term resource. Recently, the Government introduced legislation to regulate groundwater use, by requiring all private tubewells to be formally registered with DWASA and users to pay an initial and annual license fee. Although this legislation is in place, enforcement is very weak, and most tubewells still operate unregulated. A review of the regulatory framework for the water resource use will be conducted under the Water Resources Management Study in the project to address in the management of water resources, including the effective control of private and industrial use (para. 3.7(d)(ii)). C. Level of Sanitation Service 2.8 At present, Dhaka does not have an adequate sewerage and sanitation system. The waterborne sewerage system operated by DWASA only covers about 15% of the total population of Dhaka (or 29% of the population in DWASA service area). It is estimated that another 30% of the population uses approximately 50,000 septic tanks and another 15% have access to bucket and pit latrines. The remaining population do not have any form of acceptable sanitary disposal system. Much of the sewage collection system is in poor condition due to lack of a proper repair and maintenance program, which leads to sewage overflow into storm drains during the rainy season. This results in insanitary conditions, which are aggravated by the lack of a well functioning sullage drainage system. Under an ADB financed project, DWASA is installing a "small bore sewerage system" in Mirpur. Other programs include a recently completed rehabilitation of the Pagla Treatment Plant, financed by JICA, and a sanitation component under IDA's Urban Development Project (Credit 1930-BD) involving the construction of latrines in slum areas. The proposed project includes a technical assistance component for the preparation of a comprehensive long-term program to address sanitation and sewerage issues in Dhaka, including the execution of priority investments for low cost sanitation and sewerage system rehabilitation. (para. 3.7(c)(iii). D. DWASA's Investment Program 2.9 In order to meet future water demand, four alternative programs were considered under the long term investment program for water supply and sanitation. These alternative programs are combinations of expansion phases of - 12 - surface water treatment plants at two sites (Saidabad, from the Lakhya River and Friendship Bridge, from the Buriganga River) and the development of additional tubewells conjuntively to supplement surface water sources. However, in the short run the Friendship bridge alternatives were shown to present problems due to possible pollution at the identified site, and land acquisition difficulties. The alternatives were thus reduced to different phases of the Saidabad plant. For future groundwater development, the basic decision of investments must be based on an in-depth analysis of the technical aspects of groundwater resource availability, and a well-defined and enforceable plan to regulate private and public production from groundwater. 2.10 _ Annex 1.2 shows the various components of the long-term investment program. This program represents the priority investments needed to reduce water shortages and meet future demand from 1996 to the year 2020. The basis of the investment program is a least cost combination of deep tubewells and surface water treatment plant. Included in the program are activities to expand sewerage, costing about US$1.2 billion. Clearly, these would be reviewed and evaluated in the context of available financial resources. However, sanitary conditions in Dhaka are poor and deteriorating (current coverage is about 15%), and investments in sewerage expansion are critically needed. The sanitation component under the project will redefine the sewerage investment program to identify less costly options for sanitation in Dhaka, including investments in low cost sanitation to be undertaken in the medium term. 2.11 The total long-term investment program for water up to 2020 is US$588 million, which involves capacity additions from surface water of 50 IMGD in 1999 and 2008, and 100 IMGD in 2016, and deep tubewell field construction in 2002/03. However, the development of deep tubewell capacity will have to be based on an assessment of groundwater sources and a plan for adequate management of the aquifer based on the results of the Water Resources Management Study in this project. IDA's involvement in the program is a time slice of US$175.8 million (30%) in the first phase, whose objective is to reduce supply deficits, and improve the distribution network to reduce losses. 2.12 The program would allow for modest increases in water supply and sanitation coverage. Much larger investments would be required if adequate coverage (over 90% for water and 60% for sanitation) is to be provided for Dhaka. Such investment requirements are beyond the financing capability of the Government and donors. Under this project, a study to assess private sector participation in DWASA would also explore private financing for the accelerated investment program. E. Groundwater Vs Surface Water Options 2.13 DWASA's earlier projects financed by the Government and IDA developed water supply primarily from groundwater sources. However, the need for a surface water treatment plant to increase the water supply in Dhaka has been recognized for some time due to the considerable lowering of the groundwater table in Dhaka. Studies undertaken during the preparation of the Third Dhaka Water Supply Project (Cr. 1734-BD) recommended the construction of a surface water treatment plant as the next major investment for water supply for Dhaka (Report No. 5964-BD). Under - 13 - Credit 1734-BD, a Dhaka Region Groundwater and Subsidence Studyl was undertaken with the objective of assessing the impact of construction of additional tubewells within the Dhaka area to the current groundwater levels. Specific objectives were to: (a) assess the impact of increased groundwater abstraction in the greater Dhaka area; (b) quantify future groundwater abstraction, wellfield location and management of groundwater resources; and (c) evaluate the effect of increased abstraction on the compaction of clay and silt layers overlying the main aquifer. 2.14 The findings of this study showed that groundwater levels beneath Dhaka City have fallen steadily over the last 25 years in response to continually increasing abstraction. Water levels have dropped in the Motijheel, Tejgaon and Old Dhaka areas and reached a maximum depth of 20 meters below ground surface levels in 1989 (from about 3 meters in 1965). The groundwater resource model developed under this study also showed that if no new wells are commissioned in Dhaka City and the existing wells continue to operate at their present discharges, a steady state would be achieved by 1992/93 without reducing the capacity of the existing DWASA tubewells, although there would be reduction in yields in private wells whose pumps were set at depths of less than 20 meters. If additional wells were commissioned, the groundwater level would continue to fall, thus affecting the yield of existing DWASA wells. The study however noted that abstraction in Dhaka City did not affect groundwater levels in wellfields outside Dhaka City (North and West of Dhaka, Savar, Tongi and Keraninganj). 2.15 Based on this analysis, the study recommended that subject to further investigations, there should be limited development of groundwater between Dhaka City and Narayanganj because of limited recharge potential, and the risk of increased drawdown in the groundwater. While the study recommended development of groundwater in the areas outside the city, it also noted that this may cause some adverse effects to irrigation and industrial users who are located in these areas. The study also noted that the cost of bringing water from outside Dhaka into the city could be high (transmission pipes, land acquisition, river crossings); thus, it recommended that well fields outside the city should be developed for localized supply instead of supplying the city. 2.16 The economic costs of bringing water from these areas for Dhaka City were analyzed during the preparation of this project. Based on this analysis, it was concluded that the most effective option in the short-run would be the development of surface water to supply water to Dhaka City, coupled with the development of wellfields outside Dhaka in the medium term, to meet needs as the city expands closer to those areas. 1 EPC, Mott MacDonald, Camp Dresser McKee, "Dhaka Region Groundwater and Subsidence Study" Volume 2, May 1991. - 14 - III. THE PROJECT A. Proiect Origin 3.1 In the past three decades, the Government of Bangladesh has sought to formulate a long-term water master plan for the city of Dhaka, using the least cost method and utilizing available water resources to alleviate water shortages in the city. A feasibility study and the master plan, financed by bilateral donor assistance was prepared in 1992. Project preparation since the completion of the study emphasized on reaching agreement in principle with the Government of Bangladesh on the institutional and financial reforms required to enable DWASA to operate with more autonomy and efficiency as a truly independent commercial utility capable of generating adequate revenues to cover all its operating and maintenance costs, and servicing its debt. Agreement in principle on the reform program was a condition to further preparation of the physical components of the project. 3.2 The project represents the least cost feasible solution for the provision of 50 IMGD to meet demand projections. As discussed above, the development of an equivalent 50 IMGD well field source at Keraninganj, on the right bank of the Buriganga River (including transmission, and access roads) to supply Dhaka City is estimated to exceed the cost of the Saidabad surface water treatment plant and transmission, not counting the cost of well replacements which would be necessary over the life of the project. Deep tubewells will require to be redrilled every 10-15 years just to maintain output. 3.3 Difficulties with the well-field solution include the acquisition of agricultural land, access and technical problems with the river crossing. The development of surface supplies will also help arrest the continuing decline in the water table which is resulting in higher pumping costs in the most depleted areas of the well field. This draw-down eventually leads to the suspension of production altogether. DWASA on average, is currently replacing seven tube-wells every year. The project is justified on economic, financial and technical grounds as the next step for DWASA in the provision of safe drinking water in Dhaka. B. Proiect Obiectives 3.4 The basic objectives of the project are: (i) to commence a program of institutional reforms that would lead to efficient operation of the water and sanitation sector in Dhaka on a commercial basis and prepare a strategy to enhance private operations and mobilize private finance; (ii) to increase the life of existing assets and reduce water losses through a water loss reduction and rehabilitation program; (iii) strengthen water resources management for the greater Dhaka area, by optimizing use of available water resources in the most economic and environmentally acceptable way; and (iv) to increase potable water supply in the Dhaka area by effectively utilizing available surface and groundwater resources to expand water supply in the Dhaka metropolitan area. 3.5 The focus of the project is on: (a) institutional strengthening and achievement of financial and operational autonomy to ensure that DWASA, within a reasonable time frame, is able to provide efficient and reliable services; and (b) increasing available water supply to alleviate shortages through loss reduction and capacity additions. The institutional components of the project - 15 - will address some of the key sectoral constraints identified, namely the lack of commercial orientation in DWASA operations, weak planning capacity and excessive control by GOB on DWASA's day-to-day operations. This effort is consistent with the country objectives for public enterprise/utility reforms. The physical components will improve DWASA's capacity to provide water supply and sanitation services more efficiently and expand its service to new areas. Technical assistance will support better operations under a private sector manager supported with a twinning arrangement, and including a study leading to a higher degree of private sector participation and mobilization of private finance. C. Rationale for Bank Involvement 3.6 IDA has supported GOB and DWASA develop and improve the urban water supply and sanitation sector for many years. While much has been accomplished on the physical side, the increase in water produced per capita has been marginal due to the high population growth of Dhaka and other urban areas. Further investments are required to rehabilitate the system, reduce losses and increase supply. Institutional performance has been unsatisfactory, while financial performance has been erratic. The objectives being pursued in this project are part of the broad fundamental reforms IDA is pursuing in the country's public utility sector including power and gas as well as water. This approach is built on the recognition that the investments needed in these sectors to support growth and public welfare exceed the fiscal prospects of the public sector; it also recognizes that successive governments have not been able to produce efficient, financially self-sustaining public utilities. It looks to maximizing the role of the private sector, under a sound, transparent and independently administered regulatory framework. Furthermore, as the lead donor in Bangladesh, IDA can play a major catalytic role by giving the Government's institutional reform program the support it needs, by encouraging the Government to continue with the reform process and sustain its momentum and by assisting in coordinating donor participation within the reform framework. IDA's involvement will also assist in the orderly and efficient development of the sector by helping DWASA better define and rationalize its investment options, GOB to plan and analyze such investments to increase availability of water and sanitation services, promote private sector participation and better water resource management, and finally help define a sanitation strategy for Dhaka. The Bank's involvement will also afford DWASA opportunities to draw on the Bank Group's experience in utility reform in other countries. D. Prolect Description 3.7 The project components are described in detail in Annexes 2.1, 2.2, 2.3 and 2.4, 3.1 and 3.2 and will include major activities as follows: - the institutional reform program; - capacity additions and service extension; - loss reduction, sanitation and efficiency improvement activities; - institutional development technical assistance; and - project preparation and implementation support technical assistance. - 16 - (a) The institutional reform Program: This includes: (i) amendment of the WASA Ordinance to provide DWASA with operating conditions that would approximate those of commercial organizations established under the Companies Act, and obtain greater autonomy from GOB by strengthening and streamlining DWASA's existing Board to establish a Board of Directors along the lines of commercial utilities; (ii) defining the Board's role on policy matters relating to corporate planning, tariff setting, staffing, appointment of senior management and remuneration, with the objective of separating the responsibilities of the Government, the Board and management. Under this arrangement, the Chairman of the Board would be appointed from outside the Government while the Board would appoint the Managing Director of DWASA, subject to GOB confirmation. A draft Policy Statement is attached at Annex 2.2; (iii) establishing and enforcing management accountability by requiring DWASA to meet operational and performance targets; (iv) re-organization of DWASA's activities into profit/loss centers to introduce transparency into operations; and (v) introduction of activities to involve private sector participation in DWASA operations, including possible concession arrangements. (b) capacity additions and service extensions: (US$140.9 million) This will mainly consist of the construction of a 50 IMGD conventional surface water treatment plant and associated works, including transmission lines. Sub-components under this include: (i) land acquisition for intake, culvert and the treatment plant site (US$24.5 million); (ii) treatment plant and associated work consisting of intake structure and pump station (6.6 cu.m./sec) at the Lakhya River (US$3.7 million); rehabilitation of the DND Canal and site development (US$3.0 million); construction of a 1.7 km culvert from DND canal to the treatment plant site (US$3.8 million); treatment plant electromechanical equipment and civil works, including mixing tanks, flocculators, pump stations, settling basins, filters, sludge recovery facilities and ponds (US$76.8 million); ancillary works, administration and office buildings (US$2.6 million); and 38 km of primary and secondary transmission mains (US$26.6 million); (c) loss reduction. sanitation and efficiency improvements: (US$18.0 million) This will consist of various actions to reduce water loss, increase revenue and improve DWASA efficiency, including a sanitation program. Subcomponents include: (i) a distribution system rehabilitation program consisting of a Leak Detection Program to identify physical leaks in DWASA service - 17- area (US$1.2 million); a system rehabilitation program based on the results of the leak detection activities (US$8.0 million); and a tubewell regeneration program to replace rehabilitate, and reset low yielding tubewells (US$1.0 million); (ii) expansion of service connections, consisting of a tertiary distribution system and connection program (US$1.9 million); and a Crash Meter Installation Program to reduce unmetered connections to about 5Z within two years (US$1.0 million); (iii) an improved sanitation program consisting of a study and preparation of a sanitation master plan for Dhaka for the period 1996-2020 (US$0.8 million), and first stage investments in low cost sanitation and rehabilitation of selected sewerage systems assets (US$4.2 million); (d) Institutional Development Technical Assistance: (US$8.9 million). This will consist of institutional strengthening to support the following programs and studies: (i) Management and Operational Support (Twinning) Program from an efficient utility to assist DWASA improve its financial and operational performance and efficiency (US$4.0 million); (ii) a Water Resource Management Study of the Dhaka Region to obtain adequate knowledge for management of water resources in Dhaka and effectively monitor and regulate the quantity and quality of water in the region (US$1.3 million); (iii) a program to contract out DWASA billing, collections and meter repair services to the private sector (US$0.8 million); (iv) management support to senior contract staff on fixed term appointment to provide needed incentives to retain staff with necessary skills (US$0.9 million); (v) a training program for DWASA staff to improve skills in the commercial operation of utilities (US$1.1 million); and (vi) a study to assess options for private sector participation including a strategy for mobilizing private financing and improved efficiency, leading to increased private sector participation (US$0.8 million). (e) Prolect Preparation and Implementation Support Technical Assistance: (US$8.1 million). This will consist of the following subcomponents: (i) miscellaneous equipment (motor vehicles, computer equipment, meters etc) to support institutional strengthening efforts (US$1.7 million); (ii) consulting services for the design of ancillary works, the drafting of the revised WASA Ordinance; (US$0.1 million); - 18 - (iii) construction supervision of the treatment plant, distribution system, and consulting services for a Network Analysis (US$6.2 million); and (iv) consultancy services to assist DWASA implement a revised tariff structure (0.1 million). E. Proiect Cost Estimates 3.8 The total project costs, including contingencies is estimated at US$175.8 million equivalent (Taka 7.4 billion), of which US$88.1 million (50.1Z) is in foreign exchange. The project cost includes taxes and duties estimated at about US$35.5 million. The base cost is expressed in January 1996 prices. Cost estimates for the project are based on consultant feasibility studies and preliminary design, and the cost of recently awarded contracts for similar works, updated to January 1996 price levels after appraisal. 3.9 Physical contingencies are estimated at 5 to 10% for all the civil works, equipment and consultancy services. Estimated price increases over the project period amounted to 5% of the base costs plus physical contingencies. Price escalations for foreign costs are estimated at 4.5% for FY95, 2.9% for FY96, 2.0% for FY97, 2.1% for FY98, 2.3% for FY99, 2.4% FY00, 2.3% for FY01, and 2.2% thereafter, and for local costs at 4.0% for FY95, 5.0% for FY96, and 4.0% for FY97 and thereafter. It is estimated that the exchange rate adjustment would on average, maintain purchasing power parity during the project implementation period. Summary project cost estimates are shown in Table 3.1 and detailed cost estimates are given in Annexes 6.1 and 6.2. Table 3.1 Project Cost Summary 1/ ILocal Mfion) (US$ Million) % % Totel % Total Foreign Baee Foreign Bae Locol Foreign Total Exchange Coata Local Foreign Total Exchange Coats A. Land Acquisition 963.6 - 963.6 16 22.8 - 22.8 - 16 B. Treatment Plsnt & Associated Works 67 2 1. Intake Sarufia 56.3 72.5 127.8 67 2 1.3 1.7 3.0 2. Canal Rehabilitation & Site 108.2 - 10.2 - 2 2.6 - 2.6 2 3. Culvert from OND Canal to Site 123.2 1.7 124.9 1 2 2.9 3.0 1 2 4. Treatment Plant 1247.6 1,797.1 3,044.S S9 46 29.8 42.6 72.2 58 48 S. Ancillary Structure 79.9 4.6 84.6 6 1 1.9 0.1 2.0 6 1 Subtotal Treatment Plant & Associatd 1,614.2 1,875.9 3,490.1 54 53 38.3 44.5 82.7 64 63 Works C. New Pipelineo 1. Primry Transmieion Mains 312.4 426.4 730.8 58 11 7.4 10.1 17.6 se 11 2. Secondary Tranamission Mains 69.7 122.3 192.0 64 3 1.7 2.9 4.6 64 3 Subtotal New Pipelinee 382.1 648.6 930.7 59 14 9.1 13.0 22.1 W9 14 D. Distribution System Rehabilitation 130.4 228.8 369.2 64 5 3.1 6.4 8.6 64 6 E. Expansion of Service Connections 36.4 60.1 96.5 62 1 0.9 1.4 2.3 62 1 F. DOevelopent of SeveroaelSenitation 60.6 101.5 171.0 s9 3 1.6 2.4 4.1 59 3 G. Inrtitutional Development 113.0 183.4 29S.4 82 6 2.7 4.3 7.0 62 5 H. Project Prepwration nd 20.0 262.7 272.7 93 4 0.6 6.0 8.5 93 4 Implementation Support Total BASELINE COSTS 3,329.1 3,251.1 6,5s0.3 49 100 78.9 77.1 158.0 49 100 Physical Contingencis 138.0 193.0 331.0 58 5 3.3 4.6 7.8 S8 6 Price Contingencims 201.4 336.3 537.7 63 8 5.6 6.6 12.0 64 8 Total PROJECT COSTS 3,669.6 3,780.4 7,449.0 51 113 87.7 88.1 176.8 50 113 1/ Figwes may not add up due to rourading. - 19 - 3.10 The project cost estimates are based on a five year implementation period. This is shorter than the regional disbursement profile of seven years for similar projects, but attainable because of the turnkey arrangement of the main contract, the treatment plant. F. The Proiect Financing Plan 3.11 The project financing plan includes the proceeds of the credit, co- financing from the Government of France and the Government of Japan, and counterpart financing from the Government of Bangladesh. The proposed IDA credit of US$80.3 million would finance 45.7% of the total project cost (excluding taxes). The Government of France would finance US$31.3 million, equivalent to 17.8% of the total financing requirements. The Government of Japan would finance about US$1.3 million of the project which would be administered by IDA. The remaining funds (US$62.9 million) will be provided by the Government of Bangladesh and DWASA. The financing plan for the project is summarized in Table 3.2 below. Table 3.2 Proiect Financing Plan (US$ Million) The Goverment/ Government of Japanese Local Dhaka WASA IDA rance Government Total Foreign (Excl. Duties I Amount X Mount X Amount z Amount 1 Aiount 1 Exch.ae Taxes) Taxes I. Investment Costs A. Land 24.5 100.0 - - - - - - 24.5 13.9 - 24.5 - B. Civil Works 14.8 18.7 64.2 81.3 - - - - 79.0 44.9 40.1 22.1 11.8 C. Electrical i 23.1 41.8 0.9 1.6 31.3 56.6 - - 55.3 31.5 32.2 - 23.2 Mechanical D. Tecbnical 0.0 - 14.0 91.5 - - 1.3 8.5 15.3 8.7 8.3 5.6 - Assistance E. Equipment 0.5 29.4 1.2 70.6 - - - - 1.7 1.0 7.5 - 0.5 Total Disbursement 62.9 35.8 80.3 45.7 31.3 17.8 1.3 0.7 175.8 100.0 88.1 52.2 35.5 3.12 The proposed IDA credit would finance 63.5% of the project's foreign costs while the French Government would finance 35.6%, and the Government of Japan would finance the remaining 0.9%. The IDA credit would finance intake works and the pump station at Sarulia on the Lakhya River, the culvert from the DND Canal to the treatment plant site and ancillary structures, civil works for treatment plant, primary transmission and secondary distribution mains, system rehabilitation institutional strengthening and all technical assistance with the exception of the Water Resource Management Study. The French co-financing would finance the foreign exchange costs of the equipment supply and installation of the treatment plant. The Government of Japan financing will cover the consulting services for the Water Resources Management Study. The Government counterpart resources would finance customs duties and taxes, land acquisition, while DWASA would finance the rehabilitation of the DND Canal and development of the Saidabad Treatment Plant site. 3.13 The IDA credit would be made to the Government of Bangladesh on standard IDA terms for a duration of 40 years including 10 years of grace. The credit would be onlent to DWASA under a subsidiary loan agreement, and will be repaid over twenty-five years, including five years of grace, at an interest rate of 7.5%. The French Government financing will be on-lent to DWASA at the same terms. Like past DWASA projects, the foreign exchange risk on the IDA credit would be borne by the Government of Bangladesh. The execution of a Subsidiary Loan Agreement between DWASA and GOB and the French Government and the Japanese Government Agreements would be conditions of credit effectiveness. - 20 - IV. PROJECT EXECUTION A. Status of Preparation 4.1 Project preparation is significantly in advanced stage. Land has been acquired for the treatment plant and the designs of the civil works for treatment plant and ancillary works are in progress. The contract for the supply of equipment for treatment plant has been awarded. Detailed designs, bid documents, and prequalification documents have been finalized for the Lakhya Pumping Station and the intakes, primary and secondary distribution mains, and the culvert from the DND canal to the treatment plant site, and have been reviewed by IDA and the prequalification of contractors for these works is in progress. The rehabilitation of the DND canal and development of the treatment plant site being financed by DWASA and GOB have been awarded and works are about to be completed. 4.2 Regarding technical assistance and institutional strengthening, contracts for the Management Operational Support (Twining) Program and the Strategic Sanitation Program are ready to be awarded. Draft Terms of Reference (TOR), letters of invitation (LOI) and shortlists have been prepared for the Water Resources Management Study and construction supervision of the treatment plant, and consultants are about to be appointed. Bidding documents for the program to contract out billing and collections are being finalized for IDA's review and tenders will be invited shortly. The first phase of the Leak Detection and Rehabilitation Program and the Crash Meter Installation Program is in progress. TOR and LOI for all other technical assistance have been prepared. The Project Concept Paper (PCP) for the proposed project has been approved by GOB. B. Prolect Implementation 4.3 The project will be implemented by DWASA, which will be accountable and responsible for meeting agreed project and operating objectives. With the completion of the Third DWASA Project in March 1994, and experience in implementation of ADB and Japanese funded projects, DWASA has demonstrated its ability to satisfactorily implement medium sized civil works projects. It is estimated that the project will be implemented over a period of five years, which is less than the average implementation period for similar projects in Bangladesh. This is due to the turnkey arrangements for the installation of the treatment plant equipment. To speed implementation after project approval, GOB and DWASA have already completed work on the improvement of the DND Canal, to introduce canal overflow structures for maintaining the canal operation level at 5 meters above current levels and the back fill of the Saidabad treatment plant site. 4.4 Project implementation will give priority to the construction of the surface water treatment plant, Phase 1 of the Leak Detection and Rehabilitation Program, the Crash Meter Installation Program, and the management consultancy services for the improvement of the operations and management of DWASA. The signing of the contracts for the Sanitation Program and the management operation support (twinning) program would be conditions of credit effectiveness. - 21 - Land Acquisition and Resettlement 4.5 Details of land acquisition for the project are shown at Annex 9.1. Land for the treatment plant is already owned by DWASA and a provision has been included in the project cost for its value. Land acquisition necessary for the conveyance route from the Sitalakhya River to the treatment plant site amounts to a total of 6.1 acres. This includes 0.91 acres at the pump-house site, 1.55 acres for the right-of-way (ROW) for the culvert to the DND Canal, and 3.64 acres for the ROW for the culvert from the DND Canal to the Saidabad treatment plant site. A total of 37 small plots are involved. Five plots contain temporary sheds and other temporary buildings that will be removed prior to construction. Compensation has already been paid for the loss of property. A cadastral map is available that details the canal routing in relation to the plots concerned. The acquisition involved some involuntary resettlement. In view of the small number of buildings to be removed, no full resettlement action plan was required. DWASA followed IDA's resettlement guidelines in compensation for all project affected people and appointed a local consultant to assist in providing compensation and support to resettlers and monitor progress of payments by the District Administrator. 4.6 The process of land acquisition is carried out by the Ministry of Establishment at the direction of the Ministry of Land, following DWASA's request. During negotiations, GOB confirmed that the acquisition of the 6.1 acres was completed and DWASA had possession of the land. Payment of Tk. 21.6 million was made to the District Administrator (DA) which included compensation for loss of land and property on the site. GOB also confirmed that payment of compensation to affected people would be completed a minimum of three months prior to handing over of land to the contractors. 4.7 Access to the Saidabad treatment plant site is via a public road through Jatrabari Point. The contractors for the site development component of the project have constructed the access road from the existing all weather road to the western side of the Saidabad site. 4.8 Along the DND Canal, rehabilitation of the embankment involved the removal of a number of trees and temporary shacks where retail trading activities take place. The contractor responsible for the rehabilitation facilitated the removal of these sheds as part of the canal rehabilitation process. DWASA agreed to pay a lump sum cash compensation to these shack owners for temporary loss of income, and to cover relocation costs, in accordance with IDA resettlement requirements. A sturdy fence has been constructed on both sides of the DND canal, as part of the contract to rehabilitate the canal. This fence is designed to prevent access to the canal itself and thereby avoid pollution. Handpumps for water supply, latrines, and several bridges will be provided along the DND Canal in order to provide squatters who use the canal with alternative facilities. No land acquisition is necessary as part of the DND Canal rehabilitation or as a result of DWASA's use of the canal because the land and the canal belong to the Bangladesh Water Development Board (BWDB). As part of the agreement between DWASA and BWDB, the land will remain in the ownership of BWDB, although operation and maintenance of the canal along the conveyance route will be the responsibility of DWASA. DWASA is required to continue to supply existing irrigators, and extra pumps are planned for the pump station in order to carry this out. - 22 - 4.9 As part of the resettlement process, DWASA prepared a plan for impact mitigation along the route of conveyance. This plan included a map of the location of the temporary shops to be removed, together with consultation with the local people regarding the location of new handpumps, latrines and bridges, and compensation to cover relocation costs and temporary loss of income to be paid to the shack owners. Details of these plan were reviewed during appraisal and were found to be satisfactory. C. Proiect Management 4.10 The project will be managed by the Planning and Development Department (PDD) of DWASA. The PDD will execute the project, and supervise and monitor all contracts and maintain all the records including the original copies of all contracts and purchasing documents. A Project Director has already been appointed from DWASA, who will have overall- responsibility for the project, including the co-ordination of construction of IDA and French financed components. In addition, the Project Director will also have responsibility for the implementation of the technical assistance for the project. 4.11 To assist the Project Director in the management of the project, construction supervision consultants will be appointed. The first will be for the supervision of the construction of the Surface Water Treatment Plant, including intakes and the culvert, for about forty eight months. The other will be for the construction of the primary and secondary distribution system, expansion of service connections and rehabilitation of the distribution system. These consultants will report to the Project Director and will coordinate the overall implementation including verification of compliance with specifications for goods and works, commissioning of completed works, advice on training of staff to operate the completed facilities and preparation of necessary documents for the procurement of all equipment, and civil works. D. Prolect Supervision 4.12 Project supervision by IDA and the French Government would be coordinated and agreed at the Project Launch Workshop, to be undertaken at the beginning of project implementation. IDA supervision of the project would require about 95 staff weeks, of which about 20 would be needed in the first year for review of project start-up, procurement, bid specifications, and consultancy appointments. This will likely involve three supervision missions in the first year, and two in the later years. Supervision would be coordinated with IDA's resident mission staff in Bangladesh. Supervision during project implementation would be provided by sanitary engineering and financial staff, and would focus on financial management, construction administration review, procurement actions, etc. However, in the first year, additional special expertise would be required in areas like leak detection, management of utilities and operational improvements and institutional restructuring. A mid-term review would be undertaken mid-way through project implementation, but no later than December 31, 1998 to assess project management, implementation status, including progress in institutional reform including increased private sector participation, progress against agreed performance indicators and to recommend proposals for any changes in the project scope, costs, timetables and agree on any necessary corrective actions. A tentative staffing and timing schedule of supervision missions is - 23 - given in Annex 9.5. Benchmarks for assessing progress at the mid-term review are set out in Annex 9.6. E. Proiect Reporting 4.13 Progress reports, prepared by the PDD and provided monthly will describe the work done on each of the components of the project to date, detailing actual and anticipated progress, actual and estimated costs for the work completed and disbursement from the credit with estimates in the Appraisal Report. The reports will highlight causes for delays, if any, and propose measures to overcome them, and will anticipate any changes in the project completion date, or the project costs. Details will be given of contract for works, goods and services that have been awarded, invited or received during the reporting period, with reasons for any changes made in the estimated implementation schedule, quantities and costs. Two copies of the progress reports will be sent to IDA and the French Trade Commission in Dhaka within three weeks of each reporting period. Separate project reports on institutional development components and consultant activities will also be provided as specified in the TOR of these components. The format for these progress reports, including pertinent information to be included in the reports, was agreed at negotiations. Within six months of completion of the project or the closing of the credit, DWASA will prepare its part of the Implementation Completion Report, with the assistance of the PDD. F. Procurement 4.14 Procurement arrangements for the project are summarized in Table 3.3 below and details are provided in Annex 9.2. Table 3.3 Procurement Arrangements ($ millions) / Procurement Method Proiect Element ICB NCB Other NBF2/ Total3| Civil Works 68.2 7.8 3.0 - 79.0 (56.7) (7.5) - - (64.2) Goods and Equipment 3.1 0.2 - 53.7 57.1 (1.9) (0.2) - - (2.1) Consultancy Services - - 14.0 1.3 15.3 - - (14.0) - (14.0) Land Acquisition - - - 24.5 24.5 Total 71.3 8.0 17.0 79.5 175.8 (58.6) (7.7) (14.0) - (80.3) 1/ IDA amounts in brackets. 2/ Non Bank financed. 3/ Figures may not add up due to rounding - 24 - 4.15 Civil Works: The project includes about US$79.0 million in civil works. About US$68.2 million of these works would be carried out on the basis of international competitive bidding (ICB). This represents civil works for the treatment plant, transmission mains, intake and culvert from the DND Canal to the treatment plant site. Procurement for the primary and secondary distribution network will be undertaken through a "Supply and Lay" type of contract to avoid delays and problems associated with procuring pipes separately. For all civil works contracts awarded on the basis of international competitive bidding, local contractors will be eligible for a margin of preference of 7h%. Civil works totalling US$7.8 million would be procured under national competitive bidding (NCB) procedures acceptable and satisfactory to IDA. These works relate to the expansion of service connections, development of sewerage and sanitation schemes and distribution system rehabilitation. These works represent small contracts spread through the life of the project, and are unlikely to attract international bidders. GOB has already awarded the contracts for the development of the treatment plant site and DND canal rehabilitation for an amount of US$3.0 million under its own procedures and its own financing arrangements. A contract has already been awarded for the supply of the electrical and mechanical equipment for the water treatment and the civil works final design is now progress. The civil works bidding documents, prepared in accordance with ICB procedures, will be submitted for Bank review prior to bidding. 4.16 Goods: There is a total of about US$57.1 million of equipment and materials in the project, of which US$3.1 million will be procured following ICB procedures. These represent equipment and materials for the intake and pump station, and miscellaneous equipment, including meters for service connection expansion. For this procurement, local bidders will have a domestic preference limited to the lesser amount of 15Z of the CIF price or the actual amount of customs duties and import taxes. About US$0.2 million of the equipment will be procured using NCB guidelines. Other equipment and materials would be financed under the French Grant assistance. 4.17 Consultant and Contract Services: Consultancy studies and engineering designs for about US$15.3 million will be carried out by consultants whose qualifications, experience and terms and conditions shall be satisfactory to the Association. These will be selected in accordance with the Bank's Guidelines, Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency. 4.18 Land Acquisition: Land estimated to cost US$24.5 million, including the land for the treatment plant already in possession of DWASA, and right-of-way (ROW) for other works was procured using Government procedures. 4.19 All civil works contracts in excess of US$300,000, all goods package contracts in excess of US$200,000 and all consulting firm contracts in excess of US$100,000 (US$50,000 for individual consultants) will be subject to prior review. With respect to all consulting contracts, irrespective of value, prior review will continue to be required for: (a) terms of reference; (b) single source contracts regardless of value; (c) all consultant contracts and assignments of a critical nature (for example because of environmental safety or public health considerations) regardless of value; and (d) contract amendments valued at more than US$100,000 (US$50,000 for individual consultants) equivalent, or those that raise the total contract value above US$100,000 (US$50,000 for individual consultants) equivalent. All procurement will be carried out in accordance with the Bank's Guidelines for Procurement (January 1996) and the - 25 - Bank's latest Standard Bidding Documents for Works, Goods and Consulting Services. At least 10Z of all other contracts will be subject to ex-post review. However, to ensure that adequate procurement procedures are being followed, the first two contracts under NCB for works, irrespective of the amount, will be subject to IDA's review. G. Disbursements 4.20 Disbursements of the IDA credit proceeds will be on the following basis: (a) 100 percent (CIF) of total foreign expenditures and 95Z for local expenditures (ex-factory) on civil works for the treatment plant, culvert, intake, ancillary works, sanitation program; (b) 100 percent of foreign expenditures ex-factory, 100 percent for local expenditures, and 65Z for other local expenditures procured locally for all materials, equipment, miscellaneous equipment and machinery, motor vehicles, water meters and training equipment; (c) 100 percent of total expenditure for consultancy, advisory and technical assistance services; and (d) 100 percent of total expenditures for training costs. 4.21 In order to facilitate timely provision of funds for the project, the Government would establish a Special Account in the amount of US$3.0 million with Bangladesh Bank, for eligible expenditures under the project. Disbursements would be made on the basis of statements of expenditure (SOEs) for contracts for works less than US$300,000, goods less than US$200,000, consulting firms less than US$100,000 (or US$50,000 for individual consultants) and training less than US$100,000 equivalent. For all other contracts above these limits, including single source (individual consultants), disbursements would be made on the basis of standard documents. Documentation supporting SOEs would be retained in the PIU, and made available for review by IDA upon request. H. Retroactive Financing 4.22 To expedite implementation of the project, the Government has requested that advance procurement, contracting and retroactive financing be permitted for some of the contracts. The estimated value of this retroactive financing is US$2.0 million. This would finance part E of the project, consisting of: (a) Part I of the Leak Detection Program (para. 5.10) for the procurement of equipment, materials and initial consulting services for leak detection activities to commence; (b) the first phase of the Crash Meter Installation Program, to be used for contractual services for meter installation (para. 5.8(b)); (c) preparation of designs and bid documents for ancillary works; and d) procurement of equipment and other services to support the program to contract out DWASA's services (para. 5.8 (a)). Advance contracting and retroactive financing will be subject to the condition that the components are eligible for IDA financing at the time of procurement and that the Bank procurement guidelines should have been followed. Expenditures incurred during the year after December 1995 up to the signing date will be eligible for retroactive financing. - 26 - V. IMPLEMENTING AGENCY A. Implementing Organization 5.1 DWASA was established under the East Pakistan Water Supply and Sewerage Authority Ordinance of 1963, as an autonomous body to provide adequate and safe drinking water and sewerage facilities in the city of Dhaka. DWASA operates under the Ministry of Local Government, Rural Development and Cooperatives (MLGRDC). Its functions are to construct, improve and operate water supply and sewerage works, and other facilities to improve environmental sanitation in the city. The Ordinance spelt out the extent of Government control over the day-to day operations of DWASA by requiring that DWASA be guided on matters of policy by such directions as the Government may, from time to time give. In addition to water supply and sewerage, DWASA was in 1989 given the responsibility of operating Dhaka's stormwater drainage system. DWASA's service area, which includes the city of Narayanganj, has been divided into seven geographical areas for purposes of operation and maintenance. B. Organization Structure and Management 5.2 The original WASA Ordinance stipulated that DWASA would have a Board of Directors consisting of thirteen members, mainly officials of the Government. This arrangement was however not efficient in that as government bureaucrats, the Board members had no decision-making authority and deferred all policy decisions to the Government, through MLGRDC. The Ordinance was later amended to revise the Board composition and create an internal Board of Directors, consisting of three people. This internal Board operated along functional lines, e.g., Finance, Engineering, Administration; and the incumbents were effectively managers of DWASA, without any policy responsibility. DWASA was headed by a Chairman, appointed by the Ministry of Local Government and responsible for the day-to-day operations of the authority. Key decisions regarding staffing, investment decisions, remuneration and tariff setting were however made by the Government and DWASA effectively operated as a Government department. Under the reform program in the proposed project, GOB has enacted a new WASA Ordinance to strengthen and streamline DWASA's Board, commercialize its operations, and give and DWASA more autonomy. The new Board consists of seven members most of whom have been has been selected from outside the Government. The objective of this streamlining is to create a Board along the lines of commercial utilities. Additionally, the Board's role on policy matters relating to corporate planning, tariff setting, staffing and appointment of senior staff has been clearly spelt in a Policy Statement, adopted by DWASA with the objective of separating of the roles and responsibilities of the Government, the Board, and management. Under the new structure, the Government's role will be limited to that of a shareholder, setting the general policy environment within which DWASA will operate, while the Board's overall responsibility would be the implementation of the Government's policy. In addition, the appointment of the Chairman and senior staff would be on the basis of recommendation of the management. The revised WASA Ordinance was reviewed by IDA during preparation and found satisfactory. A Policy Statement describing the functions and responsibilities of the new DWASA Board shown at Annex 2.2, has been adopted. 5.3 DWASA's present organization structure is divided along three functional departments, viz., Administration, Engineering and Commercial. The Administration Department provides the administrative support services, including - 27 - public relations. The Commercial Department handles the billing and collection of revenues, and provides the accounting and financial control functions. The Engineering Department is responsible for operating and maintaining the utility systems and in implementing project. DWASA's current organization structure and the proposed new structure are attached at Annex 10.1. Under the project, an organizational study will be undertaken to identify the features essential to an effective organization and set up an incentive system for DWASA staff. This study will be undertaken and the results implemented under the Twinning Program. An additional organization change is the creation of profit and/or cost centers, in order to introduce transparency and accountability in DWASA's operations. The new structure will separate water production from distribution, and a transfer price will be established between the two units. The Twinning Program Consultants will assist DWASA in finalizing the reorganization and in setting up the accounting system and the staffing for each profit/cost center. C. Operations and Maintenance 5.4 DWASA's operational performance is affected by several institutional weaknesses. These include production and distribution inefficiency; inadequate performance monitoring; inefficient billing and revenue collection practices; a very high level of unaccounted-for water; poor institutional management and lack of clear regulatory responsibility. Maintenance is carried out in response to consumer complaints and component failures. Routine maintenance is not usually planned or allocated adequate resources. Maintenance is also hampered by lack of proper spare parts and procurement planning. Because much of the system is over thirty years old, leakage is very common, leading to substantial water loss. To improve operational efficiency, the Twinning Program will focus on improved operations and maintenance, management efficiency, and implementation of improved utility management practices. The Twinning Program will cover operations and maintenance, billing and collection, metering, financial management and training. Terms of Reference for this program are shown in Annex 8.1. The signing of the contract for the Twinning Program Consultants will be a condition of effectiveness. 5.5 Under the Third Dhaka Water Supply Project (Credit 1734-BD), a pilot leak detection program was undertaken in two zones to identify physical leaks and implement a program to rehabilitate the distribution system. A Consumer Survey was also completed in May 1993 to identify and correctly classify all consumers, and upgrade DWASA's customer data base. To improve systems maintenance, a Leak Detection and Rehabilitation Program will be implemented under this project as a follow-up to the program in the previous project (para. 5.10). To further improve operational efficiency, the reform program also includes actions to establish and enforce accountability by requiring DWASA to meet agreed operational and financial performance targets. These will be enforced through a Performance Agreement to be signed -between DWASA and the Government which will set out the operational, implementation and financial performance targets that DWASA should achieve yearly. Some of the targets will include: (i) achievement of agreed operating cost or revenue levels every year; (ii) reduction in unaccounted for water to agreed levels every year; (iii) reduction in accounts receivable to agreed levels each year; and (iv) implementation of an acceptable consumer connection program. 5.6 To further improve DWASA efficiency, a strategy study will be undertaken in the project to assess options for private sector participation in - 28 - DWASA, and mobilization of private financing for its investment program. The signing of a contract for the study will be a condition of effectiveness, and implementation of the results of the study a dated covenant. Draft terms of reference are shown at Annex 3.3. D. Billing and Collections 5.7 Currently, about 110,177 of DWASA's 160,080 (about 69%) consumer connections are metered. The remaining unmetered connections are billed on the basis of plot size and property value, regardless of the amount of water consumed. It is believed that the amount of actual consumption from non-metered connections is significantly much higher than DWASA's estimates. DWASA carries out meter readings on a bi-monthly basis, with half of the consumers billed in one month and the remaining consumers billed in the following month. Billing procedures have improved over the past five years, under initiatives undertaken under the Third DWASA Project. However, more improvements are still required to increase billing efficiency and reduce the level of un-billed water. Collections have always lagged behind billings, and between 1990 and 1993, DWASA's revenue collections were about 80% of billings, and accounts receivable arrears were about 6.5 months of billings. A major problem is irregular payments by the Government for water supplied to Government departments and other public corporations. Other problems include lack of an effective disconnection policy and lack of a reliable information base on consumer accounts, which results in some consumers not being billed. 5.8 Under the Third Dhaka Water Supply Project (Credit 1734-BD), a Consumer Survey was undertaken to record and correctly classify all DWASA customers. Using this information DWASA embarked on a program to disconnect accounts over six months in arrears, implement computerized billing system and update its billing records. This has resulted in some improvement in the level of billing. This data base will also be used in the preparation of action plans under the proposed project to improve billing and collection efficiency. The programs and actions to be undertaken to improve billing and collection and efficiency are as follows: (a) contracting Out DWASA Services: As part of an efficiency drive to improve billing and revenue collection, DWASA will commence a program to contract out some of its services to local contractors. Details of the program and contract outline are attached at Annex 2.4. The contract calls for the reading of meters, preparation of bills, delivery of bills and follow-up of defaulters in case of non-payment. The program will start in two zones of DWASA's service area, which were selected, among other things for potential revenue gains. The experience gained in these two zones will be used for planning future activities. (b) Crash Meter Installation Program: To reduce unmetered consumption, the project includes the implementation of crash program to install meters in unmetered connections, to achieve a metering level of 95% of its accounts by June 1998. The contract for the program has been signed and work has started. (c) Legislation to Reduce Water Loss: As part of the amendment to the DWASA Ordinance, DWASA will be required to introduce regulations and - 29 - enact measures to reduce water loss, including penalties for obtaining DWASA water illegally. The measures have been incorporated into DWASA's regulations, prepared under the revised Ordinance. A newly formed unit called the System Monitoring and Water Prevention Circle will be responsible for monitoring waste and illegal activities, and enforcing penalties. (d) Reduction of Public Sector Arrears: Of DWASA's total receivables, arrears from government departments and public corporations comprise - about 21%. Payment for these accounts are irregular, and accumulated arrears adversely affect DWASA's cash flows. The Government has agreed to take action to address the problem. The Government reduced these arrears to no more than ninety days as a condition of negotiations, and has now put in place mechanisms to address public sector arrears including timely budgetary allocation of funds. (e) Billing and Collection Performance Targets. As part of the performance objectives to be agreed between DWASA and the Government, DWASA will be required to maintain its accounts receivables arrears to no more than four months of its total billing by June 1998. This will also be incorporated into the Project Agreement with IDA. E. Unaccounted for Water 5.9 During a pilot leak detection and waste prevention program undertaken in one operating zone, completed in 1991, it was estimated that, of the total water produced by DWASA in that zone only 44% was billed. The remainder was attributed to administrative losses, (31%) and technical losses (25Z). The major factors contributing to administrative losses were: (i) incomplete customer data base; (ii) unmetered service connections; (iii) illegal and illegally reconnected service connections; (iv) inaccurate and tampered meters; and (v) wrong meter reading, faulty invoicing and rent seeking behavior by revenue inspectors. Technical losses were mainly caused by leaking pipes, service connections, inoperational fittings, and overflow from tanks and pump stations. Although reliable information is not available, DWASA's systems' losses are between 45% to 50%. 5.10 The proposed project includes a comprehensive Leak Detection and Distribution System Rehabilitation Program, to cover the remaining zones in the DWASA service area. Results from the pilot program show that such a program will reduce the level of unaccounted-for-water significantly. The Leak Detection Program will be undertaken in three phases. Phase I is an Immediate Action Program and Training for revisiting the pilot areas completed under the Credit 1734-BD, while Phase II would cover about 70,000 service connections, over a period of three years, and Phase III would cover the remaining 80,000 service connections. The training to be undertaken in Phase I will consist of: (a) preparation of maps and drawings of DWASA service area; (b) checking of available instrumentation for performance, ordering of new instrumentation, and training of staff in their operations and maintenance; (c) reporting leaks as originally done in the service area to update the distribution network drawings; and (d) analysis of results and updating of programs for infill, extension and rehabilitation works. - 30 - 5.11 The first phase program is in progress. To facilitate the implementation of the program, DWASA created the System Monitoring and Waste Control Circle, whose responsibilities will be to coordinate all leak detection activities, procure all required equipment, materials and services, and monitor water use in DWASA service area and enforce measures to conserve water and reduce wasteful water practices. The proposed program would reduce technical systems losses. Terms of reference for the second and third phase activities are shown at Annex 7.1. Together with other initiatives to reduce administrative losses described above, it is expected that unaccounted for water will be reduced to 30% by 2001. Achievement of these targets of unaccounted for water will be incorporated in the Performance Agreement to be signed between DWASA and GOB (Annex 2.3). F. Personnel Management and Training 5.12 DWASA's management and staff lack accountability, and do not have incentives to perform duties efficiently and effectively. Management also lacks the necessary skills and experience to manage and operate the institution, and there are no clear institutional performance objectives and targets. DWASA's staff is generally engineering oriented and the technical staff are of reasonable quality. There is, however a general lack of capability and weakness in commercial and accounting section staff, in particular, revenue and meter inspectors. In addition, DWASA is responsible for the operation and maintenance of the Dhaka stormwater drainage system for which it has no technical staff. 5.13 As of January 1996, DWASA had a total staff of about 3,020 on a permanent basis. This translates to a staffing ratio of about 20 employees per 1,000 connections, which would be considered high by most standards. However, the staff/connection indicator does not provide a full picture of the staffing situation in DWASA. First, given the low cost and efficiency of labor in countries like Bangladesh, labor tends to be substituted for capital, thus DWASA is less capital intensive than other utilities in developed countries. Second, in Dhaka, a lot of DWASA residential consumers live in apartment buildings where consumption is not always individually metered; thus service to an apartment building appears in DWASA's records as one connection. This limits the number of connections and undermines the number of consumers. A more representative indicator of staff efficiency would be the ratio of personnel costs to operating costs. This has been around 15% in DWASA, considerably lower than other developing or developed countries. While the project will not recommend a reduction in staff, IDA will seek assurances that DWASA would only hire additional staff based on needed expansion of service and scope of operations. In addition, DWASA's Board will review its staffing structure on a regular basis to determine required staffing levels. This will be incorporated in the Performance Agreement to be signed between the Government and DWASA. 5.14 To improve DWASA's efficiency, there is need to modify the organizational structure to rationalize staff responsibilities, introduce a system of incentives to staff commensurate with their performance, and improve their skills through appropriate training. The following actions will be introduced under the proposed project: (a) the appointment of an experienced managing director and appropriately skilled deputy managing directors from the private sector to head critical units, e.g., commercial and finance; water production, - 31 - distribution and administration, with -measurable objectives established for judging their performance. To attract staff with the necessary skills and experience, these managerial positions will initially be filled by local contract staff on fixed term appointments, to be initially financed from the project, but gradually transferred to DWASA. The Managing Director has been appointed. By March 1997 DWASA shall appoint Deputy Managing Directors for Finance and Administration, Technical and Planning and Development Departments. (b) provision of technical assistance under the project to help DWASA improve its management and technical capabilities to improve efficiency in operations. This technical assistance will be through the management operational support (twinning) program. The twinning arrangement would be rendered over a period of four years, but renewable every year with long and short term personnel, whose duration would be determined during implementation, to provide the most effective transfer of knowledge to assist the Managing Director and his deputies. A critical task of the program will be to develop performance objectives on which management and staff performance would be assessed, and which would form the basis for performance incentives and penalties. Terms of reference for the Twinning Program are at Annex 8.1. In addition, preliminary studies leading to further privatization be undertaken in the project, with the objective of signing of a contract by mid-term review of the project. Terms of reference for the preparatory activities are at Annex 3.3. (c) a staff rationalization program to be carried out by June 1997 under the Twinning Program to assess staff strength and weaknesses, and to ensure that staff are re-assigned to areas with staff shortages; and (d) training programs in various areas, with emphasis on the commercial operations of water utilities. The training programs will be developed under the management operational support (Twinning) Program. Additional training is being provided under the first phase of the Leak Detection and Rehabilitation Program (para. 5.10). Included in this is an incentive system to be financed by DWASA, to motivate staff working on leak identification and rehabilitation. DWASA has already approved an incentive system for the staff on the leak detection program, in line with the proposals made by IDA. - 32 - VI. FINANCIAL ANALYSIS A. Past and Current Financial Situation 6.1 DWASA's audited financial statements for FY92 to FY95 and projected statements from FY96 to FY2001 are detailed at Annex 11.2 and summaries of the past and current statements are shown in Table 5.1 below. Table 5.1 Past and Current Financial Statements Income Statement FY92 FY93 FY94 FY95 ('000) ('000) ('000) ('000) Total Revenue 479,030 659,024 821,579 992,906 Direct Expenses 330,772 403,099 491,739 552,877 Administrative Expenses 66,740 86,661 123,547 145,390 Income before Depreciation 81,518 169,264 206,293 294,631 Depreciation 115,701 117,927 140,669 126,303 Interest 35,706 107,794 166,114 201,547 Other Income 74,464 67,548 32,568 33,219 Net Earnings 4,575 11,091 (68,923) 36,407 Balance Sheet FY92 FY93 FY94 FY95 ('000) ('000) ('000) ('000) Total Fixed Assets 5,190,929 6,116,086 7,021,588 8,000,197 Current Assets 1,847,431 1,747,716 1,567,003 1,915,168 Total Assets 7,038,360 7,886,802 8,588,591 9,915,365 Equity 5,285,500 6,006,410 6,874,432 7,931,051 Long-term Liabilities 1,596,758 1,755,298 1,510,759 1,725,061 Current Liabilities 156,102 102,094 203,400 259,253 Total Equity/Liabilities 7,035,360 7,863,802 8,588,591 9,915,365 Debt/Equity Ratio 23.20% 22.61Z 19.93% 17.76% 6.2 DWASA's past audited income statements show that between FY92 and FY95, its total operating revenue increased by about 107% (i.e. 38% between FY92 and FY93, 25% between FY93 and FY94 and 21% between FY94 and FY96). These increases were partly due to tariff increases of 10% in October 1991 as an adjustment against power cost increases, 15% in October 1992, and 10% in November 1993, and increased water production as a result of new tubewells commissioned under the Third DWASA Project. Despite these revenue improvements, DWASA's performance was not altogether satisfactory. Net profits fluctuated from marginal profits in FY92 and FY93; a loss in FY94 and a profit in FY95. Electric - 33 - power costs (representing 56% of operating expenditures) increased by 83% mainly due to increased pumping costs as a result of the drawdown of the groundwater table in the service area. Interest charges also increased significantly during the period, particularly in FY94, due to new loans incurred by DWASA. 6.3 DWASA's cash flow statements showed positive annual cash balances in FY92, FY94 and FY95 and huge accumulated cash balances because: (a) it did not service principal and interest due on its loans because of lack of proper records in the Ministry of Finance (MOF). This left DWASA with cash balances equivalent to the unpaid amounts (e.g., in FY92, interest due according to the income statement was Taka 35.7 million, and interest actually paid, according to the cash flow statement was Taka 15.0 million); and (b) annual development grants disbursed by GOB and donor agencies for investment programs, without regard to actual annual work programs to be implemented, resulted in cash balances being carried forward, thus enhancing DWASA's cash flow position. These issues reveal the lack of financial accountability that exists in DWASA. More importantly, they also reveal the lack of accountability and weakness within the government establishment responsible for monitoring and enforcing payment of actual debt service due. They also reveal weaknesses in audits, which should highlight these issues. While accountability within DWASA would be addressed under this project, the lack of proper debt service records in MOF, a systemic problem affecting all Government agencies in Bangladesh, requires wider reforms of public sector and civil service practices. 6.4 DWASA did not always meet the covenants agreed for the Third DWASA Project (Credit 1734-BD) although overall, actual performance was close to the agreed covenants, which were to achieve a rate of return on fixed assets of 5% beginning in FY91 (DWASA's rate of return was 2.3% in FY92 and 4.7Z in FY93); reduce accounts receivables arrears to six months of billings (DWASA achieved a ratio of 6.35 months in FY92 and 5.9 months in FY93 and 4.0% in FY94); and meet subsidiary loan obligations. Outstanding debt service arrears were always capitalized into new debt. 6.5 DWASA's erratic performance is due to a number of reasons, some of which are: (a) Inefficient operations: Despite high tariffs and low cost operations, DWASA is an inefficient operator. These inefficiencies are passed on to consumers in form inadequate service coverage, low quality supply and high tariffs. (b) Unaccounted for water: The level of unaccounted for water, estimated to be as high as 50% (para. 5.9) reduces actual revenue substantially and increases unit operating costs. (c) Collections: DWASA was unable to collect all of its revenue billed; the ratio of collections to billings fluctuated between 75% to 80Z during the period. Some of the collection problems stem from consumer resistance to pay for poor service, irregular payments by the - 34 - Government for service provided and lack of a reliable system for arrears follow-up and disconnection. DWASA however had adequate cash reserves to service its debt (para. 6.3). As a condition of appraisal, DWASA paid GOB Taka 400 million in FY94 to reduce its debt service arrears. 6.6 Under the project, initiatives to be taken to improve revenue performance include the following: (a) commitment by DWASA to achieve agreed levels of financial performance and cost recovery. These performance objectives will be established in the Performance Agreement to be signed between DWASA and the Government. The performance indicators to be achieved are shown at Annex 12, and include collections to billings ratios; debt service coverage; receivables/billings and debt/equity; (b) an agreement by GOB to grant autonomy to DWASA to adjust tariffs on an annual basis, based on an agreed inflation index. This agreement would be reflected in the Operating Policy Statement which would form the basis for DWASA operations; (c) a comprehensive leak detection program (para. 5.5) to reduce technical water losses, the Crash Meter Installation Program (para. 5.8(b) to reduce unmetered connections and the program to contract out billing and collections to enhance revenues (para. 5.8(a). B. Balance Sheet and Fixed Assets 6.7 DWASA's audited balance sheets for FY92 to FY95 are shown at Annex 11.2. DWASA's long terms assets include stormwater drainage assets which were transferred from DPHE in 1989, and water and sewerage investments financed by IDA credits, ADB loans, and Japanese grants. Over 90% of DWASA's outstanding loans are from IDA. DWASA's debt to equity ratio was about 20:80 during the period in review, which indicates that DWASA is low leveraged. This is due to the fact that: (a) Government allocations to various DWASA investments are usually in form of grants and equity; (b) apart from IDA and ADB loans, there are apparently no onlending terms for other bilateral funds transferred to DWASA, which are shown as grants in its balance sheet; and (c) the value of drainage assets transferred from DPHE in 1989 was treated as equity in DWASA's accounts. Because of this, the level of equity increased much faster than debt during the years in review. DWASA's debt level is, however, high when compared to the level of its operations. In FY93, total debt service was 42% of revenue. With the introduction of additional loans under proposed project, DWASA's debt obligations will be higher. Improvements in efficiency, reductions in water losses and regular tariff increases will therefore be critical to generate more revenues and improve asset utilization. These issues are being addressed under the project through performance enhancements and agreed targets, tariff increases to enable DWASA to cover its costs, including additional debt service. 6.8 DWASA's current ratio, which ranged from 11.8:1 in FY92 to 7.3:1 in FY95 is high by any standards. This ratio reflects: (a) uncollected revenue arrears for water billed including arrears from Government departments some of which have been outstanding for years; (b) a high level of stocks for materials - 35 _ and consumables, e.g., pipes, valves, meters which were procured under previous projects, but never used, and some of which are now unusable and obsolete; (c) a high level of advances for materials, representing funds advanced to contractors, which are not reconciled with contractor's payments; and (d) a low level of accounts payable due to the nature of its operations (payables mainly consist of outstanding amounts on power bills). Actions to be taken under the project to address these issues are: (a) agreement with the Government on a system of allocating adequate funds to Government departments and public institutions to enable them to pay water bills and arrears in time. This would be included under the Performance Agreement whereby DWASA would be allowed to offset outstanding public sector arrears with debt service payments due to the government in case of continuous failure to make payments to ensure that by June 1997, public sector arrears are no more than 90 days of billings. (b) an assessment and evaluation of all stores and inventories by March 1997, and agreement to sell or dispose all mismatched, obsolete and slow-moving stocks by December 1997. These actions will be dated covenants and defined in the Performance Agreement; (c) an assessment of all receivables to identify all uncollectible arrears by March 1997 and agreement to write off uncollectible amounts by December 1997. These actions will be defined in the Performance Agreement; and (d) under a program to improve DWASA's accounting system to be undertaken under the Twinning Arrangement, a reconciliation of outstanding advances and writing off uncollectible amounts. C. Current Water and Sewerage Tariffs 6.9 DWASA has separate tariffs for metered and non-metered customers. The metered charge (which applies to about 76% of its customers) is Taka 15.84 per 1,000 gallons for domestic consumers and Taka 51.48 per 1,000 gallons for commercial and industrial users. Unmetered customers are charged on the basis of the valuation of the property supplied with the connection. Currently, this is 22.62% of the annual valuation of the property for residential, community and industrial buildings, prorated on a monthly basis. The sewerage charge is 100% of the water tariff for all water and sewer connected buildings. A reduced water and sewer rate applies to properties with water supply but unconnected to a sewer line that is within 100 ft. Annex 11.3 shows current tariff rates and other charges and proposed tariff structures. 6.10 DWASA's tariffs, which are currently regulated by the Government, do not reflect DWASA's cost structure and are not designed to respond to changes in DWASA's financial requirements. Tariff increases have been irregular in the past. However, since 1985, adjustments have been more regular, with GOB authorizing tariff increases of 10%, 15% and 10% between FY91 and FY94, resulting in a total increase of 39Z. Even with these recent increases, which makes DWASA's tariffs high by South Asia standards, DWASA is still unable to fully meet its total costs. Tariffs do not properly reflect the cost of service provided to consumers because: (a) they convey the wrong economic signals, since - 36 - inefficiencies and distortions (e.g., systems losses) are passed on to consumers; (b) they do not give adequate guidance on whether there should be cross-subsidies or the degree of such subsidies to the poor; (c) they do not provide enough justification on the charges being applied to small, large, domestic or commercial consumers; (d) they do not reflect externalities, (e.g., the cost of treating pollution to the water supply and how this would be reflected in the charges); and (e) being non-progressive, they encourage wasteful water consumption practices, particularly among upper income and unmetered consumers. 6.11 To address these concerns, a Tariff Study was completed that recommended a revised tariff structure. The new structure is progressive, and would enable DWASA to address the needs of affordable water supply for the urban poor and allow it to meet its financial requirements. Implementation of the revised system would be a dated credit covenant. Tariff increases would be included as part of the performance objectives, to be enforced under the Performance Agreement. Agreement has also been reached that after the implementation of the revised structure, DWASA will be allowed to raise tariffs annually by up to 5% as needed to reflect inflation, without Government approval. A 10% tariff increase was implemented in FY94, as a condition of preappraisal. D. Financial Proiections 6.12 DWASA's financial projections, and the assumptions used in developing them are given in Annex 11.1 and 11.2. These projections are summarized below. Table 5.2 Projected Final Statements 1996 1998 2000 Income Statement ('000) Revenue 1,081,711 1,518,116 2,045,500 Working Expenses 760,374 1,005,909 1,365,934 Depreciation 149,037 211,704 206,985 Interest 164,913 327,157 425,961 Net Earnings 24,271 7,598 82,297 Balance Sheet ('000) Total Fixed Assets 9,903,488 12,969,815 13,629,465 Current Assets 2,028,436 2,339,204 2,867,590 Total Assets 11,931,924 15,309,018 16,497,055 Total Net Worth 8,914,830 10,008,571 10,491,026 L.T. Loans 2,731,510 4,950,945 5,500,320 Current Liabilities 285,584 349,502 505,709 Equity/Liabilities 11,931,924 15,309,018 16,497,055 - 37 - 6.13 A major objective of the project is to improve the operational and financial performance of DWASA. The proposed strategy is to cover all costs of operations, including debt service within a period of four years, by FY99. Improvements in DWASA's financial performance will come about as a result of: (a) regular and automatic tariff adjustments tied to the Bangladesh inflation index to cover increases in operating costs, as agreed annually between GOB and DWASA and reflected in the Performance Agreement; (b) efficiency gains from operational and financial improvements expected under the reform program, and through the Twinning Program; (c) increased revenue from additional sales volume generated by the proposed project and other initiatives, including the program to contract out billing; and (d) reduced water losses as a result of the Crash Meter Installation Program, and the Leak Detection and Rehabilitation Program. The proposed efficiency improvements, including estimated tariff increases will be incorporated into the Performance Agreement (Annex 2.3), which will be reviewed by IDA and GOB to ensure compliance by DWASA. E. Performance Monitoring and Evaluation 6.14 DWASA has made some efforts to improve its planning capability and management information systems over the last five years. Under the Third DWASA Project, IDA assisted in this effort by helping to develop management information systems and to improve efficiency. However, DWASA's systems are still inadequate and further improvements are needed to help it accurately forecast its finances, revenue and water demand, which are critical to its planning and financial viability. Currently, budgetary control is very weak and needs to be improved significantly. Improvements in planning, budgeting and financial reporting would be introduced under the Twinning Program being undertaken is the project. 6.15 A set of operational and financial monitoring indicators developed during project preparation are attached at Annex 12.1. These indicators will constitute the basis for reviews by GOB and IDA on DWASA's financial and operational performance during the period of project implementation. Particular attention will be paid to the level of unaccounted for water; billings/accounts receivable ratio; percentage of water connections with meters, and service coverage. These monitoring indicators will be included in the Performance Agreement between DWASA and GOB, and will have the same legal standing as covenants in the Project Agreement. F. Accounts and Audits 6.16 Although the WASA Ordinance specified that DWASA would maintain a single entry accounting system, DWASA has now adopted a double-entry accrual based commercial accounting system, as required under previous IDA credit covenants. The system is however not fully efficient to allow DWASA to operate as a well managed commercial concern. First, the system is still manual, and financial statements are prepared only once a year and seem to be geared mainly to fulfilling IDA and GOB reporting requirements rather than as a financial management tool. Under the project, the financial management system would be improved to provide financial results promptly on a monthly basis and at operational unit level. DWASA will first conduct a full review of its system, prior to the appointment of the Twinning Program Consultant as a basis for the implementation of a computerized improved information and accounting system that facilitates the preparation of a balance sheet, profit and loss statement, - 38 - sources and application of funds statements, and other reports necessary for DWASA's financial management, on a monthly basis throughout the financial year. Terms of Reference for the review were discussed during appraisal and found to be satisfactory. Implementation of the new system will be undertaken under the Twinning Program. 6.17 Currently there are three levels of audits in DWASA: (a) Internal Audit: This is mainly an integrated function associated with the approval procedures for payments, and matters such as financial authority limitations for senior officers. It does not check inconsistencies in accounting systems, cash collections, billing procedures, or advances to contractors. (b) Government Audit: This is a compliance audit to ensure that Government authority levels have not been exceeded, that procedures are carried out as directed, that pay scales are followed, etc. This audit, normally carried out by the Comptroller and Auditor General Bangladesh (Directorate of Audit) also reviews project specific accounts to ensure that the project funds are used for the purpose for which they were approved; and (c) External Audit: Under the old WASA Ordinance, the Government appointed an external auditor, normally a public accounting firm. The auditors produce a long-form report, which in other countries would be regarded as management letter. Under requirements from previous IDA credits the auditors also provide a separate opinion on DWASA's Statement of Expenditure Accounts and Project Accounts. However, the reports are of limited acceptability as they are not based upon accepted international accounting and auditing standards. 6.18 The above arrangements will continue under the proposed project, and the external audit would be enhanced by requiring that DWASA appoint auditors of acceptable quality on a three year contract. To ensure that audited statements are prepared in time, an agreement will be sought with GOB to have the statements submitted to IDA within six months of the end of the fiscal year, i.e., December 31, each year. Beginning in FY97, the authority for appointment of auditors and remuneration will be delegated to DWASA Board. - 39 - VII. ECONOMIC AND SOCIAL ANALYSIS A. Proiect Benefits 7.1 The proposed project would introduce the first primary water treatment plant in Dhaka and would therefore provide urgently needed safe water to the area, relieving current water shortages, particularly to areas that are currently not served by piped water. The project, when in full operation will supply 223 million cubic meters (50 IMGD) of potable water, equivalent to the consumption requirements of 2.3 million people. This will be the joint contribution of additional capacity provided by the Saidabad treatment plant and the loss reduction activities. The economic value of this additional supply is considerable because it will reduce costs and allow an increase in consumption by low income groups. These groups pay as much as Tk. 27.00 (US$0.675) per cubic meter for water purchased in small volumes and consume as little as 30 lpd (liters per capita per day), while the current DWASA price of water for residential connection is Tk 3.49 (US$ 0.09) per cubic meter, and consumption of the population served with direct residential connections, although low, is about 90 lpd. 7.2 The population of Dhaka as a whole will benefit from the additional supply since it currently consumes an average of 90 lpd. The economic price of this consumption is nearly Taka 15.00 (US$0.375) per cubic meter. The value of the additional supply is therefore significant, as expected in a large and growing city with relatively low consumption due to supply restrictions, large water deficits, low coverage, and high costs for those without direct water service. 7.3 Without the proposed project, water shortages would become more critical, and it is estimated that, with the current population growth of the City of Dhaka (estimated at 4%) per capita consumption in Dhaka would have to decline and water supply coverage for the service area would drop from the current 65% to about 45% by the year 2001. B. Economic Rate of Return and Least-Cost Solution 7.4 The economic analysis of the project is shown at Annex 13.1 The economic rate of return for the project is estimated at 22%. Net benefits amount to Tk 4,823.93 million (US$120.60 million) which are more than 60% of the project costs. This means that even if costs increase by 60%, the project will still be economically feasible at a 10% discount rate. Moreover, if only 60% of the estimated benefits are obtained, the project is still economically feasible. The main factor affecting project feasibility is the value of water since, as mentioned previously, the willingness to pay is substantial and the estimates used may be conservative, given the critical water supply situation in Dhaka and its possible development in the coming years. It must be noted that the population growth estimates may also be conservative for a country with a large rural population, few medium or large cities and high rural to urban migration rate. 7.5 The proposed project represents the least cost solution and best alternative. Four options were considered, which included the installation of additional deep tubewells; the conjunctive use of groundwater and surface water and two surface water treatment options. Because of the decline in the water - 40 - tables in the Dhaka area which has increased abstraction costs and limited the availability of ground water in the Dhaka area, the continued use of groundwater was not feasible as a solution to provide the required equivalent of the 50 mgd water treatment plant (paras. 2.13 to 2.16). The other surface water treatment options (plant at Buriganga River) were found to be to costly because of the need for additional land acquisition; the need for river crossing; and pollution problems on the Buriganga River. 7.6 It must be noted that the benefits of the project come from both the increased capacity and the loss reduction activities. Capacity expansion itself, that is, without reduction of losses, would be an economically marginal investment. Its net present value would be US$67.5 million (at 10% discount rate) and its IRR is 11.9%. Although loss reduction activities are highly profitable in economic terms, with a net present value of US$ 18.5 million, by themselves, they do not resolve the problem of rapidly growing deficits in any significant manner. Furthermore, even though the IRR is higher for the loss- reduction program, the net present value of the overall project (the first order condition in this case) is more than six times greater. 7.7 A sensitivity analysis of the project shows that if total investment costs increase by 10%, the economic rate of return is reduced to 19.5%, while a reduction in revenue of about 15% (resulting from inadequate reductions in systems losses) reduces the economic rate of return to 17.8%. The rate of return in both cases is above the 12% marginal cost of capital discount rate deemed acceptable reasonable for such projects. C. Fiscal Impact 7.8 The project's fiscal impact is expected to be positive. Currently, the Government implicitly subsidizes DWASA's net losses through the non-servicing of debt charges by DWASA. Since the objective of the project is to reduce these losses, this implicit subsidy will be eliminated. In addition, GOB charges a 15% tax on DWASA water and sewerage revenues. Since the project will increase DWASA's revenues, the net revenue flows to the Government over the life of the projects asset will be positive. The project will, therefore, not distort the Government's budget priorities. D. Impact on Urban Poor 7.9 The urban poor will benefit from this project through reduced costs for water. Currently the poor pay a high price for small volumes of water purchased daily. Access to direct connections substantially reduces the cost of water and increases their consumption. Benefits to this income group would include improved sanitation services from the sanitation component under the project, although this is difficult to quantify. It is estimated that about 45% of the people in Dhaka are below the poverty line. The project would serve an additional 500,000 people, and reduce suppressed demand over the DWASA service area. It has been estimated that the additional water supplied would serve 250,000 people below the poverty line. 7.10 The provision of water through house connections to this income group would also have considerable impact of freeing the urban poor, particularly women from the task of carrying water from public standposts. The introduction of a - 41 - progressive tariff structure under the project would have the added benefit of cross-subsidizing the poor, thus ensuring equity in the availability of water supply. E. Environmental Impact 7.11 An Environmental Impact Assessment (EIA) of the project was carried out by BCEOM (French Engineering Consultants) with local partners EPC (Engineering and Planning Consultants Ltd.) during the period February-April 1994. A Draft Final Report is available, dated April 1994. Details of the analysis are provided in Annex 14.1. The consultants specifically investigated the impact of the 50 IMGD increment which would be supplied to the DWASA system from the Sitalakhya River through the first phase Saidabad Treatment Plant, yet were mindful that future additional increments of treatment plant investments (up to a total of 200 IMGD) are expected at the same site, and raw water conveyance is expected to be located along the same route. Key environmental impacts identified include the following: (a) for raw water quality: positive impacts through continuing monitoring of raw water quality at source and long-term protection of water quality, through restriction of industrial discharges; (b) for raw water intake and transmission, construction and operation: some possible long term effects on river flows during the dry season; land based effects along the transmission alignment (both physical and social), short-term construction and nuisance effects; (c) for surface water treatment plant construction and operation: long- term physical and social effects at the site, short-term construction nuisance; and (d) for treated water distribution network: short-term construction nuisance, especially traffic disruption, long-term impacts on public health and disposal of wastewater. 7.12 Positive impacts include the provision of a 50 IMGD increment of treated surface water supply to the DWASA system, planned conjunctive use of ground and surface (thus reducing groundwater overpumping), and improved environmental management and monitoring of the water sources as a result of the Water Resources Management Study to be undertaken under the project. Commencement of the implementation of the results of this study will be a dated credit covenant. Positive impacts will be strengthened by the concurrent program of leak detection and rehabilitation which will enable greater pressures to be maintained in the distribution system and system integrity to be improved, with greater amenity and public health benefits. The treated surface water is to be supplied to areas of the city where groundwater drawdown is most severe, thus allowing the groundwater resources to recover from overpumping. Potential negative impacts of the project include: (i) the increased discharge of wastewater to the shallow surface aquifer through (a) household on-plot sanitation facilities, (b) the existing sewerage system, and (c) surface drainage channels; (ii) further growth in urban development (supported by the increased availability of water supply through the project); and (iii) necessary restriction or regulation of industrial and other discharges along a stretch of the Sitalakhya River in the vicinity of the raw water intake (to be further investigated in the water resource management study). Mitigation measures are - 42 - being incorporated in the project to reduce or eliminate the potential negative impacts associated with necessary fencing of the DND Canal, including the removal and relocation of shacks used by small businesses, the removal of domestic and commercial washing points along the canal, and the production of large volumes of sludge. During negotiations. IDA and GOB agreed on the establishment of an environmental cell within DWASA to monitor water qualitV and advise on environmental issues, as a credit covenant. F. Affordability 7.13 Surveys conducted during project preparation indicated that the present tariffs are considered affordable for both residential and industrial use, being between 2.8% of monthly income for consumers with an average income of between Taka 1,000 and 3,000 to 1.0% for consumers with an average income of over Taka 20,000. The critical test for affordability is however, the low income population. Using the minimum wage of Taka 1,400 per month and assuming a per capita consumption of 30 lpcd in a family with 6.5 people, the cost per month would be Taka 21.10 representing 1.5% of the minimum wage. Even with the expected tariff revisions under this project, the monthly cost of water would still be below the 5% to 7Z percentage considered standard in other countries. At a consumption of 30 lpcd, and if the current income tariffs is doubled the water bill would be below 5% for all consumers except those with a monthly income of Taka 900.00. G. Proiect Risks 7.14 The main risk of this project is delays in implementation of the various components of the project, causing postponement in overall project completion. DWASA has adequate experience in the implementation of World Bank financed projects, and with the assistance of consultants for construction supervision, the proposed project should be implemented without major delays. DWASA's experience was evident under the Third DWASA Project (Credit 1734-BD), in which major civil works were completed before the original closing date. In addition, the main civil works under the project will be contracted before Board discussion of the IDA credit. This should help mitigate some of the risks of delays. With its own financing, GOB has already commenced the implementation of two components critical in the project to speed implementation. 7.15 The other major risk is the possibility that the Government and DWASA may not follow through with the reforms under the project, due to political constraints, and possible resistance to reforms by major interest groups. To minimize this risk, IDA's project processing was preceded by continued policy dialogue with the Government. The risk was approached by requiring the taking of upfront action on the reform programs as a means of demonstrating commitment. The National Cabinet has approved a program of reform. The Government is in the process of amending the regulatory framework, recruiting private sector managers, and has started the Leak Detection program. Annual comprehensive reviews and a mid-term review of project progress against specific performance objectives would provide opportunity for corrective action if necessary. - 43 - VIII. AGREEMENTS TO BE REACHED AND RECOMMENDATION 8.1 During negotiations, the following was agreed with DWASA/GOB: (a) to carry out resettlement activities in accordance with IDA's resettlement and rehabilitation guidelines (para. 4.5); (b) the content and timing of the mid-term review, including benchmarks for assessing progress against objectives (para. 4.12); (c) format for progress reports, including information to be provided in the reports (para. 4.13); (d) carrying out a strategy study to assess privatization options and commencement of the implementation of the results of the study by February 28, 1998 (para. 5.6); (e) by June 1998, maintain its accounts receivable arrears to no mote than four months of its total billings (para. 5.8(e)); (f) by June 1997, appoint the Deputy Managing Director for Finance and Administration, Technical and Planning and Development (para. 5.14(a)); (g) by June 1997, carry out a staff rationalization program to assess staff strengths and weaknesses (para. 5.14(c)); (h) establish a system to reduce public sector arrears and maintain them at no more than 90 days of public billing (para. 6.8(a)); (i) conduct an assessment of stores and inventories by March 1997 and dispose off all mismatched, obsolete and slow moving stocks by December 1997 (para. 6.8(b)); (j) conduct an assessment of all receivables to identify all uncollectible arrears by March 1997, and write off uncollectible amounts by December 1997 (para. 6.8(c)); (k) DWASA to have its records accounts and financial statements audited and furnish to IDA copies of such audits within six months of the end of the fiscal year (para. 6.18); (1) commencement of the implementation of the results of the Water Resources Management Study by January 31, 1998 (para. 7.12); and (m) establishment of an environmental cell within DWASA to monitor water quality and advise on environmental issues by March 31, 1997 (para. 7.12). - 44 - 8.3 The following are conditions of credit effectiveness: (a) the execution of a Subsidiary Loan Agreement between DWASA and GOB to cover the onlending terms of the credit to DWASA (pars. 3.13) and the signing of a Performance Agreement between DWASA and GOB, to cover performance indicators to be achieved by DWASA (para. 6.6(a)); (b) the signing of the contracts for the sanitation Program and Twinning Program, (para. 4.4); (c) commencement of the strategic study to assess private sector options (para. 5.6); and (d) execution of the French and Japanese Grant Agreements (para. 3.13). 8.4 With the above agreements and assurances, the proposed project will constitute a suitable basis for an IDA credit of SDR 51.0 million (US$80.3 million equivalent) on standard IDA terms with 40 years maturity to the People's Republic of Bangladesh. Annex 1.1 Page 1 of 8 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Water Supply and Demand Proiect Area 1. DWASA' a service area includes Dhaka City and the township of Narayanganj, located to the south-east of the Dhaka metropolitan area. DWASA's service area is bounded by the Tongi River in the North and the Balu River in the East, the Lakhya River in the South East and the Buriganga River in the South-West. For purposes of the proposed project, the relevant area has been defined as a part of the Dhaka Statistical Metropolitan Area, which in turn is part of Greater Dhaka. It comprises the present urbanized area which is also the Dhaka WASA Service Area, and includes Dhaka City, Narayanganj, and two suburban areas, North and South. The area has been divided into 36 elementary urban zones (EUZ), according to current land use patterns. The population of each of the 36 EUZs was projected from the results of the 1981 census, and updated during the 1993 census. Population 2. Between 1974 and 1981, total population in Dhaka City increased by over 6Z per annum. In 1981, the population of Dhaka was 2.3 million people. This increased to 3.5 million in FY91. Population growth rates for the sub-urban areas are not very reliable. However, detailed population estimates for each EUZ were prepared on the basis of: (a) the existing land use (i.e. agriculture, commercial, industrial, etc.); and (b) the expected land use patterns in future by taking into account the possible extension of housing areas, the present population density and the rate of urbanization. Population projections for the years 1994, 2000, 2010 and 2020 were prepared and are summarized below in Table 1. Table 1: Population Proiections 1981 1991 1995 2000 2010 2020 Total Study Area 2,878,180 4,816,387 5,647,991 6,778,340 9,261,394 12,618,842 Dhaka City 2,273,357 3,804,140 4,355,216 5,025,655 6,174,268 7,172,236 Narayanganj 197,733 252,977 313,394 414,523 598,621 785,069 Suburban (North) 120,615 246,888 330,258 465,427 902,990 1,349,409 Suburban (South) 286,474 512,381 649,123 872,736 1,585,515 2,910,328 The projections shows that the population of the DWASA service area will grow to 6.8 million, and 12.6 million by the years 2000 and 2020 respectively. The higher growth rates will be in Narayanganj and the suburban zones north and south of the city, rather than in Dhaka City itself. A large percentage of this population will continue to live in slum areas with minimum water service and poor housing. These estimates seem reasonable even conservative, given probable rural-urban migration rates in a country with a large rural population and a growing industrial base. This growth will add pressure for DWASA to increase system coverage. Coverage 3. It is estimated that 3.53 million people (65% of the population), are served by the DWASA system through direct household connections. Since the number of residential connections was 130,143 (June 1994), the average number of persons per connection is about 26; there are 3 to 4 households per connection, on average. Annex 1.1 Page 2 of 8 This is high for urban standards. Actual coverage is difficult to estimate because of the substantial volume of floating population and slum dwellings. The meaning of service coverage is in itself particular to the characteristics of Dhaka. Coverage would be best defined in terms of access; that is, in terms of providing the non-connected population with access to potable water not necessarily through household connections. The 1,680 stand posts (street hydrants) still in operation' are estimated to supply water to 300,000 people. The remaining population - 1.6 million people - use "neighboring" connections both legal and illegal, purchase water in small volumes from other users and DWASA trucks, and use hand pumps in fringe areas. In this context, community stand posts and other forms of delivery to irregular holdings could be part of DWASA's strategy to increase coverage (access). Level of Consumption 4. Current per capita production from DWASA sources, using June 1994 data, is 136.45 lpd. Assuming 34% physical losses (estimated as shown in para 12), per capita consumption would be 90.05 lpd. However, DWASA supplies only a small fraction of non-domestic (industrial, commercial, government institutions) consumption. Private deep tubewells (DTWs) supply the bulk of these sectors' consumption. For a city like Dhaka, consumption of the non-domestic sector may be as much as 24 million m for each million peog1e. This would amount to 130 million m3 of which DWASA supplies only 13 million m . This implies an additional 59 lpd as consumption by the non-domestic sectors not presently supplied by DWASA. Therefore, total estimated consumption would be 149 lpd. This is still low for a city like Dhaka taking into account its climatic conditions and the fact that it is the country's main commercial and industrial center as well as the location of all national government institutions. 5. Average consumption for the population with direct connections is 102.18 lpd; for the non-domestic sectors combined; consumption from DWASA sources is the equivalent of 6.55 lpd. The 300,000 people using stand posts consumed 62 lpd (assuming that 1,680 stand posts deliver 18,630 m3 daily2). The remainder of the population (not connected), 1.6 million people I consume 46.3 lpd, assuming that they "recover" 10% of production from the system . The weighted average of these values is 90.05 lpd. It is estimated that I million slum dwellers consume an average of 30 lpd.4 1 According to some accounts DWASA has attempted to close stand posts, as regular connections are installed, because it cannot control their use. The government paid Tk 14.02 million (US$ 350,500) for water consumed from stand posts in 1993-94. 2On the basis of 2,500 gallons per day per post. 3 These estimates are based on a total production reported by WASA of 740.9 million 1/day (June 1994 MIR) and estimated population of 5.43 million. 4 UNICEF, Study to formulate a national policy on water, sanitation and hygiene in urban slums and fringes. Dhaka, May 1994. Annex 1.1 Page 3 of 8 Industrial and Commercial Consumption 6. Private companies mainly use their own tubewell installations for their water supply needs. Currently, industrial and commercial consumers connected to DWASA represent only 3,170 connections (i.e. about 2Z of total connections). In FY93, industrial and commercial consumption represented 11X of total water consumption, and contributed about 28Z of the total revenue. However, future industrial consumption from DWASA water is likely to be influenced by the government policy concerning groundwater abstraction by industries, which is affecting the levels of the water table. In this context, legislation already exists to discourage industrial and commercial users from excessive groundwater abstraction, through a levy on tubewells based on tubewell sizes. However, enforcement is lax and most industrial and commercial consumers continue to use tubewells without the payment of the levy. The Water Resources Management Study to be undertaken under the project will recommend measures and legislation to regulate water abstraction by industrial and commercial users. Demand Proiections 7. As for any other commodity, demand growth for potable water services is a function of market size (population) growth, consumer's income growth and prices. The effect of each depends on its elasticity which measures consumers response to changes in each variable. There are no estimates of demand elasticities for water in Dhaka, and they are difficult to estimate because actual demand is unobservable due to permanent supply restrictions, and adequate data is not available. It is evident, however, that - at current prices - demand is far larger than supply. 8. If we consider at least two markets: low income and other income consumers, there may be a decline in consumption by the latter due to an increase in the tariff, as waste is reduced. For the low income group, this effect is small due to their already low consumption; however, the relevant impact for this group is related to service coverage: an increase in coverage normally implies a substantial reduction in cost for the newly connected customer and therefore a significant increase in consumption. As shown above, consumption per capita from direct connections is higher than from stand posts and the latter is higher than per capita consumption for the population without connection. The evidence is overwhelming with respect to the high cost of water to the urban poor when they do not have a direct connection. In the case of Dhaka this could be as much as eight times the average tariff. 9. The implication of these arguments is that, under the particular circumstances of the Dhaka water supply system - especially in the absence of the rationing effect of an adequate tariff, population and service coverage become by far the main factors affecting any changes in water requirements in the near future. That is, the level of consumption (consumption per capita) is not a function of price and income but of available supply; therefore, projected demand depends on assumed consumption per capita since for all realistic prices, currently and in the near future, there will be excess demand. Annex 1.1 Page 4 of 8 10. If per capita consumption is approximately 156 lpd currently5 and is expected to increase by 1% in the coming years due to the effect of increased coverage and higher incomes, demand would be as shown in Table 2. These estimates should be interpreted with caution because, in economic terms, at current low tariffs, demand is substantially higher than consumption. Therefore, for all probable increases in the water tariff, available increments in supply will be quickly exhausted. At current prices, demand is almost twice as the current level of consumption. If deficits shown in Table 2 are not met, per capita consumption will have to decline due to the high rate of population increase. In Table 2, it is assumed that per capita consumption stops increasing at 166 lpd in 1999; this is to reflect rationing either through increased tariffs, scheduled cut-offs, or just lack of water as growing per capita consumption cannot be sustained due to the massive investments that it would require. Table 2: Dhaka. Water Supply and Demand Proiections 1994-2020 Per capita Projected Available Current icar PopuLation Consumption Demand ------> Deficit <------ SuppLy Losses Production Capacity Lpd m3/yr m3/yr m3/s m3/yr rn/yr m3/yr m3/s 1994 5,427,513 150 297,156,329 (43,287,864) (1.37) 253,868,465 130,780,724 384,649,189 13.23 1995 5,647,991 153 315,412,077 (41,582,683) (1.32) 273,829,394 141,063,627 414,893,021 14.27 1996 5.857.872 156 333.675.526 (41.922.009) (1.33) 291.753.517 143.699.493 435,453.010 14.97 1997 6,075,552 159 352,996,491 (56,888,445) (1.80) 296,108,047 139,344,963 435,453,010 14.97 1998 6,301,321 162 373,436,208 (72,973,631) (2.31) 300,462,577 134,990,433 435,453,010 14.97 1999 6,535,480 166 395,059,455 (90,242,348) (2.86) 304,817,107 130,635,903 435,453,010 14.97 2000 6,778,340 166 409,739,963 (96,213,796) (3.05) 313,526,167 121,926,843 435,453,010 14.97 2001 6,993,243 166 422,730,543 (100,495,316) (3.19) 322,235,227 113,217,783 435,453,010 14.97 2002 7,214,960 166 436,132,982 (105,188,695) (3.34) 330,944,287 104,508,722 435,453,010 14.97 2003 7,443,707 166 449,960,338 (110,306,991) (3.50) 339,653,348 95,799,662 435,453,010 14.97 2004 7,679,705 166 464,226,084 (115,863,676) (3.67) 348,362,408 87,090,602 435,453,010 14.97 2005 7,923,186 166 478,944,116 (130,581,708) (4.14) 348,362,408 87,090,602 435,453,010 14.97 2010 9,261,394 166 559,836,695 (211,474,287) (6.71) 348,362,408 87,090,602 435,453,010 14.97 2015 10,810,211 166 653,460,221 (305,097,813) (9.67) 348,362,408 87,090,602 435,453,010 14.97 2020 12,618,042 166 762,740,750 (414,378,342) (13.14) 348,362,408 87,090,602 435,453,010 14.97 Capacity and Production 11. More than 95Z of DWASA's installed capacity is comprised of Deep Tubewells (DTW). In recent years, DWASA has been improving this system through rehabilitation and replacement of DTWs; capacity has also been increased significantly since the BCEOM Study was completed (1992). The main problem, however, is the status of the distribution network. The BCEOM Study surveyed the different components of the network and found that in general the network is inadequate for the size of the system and is in precarious condition; physical losses between 30 and 50 percent were found depending on location, age of the network, maintenance, and water pressure. According to DWASA officials, some segments of the network are in such poor condition that they are no longer maintained; instead they must wait to be replaced when they break down completely. The Leak Detection and Waste Prevention Programme investigated two 5 Per capita consumption from the system is 66% of production, or 90.05 lpd; 59 additional lpd are consumed from non-WASA sources, for a total of 149.05 lpd currently. Annex 1.1 Page 5 of 8 small segments of the system and found numerous problems associated with materials and installation of pipes and fittings throughout the network. Table 3: Dhaka, Water SuppLy InstaLled Capacity Deep TubeweLLs Chandnighat Narayanganj Private DTWs Total Year No. m3/s m3/s m3/s m3/s m3/s 1991 140 7.280 .208 .139 7.627 1992-93 166' 8.632 .208 .139 8.979 1993-94 190b 9,880 .208 .139 3.0 13.227 1995 210b 10.920 .208 .139 3.0 14.267 1996 210 10.920 .527 .527 3.0 14.974 * DWASA, Annual Report 1992-93 ; b DWASA PLanning Division; C Wasa's estimate is 8.974 (June 1994 MIR). 12. Table 3 shows the system's capacity changes since 1991 up to 1996. Currently, there are 190 DTWs in operation and 20 under construction which, together with the surface water treatment plants at Chandnighat and Narayanganj and an estimated 3.0 m /s from private DTWs, amount to a total available capacity of 14.267 m3/s (271 IMGD).6 for 1995. Expansion of the Chandnighat and Narayanganj plants increased capacity to 14.974 m3/s in 1996.7 13. DWASA reported production was 8.25 m3/s during 1993-94 of which 51.5% was billed. This production can only be expanded marginally due to limitations in the distribution system; and increased supply to the current network will increase losses significantly. According to the Leak Detection pilot investigation, at very low pressures, physical losses are already at more than 25%. 14. Private Tubewells. The BCEOM Study did not take into account the existing capacity of private tubewells as source of water supply in the study area. Private tubewells are licensed by DWASA when it is demonstrated that DWASA is unable to meet the applicant's supply requirements. According to DWASA's records, 284 deep tubewells have been licensed. However, the Consumer Survey 1992-93 found 358 private tubewells. Normally they are between 2 and 8 inches in diameter, compared to 8 inches for all DWASA DTWs, and their operating time is also less. Assuming that, on average, each private DTW produces 20Z of the average DWASA DTW, the 358 private DTWs could add as much as 117 million m3 to the city's water supply annually. The environmental impact assessment report for the project estimated a volume of 76 million m3 annually as "private abstraction." An assessment by the ADB estimates 250 DTWs producing 50 million m3. It must be noted that the supply from these sources is not readily available to the distribution network; it is illegal to supply water from private DTWa 6 1.0 m3/s - 19 (approx.) IMGD (Imperial million gallons per day). 7 Capacity of DWASA's DTWs has been estimated assuming 52 l/s (4500 m3/day) per DTW which is the rated capacity. DWASA's estimate is slightly less (47.23 l/s). Annex 1.1 Page 6 of 8 outside the applicant's requirements but this is clearly not enforced. For the purposes of measuring total available capacity, private DTWs are estimated to add 94.6 million m3/year or 3.0 m3/s. 15. It is difficult to accurately determine the volume of private production since many DTWs have not been registered with DWASA and operators are unwilling to provide information. There are probably more DTWs than those reported in the Consumer Survey; during the survey, there was considerable resistance to provide information. Their estimated capacity (3 m /8) is an approximated average of the first two estimates mentioned above. Private DTWs are also highly underutilized but their capacity is not available to the network, and it is unknown whether it is technically feasible to increase their capacity significantly due to possible drawdown problems. 16. Losses. Physical losses are estimated at 34% currently. This level may be higher but the data on Unaccounted For Water (UFW) is not reliable since the method of estimating non-metered consumption does 8not have anything to do with water consumption but with property rental values. Estimates of UFW range from 30% to 56%. In order to estimate physical losses, given the lack of reliable data, the following assumptions were made: only 40% of water produced is delivered to water connections (the BCEOM survey found between 30 and 50 percent losses due to leaks)9; of this volume 8% is consumed by the industrial, commercial and government sectors (from water billing); an estimated 300,000 people consume 18.63 mld from stand posts or street hydrants. The remaining population not directly connected to the network "recovers" 10% of total WASA production through legal and illegal connections, purchases, etc. Estimated losses are 251.91 Mld, equivalent to 46.39 lpd. This is 34% of DWASA production. Deficits 17. Assuming that water production is maintained at the current level of 86% of capacity, and losses are reduced gradually from 34% to 20% in 10 years, production is projected as shown in Table 2. Based on projected demand, water deficits are then estimated. The current deficit is 1.37 m3/s assuming per capita consumption of 150 lpd. However, private production is not readily available to the network but only to the consumers who own the private DTWs. With current capacity, by 1998 the water deficit will be approximately equal to the net capacity of the Saidabad I Surface Water Treatment Plant (2.63 m3/s). The additional supply will be consumed immediately, even if tariffs are increased significantly (or for any realistic tariff increase). 18. Despite recent expansion of the number of DWASA DTWs, and the number of private tubewells, it has been difficult to reduce water shortages; this requires significant increments in capacity; therefore, a deficit remains every year which is simply met by not providing full coverage, not meeting residential demand and not addressing the non-residential demand question. Some of this 8 Water consumption for non-metered connections is estimated by dividing the water bill (22.62% of the property's rental value) by the tariff. 9 The Leak Detection Programme pilot study found at least 25% losses through pipes and service connections based on a survey of 2 small areas of the city with very low pressures. It did not take into account losses in main lines feeding the specific areas. Annex 1.1 Page 7 of 8 deficit would be covered by non-WASA sources. Moreover, it is unlikely that these deficits could be covered by increasing the number of DTWs. Considerable discussion has taken place recently on the capacity of the aquifer to sustain growing abstraction. Further development of ground sources will have to be gradual and after careful study of location and existing DTWs. A study of ground water management has been included in the proposed project. Suzmmary 19. DWASA's total water production capacity is currently estimated at 192 IMGD. About 95% of this capacity is from groundwater through 190 tubewells, which have a total capacity of 780 MLD (173 IMGD). The remaining capacity (19 IMGD) is from the Narayanganj Treatment Plant (9 IMGD) and the Chandnigat Treatment Plant (10 IMGD). Projections of increases in DWASA's production capacity are shown below with investment assumptions. 20. Even with the capacity above, DWASA's current production is substantially below capacity. Current production is estimated at about 166 IMGD (i.e. 86% of capacity). Although actual water billed is approximately half of this production, the level of consumption is higher due to illegal connections, underbilling and other "administrative losses". In addition, the actual level of production is not known, and DWASA has normally estimated on the basis of non- revenue water and billed consumption. In calculating the level of water shortages, it is assumed that DWASA will operate tubewells at 95% of capacity and treatment plants at full capacity. Based on these assumptions, the expected water shortages are shown below. Annex 1.1 Page 8 of 8 Table 4: Total Water Requirement. Capacity and Deficit Proiections Total Water Requirements Current 2000 2010 2020 m3/day 1,192,178 1,370,745 1,762,428 2,480,522 IMGD 262 302 388 546 MGY 95,630 110,230 141,620 199,210 Production Capacity Prolections (IMGD) Current 2000 2010 2020 Groundwater10/ 173 197 217 234 Chandnigat 10 10 10 10 Narayanganj 9 9 9 9 Phase 1 Treatment Plant - 50 50 50 Phase 2 Treatment - - 100 100 PlantllI Phase 3 Treatment - - - 100 Plant12' TOTAL 192 266 386 503 Projected Water Shortages (IMGD) Current 2000 2010 2020 Total DWASA 189 266 386 503 Capacity Production 166 256 375 491 Total Requirements 262 302 388 546 Water Shortage 96 46 13 55 10 Assumed gradual implementation of groundwater schemes to relieve local shortages and increase water by about 57 IMGD over the period. 11 Second Phase of the Saidabad Surface Water Treatment Plant. 12 First phase of the Friendship Bridge Surface Water Treatment Plant. Annex 1.2 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Proiected Deficits. Planned Capacity Increase and Investment Program Planned Investment Program Current Increased Surplus* Cost Year Deficit Capacity (Deficit) US$ M Component/Activity M3/S M3/S MN/S 1994 (1.37) 1995 (1.32) 28.2 Technical assistance, including leak detection, training; Saidabad I Construction. 1996 (1.33) 29.9 Rehabilitation of secondary distribution; metering program; technical assistance; Saidabad I construction. 1997 (1.80) 52.8 Saidabad I construction; technical assistance; secondary distribution (60 km); water & sewerage connection and metering program; primary distribution (38 km). 1998 (2.31) 2.63 0.32 38.8 Saidabad I starts operation; technical assistance. 1999 (2.86) 2.63 (0.23) 17.6 Technical assistance; improvement and rehabilitation of sewerage system; 2000 (3.05) 2.63 (0.42) 5.3 Technical assistance. 2001 (3.19) 2.63 (0.56) 2.3 Technical assistance; end of IDA project. 2002 (3.34) 2.63 (0.71) 127.0 DND-1 DTW field construction (5.0); primary distribution (122,0). 2003 (3.50) 2.63 (0.87) 14.2 DND-1 DTW field construction (6.7); technical assistance (7.5). 2004 (3.67) 3.03 (0.65) 273.4 Sewerage expansion; DND-1 field starts operation 2005 (4.14) 3.03 (1.12) 64.0 Saidabad II construction. 2006 (4.62) 3.03 (1.60) 36.8 Primary distribution. 2007 (5.12) 3.03 (2.09) 2008 (5.63) 5.66 (0.02) Saidabad II starts operation. 2009 (6.16) 5.66 (0.51) 489.3 Sewerage system expansion. 2010 (6.71) 5.66 (1.05) 8.0 Technical assistance 2011 (7.26) 5.66 (1.61) 2012 (7.84) 5.66 (2.18) 125.0 Friendship Br. I construction 2013 (8.43) 5.66 (2.78) 2014 (9.04) 5.66 (3.39) 2015 (9.67) 5.66 (4.02) 2016 (10.33) 10.92 0.59 Friendship Br. I starts operation 2017 (11.00) 10.92 (0.08) 2018 (11.69) 10.92 (0.77) 762.0 Third phase of Long term Program: water (Saidabad III, Siddirganj) and sewerage systems expansion, primary distribution, Leak detection and technical assistance. To be scheduled beyond 2020. 2019 (12.40) 10.92 (1.49) 2020 (13.14) 10.92 (2.22) * Part of this deficit will be met by additional DTW construction. Figures shown do not include losses; therefore deficits vill be between 20 and 34x higher. Annex 2.1 Page 1 of 5 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT The Institutional Reform Program BACKGROUND 1. The Government of Bangladesh (GOB) has been trying to satisfy the increasing demand for water arising from the rapid population expansion, particularly in the urban areas of Dhaka and Chittagong. Since 1963, IDA has financed five water supply projects in Dhaka and Chittagong, totalling US$108 million. IDA's fundamental objective in the sector has been to support GOB in providing equitable and improved access to basic water supply and sanitation services. To address these concerns IDA has focused on three areas of potential improvements: (a) to support the development of effective sector institutions through the establishment of the Dhaka and Chittagong Water Supply and Sewerage Authorities (WASAs); (b) to promote long term planning of capital investments through the identification of needs for expansion and the constraints on capital investments; and (c) to strengthen financial discipline and lessen the sector's reliance on limited public resources through the direct recovery of most or all of the costs through user charges. Notwithstanding IDA's emphasis on institutional strengthening, the water supply network in Dhaka remains grossly inadequate and the performance of the water sector entity (DWASA) remains very poor. There is an urgent need to increase access to basic water supply and sanitation services, and improve DWASA's capacity to operate efficiently and generate adequate revenues to cover all costs of operations, including debt service. Currently, water supply coverage in Dhaka is between 50-60%. 2. The poor performance of DWASA is due to: (a) GOB's inadequate management of the sector and excessive control on DWASA's operations as evidenced by the increasing interference in the day-to-day operations; and (b) the poor institutional capabilities of DWASA to effectively manage and operate its facilities including a lack of capable management, trained manpower and clear operating objectives, resulting in poor cost recovery, a high level of system losses and inadequate billing and revenue collection practices. 3. Sector Management: Overall management of the water supply sector is characterized by excessive government control and interference, and too much dependence by DWASA on the Government budget for its capital operating expenditures. While the WASA Ordinance empowers DWASA to formulate, execute and maintain water supply and sanitation schemes, impose rates and charges on users, management decisions, including tariff setting, staffing and investment planning are controlled by the Government. On the other hand, there are neither defined government policy guideline for sectoral development nor mandates for sector entities. The current DWASA Board is staffed by representatives of Government agencies, and there are no incentives or initiatives by DWASA staff to operate efficiently. Water tariffs, regulated by the Government, neither reflect cost structures nor meet financial requirements of the operating entities, and adjustments have been irregular in the past. While DWASA is able to fully cover its operating costs, it is unable to fully cover interest charges on three IDA loans. The most recent tariffs increases were 10% in FY91, 15% in FY93, and another 10% in FY94. Annex 2.1 Page 2 of 5 Even these were not adequate to cover DWASA's costs during a time when DWASA's its systems losses were about 50%. As a result, DWASA has been unable to keep up a full program of regular maintenance and leak detection, leading to a further deterioration of its system and services. In addition, DWASA is unable to make the relatively modest investments in institutional improvements in areas like accounting and billing, collection without the financial support of multilateral donors. 4. DWASA's Capability: DWASA's operations suffer from a lack of commercial orientation and accountability, poor management systems and shortage of trained and motivated staff. Operational performance is weak in many respects. The level of system losses was as high as 532 in 1991, and accounts receivables arrears average about 6.5 months of billings. Of the system losses, it is estimated that 20% is attributable to administrative or commercial losses, e.g. under-billing as a result of unmetered service, illegal connections and inaccurate and tampered meters, an incomplete customer data base, wrong meter reading and rent seeking activities of meter inspectors aimed at reduction water bills. Despite revenue improvements DWASA could not fully service its interest obligations in recent years, and was in default on some covenants for the Second and Third IDA credits. 5. Many of these issues have been continuous and pervasive. In the past there has been ad hoc attempts to address them, through DWASA activities financed through IDA credits. While this has brought some improvements from time to time, the lack of a comprehensive approach to deal with the issues have affected the sustainability of the programs. In addition, the lack of an effective dialogue between GOB and IDA on the need and the approach to sector reforms have affected their implementation. The reforms prepared under this project have been formulated after a sustained policy dialogue with the Government and represents an attempt to deal with issues affecting DWASA in a comprehensive manner. THE PROPOSED REFORM PROGRAM 6. The proposed objectives of the reform program is to commence a process of actions and policy changes that would improve DWASA's institutional and financial efficiency and performance to enable it to operate as a more autonomous and commercially managed water supply institution. The program would seek to: (a) provide DWASA with operating conditions that would approximate those of commercial organizations established under the Companies Act, and obtain greater autonomy from GOB by strengthening and streamlining DWASA's existing Board, revising its Ordinance and providing it with operating policies which would define its responsibilities as a water utility in areas like staffing, financial policy decisions and tariff setting, and those of the Government as a share-holder; (b) seek internal changes in DWASA's operations, financial management and performance; and (c) establish and enforce management accountability by requiring DWASA to meet agreed operational and financial performance targets. Annex 2.1 Page 3 of 5 7. The actions required to meet each of these objectives are described below: (a) Increase in DWASA Autonomy: Within the -context of the existing regulatory framework, revisions have been made to the WASA Ordinance with the objective of establishing DWASA as a commercial utility along the lines of utilities in developed countries, streamlining its Board membership to seven, the majority of whom would be non-government, with renewable fixed tenures. The Board would be appointed by the Government, under very clear guidelines agreed with IDA. The Ministries of Local Government (MLG) and Finance (MOF) would each nominate a Board member to represent the Government and DWASA's interests on the Board. The other non- governmental members would include a consumer interest group representative. The Government would appoint the Chairman of the Board from amongst the Board members, also under clear guidelines. The Board would select and recruit the Managing Director of DWASA, from the private sector with final ratification by the Ministry of Local Government, also based on very clear guidelines and criteria, agreed with IDA. This Managing Director would be an ex officio and non-voting member of the Board. To reinforce the separation of responsibilities and DWASA's autonomy, a Policy Statement has been agreed that would define the Government, Board and Management's role in DWASA's operations. In broad terms, the Government's role would be to establish the policy framework for the sector and for DWASA; the Board's role would be to implement the policy within the framework agreed, and the DWASA management's role would be the day-to-day management and achievement of agreed operational, financial and institutional performance objectives. A system of performance evaluation for the Board and management would be established to enable supervision and management by results rather than processes, and to clarify the perception of managers and GOB about DWASA's corporate objectives. (b) Internal changes in DWASA's performance: To address the problems of DWASA's weak capability to provide its services the following actions would be taken: (i) establishment of a-Twinning Arrangement with a water utility management consultant under technical assistance to help DWASA to build managerial, financial and technical capabilities essential for efficient management and operation of a commercial oriented water utility. This technical assistance, renewable every year for four years, would seek to improve operations and maintenance, management information systems, by implementing a modernized and efficient billing and collection system, an improved accounting system, technical improvements to DWASA to reduce water losses, and training to DWASA staff to improve their capabilities to manage the utility; (ii) re-organization of DWASA's structure to create profit/cost centers designed to introduce transparency and Annex 2.1 Page 4 of 5 accountability into operations, by separating distribution and water production and introduction of a transfer price between the two units. This would be undertaken by the Twinning Program described in (i) above; (iii) implementation of a Crash Meter Installation Program to reduce unmetered connections to less than 5% within three years. This program would be contracted to a private sector contractor and would include district/zone metering to properly monitor water consumption in different zones to set the stage for private participation in DWASA activities in future. This program, will utilize information from a consumer survey completed in July 1993 financed under the Third Dhaka Water Supply Project (Cr 1734-BD), and would commence by Board presentation of the project, under a retroactive financing arrangement; (iv) implementation of a Leak Detection and Rehabilitation Program throughout DWASA's distribution system to reduce physical water losses. This program would utilize a pilot program initiated in two consumer zones under the Third DWASA Project; (v) contracting out DWASA services to local contractors to reduce system losses and improve billing and collection efficiency. The services to be contracted out will include meter reading, billing, collections, and follow-up on payments and disconnection in case of default. The program will initially start in two zones and the experience in these zones will be used to plan future activities; and (vi) implementation of a graduated or block tariff structure to properly reflect the cost of providing service and discourage excessive water consumption, to be implemented gradually over two years. Tariff increases would still be required in the interim period to ensure that DWASA revenues continue to improve and it achieves financial sufficiency within four years. A Tariff Study recommending the revised structure was completed during preparation. (c) Establishment and enforcement of Management Accountability: This would include actions requiring DWASA to meet agreed operational and financial performance objectives, which would be defined in a Performance Agreement between the Government and DWASA. The most critical of these targets would include: (i) achievement of agreed operating ratios/(revenue/cost) levels every year through tariff increases and cost reductions to ensure that DWASA covers all costs of operations, including debt service charges within four years; Annex 2.1 Page 5 of 5 (ii) reduction in unaccounted-for-water (systems losses) to about 30X within seven years; (iii) implementation of agreed annual targets of the metering program discussed above; (iv) reduction of accounts receivables to agreed levels each year (including an initial ageing analysis and writing off of uncollectible arrears), with the objective of achieving a receivable to billing ratio of 3 months within three years; and (v) implementation of an acceptable consumer connection program, subject to the availability of water. Targets for this will be defined on an annual basis, based on an estimate of the availability of water. 8. The Performance Agreement will also address issues like reporting procedures, the financing of DWASA investments, and performance objective follow-up procedures and plans for payment of water supply and sewerage arrears from Government departments and public corporations. Some of the monitoring indicators to be used to measure DWASA's performance are shown at Annex 12. These include physical, technical and financial indicators. 9. In addition to these activities, a strategy study would be carried out under the project to investigate privatization alternatives, and develop a long term strategy for mobilizing finance and increasing efficiency in DWASA. The study will assist in demonstrating the need for fundamental reform in order to attract required finance from the private sector for DWASA's investment program, as well as assess the steps required for reform implementation, including the development of a regulatory framework. Table 1: SUMMARY OF INSTrUlTIONAL REFORM COMPONENTS Objectjve Descipi T Amendment of the WASA Ordine Provide DWASA with operaing conditi mlar Revision of Ordnce to provide DWASA with Ratificatiaa of Ordance by GOB before Board to thoe in conunestial ogankzatiens. greater autonomy by str_ngting DWASA Board, Prsntatio of the Prect inoductio of ommial rgltos sad limitng GOB functions 2. Establisment of Policy Stement To create policies that would define responsibilities Policy Statement would create specific Poicy Staement to be canpleted by Board of DWASA, its Bord and the Ooveansnt. respensibtlie for DWASA as a utiLity in areas Presetao and ratified by Bord. lie saffing, financial poicy and tariff, the Board as impxantng uit of DWASA policits, and GOB as shardelder. 3. Perforane Agoeonmct To establish anual perfmance objectives by Perfomace Agrment weuld covcr trgets in Perfornance Agcest to be finlized at Board. which DWASA would be held accotable. revenue, cot lveba, water lo, billing and Agreemen to be raviewed annually betwen coleics, red tagets of service provision. DWASA and GOB to chdck compliaoce with targets. 4. Appoinmt of MWAging Director To improve _mnat of DWASA. Mawning Director with appropriate skills ad AppoiiCst or desipatie to be completed by expeience to be ppointed from the private ector negots . Appoinmmt is for four years, ad on a contact basis under the project. renewablt. 5. Twinning Program To help DWASA build manaia, fineaial and Twinng arrangemt with an efficiemt wat Program would be for four years. Phae I tchnial capabili esen t for efficiency utility to help impr opeoanad mns scc, (diagostic) for four mtinls and Phae 1 for 31/2 managant and operatio of a conmercial fnacial managemen, nmangemet informatio year. or ed water utilty. sydms and training to DWASA to help inprove staff capabthes. 6. Meter Inallao Pgnm Icreas biled water by reducing unmetred A crah mdeer isll pror to reduce Threeyea. cacons. unmetred connctio font 22X to about 51 in two yea. Program would be conctcd out to a private sector coactor. 7. Leak Ddecon and Rehabilitation Prgr Reduce physica losss and isrea mrevnu. A program to cover tDe DWASA ervice area to Phaes I to cce in Noveabr 1994. Phas H1 reduce physial les ad undeta repar and to onmene afler Phase I in approximately 20 J reabiJitbati, to be implemitd in three phas. nths later. Phas m t commence sfkcr four year. S. Tariff Study To recomnd a rvised cad inproved tariff A study to recommed and impkment a gradud Tariff study in progirss, to be complted by structwu. tariff structre which proerb rdects the coat of Navember 1994. providing th services and discourage exsive water consumption. C Obie*nctDeivri_ T_m 9. Contacting out DWASA Services. To improve billing amd collcti efficiency and Contracting out billn, cdletn, meter repis Frst two z7o wil be tsted over twelve montns; reduce nmm-cbhnical systm losses. and readings and disconnection to private setor, to resulb will be used to plan addion activities. initially tart in two mums of DWASA'a service area. 10. Reosgniztio of DWASA's fictions io To inmtoduce acntabily between diffeet Sepati of disriution and water production to To be undeake unde the Twinnig Program protlcost cente. functiona. allow belter monn of inputs and mach thea Consultancy. with outus. 11. Strategy Study for Private Sctor To introduce futher privat participation throu To s the private ector optims available to Study will tnt immediately after project Participation, a dedicated utility operstor. improve DWASA's efficiency and reconomed the effectiveness, and be implented over a year. most feasble option. Folow-up diaogue with the Overnm nt. Annex 2.2 Page 1 of 10 BANGLADESH DHAKA WATER SUPPLY AND SEWERAGE AUTHORITY General Operating and Financial Policy Statement I. PREAMBLE 1. The Dhaka Water Supply and Sewerage Authority (DWASA) was established under the Water Supply and Sewerage Ordinance of 1963, and amended by the Water Supply and Sewerage Authority-(Amendment) Ordinance of 1984. DWASA's objectives are to provide for the construction, improvement, expansion, operation and maintenance of water supply and sewerage facilities in Dhaka. 2. DWASA is a public authority under the Ministry of Local Government, Rural Development and Cooperatives. In recognizing the important role that DWASA plays in the urban development of Dhaka and in meeting basic water supply needs, the Government has placed high priority in improving DWASA's operational and financial performance. The Government also recognizes that DWASA's performance could be improved by providing clearly defined guidelines and mandates relative to the organizational, functional, managerial and financial aspects of DWASA and the Government's own role in supervision and monitoring DWASA's operations. 3. The objective of this policy statement is to establish clear guidelines for DWASA operations, and provide the required level of autonomy for the efficient delivery of its services. This policy statement also defines the roles and responsibilities of the Government and its Ministries in monitoring and supervising DWASA's performance to ensure that it operates efficiently. II. GENERAL CORPORATE POWER AND FUNCTIONS 4. DWASA shall have the following general power and functions among others: (a) transact the business for which it has lawfully been organized, and exercise such powers and perform such acts as are directly or indirectly necessary to the attainment of its purposes and objectives; (b) provide water and sanitation services in the City of Dhaka as efficiently as possible, recover fully all of the costs of service delivery, and expand coverage, improve water and sanitation services to the extent possible, and with the resources available; (c) own, lease, mortgage, encumber or otherwise dispose of real and personal property as the attainment of its purposes and objectives may reasonably permit and the transaction of its lawful business may necessarily require; Annex 2.2 Page 2 of 10 (d) enter into any obligation or contract (financial or otherwise) to the proper administration of its affairs, the transaction of its business or the accomplishment of its purposes and objectives; (e) sue and be sued in its name before any court or tribunal; (f) formulate policies and promulgate regulations necessary for the attainment of its purposes and objectives, which are not contrary to law, or the WASA Ordinance, morals, public interest, and amend or repeat the same where necessary; and (g) generally, exercise all the powers of a utility under the amended WASA Ordinance of 1995 consistent with the provision of the policy statement. III. BOARD 5. Under Section 6 of the WASA Ordinance, DWASA shall be governed by a Board or equivalent body composed of a Chairman and six members, to be appointed by the Government of Bangladesh. The Board will consist of: (a) a representative of the Ministry of Local Government; (b) a representative of the Ministry of Finance; (c) a representative of DWASA water users; (d) a member of the Dhaka Chamber of Commerce and Industry (e) a member of the Institute of Chartered Accountants; (f) a member of the Institute of Engineers Bangladesh; and (g) an additional non-governmental member. 6. The Managing Director of DWASA will be an additional ex-officio but non-voting member of the Board. The number of Board members required to constitute a quorum for transacting the business of the corporation shall be four. 7. The representatives from the Ministry of Finance and the Ministry of Local Government will be senior officials of a rank no less than that of a Joint Secretary. 8. The appointed members of the Board or equivalent body shall serve for a fixed renewable term, and shall be eligible for reappointment. 9. Members of the Board shall remain in office until their successors shall have been appointed and qualified. In case of a vacancy on the Board, the same shall be filled by the Government for the unexpired term. 10. No person shall be appointed member of the Board unless he is a citizen of Bangladesh, of established integrity, and has the specific qualifications required to transact DWASA business. 11. - The Chairman of the Board shall be appointed by the Government of Bangladesh from amongst the members of the Board. The Board will elect amongst themselves a Vice-Chairman of the Board. The Chairman, or in his absence the Vice-Chairman, shall act as the presiding officer of the Board. Annex 2.2 Page 3 of 10 12. The Chairman and members of the Board, (except the Managing Director as ex-officio member) may have alternates who shall be appointed or elected in the same manner and for the same term of office as the members to whom they are alternate. The alternative member shall be duly authorized to sit temporarily in the member's stead, whenever they are unable to attend any Board meeting. 13. An alternate member may participate in meetings but may vote only when he is acting in place of and in the absence of the member to whom he is an alternate. 14. While the office of a member is vacant, the alternative of the former member shall exercise the powers of that member. IV. POWERS AND FUNCTIONS OF THE BOARD 15. The Board or equivalent body shall have the following powers and functions: (a) formulate policies necessary for the attainment of the purposes and objectives for which DWASA was established; (b) proclaim regulations governing the manner in which the general business of DWASA is to be transacted, including financial regulations; and amend, repeal or alter such regulations as it considers necessary or appropriate to further the objectives and functions of DWASA; (c) recommend for ratification by the Governmei.t of Bangladesh, appointment of the Managing Director of DWASA; (d) determine the organizational structure of DWASA, and in accordance with the provisions in clause , create such positions as may be necessary for the economical, effective and efficient discharge of its functions and responsibilities in accordance with an agreed manning plan; (e) appoint the Deputy Managing Director(s) of DWASA, if necessary, provided that these will have different functional responsibilities like finance and administration, technical and planning and development and the like; (f) pass upon and approve, in accordance with the provisions of clause 51, the annual and supplemental budgets, audit report, corporate plans and annual and medium-term investment plans submitted to it by the Managing Director of DWASA in accordance with the provisions and targets in the Performance Agreement; (g) pass upon and approve self financed investments of DWASA and including the financial arrangements for such investments provided that DWASA makes such investments after meeting its normal annual liabilities, and the investment plans are consistent with the Performance Agreement; Annex 2.2 Page 4 of 10 (h) pass upon and approve, in accordance with the provisions in clause 50, management contracts and proposals, including procurement arrangements for self-financed investments; (i) pass upon and approve, in accordance with the provisions in clause 49, DWASA's proposals for adjustment of tariffs and charges for its services based on an agreed annual inflation index; (j) present annual reports, including any other special reports as may be required to the Government of Bangladesh; (k) submit to the Ministry of Local Government, fiscal plans and statements of financial condition at such time and in such form as may be prescribed, for-the purpose of incorporating in the fiscal budget plans of the Government; (1) submit to the Ministry of Local Government for Government approval all investments requiring Government financing or guarantees; (m) adopt rules and procedures and fix the time and place for holding Board meetings; (n) appoint DWASA's auditors annually, and fix the remuneration for the auditors; and (o) exercise such other powers and perform such other functions as may be required by law. V. BOARD MEETINGS 16. The Board shall convene as frequently as possible (preferably every two months), or as is necessary to discharge its responsibilities properly. 17. The members of the Board (except the Managing Director of DWASA, as ex-officio member) shall receive such per diem as may be authorized by the Ministry of Local Government for every meeting attended. 18. Meetings of the Board shall be convened by the Chairman, or in his absence, by the Vice Chairman. Meetings other than regular meetings shall be so convened: (a) whenever the Chairman or, in his absence, the Vice Chairman deems it necessary or desirable; (b) whenever the Managing Director so requests; and (c) whenever a majority of the members of the Board so requests. 19. If a quorum is not present within 30 minutes of the appointed time for the Board meeting, the meeting shall be adjourned to the next day, at the same time and place, or if that day is a public holiday, to the next succeeding day which is not a public holiday at the same time and the same Annex 2.2 Page 5 of 10 place; if a quorum is not present at such adjourned meeting, the members present shall constitute a quorum and may transact the business for which the meeting was called. 20. The Board may, by regulation, establish a procedure whereby a decision in writing signed by all the members of the Board shall be as valid and effectual as if it had been made at a meeting of the Members of the Board. 21. All matters brought before the Board shall be decided by a simple majority vote. VI. CHIEF EXECUTIVE OFFICER OF DWASA 22. DWASA shall have a full time Managing Director as its Chief Executive Officer. He shall be appointed by the Board, with final ratification by the Government of Bangladesh, for a fixed term unless sooner removed by the Board for cause or by reason of incapacity. The Managing Director shall be of good moral character, of unquestionable integrity and responsibility and shall be of recognized competence in managing of public utilities or other corporations. 23. The Managing Director shall be the legal representative of DWASA. 24. The salary of the Managing Director shall be fixed by the Board, and shall reflect the experience, competence and qualification of the individual and his expected responsibilities. The Board may authorize payment of allowances and other emoluments to the Managing Director, including incentive bonuses depending on performance. 25. The Managing Director shall be assisted by such other officers as may be necessary for the efficient operation of DWASA. 26. The Managing Director shall not perform any functions outside DWASA which in the opinion of the Board are incompatible with his office in DWASA. 27. The Managing Director shall vacate his office if the Board so decides, and the Government ratifies the decision. Such ratification shall be granted within twenty-one days, failing which the Board shall proceed with the removal of the Managing Director. 28. The Managing Director shall have the following powers and functions:- (a) execute, administer and implement policies and measures, including financial and operational objectives approved by the Board; (b) direct and manage the affairs and business of DWASA in a financially and administratively sound manner, and in compliance with the rules, regulations, provisions of the ordinance or other contracts approved by the Board; Annex 2.2 Page 6 of 10 (c) submit, within three months after the close of the calendar year, a draft annual report to the Board and such other reports as may be required; (d) submit to the Board three months before the end of the fiscal year an annual budget for the following fiscal year and such supplemental budgets as may be necessary for its consideration and approval; (e) represent DWASA in all dealings with other offices, agencies and departments of the Government and with all persons and other public or private, domestic and foreign entities; (f) appoint, with the approval of the Board, and discipline for cause in accordance with civil service law, rules and regulations, the subordinate officers and personnel of DWASA; (g) transfer officers and personnel within DWASA as the nature of the service may require without need of prior approval by the Board; (h) delegate authority, in whole or in part, to subordinate officers and personnel of DWASA, provided such delegation has the prior approval of the Board; (i) recommend to the Board, adjustments to DWASA's tariffs and charges, based on an evaluation of expected performance in the following fiscal year; (j) perform such other duties as may be assigned to him by the Board; (k) set DWASA's performance targets relative to the implementation its corporate plans and programs, subject to approval of the GOB taking into account the capabilities and resources of the corporation, the agreed performance evaluation criteria for DWASA and the sectoral policies of GOB; and (1) formulate operational policies and internal work systems for the conduct of its day-to-day affairs including performance incentives for staff, toward the attainment of the coordinated corporate and government sectoral policies and objectives. Such policies shall require approval of the Board before becoming effective. 29. The Managing Director shall be held accountable for DWASA's performance and will be responsible for meeting agreed performance targets, and ensuring that adequate resources are available for meeting those targets. VII. MINISTRY OF LOCAL GOVERNMENT 30. The Ministry of Local Government, Rural Development and Cooperatives (MLGRDC) shall accord the greatest possible degree of autonomy to DWASA in decision-making at the operational level. Annex 2.2 Page 7 of 10 31. MLGRDC may establish, within its organizational structure, a specific unit of competent personnel who shall be charged with the function and responsibility of assisting the Ministry in the discharge of its functions of monitoring DWASA's performance. Such a unit shall be headed by an official not lower than the Joint Secretary level in rank. The mix of skills and types of staff needed for this purpose shall be determined by the MLGRDC. 32. MLGRDC will review agreed performance targets of DWASA relative to the implementation of the corporate plans, programs, and performance agreement, taking into account the resources of DWASA, the agreed performance evaluation criteria, established beforehand with DWASA. 33. MLGRDC will provide through DWASA's Board, the overall framework to guide DWASA's operational policies and internal work systems. 34. MLGRDC shall monitor and evaluate periodically the physical and financial performance of DWASA for the purpose of ensuring that both objective and execution of the corporate plans and programs are being effectively pursued and implemented in accordance with the approved performance targets. For this purpose, MLGRDC shall, among others, require DWASA through its Board to render periodic reports on the progress of plans and programs, including the conduct of appropriate financial and other audits and examinations of audited annual financial statements of DWASA as appropriate. 35. The role of MLGRDC in decision-making shall be: (a) ensuring that DWASA's corporate plans, programs and budgets are congruent with its own sectoral objectives and priorities; (b) determining the implications of such plans and programs on those of other public corporation or utilities attached to the ministry; (c) reviewing the assumptions given and calculation made in justifying the viability of such proposed plans and programs; (d) reviewing the targets proposed to be achieved and monitoring the physical and financial performance of DWASA on a periodic basis to ensure that such agreed targets are being faithfully pursued; and (e) discussing and giving guidance to the Board as appropriate with respect to the operations of DWASA and any matters which the Board may refLer to it. 36. MLGRDC shall nominate an appropriate senior official of MLGRDC to DWASA's Board. It shall be among the functions and responsibilities of the representing official to provide a two-way flow of timely, relevant and accurate information between MLGRDC and the Board on all matters necessary for effectively coordinating the plans and programs of the corporation with the policies and objectives of the Government. Annex 2.2 Page 8 of 10 37. It shall be mandatory for MLGRDC to: (a) enforce a closer ministerial overview of operations of DWASA in the case of continuing incurring of deficits by DWASA, or inability to meet performance targets, through the examination, review and approval of DWASA's operating and capital expenditures, and more frequent reports as may be necessary; (b) conduct management audits of DWASA if it is reasonably believed to have been mismanaged, upon prima facie evidence of such mismanagement, and take such action as may be appropriate under the circumstances; (c) see to it that inputs of corporate operations in which the Directorate of Audit has qualified audit opinions are improved; and (d) dismiss a member or members of the Board in case of misconduct or failure to undertake their duties and responsibilities as provided in this policy statement. 38. Nothing in this policy statement shall be construed as reducing or absolving DWASA, or its Board of the responsibility to ensure the efficiency, effectiveness and viability of DWASA operations, nor MLGRDC of the responsibility to take such remedial actions as may be necessary under the premise to improve DWASA's performance. 39. MLGRDC shall, in consultation with the Board, be responsible for developing indicators, criteria, standards and other measures of performance relevant to corporate monitoring, including the identification of problem areas, measures for relevant follow-up action and designing a performance evaluation system that will include a comprehensive review of DWASA's performance on an annual basis. VIII. THE MINISTRY OF FINANCE 40. The Ministry of Finance (MOF) will provide technical support to MLGRDC in the monitoring and evaluation of the financial performance of DWASA, as well as in the analysis of the financial implication of DWASA's development plans submitted to the MLGRDC including the requirement for funding support from other sources, foreign and domestic borrowing, and foreign exchange requirements, in terms of the medium term public investment program, and the Annual Development Program, where necessary. 41. MOF shall provide support in monitoring disbursement or releases to DWASA, as well as the implications of government guarantees required by DWASA for loans incurred by DWASA. IX. FINANCIAL AND INVESTMENT POLICY 42. DWASA will operate in a commercially oriented and financial manner with the objective of generating adequate revenue to cover all cost of Annex 2.2 Page 9 of 10 operations, including depreciation, provision of doubtful debts, financial charges, plus a profit on invested capital on an accrual basis. 43. The Managing Director will present to the Board for approval, its proposed investment/expansion, with all the justification for the investment, and demonstrable evidence of positive contribution to the water supply and sanitation sector, and the technical, financial and economic viability of the investment. 44. In selecting investments or expansion, DWASA shall always be guided by the need to pursue the objectives set forth in Section 2 of this Policy Statement and Section of the revised WASA Ordinance. 45. DWASA shall so conduct its operations as to earn a reasonable return on its capital, as agreed annually with the Government, and reflected in its Performance Agreement. 46. Subject to Board approval, DWASA will incur loans (whether domestic or foreign) to carry out the investments or development projects. The Board will specify to the Government the purpose for which the proposed debts is to be incurred, and the terms and conditions as it shall deem appropriate for the accomplishment of the said purpose. The rate of DWASA's borrowing to the total of borrowing and shareholders funds should not exceed 60Z, with borrowing defined as current and long term interest bearing debt, and excluding trade creditors and other accounts payable. Shareholders funds shall be defined as share equity, revaluation reserves, government and foreign grants, and accumulated earnings/(shares). 47. DWASA will maintain adequate accounting systems incorporating various internal controls to the extent possible, and appropriate to its nature and size of its operation. 48. Subject to Board approval, the Managing Director will appoint the staff of DWASA, based on an agreed staffing formula that will limit excessive employment. DWASA shall always ensure that its staff costs do not exceed 25% of its total operating costs in any given fiscal year. 49. In recommending annual tariff increases to the Board, DWASA shall always ensure that proposed increases do not exceed the average of the inflation index for the previous year and estimated index for the current year. 50. The Board shall establish the approval limits for Board and DWASA Management for procurement and other contracts. 51. The Board will present to the Government DWASA's budget, for its examination and inclusion into the annual development program and Performance Agreement after discussing and approving it in its Board meeting. Annex 2.2 Page 10 of 10 52. The Managing Director shall, within three months from the end of the fiscal year, provide to the Board annual reports and audited reports for the fiscal year ended. These reports shall include the appropriate narrative, statistical information and financial statements describing the activities of DWASA during the fiscal year. The reports shall also describe and justify any substantial deviation from the annual plan, budget and specific performance targets agreed beforehand. Annex 2.3 Page 1 of 8 BANGLADESH Performance Aareement Between The Government of Bangladesh and Dhaka Water Supply and Sewerage Authoritv AGREEMENT 1. This Performance Agreement (hereinafter called the Agreement) is between the Government of Bangladesh (GOB) represented by the Ministry of Local Government, Rural Development and Cooperatives (MLGRDC) and the Dhaka Water Supply and Sewerage Authority (DWASA). 2. The rationale for this Agreement arises from the mutual interest of both DWASA and GOB to: (a) improve the performance and growth of DWASA as an autonomous public utility capable of exercising its powers to maximize the benefits from DWASA's assets; (b) to increase the level and quality of water and sanitation services in the City of Dhaka; (c) to improve investment and financial planning and reduce the level of financial losses in DWASA; and (d) to contribute towards the economic and social development of Bangladesh by increasing DWASA's capabilities in the areas of its functions as identified by the amended WASA Ordinance of 1963, as amended by the WASA (Amendment) Ordinance of 1996. 3. Based on this mutual interest, both DWASA and GOB have agreed to undertake the obligations set forth in this Agreement toward the fulfillment of their respective commitments as described in the following paragraphs. 4. GOB and DWASA shall be bound by the provisions of this Agreement and shall assist each other in the fulfillment of their respective obligations as laid down in this Agreement. 5. This Performance Agreement shall consist of this Agreement and its Annexes, as incorporated herein. OBJECTIVES 6. The Government recognizes the urgent need for improvement in water supply and sanitation in Dhaka and other urban areas in Bangladesh. The main sector objective being pursued by the Government is to improve human health and productivity through the development of water supply services which are affordable and sustainable to as many people as possible. 7. In this context, GOB established DWASA under the Water Supply and Sewerage (WASA) Ordinance of 1963 to formulate, execute, and maintain water Annex 2.3 Page 2 of 8 supply and sanitation schemes and impose rates and charges on consumers for these services. According to this Ordinance, DWASA is supposed to be an autonomous entity; however, the Ordinance also stipulates that DWASA shall be guided, on questions of policy, by such directives as the Government may, from time to time give, and the Government shall be the sole judge as to whether a direction given to DWASA is or is not a question of policy. 8. An essential goal for DWASA is to ensure that it operates more efficiently as a truly autonomous and commercially managed water supply utility by implementing actions that would give it more autonomy in its operations to provide its customers with an adequate and reliable water source efficiently. To meet the growing demand for water supply in Dhaka, GOB support is required to ensure that DWASA achieves this goal. This will involve DWASA adopting clear strategies addressing its financial, operational and institutional performance. 9. The main objective of this Agreement is, therefore, to develop DWASA into an efficient and financially autonomous organization, capable of meeting consumer needs, without recourse to GOB financial and budgetary support. With donor assistance, DWASA is committed to improve the water supply and sanitation situation in support of overall Government sector objectives. 10. The Agreement defines, for the period stipulated: (a) the objectives and obligations of DWASA under the Agreement; (b) the rights and obligations of GOB and DWASA under the Agreement; and (c) the procedures for performance evaluation and monitoring under the Agreement. 11. The targets and provisions in this Agreement will be incorporated into a Corporate Plan that will form the basis for DWASA's operations and will be revised annually. GENERAL PROVISIONS 1. Period of Agreement This Agreement covers a period of five years from the date of its signature to 200_. The parameters for this Agreement shall be reviewed annually between the parties involved. 2. Review and Modification of Agreement Notwithstanding the provisions made in the paragraph above, this Agreement shall be subject to review and/or modification or extension by the agreeing parties during the period of this Agreement. Annex 2.3 Page 3 of 8 3. Limitation of Agreement This Agreement shall in no way supersede, amend or modify the provision of the WASA Ordinance, including its amendments, and shall, in all respects, be subject to the provisions of the Ordinance. In case of a conflict between the provisions of this Agreement and those of the Ordinance, the provisions of the Ordinance will prevail. OBJECTIVES AND OBLIGATIONS OF DWASA IN THE PERFORMANCE AGREEMENT 4. Supply Obiectives 4.1 DWASA will commit itself to provide at all times the best conditions of service within the means at its disposal and will achieve the water supply coverage levels shown in the Annex to achieve a 70% coverage level in FY2000. 4.2 To meet the targeted water supply coverage levels, DWASA shall undertake an expansion of its water supply capacity by implementing the Fourth Dhaka Water Supply Project, with efficiency and efficacy. 5. Technical Operational Objectives DWASA will make every effort to improve the technical qualities of its services. The objectives of such efforts should cover the following areas: 5.1 DWASA will undertake to improve its distribution system by introducing a preventative maintenance program for all plants and distribution network. This program will be reviewed annually by a committee consisting of DWASA and MLGRDC officials to ensure that it meets stated objectives. 5.2 DWASA will undertake to implement the Crash Meter Installation program and to achieve the targets in the Annex to increase metered connections to about 95% of total connections by June 1998 DWASA will use all resources available, internally or externally, including the option of contracting the implementation of this program to the private sector. 5.3 DWASA will undertake to implement a leak detection and control program, and actions to reduce commercial and administrative system losses to reduce system losses according to targets in the Annex and achieve a level of unaccounted for water of 36% from the current level by 1999. 5.4 DWASA will undertake to implement a consumer connection program, to achieve the targets in the Annex and increase the level of connections to 199,485 by FY99. 5.5 DWASA will undertake to implement a well monitoring and regeneration program to improve productivity of its tubewells, and achieve increase average productivity per well to 4.0 million lpd by 1998. Annex 2.3 Page 4 of 8 6. Commercial and Operational Obiectives DWASA will make every effort to improve the quality of its service and commercial operations. The objectives of such efforts are: 6.1 DWASA will improve the level of its revenue collection to attain the targeted levels of receivables to monthly billings shown in the Annex and achieve a ratio of 3 months by FY98. 6.2 DWASA will implement a meter repair program by FY97 to ensure that faulty meters are reported and repaired within thirty days. 6.3 DWASA commits itself to improve its billing practices to ensure that by FY98, all customers receive their bills on a monthly basis. 6.4 DWASA will implement a billing policy to ensure that by FY98, all bills are paid within three months from the receipt of the bill. 7. Investment Oblectives DWASA commits itself towards the effective implementation of its investments under the Fourth DWASA Project to sustain the growth -. and capability required to meet the forecasted production capacity of 101,300 million gallons per year by the year 2001. 8. Consumer Relations Obiectives DWASA commits itself to improving the quality of its commercial management and interaction with its consumers. The commitments of DWASA under this objective is to introduce policies that would: 8.1 improve commercial relations with consumers along with prompt handling of queries and service complaints. DWASA commits itself to respond to a service complaint within 10 days; 8.2 provide information to consumers beforehand on expected water shortages, and reasons and estimated duration of the shortages, and explanation afterwards on sudden and unexpected water shortages; 8.3 implement a media campaign to warn consumers on the legal implications on the pilferage and theft of water; 8.4 implement a media campaign to bring awareness in consumers of the benefits of the conservation of water resources. 9. Human Resource Management Obiectives DWASA commits itself to improve the efficiency of its staff in relation to its services. The commitment of DWASA under this objective would be: 9.1 achieve the staffing targets set in the Annex and improve its staff productivity index to 14 staff per 1,000 connections by the Annex 2.3 Page 5 of 8 year 2,000, and maintain its staff costs to no more than 25Z of total costs. 9.2 take appropriate action, to improve staff productivity measures through strict recruitment policies, natural attrition, incentives for greater motivation and productivity and comprehensive training program. 10. Finance, Accounting and Audit Obiectives DWASA commits itself to strengthen its financial performance, accounting systems, audits and control and improve its financial management and operational efficiency. The commitments of DWASA under this objective would be: 10.1 to take adequate financial and regulatory measures to improve revenue to a level such that gradually, and by FY99, internal revenue generation shall be sufficient to cover cash operating expenses; debt service resulting from all debt incurred under three IDA credits, two ADB loans, and debt to be incurred under the proposed Fourth DWASA project in percentages shown in the Annex and contribute to the self-financing of the Investment Program in percentages shown in the Annex; 10.2 to review and improve the accounting system, with assistance of technical assistance under the project, to establish an efficient computerized accounting system with updated accounting manuals by FY98. 10.3 to review and update the financial status of DWASA, including review of accounts receivables to establish a realizable value, perform an ageing analysis of all receivables, perform a reconciliation of all balance sheet items, including stores to identify obsolete and slow moving stores, establish more reliable estimates of work-in-progress, current liabilities and fixed assets, by March 1997 and sell all mismatched obsolete and slow moving stocks; and write off uncollectible arrears by December 1997; 10.4 to review and update budget procedures, and issue manual of procedures and guidelines; 10.5 improve financial management of DWASA, in respect of cash management, account and ledger reconciliations and provide training to accounting staff to improve their efficiency; 10.6 review and establish effective systems of internal control throughout DWASA, including strengthening of the Internal Audit System. 11. Tariff Policy Objectives 11.1 DWASA will adopt a revised tariff structure by June 1997. The revised tariff structure shall be aimed to fulfill the following functions: Annex 2.3 Page 6 of 8 11.1.1 to meet DWASA's financial requirements as outlined in Section 10.1; 11.1.2 to adapt a tariff structure leading towards the long-run marginal cost methodology; 11.1.3 to address appropriately the issue of cost recovery for other services, e.g. drainage, sewerage; 11.1.4 to provide an appropriate guidance to the charges to be applied to large, medium, small, commercial and domestic consumers. 11.2 DWASA will take actions to adjust its tariffs annually as required, based on an agreed inflation index, and to meet its financial objectives for the period FY97 to FY01, to enable it to achieve the performance targets in the Annex. RIGHTS AND OBLIGATIONS OF GOB AND DWASA 12. Arrears from Government Departments for Water Supplied GOB commits to cause Government departments to settle outstanding arrears to DWASA including setting up a mechanism to ensure that receivables from Government Departments are no more than 90 days of billings, and by making the appropriate annual budgets allocation for these arrears. 13. DWASA Interest and Principle Arrears DWASA commits to prepare by March each year, repayment schedule for arrears of interest and principle obligations under the three IDA credits onlent to it by GOB. 14. Recovery of Current Accounts From Government Departments GOB shall ensure that all government departments, Ministries and parastatals who use DWASA water do so as consumers of DWASA and that they will respect the terms and conditions of supply, including timely payment of water charges. GOB ensure that such departments settle water charges within three months of receipt of bills. 15. Disconnection of Water Supplv DWASA shall disconnect water supply to any government, parastatal or private consumer with more than three months of unpaid bills. Resuming water supply shall be subject to resettlement of the sum due, plus payment of any reconnection charges and penalties. 16. Compensation due to Obligations imposed by GOB Whereby, for general public welfare, GOB directs DWASA to undertake any special obligations or works which increases its operating costs, or reduces its revenues, (e.g. maintain Dhaka City's drainage system), GOB will compensate DWASA to the extent Annex 2.3 Page 7 of 8 of such costs and losses within six months of the receipt of financial records confirming such costs. 17. Audit of Accounts and Statements of Expenses No later than two months after the end of each year, DWASA must have its accounts for the year audited by independent auditors. Such an audit would include authentification of DWASA's financial statements, Project Accounts covering investments under the DWASA IV Project, and Statement of Expenses, also under the project. 18. Submission of Annual Reports Each year after completion of the audit, DWASA will submit to GOB an Annual Report, along with the final Audit Report within three months of the final Audit report submitted by auditors. 19. Financial Statements to be produced by DWASA DWASA agrees to prepare monthly financial statements consisting-of income statement, balance sheet and sources, and uses of funds on an ongoing basis. DWASA also agrees to submit to GOB through its Board, three months before the end of each fiscal year: 19.1 a detailed budget for the next fiscal year; 19.2 detailed financial forecasts (income statements, balance sheet, and sources and uses of funds statement) for three fiscal years, updated annually, with a summary of the investments to be - undertaken and their costs. 20. Legal and Regulatory Aspects 20.1 GOB and DWASA will prepare and publish regulations which will make the theft of water a punishable offence; 20.2 GOB will take the required legal and administrative actions to support DWASA to implement the program, this contract, Performance Agreement and other policies, including the required legal amendments to existing legislation. PERFORMANCE AGREEMENT MANAGEMENT 21. Performance Evaluation DWASA shall install by FY98 a system of effective performance evaluation to steer its performance in the desired direction. The evaluation system shall be based on the principle that DWASA's performance should be assessed against pre-determined targets. The evaluation system shall have three basic elements- 21.1 A performance information system to measure actual performance; 21.2 A performance evaluation system to specify desirable performance; Annex 2.3 Page 8 of 8 21.3 An incentive system to link desirable performance with a set of monetary and non-monetary incentives. 22. Performance Indicators 22.1 To measure the achievements under this agreement, DWASA shall issue, along with the annual budgets, the indicators to be achieved each year; which will be submitted to MLGRDC. Within three months after the end of the fiscal year, DWASA will issue updated values of the indicators, stating the actual values achieved during the previous year and justification for such updates, if any. 22.2 GOB commits to provide satisfactory autonomy to DWASA to achieve the given targets. 23. Performance Monitoring 23.1 To follow-up the execution of this Agreement and the indicators, a review committee shall be established consisting of DWASA and MLGRDC representatives. The committee will monitor progress on a quarterly basis, and will provide interim review reports after each quarter, and an annual review report at the end of the fiscal year. 23.2 GOB will evaluate performance based on the annual review report, which will form the basis for performance incentives against a pre-determined formula. 23.3 The annual review report for each year will include an update of the objectives for the ensuing fiscal year and forecasts for the following three years. 23.4 In case of continued non-compliance with the provisions of this Performance Agreement and agreed performance targets, GOB will take action, through the Board, for the immediate dismissal and replacement of the concerned individuals in DWASA responsible for DWASA's performance within six month(s). 23.5 GOB in conjunction with the Board, may prescribe other penalties as they see fit for non-compliance with the provisions of this Agreement. 24. Effective Date: This Agreement is effective from the date of signature thereof by both the parties. 25. Subscription: This Agreement will be signed by the Managing Director on behalf of DWASA and an official of the Ministry of Local Government of a rank no less than a Joint Secretary on behalf of the Government of Bangladesh. Annex 2.4 Page 1 of 4 BANGLADESH FOURTH DHAKA WATER SUPPLY AND SANITATION PROJECT Contractinx Out of DWASA Services INTRODUCTION 1. As part of an efficiency drive, Dhaka Water Supply and Sewerage Authority (DWASA) proposes to "Contract-out", on a trial basis, two of its operational activities in two zonal supply areas. The operations are meter reading including installation or replacement and repair of defective consumer meters billing and collection. This approach has become necessary because of increasing water and revenue losses due to (i) non-working meters; (ii) absence of meter reader incentives and integrity control; (iii) delays in replacing defective meters; and (iv) physical and administrative losses in the secondary/tertiary distribution system. 2. There are some firms in Dhaka with the resources and the understanding of the work to be done as envisaged under this contract. Accordingly, offers are being invited from these firms for evaluation together with any other companies or agencies with experience or knowledge in operating water supply systems and billing procedures. Some of the companies in question have already worked with DWASA on analyzing system operations and measures to combat losses. However, it is intended that this task will generate a degree of competition between bidders with a proper understanding of the work to be done and the ability to mobilize the resources required. In addition, it has been agreed that one zone would be contracted out to DWASA's workers' union along the same terms as those applicable to the commercial operators. This will foster competition initially, and both contracts would be reviewed after a year, to assess the success of each, and provide a basis for renewal, cancellation of either or both contracts. Type of Contract: 3. The contracti (or contracts) to be drawn-up, would give some incentive to increase the numbers of meters read and replaced and the level of billing and collections. Additionally, it would include a control element to ensure that reliable meter readings are obtained, on which DWASA's customers can be billed. The contract will include a payment schedule for replacing non working meters with new or refurbished meters from DWASA Stores and may also allow access by the contractor to DWASA's meter repair workshop to carry out repairs and recalibrate meters. However, these facilities are limited and the contractor may well decide to establish his own repair facilities or make other arrangements. 4. The contract will be written to encourage the conversion of non-metered connections to ones with working meters. Meter removal, repair, recalibration and reinstallation will be carried out by the contractor. The contractor will also prepare DWASA bills for customers still being charged on the basis of 1 Outline attached. Annex 2.4 Page 2 of 4 property values. 5. The successful bidders would be provided with computer equipment purchased by DWASA for use in zonal billing, using the present billing proforma. The billing, therefore, would be designed with an interface compatible with DWASA's billing computer which is to be incrementally strengthened under the project. In this regard, there must be full co-ordination between DWASA and the firm that installed DWASA's software. 6. As part of the meter reading work and billing process the contractor will report system leaks. The repair of these leaks may be the subject of a separate priced contract either with the meter reading contractor or another procured by DWASA. Such repairs may also include necessary pipe replacement. It is already the practice for DWASA to execute such works as individual small scale contracts. Monitoring & Evaluation 7. To assess the effectiveness of "contract out program", DWASA will start by costing the "in house" part of this operation, in the pilot zones, associated with the current stream of revenues. This information will be compared with improvements, if any, in metering and billing resulting from the "contracting out" process. The trial period will run for not less than 12 months and will be extended to two additional zones after the first twelve months. It is expected that by FY99, all zones will be covered under the program. Timetable for Preparation/Execution by DWASA - Preparation of suitable bid document --- May 15, 1996 - Receipt of expressions interest from --- June 15, 1996 - Issue and receive bids --- September 24, 1996 - Evaluate bids, award contract and commence work--- November 30, 1996 - Evaluate performance of contractor within 9 months of commencement and negotiate contract extension or prepare for further bidding. Annex 2.4 Page 3 of 4 METER READING AND REPLACEMENT CONTRACT OUTLINE The principal items to be included and developed by DWASA into a suitable contract bidding document which can be used for engaging a contractor to read revenue meters and carry out necessary replacements are given in this outline. This work would be carried out on a "trial basis" as an alternative to the present "in-house" system where a number of inefficiencies have been identified. The supply areas to be covered by this proposal would be DWASA's Zone 4 & 5 containing about 19,000 connections each. Zone 5 is almost completely metered but there is no up-to-date of how many meters are actually working. Zone 4 is more representative of the undermetering problem and is selected because, as well as tackling billing and collection, it will enable the meter coverage to be increased significantly. It is proposed that the entire zones should be covered with the possibility of an extension to other areas. Contract Information to be Provided by DWASA (a) Customers billing record, including postal addresses (b) Number of revenue meters and sizes (c) Number of unmetered connections and pipe sizes (d) The number and sizes of new meters which could be released from DWASA's stores (e) DWASA Unit Cost for repairing and rehabilitating meters of various sizes (f) Delivery time for DWASA repaired meters; i.e. in and out of workshop. (g) A route walking map of the area covered by the contract (h) Detailed drawing of a meter box/chamber installation and specification. (i) Meter specification with stated plus and minus accuracy. Work Description The contract would, as fully as possible, describe the work to be carried out. This calls for reading meters every 2 months, preparing and delivering bills and monitoring collections. The contractor who would also be responsible for following up defaulters; for this to be done DWASA would keep the contractor informed on collection deficiencies. At the same time as submitting meter readings the contractor would provide the zonal office with a list of unmetered connections recommended for Annex 2.4 Page 4 of 4 conversions. The contractor would obtain approval for a planned conversion program with new meters, available in DWASA stores, or repaired units. To expedite this work the contractor may make his own arrangements for obtaining meters that comply with DWASA's own specifications. The contractor would undertake the following: (i) for each meter reader collect at least 750 meter readings per month; (ii) arrange a cost effective system for delivering bills; (iii) assess meter accuracy in relation to size of buildings/number of apartments/occupants and make checks where underbilling is suspected due to faulty or tampered meters; (iv) investigate and report illegal connections and by-passes; (v) establish a rolling program for meter testing and replacement; (vi) computerize the consumer record and submit to DWASA's computer center every month; and (vii) submit reports on billing, collection, meter testing and repairs. Payment Schedule (Bill of Quantities) Payment for meter reading preparation and delivery of bills would be on a simple unit price based on 6 readings per calendar year for each property. Payment would be on a performance basis, i.e. bills delivered and collections received by DWASA The billing for un-metered customers would be based on DWASA's property value formula. Where new meters are installed or replaced a unit price would also apply. One price would be for replacement, the other would be for a complete installation, including the meter box, if any. A separate unit price would be given where the contractor supplied the meter. Supervision DWASA's zonal supervisors would be responsible for overseeing the contract and certifying payments under the contract. Currently, in zone 3 there are 4 DWASA meter/connection supervisors and 40 inspectors (meter readers). Evaluation of Bids DWASA will evaluate bids submitted both on price and the contractors' understanding of the work to be done and the contractors' ability to mobilize resources. Accordingly, as well as a priced bid, contractors will be asked to submit an adequate work plan. Annex 3.1 Page 1 of 3 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Detailed Description of Proposed Water Treatment Plant 1. The proposed treatment plant will include the construction of the following subcomponents: A. Pumping Station, Intake Works and Twin Culvert. i) Intake Structure: The location of the intake structure will be about 400 meters down stream of Demra Ghat at Sarulia village. A conventional intake with bar racks to provide screening of raw water will be constructed off-shore in the river bed. The intake will have a capacity of 275 IMGD of water to enter the new raw water pumping station. The intake structure is designed to operate over a wide variety of river levels so that during the wet season, it will not be necessary to pump water from the river into the canal. ii) Raw Water Pumping Station: A raw water pumping station at the river front will be constructed to pump water into the DND Canal. The pump station will accommodate pumps needed for 125 IMGD raw water with a provision of another 150 IMGD in future. The initial electro-mechanical works will be limited to 60 IMGD (50 IMGD for treatment and 10 IMGD for canal logging). Water will be pumped in the dry season when the water levels in the dry season fall under a certain levels. iii) Twin Culvert: Water will be carried from the raw water pumping station to the DND canal at Karim Jute Mills by a twin RCC culvert with a capacity of 275 IMGD. A control structure equipped with penstocks and stop logs will be constructed on the culvert to regulate the flow, to clean the culvert i.e. by sending the flow in one direction, and to close the flow in case of emergency. B. Rehabilitation of the DND Canal. The DND canal was built by the Bangladesh Water Development Board (BWDB) for irrigation purposes. In March 1993, an agreement was signed between BWDB and the Dhaka Water Supply and Sewerage Authority (DWASA) for the joint use of a part of the main canal for the purpose of the Fourth Dhaka Water Supply Project. DWASA will use the part of the canal located from Sarulia to Kajla to convey raw water from the Lakhya river to the site of the water treatment plant at Saidabad. The length of the canal to be used by DWASA is 4.6 km with an average width of about 40 meters. To secure this canal from potential pollution and to introduce overflow structures for maintaining the canal operation level at 5.00 meters about PWD levels, rehabilitation works will be undertaken. This will include: (a) repair of embankments on both sides of the canal and removal of trees and Annex 3.1 Page 2 of 3 stand wall with intermediate gullies in turn draining under the road to the north; (d) security overflow weirs connected with the existing drainage system of the DND irrigation project; (e) an isolating embankment (cross dam) at the head of the canal to isolate the southern part to be used by BWDB for irrigation purposes; and (f) rehabilitation of temporary pedestrian crossings over the canal and provision of alternative water supplies (handpumps) to residents who currently use the canal for washing. C. Culvert from DND Canal to Treatment Plant Site. The DND canal terminates at a point 1.6 km from the Saidabad Treatment Plant Site. To link the canal to the water pumping station within the treatment plant site, a second twin box culvert will be constructed with the ultimate capacity of 200 IMGD. An intake structure at the canal and control structure on the culvert will also be constructed. D. Development of the Treatment Plant Site. The present site is at average ground level of 2-3 meters, and is, in consequence, prone to flooding every wet season. To make the site suitable for construction, DWASA will require special foundation (piles/rafts) in order to construct the works. The site development will raise the platform level to 8.00 meters suitable for construction of the plant and subsequent operation and maintenance. Backfill will involve about 500,000 m3 of earth work, followed by 90Z compaction of standard proctor test. E. Saidabad Treatment Plant. A conventional surface water treatment plant with a capacity of 50 mgd will be constructed. The electro- mechanical equipment will be manufactured, delivered, installed and commissioned under turnkey arrangement, with limited competitive bidding. The scope of work for the plant will include: i) Raw water pumping station and distribution arrangements with civil works of 200 IMGD capacity, but electro-mechanical and equipment limited to 52.5 IMGD; ii) Mixing tanks and flow distribution arrangements; Clarifiers and filter batteries; iii) Chlorine control tank and-treated water reservoir; iv) Treated water pumping station; v) Main power switchboard and transformer buildings; vi) Chemical storage building, chemical mixing tanks, and chlorination building; vii) Sludge recovery facilities; and viii) Standby power generation and miscellaneous works. F. Ancillary Structures at Treatment Plant. This will comprise of the following: Annex 3.1 Page 3 of 3 i) Administration building and laboratory; ii) Maintenance Workshop; iii) Site clearing, fencing, road drainage and site lighting; iv) Pavement of access road after completion of construction activities; and v) Provision of gas, electricity and telephone facilities. G. TransmissionlPrimary Distribution Mains. About 20 km of transmission and primary mains will be constructed. The procurement and implementation of primary distribution mains will be on a "supply and lay" basis. Pipe will be in the diameter range 1,000 mm to 1,500 mm. Dual pipelines will be laid along the routes where there is no major traffic congestion. H. Secondary Distribution System. Approximately 18.5 km of secondary mains will be constructed. New distribution pipelines, diameter range 300 mm to 600 mm will be laid in those areas of the city whether new treated water sources will be available to improve the local hydraulic capacity for supply to existing and new consumers in each sub-zone. In addition, new areas will be supplied with water for the first time by DWASA and the new secondary distribution pipelines will be laid in each sub-zone. 2. Water Treatment Method. Raw water transmitted to the treatment plant would initially receive chemical mixing before passing to the clarifiers. The process treatment steps would be chemical injection, rapid mixing, flocculation and clarification. Chemicals added at this point would include alum for coagulation purposes and chlorine, if necessary, for the control of aquatic growths within the clarifiers and filters. From the rapid mixing tanks, water would flow to clarification tanks. Clarified water would then flow by gravity to the filter influent head channels. Filtered water would flow by gravity into the clearwell which would be pumped into the treated water reservoir. The storage reservoir is 8% of the plant's rated capacity. Annex 3.2 Page 1 of 3 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Detailed Description of Institutional Strengthening, Loss Reduction and Technical Assistance Components 1. Distribution and Production Svstem Rehabilitation i) Leak Detection Program: A leak detection program will be implemented in the DWASA service area as a follow up to the pilot program undertaken in a DWASA zone under the Third DWASA Project (Cr.1734-BD. The program will be undertaken in three phases; Phase I will revisit the two pilot areas under the Third Project; Phase II will cover about 70,000 connections, while the Third Phase will cover about 80,000 connections. ii) System Rehabilitation: Based on the Leak Detection program in (i) above, a program for system rehabilitation for the entire service area will be implemented. This program will consist of replacement and repair of broken or worn pipes, defective or unsuitable meters and fittings, valves, and preparation and implementation of a preventive maintenance program for the whole distribution system. iii) Tubewell Regeneration: A tubewell regeneration program will be prepared and implemented to improve the production efficiency of DWASA's tubewells. The program will seek to replace or reset wells that are non-operative due to sand clogging or whose yields have deteriorated. A preventive maintenance program will also be prepared and implemented. 2. Expansion of Service Connections i) Tertiary Distribution and House Connections: This will include extension of the existing connections to provide water to areas of Dhaka that are currently not connected to DWASA services. About 50,000 new connections will be installed by the year 2001. ii) Crash Meter Installation Program: The objective of this program is to install meters to connections that are currently not metered, to reduce the level of unbilled water and thereby increase revenue. The program will reduce unmetered connections from the current 32% to 5% within two years. The program will be contracted out to the private sector. 3. Development of Improved Sanitation/Sewerage Services i) Evaluation Stud_y: This study will: a) review the existing situation to determine the key problems and issues in sanitation and collection of waste water and sewerage from domestic, industrial and commercial sources in the city; and b) estimate the demand for various sanitation options and determine the investment options Annex 3.2 Page 2 of 3 available, including detailed preparation of priority investments to be implemented under the project. ii) Physical Works/Sewerage and Latrines: Based on the evaluation study above, priority investments will be undertaken in rehabilitation of selected sections of the sewerage system, and a low cost sanitation program to be implemented under the project. The program will also provide limited expansion of sewerage services to unserviced areas of the city. 4. Institutional Development Technical Assistance i) Water Resources Management Study: The objectives of this two year study are to obtain adequate knowledge of the water resources (both ground and surface water) in the Dhaka region to facilitate the monitoring of quality and quantity of resources and allow effective demand management to conserve and utilize available water more efficiently. ii) Management and Operations Support (Twinning) Program: To help DWASA improve efficiency, a twinning program from an efficient utility will be sought for a period of four and half years. The program will address problems and issues in operations and maintenance; financial and operational management, personnel management and training; management information systems and computerization. iii) Program to Contract Out DWASA Services: To improve operational efficiency, DWASA will commence a program to contract out some of its services to local contractors. The contracts call for the reading of meters, preparation of bills, delivery of bills, follow- up of defaulters in case of non-payment, meter repair and replacements. The program will start in two zones of DWASA service area and experience in these zones will be used for planning additional contracting services. iv) Training: Training will be provided to DWASA staff to improve skills in financial, operational and technical operation of the utility. Training would be based on a manpower and organizational study to be undertaken under the Twinning Program. Training will be provided on the job, through the DWASA Training Institute, and abroad to enable DWASA staff and management gain specific skills required for utility operation. Training will also include secondment of DWASA staff to the utility of the twinning partner to facilitate appropriate technology transfer. v) Management Support (Contract Staff): An experienced and appropriately skilled managing director, and three deputy managing directors will be appointed under the project and provided with appropriate financial incentives commensurate with their skills. To attract staff with necessary skills, these positions will be filled by local contract staff, to be initially financed under the project, with the objective of gradually transferring financial responsibility to DWASA. The initial contracts will be over a period of four years. Annex 3.2 Page 3 of 3 vi) Strateav Study for Private Sector Participation: To assist in developing a long term strategy for mobilizing finance and increasing efficiency, DWASA will retain consultants to determine the broad levels of finance required, and the sum available from different Government concessional and commercial sources. The study will assist in demonstrating the need for fundamental reform in order to attract the required finance. It will also assess the steps required for reform implementation, including the development of a regulatory framework, and will outline the possible contractual and financial structure for major private sector participation, for example, through a long term concession. The study findings are expected in early 1986. Action taken in response to the study will be covered in the mid-term review. 5. Prolect Preparation and Implementation Support Technical Assistance i) Project Preparation: Two consultants to be financed retroactively have been appointed to prepare two remaining components of the project: a) revision of the WASA Ordinance to create legislation that will allow DWASA to operate as a commercial entity; and b) detailed design and preparation of bid documents for ancillary works. ii) Construction Supervision and Network Analysis: The project will require two construction supervision contracts: a) construction supervision of the treatment plant; and b) construction supervision of the primary, secondary and tertiary distribution system and the intake. The second contract will include a network analysis of the distribution system to identify areas of the distribution system that need strengthening and extending, using a computer analysis of the network (WATNET), with a planning horizon of 2010. iii) Equipment: Miscellaneous equipment, including motor vehicles, computers and 50,000 meters will be procured under the project. iv) Implementation of Tariff Study: A local consultant will be appointed to help DWASA implement a revised tariff structure based on the results of the Tariff Study completed recently by the Government. Annex 3.3 Page 1 of 8 Bangladesh Fourth Dhaka Water SuPPlY Proiect Strategv to Mobilize Finance and Increase Efficiency in the Dhaka Water Supply and Sewerage Sector Draft Terms of Reference I BACKGROUND 1. The Dhaka Water Supply and Sewerage Authority (DWASA) provides drinking water to 3.8 million people in Dhaka and sewerage services to around 1.14 million people. It is owned by the Government of Bangladesh, and responsible to the Ministry of Local Government, Rural Development and Co-operatives. 2. DWASA is inefficient. There are high levels of unaccounted for water, which have exceeded 50% in recent years. Staff numbers are excessive, at around 22 staff per thousand connections. Tariffs are high, with residential consumers paying Taka 15.84 per 1,000 gallons (equivalent to US$0.09 per cubic meter). Industrial and commercial consumers pay much higher levels, and many choose to make their own arrangements for water supply. Although DWASA has had access to concessional lending and grants, its financial performance has been poor. 3. The coverage of drinking water and sewerage is low. Only 50% of Dhaka's population is provided with drinking water, and 15% with water-borne sewerage services. Actual numbers are likely to be above this, since some unaccounted for water is for illegal connections. 4. The proposed Fourth Dhaka Water Supply Project will provide drinking water to a further 500,000 people, and reduce levels of unaccounted for water. However, given the population growth over the period this will still leave major investment requirements. Rough estimates of the investment required to provide drinking water to all Dhaka's population and sewerage to 60% by 2010 suggest that as much as $1.5-2 billion might be required over the next fifteen years. II OBJECTIVES 5. A strategy is required to raise this finance, and to increase the efficiency of water and sewerage provision. To date water and sewerage has been supplied by a public enterprise drawing heavily on concessional lending. However, the sums now required greatly exceed the finance available from concessional lenders. In its current form DWASA would not have access to this scale of finance from commercial sources. 6. The objective of the study is to prepare a strategy that will enable the Government of Bangladesh to raise the finance required for an accelerated investment programme and to increase the efficiency with which investments are implemented and operated. In preparing that strategy the consultants should: Annex 3.3 Page 2 of 8 * agree a set of options to be considered for the future structure of the sector, and for responsibilities for investment and operations; * prepare an estimate of investment costs for an accelerated investment programme; * amend existing forecasts of operating costs and revenues to be consistent with the accelerated investment programme, and with the expected efficiency of operations under different options; and * review the scale of funds available from different sources and the terms attached to them, to determine the feasibility and cost of financing the accelerated investment programme under different options. 7. The objective of the study is to assist the Government of Bangladesh in understanding, and selecting between, options for financing and managing future water and sewerage provision. The consultants will be required to work closely with Government throughout ths- study. A Steering Committee will be convened by Government to guide the consultants, and to monitor and respond to the key deliverables described below. The consultants will arrange for key officials to have exposure to private sector operators, and to visit cities where greater private sector participation is being introduced in the water sector. II SCOPE OF WORK Overall approach 8. The consultants should review a broad range of options for ownership, operation and industry structure. These should include continued public enterprise reform, and differing forms of private sector participation. The profitability of DWASA (or any successor body), and its access to the required finance should be estimated for each option. Options which are not capable of raising the required finance should be rejected, but should be included in the report with detailed anaysis. 9. There are likely to be a number of different options under which DWASA would be capable of financing the proposed increase in service provision. The costs associated with these options should be modelled. The final tariff impact should be assessed for different options, as well as the transitional costs (such as demanning) associated with them. The consultants should also review the regulatory and legal requirements associated with each option. 10. Detailed analysis should be presented for each option capable of financing the required expansion. The consultants should also indicate the preferred option. Options for-consideration 11. The consultants should prepare options for ownership of the assets, responsibility for operation and industry structure. These should include one or more options for public enterprise reform from continued public ownership with differing forms of private sector participation up to full privatization. Annex 3.3 Page 3 of 8 12. The option for continued public enterprise reform would continue DWASA's ownership and operation responsibility. However, it should incorporate the institutional changes agreed in preparation of the Fourth Dhaka Water Supply project. These include steps to organise DWASA along more commercial lines; creation of internal profit centres; contracting out of billing, collections and meter repair; and support through a twinning programme, training and other technical--assistance. 13. The consultants will need to form a realistic and soundly based assessment of the likely impact of these reforms on DWASA's efficiency, profitability and access to finance. This will require an understanding of the success of such reform measures elsewhere, and in particular in other sectors in Bangladesh. 14. The consultants should also review possible forms of private sector participation. These should include: * further contracting out of specified services, in addition to that already proposed, or modification to existing contracts; * contracting out of new investment through BOO or BOT financing; * a management contract; * private sector responsibility for operations, including working capital, combined with public sector responsibility for major investments; * _ a long term concession, with private sector responsibility for all investments over the life of the concession; and * privatization. 15. The consultants should cover the options described above. However, they can also propose alternative forms of private sector participation or public enterprise reform for inclusion within the study. 16. At present DWASA is an integrated utility. The consultants should consider the scope for vertical or horizontal separation, where this would provide greater transparency in operational performance and stronger incentives for efficiency. However, the dominant objective is to assist in the mobilization of finance. Where unbundling would increase risk to an unacceptable degree and so hinder financing this should be stated. 17. The deliverables from this work will be a set of options for detailed consideration. The development of these options will be reviewed and commented upon by the Steering Committee. Financial Projections 18. Financial projections have been made in preparation for the Fourth Water Supply project. These financial projections will need to be updated. They will also need to be amended to allow for achievable efficiency gains and increased financing requirements. Annex 3.3 Page 4 of 8 19. The financial projections should be prepared to allow for fully meeting the demand for water and meeting the 60% of the demand for sewerage. Costs and revenues should be projected for meeting this level of coverage by 2010 and 2020. Demand forecasts should be based on those prepared by BCEOM, but DWASA's views should also be taken into consideration. Operating costs 20. DWASA incurs very high electricity costs for water pumping, and these account for 60X of operating costs. Direct wages and salaries account for a further 15%. Repairs and maintenance account for only 6% of direct expenses, and this inadequate funding is leading to deterioration of the network. The consultants should assess operating costs; determine what these might be following implementation of the proposed reforms to DWASA; and determine how operating costs might change as service provision increases. 21. The Fourth Water Supply project will achieve significant changes in DWASA's status and structure, strengthen DWASA's management, and provide technical assistance to increase management capability and DWASA's efficiency. It will be important to have a realistic view of what efficiency gains can be achieved through public enterprise reform in the operating environment faced by DWASA, and to incorporate these in the revised financial projections. The consultants should review the reform experience of other utilities in Bangladesh, and draw on experience of water utility reform in other developing countries, in particular South and South/East Asia. 22. Significant private sector participation is likely to change fixed and variable operating costs. The consultants should prepare estimates of what further changes in operating efficiency could be achieved under different options. Where significant transitional costs are incurred these should be incorporated in the analysis. For example, it is possible that a private sector operator would achieve greater reductions in fixed labour costs, but would incur a transitional cost for redundancy payments/redeployment. Investment costs 23. Investment needs to 2020 have already been assessed in a study carried out by BCEOM. The consultants should review this work, and prepare outline estimates of the costs of an accelerated investment programme. Two accelerated programmes should be prepared, to allow for 100% drinking water provision and 60% provision of water-borne sewerage by 2010 and by 2020. 24. It is not envisaged that the study recommendations will be sensitive to the level of investment costs, and if necessary the financial analysis can be amended at a later date once the findings of other studies emerge (such as the Feasibility Study for Improved Sanitation Services). Cost estimates should only be approximate. Where possible they should be based on the BCEOM study. Where new investment costs need to be estimated, these should be based on simple unit cost estimates. 25. The scale of investment required will vary according to the efficiency of operations. Investment costs should be adjusted to allow for the variations in operating efficiency discussed above, and in particular the variations in levels Annex 3.3 Page 5 of 8 of unaccounted for water. Costs of Capital 26. Over recent years, DWASA has made a net loss. However, it has had access to low cost capital from bilateral and multilateral sources. Capital investments have been financed through substantial levels of grant, and through foreign exchange loans with 25 years repayment, 5 years grace, and interest rates ranging from 3-12.5Z. The consultants should review DWASA's financing costs over recent years to determine the historic costs of capital. 27. The financial projections should allow for the expected future costs of capital. Under the public enterprise reform option, possible sources of financing will include: * a higher level of self-financing, due to greater profitability; * continued concessional lending. The consultants should review the scale of funds and the likely terms for future concessional lending from the IBRD, ADB and bilateral concessional sources. Discussion with the Ministry of Finance will be required to assess the on-lending terms to be attached to any finance from concessional sources; * Government grants or loans. The consultants should agree with the Ministry of Finance the scale of funds and terms for Government finance; and * lending from commercial sources. The consultants should review the scale and terms of commercial lending to DWASA under credible public enterprise reforms. 28. The expected return on equity and costs of debt for private sector participation in major investments, through BOO/BOT financing or a long term concession, should be assessed to determine the cost of capital associated with private sector participation. 29. The consultants should determine the possible scale and cost of private sector finance-through discussion with possible operators and review of private sector participation elsewhere in Asia. The level of risk which the private sector is willing to accept should be assessed and conclusions drawn on the requirements for guarantees against specific risks. Revenues 30. Revisions to the tariff structure and levels have been agreed during the preparation of the Fourth Water Supply project. The consultants should prepare revenue projections associated with the accelerated investment programme, allowing for any variations in estimated commercial performance and collection under different options. 31. This analysis should be used to prepare revised financial forecasts for DWASA. These forecasts would be used to assess the feasibility and cost of financing accelerated investment under different scenarios for public enterprise Annex 3.3 Page 6 of 8 reform and private sector participation; the effect of achievable efficiency gains; and the impact on tariffs. 32. The deliverables from this work would be a set of outline financial forecasts associated with each of the options described above. These forecasts would be presented to the Steering Committee and amended in the light of comments received. Preferred option 33. The analysis described above would start with a wide range of options. It is expected that some of these options would not be capable of raising the required finance, or could only do so at a very high cost of capital. The consultants would reject these options/giving justification for such rejection. 34. Options that enabled the required finance to be raised would be examined in greater detail. 35. For options with greater private sector participation the consultants should describe: * the proposed contractual structure; and * the allocation of risk between the parties, including any guarantors. 36. Greater private sector participation will require development of an appropriate legal framework and of regulation. For each option the consultants should propose an appropriate form of regulation. Where this requires an autonomous regulatory body, the consultant should describe the scope of work of the regulatory body, its legislative underpinning, its financing, and ways in which regulatory autonomy can be ensured. 37. For each feasible alternative, the consultants will assess the step6 required for implementation. Any requirements for legislative change would be described. A timetable for implementation of each feasible option should be given. 38. The consultants should assess the political and other costs associated with greater private sector participation. This will include the possible impact on employment and tariffs. 39. Where there is likely to be substantial demanning, they should propose solutions that would make the social cost acceptable, and they should assess the costs of redundancy payments or other interventions. 40. Where tariff increases are required, the consultants should assess the social impact. If tariff increases have an unacceptable impact on low-income groups, offsetting measures should be proposed and costed. 41. The consultants should clearly and concisely summarise the feasibility of financing an accelerated investment programme under different forms of public enterprise reform and private sector participation. The consultant should Annex 3.3 Page 7 of 8 recommend the option which meets the objectives of heightened efficiency and resource mobilisation most effectively. The main selection criteria should be the impact on consumer tariffs. However, the consultants should also propose alternative selection criteria (such as ease of implementation) if appropriate. 42. The deliverables from this work will be detailed analysis of feasible options, a recommended option for mobilising finance and a timetable for Implementation. This will form the basis of a policy dialogue between the World Bank and the Government of Bangladesh on the way forward. Capacity buildina 43. The purpose of this study is to assist the Government of Bangladesh in providing drinking water and sewerage services. It is likely that this will require a higher degree of private sector participation. A key element of success will therefore be the ability to develop an understanding of the rationale for private sector participation, and the different forms of private participation open to Bangladesh. 44. The consultants should work closely with officials of DWASA, the Ministry of Local Government and the Ministry of Finance throughout the study. In addition, the study should allow for visits by key Government and utility officials to developing countries that are successfully developing greater private sector participation, as well as exposure to possible private sector operators. 45. The deliverables from this work will be a deeper understanding of the reasons for and process of private sector participation in the Government of Bangladesh. III Study Organisation and Inputs 46. The study will address fundamental issues in the approach to financing infrastructure provision in Bangladesh. It may recommend major policy shifts. A Steering Committee will be convened to ensure that the study effectively responds to the concerns of the Government of Bangladesh. The Steering Committee will include representatives from the Ministry of Local Government, Rural Development and Cooperatives, the Ministry of Finance and the Economic Relations Department. The Steering Committee will be chaired by the Secretary for Local Government, Rural Development and Cooperatives. 47. DWASA will be work closely with the study team. Two counterparts within DWASA will be nominated to work with the study team on cost analysis and preparation of the financial forecasts. 48. DWASA will provide the consultants with access to all available data and internal documents. DWASA will also arrange access to facilities as required, and to key officials within government. Office space, telephone and fax facilities will be provided at DWASA's office. 49. The study will be undertaken over an elapsed time of five months. Reporting requirements will be as shown below. Annex 3.3 Page 8 of 8 Table 1: Reporting Requirements Report Number of copies Timing in weeks from start date Reform Options 10 4 Revised financial 10 15 forecast Analysis and 10 1 20 recommendation l 50. The study is expected to require around twelve man-months consultancy input. Annex 4.1 Page 1 of 8 BANGLADESH PROPOSED FOURTH DHAKA WATER SUPPLY AND SANITATION PROJECT Feasibility Study for Improved Sanitation Services Draft Outline Terms of Reference I. INTRODUCTION 1. The Fourth Dhaka Water Supply Project includes a technical assistance component for the preparation of a comprehensive plan to address the sanitation and sewerage problems of the city. It also includes financial resources for the implementation of a modest sanitation/sewerage component to be identified as the first stage of a longer term program for which future funding will be sought. 2. The study will be conducted in two parts: (i) a comprehensive evaluation of the current problem including a projection of demand covering the period 1995-2010; and (ii) the identification of an agreed component for which detailed design and bidding documents will be prepared. II. BACKGROUND 3. The Fourth Dhaka Water Supply Project has institutional and physical investment components. The institutional component is aimed at reforms that would enable Dhaka WASA to operate more efficiently. The physical component is intended to augment the water supply by about 50 IMGD1 as the first phase of a development program aimed at increasing Dhaka's water supply by about 250 IMGD over a period of 20 years. Up to now, the water supply of Dhaka has been obtained mainly from deep tube wells distributed over the city. The proposed project would change this; in addition to the existing multi-point ground water supply system, the project envisages a surface water intake structure, together with a new treatment plant with associated transmission lines and civil works. 4. The change from a multi-point ground water supply system to a single point surface water source could have implications for the distribution system sizes and pressures; it would also have a number of possible environmental impacts. Augmentation of the supply would result in the generation of additional waste water flow and inadequate disposal of the additional wastewater may create a risk of pollution of ground and surface water sources. One of the technical options for addressing this problem may be to use a combined sewerage system for the collection and disposal of sewage and storm water. However, the 1 IMGD equals one million imperial gallons per day. It is equivalent to 4.546 MI/d or 4,546 m'/d. Annex 4.1 Page 2 of 8 effectiveness of the solid waste collection and disposal system might affect the efficacy and sustainability of such a solution; therefore, the sanitation study should also include an assessment of the adequacy of solid waste and storm drainage services in Dhaka to determine the reciprocal impact of these elements. 5. A variety of sanitation2 technologies are used in the city. An estimated 15 percent of the population is served through conventional sewerage; about 30 percent use septic tanks; others use pit latrines, pour flush toilets, or no formal sanitation facilities. The first sewerage system for Dhaka dates back to 1923. Since then there has been a number of expansions to the system to cope with the growing population. The existing sewerage system covers the central developed area of Dhaka. It comprises three trunk interceptor sewers, one central pumping station, 12 small lift stations, and one sewage treatment plant at Pagla. The system is now aged and deteriorated and portions have become broken or clogged. 6. A number of studies have been undertaken to identify remedial measures; these will be reviewed and used as source material in preparing this study. The latest were completed in February of 1990 by Messrs CDM and McDonald & Partners. Under a recent grant from the Japanese International Cooperation Agency (JICA), the sewage treatment plant at Pagla which had become overloaded has been rehabilitated and upgraded; in addition, inoperative pumping and lift stations have been rehabilitated. There has also been some extension and upgrading of parts of the system under the Third Dhaka Water Supply Project funded through an IDA Credit (Credit 1734-BD). However, no comprehensive city-wide evaluation of the hydraulic and structural condition of the sewerage system has been undertaken. The need for such an evaluation has become even more pressing as a result of population growth, the expanding geographical size of the Dhaka WASA area, and the impact of the additional water production soon to be provided. 7. On the institutional side, the primary agencies with responsibility for this component are the Dhaka Water Supply and Sewerage Authority (DWASA), and the Dhaka City Corporation (DCC). DWASA was established in 1963 as a semi-autonomous authority for the provision of water supply and sanitation services for the City of Dhaka. It is responsible for sewerage and drainage. Services that entail the use of low-cost and on-site sanitation systems are the responsibility of DCC where a low-cost sanitation unit has recently been established. The DCC is also responsible for solid waste disposal. 8. DWASA and DCC come under the Local Government Division (LGD) of the Ministry of Local Government, Rural Development and Cooperatives. The LGD regulates the activities of DWASA and DCC; it reviews their project proposals, 2 The term "sanitation" is defined here as a service: (a) for the collection and disposal of excreta and wastewater from domestic, commercial and industrial sources and (b) for the abatement of environmental pollution from such wastes. The provision of this service entails the construction, operation and maintenance of a range of physical infrastructure, such as conventional sewerage, intermediate sewerage and various types of on-site sanitation systems. Annex 4.1 Page 3 of 8 and monitors their performance in project implementation. Matters relating to the environment are the responsibility of the Department of Environment (DOE). III. SCOPE OF WORK PART l 9. In carrying out this part of the study the consultant will be given access by DWASA to all previous studies and be provided with such relevant information it has at its disposal. The output expected is a prioritized series of project components aimed at solving the most critical identified sanitation/ sewerage problems of Dhaka. 10. The output will be in the form of reports, diagrams and maps and also consist of an Executive Summary. 11. During the preparation of this part of the study the consultant will liaise with DWASA (and any other concerned agencies), at regular intervals, to report interim findings and conclusions to ensure that the final recommendations identify a costed acceptable sanitation/sewerage component that can be implemented under the Fourth Dhaka Water Supply Project. 12. In the following summary suggested activities have been grouped together for reasons of clarity, but the Consultant shall ensure full cross- referencing between the tasks described. Review of Existing Situation 13. A review of the existing situation is required for defining the key problems and issues in the collection and disposal of exereta and liquid wastes from domestic, industrial and commercial sources in the city. The review is also required to enable the Consultant to identify and estimate the costs of feasible technical measures to address these issues. To this end, the task of the Consultants shall include, but shall not necessarily be limited to, the review of: (a) previous studies carried out during the past 15 years in sanitation services for Dhaka, including recently completed and on-going projects; (b) trends in demographic and housing patterns, and in industrial and commercial development patterns; (c) existing status and future plans for water supply, sanitation, industrial and solid waste management, and storm water drainage; (d) the extent, hydraulic capacity, structural condition, and technical performance of existing sewerage systems in Dhaka; (e) existing service levels and deficiencies in sanitation coverage and operational performance in different parts of the city and in Annex 4.1 Page 4 of 8 different income groups; (f) neighborhood environmental conditions, and city-wide environmental/water quality conditions, including the extent and risk of pollution of surface and ground water resources; (g) financing and cost-recovery policies and achievements; (h) policy and institutional framework for service provision, including the share of public and private sector involvement in sanitation service provision, and the legal and regulatory framework for service provision; (i) existing informal organizations in the city (NGOs, voluntary service organizations and community-based organizations) -- the roles they have played in the past, and the potential roles they can play in the provision of improved waste management services; and (j) water quality standards and pollution control regulations. 14. Based on this review and on their own investigations, the Consultants shall prepare a report on existing conditions. The report shall include, but shall not necessarily be limited to the following: (a) summary of existing conditions with respect to: (i) coverage and deficiencies in services at zonal or neighborhood level, (ii) neighborhood or zonal level environmental quality conditions, and (iii) the wider environmental/water quality conditions; (b) existing cost-recovery policies and mechanisms for sewerage and sanitation services, and the ratio of revenues to investment costs in sewerage and sanitation services; (c) issues constraining sector development in the past, and recommendations for addressing these issues; (d) informal organizations in Dhaka City, their past and potential future roles in waste management; (e) feasible solutions to the problems identified in each of the three sub-sectors of waste management; and (f) cost estimates for each feasible technical solution, calculated on a zonal or neighborhood basis, or on such other basis as the Consultants deem appropriate. Demand Estimation and Choice of Investment Options 15. A demand estimation is required to establish a basis for the Consultants to elicit from households which types of investments they preferred and willingness to pay. This information would then be used, along with other Annex 4.1 Page 5 of 8 information, to help make choices from options in technologies cost- recovery/financing arrangements. 16. To this end, the Consultant shall perform, but shall not necessarily be limited to the following tasks: (a) household willingness-to-pay studies, using a sampling method which permits investment decisions to be made on a zonal or neighborhood basis; this should include an assessment of household knowledge, attitudes and practices with regard to sanitation, solid waste and storm drainage services; (b) community-level dialogue -- where appropriate -- to discuss and confirm demand; ascertain extent of in-kind contributions, if any; and identify additional measures communities would be willing to undertake to ensure effective cost-recovery, and sustainability of the flow of benefits from proposed investments; (c) matching the willingness-to-pay with each of the sub-sectors in waste management, and with the technological options within sub-sectors; (d) rank ordering the different sub-sectors and the technological options within sub-sectors, using the following performance criteria: (i) cost-recovery per unit cost of investment; (ii) coverage per unit investment cost; (iii) benefits per unit cost of investment; and (iv) analyzing the trade-offs between the different criteria. 17. The relevant revenues that should be used in ratio of cost-recovery per unit investment cost are (a) direct user charges (estimated on the basis of the demand information) and (b) local government levies on the beneficiaries of the investments. This is consistent with the general principle of cost-recovery which states that local and regional residents should finance, through user charges or locally borne taxes, the costs of designing, building, operating, and maintaining facilities to the extent that they receive the benefits. 18. Based on the tasks identified in paragraph 16 and on the Consultant's own investigations, the Consultant shall make recommendations on: (a) where there should be investments in sanitation infrastructure under the Fourth Dhaka Water Supply Project; (b) how the sanitation investments should be prioritized within the city: and (c) what should be the choice of technological facilities in different locations in the city. Annex 4.1 Page 6 of 8 Choice of Investment Options 19. On the basis of these tasks and on own investigations, the Consultant should prepare a demand-based sustainable sanitation plan for implementation in the city during the period 1995-2010 in three 5-year periods, and based thereon, identify priority investments for implementation during the Fourth Dhaka Water Supply Project. 20. The plan should be prepared at feasibility level. It should include a clear definition of the criteria used for investment decisions and for the prioritization of investments in different parts of the city. It should identify the pressing problems facing the city in the sanitation sub-sector, the investment choices for addressing the problems, and the justification for the Consultant's recommendations. It should make recommendations for financing and cost-recovery arrangements to ensure financial sustainability of proposed investments. In addition, it should include institutional arrangements necessary to ensure that the expected flow of benefits can be sustained over the useful life of the physical infrastructure to be built. The proposed plan should be sufficiently flexible and adaptive. PART 2 21. Based on an agreed project component, identified in the overall study in Part 1, the consultant will prepare detailed engineering drawings and bid documents for works to be executed in accordance with Local Competitive Bidding (LCB) procedures approved by the World Bank. 22. The specifications for the work to be executed will be in accordance with best engineering practice and take into account local contractor competence. Time Schedule and Reporting Requirements 23. The consultants shall mobilize their team in Dhaka within one week of the starting date. They should provide a core team of professionals, local and expatriate, as appropriate, for the assignment. In performing their duties, the consultants shall prepare reports in English and submit them to DWASA and IDA within the time periods specified in Table 1 below, and in the number of copies specified therein. IV. DATA, SERVICE.S AND FACILITIES AVAILABLE FROM DWASA A. Data, Maps and References 24. DWASA shall provide the Consultants with access to all available data, information maps, drawings and internal documents relevant to the consulting services. All reference materials will be loaned to the Consultants and shall be returned on the completion of the consultancy, or as may be requested. Exceptions to this principle may be granted on special request. Annex 4.1 Page 7 of 8 25. DWASA will arrange for access by the Consultants to all sewerage, sanitation and drainage facilities to be studied, and also to key officials in DCC and other government agencies concerned with subjects related to the consultancy. B. Services 26. During the stay of the Consultants in Dhaka, DWASA will provide the Consultants with the following services provided by their own or hired staff: (a) topographic surveys of sites and pipelines required for preparation of various designs; physical, chemical, and bacteriological analyses and tests of water and wastewater; arrangements for soil investigations at project sites and related laboratory tests; (b) unlimited local telephone service within Dhaka, long distance service within Bangladesh, and telefax and international mail service, as required for the services; and (c) local transportation within Dhaka limited to site visits and investigations, official meetings at various government agencies, and messenger services. C Personnel 27. DWASA intends to support the Consultants with counterpart staff -- engineers, technicians, and administrative staff of full-time basis (subject to time-off for normal leave) to the maximum extent to be agreed during contract negotiation. The consultants will therefore, include in its project team the DWASA counterpart staff; where such staff are professional staff, they would have about five years of relevant professional experience. D Office Accommodation 28. DWASA will furnish the Conjultants with office space in its buildings in Dhaka. The space will be air conditioned, open (without partitions) and furnished with desks, chairs, book shelves and filing cabinets or cupboards. The space will be available to the Consultants for the duration of the consultancy. Annex 4.1 Page 8 of 8 Table 1: Reportin, Requirements Report Number of Copies Timing in Weeks from Starting Date Inception Report 25 4 Review of Existing Situation 25 16 Progress Reports 10 Every two months Willingness-to-Pay Survey Reports 15 28 Draft Feasibility Report 15 40 Final Feasibility Report 25 Within four weeks of receiving comments on draft l____________________ report Preparation of Design on Bid 30 52 Documents or 8 weeks after approval of Final l_________________________________ ____________________ Feasibility Report Annex 5.1 Page 1 of 7 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Dhaka Water Resource Management Study Draft Terms of Reference Background 1. The city of Dhaka is seriously short of safe domestic water; about 50 percent of the population is served by the city's domestic water supply system which is operated by the Dhaka Water and Sewage Authority (DWASA). Ninety- five percent of the total amount of the supplied water has always come from ground water, which is less expensive and hygienically safer compared to surface water. Due to the limited availability of ground water, particularly in the most densely populated area of Dhaka, surface water is now being considered as an alternative source for domestic water supply. 2. The total amount of ground water abstraction by private and DWASA tube wells is estimated to be 274 x 106 M3 per year, of which DWASA is responsible for about 81 percent of the total or about 223 x 10 6M per year of water as of 1992. At this rate of abstraction, despite favorable natural recharge, it has experienced a drawdown "cone" to develop, with a maximum fall in piezometric level of over 20 meters. 3. Under the proposed project, Dhaka is seeking the use of surface water to satisfy the city's ever-growing demand of water supply and to alleviate existing excessive burden on the ground water source. The beneficiary of the project will mainly be people of the old part of the City. 4. The proposed project will provide additional water to alleviate, to a certain extent, the existing drinking water shortage problem of Dhaka. Due to competing use of water of the various sectors and the ever growing problem of pollution from both domestic and industrial sources a water resource management study addressing both the water quantity and water quality issues is needed in order to guide the future of water resource management and development for Dhaka. 5. The primary targets of the Water Resource Management Study (WRMS), are among other things: (i) to recover the ground water level in the affected areas, and (ii) to protect the new surface water intake point from competing users and pollution. The scope of the WRMS should include the greater Dhaka area as the city is expanding rapidly although the affected area is centered at Dhaka city proper. This is also required for the protection of the Demra intake point on the Lakhya River. 6. Urban environmental sanitation and domestic waste management is generally an integral part of most of the WRMS. Under the proposed project already there is a technical assistance component for a strategic sanitation Annex 5.1 Page 2 of 7 plan for Dhaka for the period 1995-2020 to address sanitation and sewerage problems in Dhaka. It is critical that the two studies be well coordinated. Objectives 7. The WRMS will try to address the questions of water resources management, competing sector uses, and quality and quantity of sources, including allocation and pricing. The specific objectives of the study will include, but not necessarily be limited to: a. documenting the existing urban/industrial development and the future development plan of the Greater Dhaka and the project- related areas; b. documenting the existing water resources abstraction information, including surface water and ground water, and project future water demand and abstraction plan; c. documenting existing environmental water pollution problems, including domestic and industrial sources, and project future pollution problems; d. addressing the principal issues of water resource development including the control of water (flood control, storm water drainage, sewerage conveyance); the use of water (municipal, industrial, irrigation and navigation); and the management of water quality (pollution control); e. assessment of the ways to manage water demand between competing users, including water allocation and pricing for irrigation, domestic and industrial uses; f. establishment of water rights and improvement of delivery efficiency (quantity and timing) and effective water use participation; g. co-ordination and control of water abstraction from both ground and surface water sources to maximize available water resources; h. preparation of measures for improved water quality/quantity management and urban/industrial drainage control, including municipal and industrial waste abatement; i. implementation of institutional and organizational arrangements for better coordination of water users and agencies managing and allocating water; and j. implementation of legislation for developing and managing water resources, including pollution control and water rights regulations. Annex 5.1 Page 3 of 7 Approach 8. Quite often in the developing countries environmental protection gets more publicity than real problems solved primarily due to lack of financial resources. Financial assistance acquired from abroad only represents a very small fraction of the actual needs of the country. The real need of financial resource for environmental protection is significant. Foreign assistance must be used in the most prudent manner in order to maximize benefit. Project success must be measured by the project component's viability or sustainability whether it is institutional or hardware investment. For the WRMS to maximize its benefit, it is important that its design observes certain guidelines, as follows: a. close coordination with other related local and international studies, such as ongoing works by ADB, JICA; b. integration into the other components of the project particularly the sanitation strategy planning under the technical assistance component; C. building on the existing institutional capability rather than creating new ones; d. recommendations for actions should be in line with existing regulations and standards; e. adopting as much assistance-oriented measures as possible rather than the command-and-control means in achieving environmental objectives, particularly for industrial pollution control; and f. adequate resource for the WRMS must be made available for the implementation of certain key components that can create tangible results. Scope of Work Part I: Institutional Strengthening 9. The ambient environmental quality standards and the standard values for industrial effluent were drafted by the Department of Environment in 1991; however, there are no rules and procedures directing the implementation. In the previous studies it was indicated that present water and environmental related institutions are weak and their coordination unstructured without specific details. The study should be able to identify certain basic institutional issues that can be studied at the beginning, and more issues are to be identified and studied as the WRMS is in progress. The study will include: a. comprehensive assessment of the capacity of existing water resource management-related institutions including staffing, facilities, management tools, database, previous performance, ongoing program and any future development plans; Annex 5.1 Page 4 of 7 b. identification/initiation of an institutional coordination plan, including both local and donor agencies, to bring water resources management of Dhaka under an umbrella organization; c. identification of the respective roles of the local agencies under the umbrella organization for the WRMS; d. identification of major areas of capacity building needed for the local agencies under the umbrella organization; e. formulation of training programs; f. providing assistance in drafting the necessary rules and procedures to supplement for the draft environmental legislation of 1994 and for the implementation of the ambient water quality standards and industrial effluent standards; g. estimation of resources needed for the various activities of capacity building, and h. formulation of implementation approach, program and time table. Part II: Water Resources Management 10. It is expected that the results of the institutional strengthening study will provide a streamlined organizational setting for water resource management for the City of Dhaka. Some specific objectives of this component are listed under items (d) to (g) of the objectives of the WRMS. However, the ultimate objective would be to develop a water resource management master plan (WRMMP) for the City of Dhaka, including both water quantity and quality and it will be coordinated with a proposed study of updating the national water resource planning. The parties involved are agencies related to flood control, storm water drainage, sewerage conveyance; water consumption and/or use by municipality, industry, agriculture and navigation. This component basically compose of two parts: (i) data collection and the monitoring system, and (ii) water resource management planning. The works of part (i) will be closely coordinated with other ongoing donor-supported program particularly ADB and JICA. This component will include: Part A: Data collection and the monitoring system a. consolidation of existing water resource and pollution information and formation of a data management system; b. assessment of data quality and creating a data quality control system; c. identification of data gap under the current water resource data collection program and establishing a coordinated data collection system supported by a sound QA/QC program; Annex 5.1 Page 5 of 7 d. survey of existing water resource monitoring laboratories and stations and the strengthening of a Dhaka water resource monitoring system including laboratory and field station needs, arrangement of control samples from abroad for data quality control and data management computer system. Part B: Water resource management planning e. A study on the principal issues of the development of water resource, the uses of water resources, including an evaluation of the current competing uses of water resource, and the impact to the environment; f. development of a ground water abstraction planning and action plan, particularly for the most seriously affected area in the old part of the city; g. development of a surface water allocation planning and action plan, particularly for ensuring adequate quality water for the surface water treatment plants; h. inclusion of a demand management plan as an important part of the above water resource development planning; i. development of economic incentives and control measures including a water rights system to assist the implementation of both the ground water and surface water action plans, including water pricing; j. designing of water abstraction and delivery system program for both ground water and surface water between competing users under the above mentioned action plans. Part III: Clean Technology for Industrial Pollution Control 11. This component will approach industrial pollution control through waste minimization/clean technology, which helps industry to improve production efficiency and reduce the costs for pollution control; it is different from the more costly traditional end-of-pipe (EOP) approach of pollution control. It will comprise of studies on the economic incentives for industrial relocation, planning for common and joint treatment facilities in the industrial areas, and promotion of waste minimization and clean technologies. Specifically, the studies will include: a. information gathering and documentation of the existing industrial pollution situation in and around Dhaka area including existing and potential industrial development above the surface water intake points, and assessment of any planning related to industrial development including the Dhaka Metropolitan Development Planning (DMDP); b. following the DMDP, study the economics and the economic incentives of various options for industrial pollution control for Annex 5.1 Page 6 of 7 existing industrial clusters including waste minimization/clean technology, and joint and common treatment facilities for industrial pollution control; and c. develop preliminary plan for joint and common waste treatment facilities for selected industrial clusters such as tannery cluster and a mixed industrial cluster. 12. For the promotion of waste minimization/clean technology part, it will include: a. enhancement of awareness for industrial waste minimization/clean technology for, but not-limited to, people from industrial associations, large and small industries, environmental agencies, industrial agencies, other concerned government administration, NGOs and public media; b. creating a waste minimization/clean technology training program with interested groups such as university, industrial association and local consulting business in developing local capacity for conducting pollution audits; c. conducting a series of pollution audits for selected industries in Dhaka with a specially formed group comprised of people of sector- specific experts from abroad and local technical people and environmental staff from the government; d. the provision of funding for the implementation of low-cost options for industrial pollution abatement based on the recommendations of pollution audit results; and e. With the experience gained from the various activities under this component and knowledge of other countries, propose incentive measures into present environmental regulations and standards to promote advanced concept in dealing with industrial pollution control. Prolect Organization 13. To organize a project team for the study it is necessary to involve the main parties responsible for setting policy and regulations and implementation of water resource activities in the greater Dhaka area. DWASA, DOE and the Ministry of Irrigation are key players in this area and their support are essential for the success of the study. The Water Resource Planning Organization, under the Ministry of Irrigation, had been a coordinating group for the national water resource planning in the past and whether its role should be restored is something be discussed with the Ministry of Irrigation. 14. Coordination with other water resource related study teams and donor agencies is also important, particularly the ADB, JICA and UNDP. Annex 5.1 Page 7 of 7 Proiect Timetable 15. After the time of contract awarded to selected consulting firm the whole study will take 30 months, divided into two phases: the main study phase, 18 months; and implementation and supervision phase, 12 months. ActivitV Month Mobilization and information gathering 1-3 Inception Report 4 Main Parts of the Study Work 5-15 Finalization 16-18 Implementation, Training and Supervision 19-30 Staffing 16. The total staffing will consist of a core team consisting of 25 manmonths of international consulting inputs and 40 manmonths of local inputs. In addition, short-term national and international consulting inputs, totalling about 30 staff months will be provided in specific areas of the study. Annex 6.1 Bangbdesh Dhaka Water Supply and Sanitation IV Project Components by Year - Totals Incluiding Contingencies (LSS Million) Totals Including Contingencies 19965 1996 1997 1898 1866 2000 2001 2002 Total A. Land Acquisition 1. Land Purchase Intake Culvert 0.1 0.1 Culvert, DND Canal 0.7 0.7 Treatment Plant Sde 23.8 - - - - - - - 23.8 Subtotal Land Acquisition 24.5 - - - - - - - 24.5 E. Treatment Plant & Associated Works 1. Intake Sarulila Pumping Plant - 0.6 0.5 0.4 - 1.6 Intake CMI Works - 0.4 0.8 0.8 0.1 - - 2.1 Subtotal Intake Sarulia 1.0 1.4 1.1 0.1 3.7 2. Canal RehabilItation and Site Development Renovation of DND Canal 0.3 0.3 0.1 - - - 0.7 Backfill of Trt. Pt. Ste 0.9 0.9 0.5 - - - - 2.2 Subtotal Canal Rehabilitation and SlIte Development 1.2 1.2 0.6 - - - - - 3.0 3. Culvert from DND Canal to Site Culvert - - 1.3 1.2 1.3 - - - 3.8 4. Treatment Plant Treatment Plant Mechanical & Electrical - 21.5 18.8 13.4 - - 53.7 Treatment Plant Civil Works - - 4.5 9.2 8.2 1.2 - - 23.0 Subtotal Treatment Plant - 26.0 28.0 21.6 1.2 76.8 6. Ancillary Structures Office and Administration Buildings - 0.5 1.0 0.9 0.1 - - 2.6 Subtotal Treatment Plant & Associated Works 1.2 1.2 29.4 31.6 25.0 1.4 - - 89.7 C. New Pipelines 1. Primary Transmission Mains Primary Main - - 4.1 4.2 4.2 4.3 4.4 - 21.1 2. Secondary Tranmission Mains Secondary Main - 1.1 1.1 1.1 1.1 1.1 - 5.4 Subtotal New Pipelines - - 5.2 5.2 5.3 5.4 5.5 - 26.6 0. Distribution System Rehabilitation 1. Leak Detection Program 0.1 0.1 0.3 0.4 0.3 - - 1.3 2. System Rehabilitation - 1.3 1.3 1.3 1.3 1.4 1.4 8.0 3. Tubewell Regeneration - 0.2 0.2 0.2 0.2 0.2 - 1.0 Subtotal Distribution System Rehabilitation 0.1 0.1 1.8 1.9 1.8 1.5 1.6 1.4 10.2 E. Expansion of Service Connections 1. Tertiary Distribution and House Connections - - 0.4 0.4 0.4 0.4 0.4 - 1.9 2. Crash Meter Installation Program - 0.3 0.3 0.3 _ 1.0 Subtotal Expansion of Service Connections - - 0.7 0.7 0.7 0.4 0.4 - 2.8 F. Development of Sewerage/Sanitation 1. Feasibility Study 0.2 0.3 0.3 - - - - 0.8 2. Physical Works/Sewerage Rehab and Latrines - - 0.5 1.6 2.2 - - 4.3 Subtotal Development of Sewerage/Sanitation 0.2 0.3 0.8 1.6 2.2 - - 5.0 0. Institutional Development TA 1. Water Resources Management Study - - 0.2 0.6 0.4 0.1 - 1.3 2. Management Support (Twinning) Program - - 0.8 0.8 0.8 0.8 0.8 - 4.0 3. Contracting out DWASA Services - - 0.2 0.2 0.2 0.2 - - 0.8 4. Training (DWASA) - - 0.2 0.2 0.2 0.2 0.2 0.2 1.1 5. Management Support (Senior Contract Staff) - 0.2 0.3 0.3 0.2 - - 0.9 6. Preparatory Work for Private Sector Participation - - 0.3 0.3 0.3 - - 0.8 Subtotal Institutional Development TA - 1.8 2.3 2.1 1.5 1.0 0.2 8.9 H. Project Prep/lmplemenation Support 1. Equipment 0.4 0.4 0.4 0.4 - - 1.7 2. Project Preparation (Ordinance and Ancillary Works) - 0.1 - - - - - 0.1 3. Construction Supervision & Network Analysis - - 0.5 0.5 1.1 2.1 1.9 - 6.2 4. Implementation of Tariff Study - 0.1 - - - 0.1 Subtotal Project Prep/lImplemenation Support 0.1 1.0 1.0 1.5 2.6 1.9 - 8.1 Total PROJECT COSTS 26.0 1.7 40.5 44.2 38.6 12.8 10.4 1.6 175.8 Annex 6.2 Bangladesh Dhaka Water Suppty and Sanitation IV Components Project Cost Summary (Local Million) (USS Million) % % Total % % Total Foreign Base Foreign Base Local Foreign Total Exchang Costs Local Foreign Total Exchang Costs A. Land Acquisition 1. Land Purchase Intake Culvert 2.2 - 2.2 - 0.1 - 0.1 Culvert, DND Canal 25.4 25.4 0.B - 0.6 Treatment Plant Site 936.0 936.0 - 14 22.2 22.2 14 Subtotal Land AcquIsition 963.6 - 963.6 15 22.8 - 22.8 - 15 B. Treatment Plant & Associated Works 1. Intake Sarulila Pumping Plant 27.6 29.0 56.5 51 1 0.7 0.7 1.3 51 1 Intake Civil Works 27.7 43.6 71.3 61 1 0.7 1.0 1.7 61 1 Subtotal Intake Sarulla 55.3 72.5 127.8 57 2 1.3 1.7 3.0 57 2 2. Canal Rehabilitation and Site Development Renovation of DND Canal 26.2 - 26.2 - 0.6 - 0.6 Backrill of Tn. PR. Site 82.0 - 82.0 - 1 1.9 - 1.9 1 Subtotal Canal Rehabilitation and Site Development 108.2 - 108.2 - 2 2.6 2.6 - 2 3. Culvert from DND Canal to Site Culvert 123.2 1.7 124.9 1 2 2.9 0.0 3.0 1 2 4. Treatment Plant Treatment Plant Mechanical & Electrical 945.0 1,321.5 2,266.5 58 34 22.4 31.3 53.7 58 34 Treatment Plant Civil Works 302.6 475.6 778.2 61 12 7.2 11.3 18.4 61 12 Subtotal Treatment Plant 1,247.6 1,797.1 3,044.6 59 46 29.6 42.6 72.2 59 46 S. Ancillary Structures Office and Administration Buildings 79.9 4.6 84.5 5 1 1.9 0.1 2.0 5 1 Subtotal Treatment Plant & Associated Works 1,614.2 1,875.9 3,490.1 54 53 38.3 44.5 82.7 54 53 C. New Pipelines 1. Primary Transmisslon Mains Primary Main 312.4 426.4 738.8 58 it 7.4 10.1 17.5 58 11 2. Secondary Tranmission Mains Secondary Main 69.7 122.3 192.0 64 3 1.7 2.9 4.6 64 3 Subtotal New Pipelines 382.1 548.6 930.7 59 14 9.1 13.0 22.1 59 14 0. Distribution System Rehabilitation 1. Leak Detection Program 16.5 28.9 45.3 64 1 0.4 0.7 1.1 64 1 2. System Rehabilitation 101.3 177.7 279.0 64 4 2.4 4.2 6.6 64 4 3. Tubewell Regeneration 12.7 22.2 34.9 64 1 0.3 0.5 0.8 64 1 Subtotal Distribution System Rehabilitation 130.4 228.8 359.2 64 5 3.1 5.4 8.5 64 5 E. Expansion of Service Connectlons 1. Tertiary Distribution and House Connectlons 23.7 37.9 61.6 62 1 0.6 0.9 1.5 62 1 2. Crash Meter Installation Program 12.7 22.2 34.9 64 1 0.3 0.5 0.8 64 1 Subtotal Expansion of Service Connections 36.4 60.1 96.5 62 1 0.9 1.4 2.3 62 1 F. Development of Sewerage/Sanitation 1. Feasibility Study 11.5 16.2 27.7 59 - 0.3 0.4 0.7 59 2. Physical Works/Sewerage Rehab and Latrines 58.0 85.3 143.3 60 2 1.4 2.0 3.4 60 2 Subtotal Development of Sewerage/Sanitation 69.5 101.5 171.0 59 3 1.6 2.4 4.1 59 3 G. Institutional Development TA 1. Water Resources Management Study 15.0 28.3 43.3 65 1 0.4 0.7 1.0 65 1 2. Management Support (Twinning) Program 60.0 73.4 133.4 55 2 1.4 1.7 3.2 55 2 3. Contracting out DWASA Services 8.0 18.9 26.9 70 - 0.2 0.4 0.6 70 - 4. Training (DWASA) 12.0 23.1 35.1 66 1 0.3 0.5 0.8 66 1 5. Management Support (Senior Contract Stall) 9.0 19.9 28.9 69 - 0.2 0.5 0.7 69 - 6. Preparatory Work for Private Sector Participation 9.0 19.9 28.9 69 - 0.2 0.5 0.7 69 - Subtotal Institutional Development TA 113.0 183.4 296.4 62 5 2.7 4.3 7.0 62 5 H. Project Prepilmplemenation Support 1. Equipment 20.0 41.9 61.9 68 1 0.5 1.0 1.5 68 1 2. Project Preparation (Ordinance and Ancillary Works) - 2.1 2.1 100 - - 0.1 0.1 100 - 3. Construction Supervision & Network Analysis - 206.6 206.6 100 3 - 4.9 4.9 100 3 4. Implementation of Tariff Study- 2.1 2.1 100 - 0.1 0.1 100 Subtotal Project Prep/Implemenation Support 20.0 252.7 272.7 93 4 0.5 6.0 6.5 93 4 Total BASELINE COSTS 3,329.1 3,251.1 6,580.3 49 100 78.9 77.1 156.0 49 100 Physical Contingencies 138.0 193.0 331.0 58 5 3.3 4.6 7.8 58 5 Price Contingencies 201.4 336.3 537.7 63 8 5.5 6.5 12.0 54 8 Total PROJECT COSTS 3,668.6 3,780.4 7,449.0 51 113 87.7 88.1 175.8 50 113 Annex 7.1 Page 1 of 5 BANGLADESH PROPOSED FOURTH DHAKA WATER SUPPLY PROJECT LEAK DETECTION AND LOSS REDUCTION PROGRAM TERMS OF REFERENCE FOR THE SECOND AND THIRD PHASE PROGRAM Introduction 1. The Dhaka Water Supply and Sewerage Authority (DWASA) is committed to making a major effort to reduce unaccounted for water (UFW) in its current operations and deal with any potential increase due to higher system pressures which will result from the introduction of the new surface water treatment plant under the Fourth Dhaka Water Supply Project. In this regard, DWASA is undertaking a leak detection and loss control program in its service area. The program is aimed at transferring of appropriate technology, including modern specialized equipment to facilitate the implementation of a systematic control program of non revenue water. The program will also provide for training of DWASA staff in new methodologies, for monitoring and evaluating effects of the program and for assisting DWASA in repair and rehabilitation works identified during the program. The program will also provide incentives for DWASA staff for improved performance to bring about sustainable operating practices. Program Obiective 2. The primary objective of the program is to prepare and implement a comprehensive menu of reforms to reorganize the leak detection division, provide incentives for UFW control teams, strengthen workers training programs and update and enforce bylaws for the reduction of unaccounted for water by about 12 percentage points during the program period and for the implementation of long term sustainable and improved system operation and maintenance practices within DWASA. The program will also assist in physical rehabilitation of the water distribution network and in reviewing the policies and practices of the DWASA related to UFW. The program will comprise implementation of works in three overlapping phases and will be geared to dealing with the expected high pressures when the Saidabad Water Treatment Plant starts operating in 1998. These TOR describe the scope of work for the second and third phase of the program. Background 3. A limited pilot area was the subject of a leak detection program undertaken in 1991 by foreign consultants (GKW) in association with a local partner (BETS). The program developed a methodology and an approach for tackling the leak problem and this knowledge is available (in the form of reports) for transfer from the local consultant (BETS). Accordingly, DWASA prepared Terms of Reference (reviewed during pre-appraisal) for the same consultant to revisit the pilot area and extend into two new areas as part of an immediate action program. The consultants were sole sourced in the interest of efficiency and economy. This first phase program started in November 1994. The scope of work of the first phase consists of: (a) training of DWASA staff to repair, replace, infill Annex 7.1 Page 2 of 5 and extend pipework in the pilot area zones to updating of the calculation of unaccounted for water and implement the loss control program identified in the pilot program; (b) selection of two additional cells of about 500 to 1000 service connections, and prepare designs and tender documents, and supervise the installation of border valves, bulk and waste detection meters, including localized consumer surveys to identify administrative losses; and (c) updating of the distribution network drawings and preparation of detailed reports on tasks performed. The first phase program will last eighteen months. Administrative Actions 4. To assist in the implementation of the program, DWASA has made administrative changes in its organizational structure to upgrade the Waste Prevention Division into a System Monitoring and Waste Control Circle with a Superintending Engineer as the head of the circle. The Superintending Engineer will act as the Project Director in addition to his normal duties until a revised organizational set-up is approved. The immediate procurement of equipment, tools and training materials would be achieved through retroactive financing under the proposed IDA Credit. The immediate activities and procurement actions are expected to take about one and a half years, during which period the selection and appointment of the consultants for the next phase of the work would take place. 5. Included in the administrative actions are specific pay incentives over basic wages, for staff engaged in the leak detection program complying with performance criteria devised by the consultant. This reimbursable expense has been included in the consultancy contract. Scope of Work 6. For the second and third phase, it is expected that DWASA will appoint a joint venture consisting of a local consulting and foreign consulting firm. Because of the experience gained by DWASA in the pilot program and the first phase of the current program, the local consulting firm would be the lead firm, and would direct and supervise implementation and rehabilitation activities. The foreign firm would have wide experience in leak detection and control program design, survey and implementation, and would provide backup and technical support. The consultants shall provide the following services: (a) Prolect Management: Assist the project management unit of DWASA in preparation of specifications and bidding documents for material and equipments for the operation of leak detection and pipeline repair work, including hand tools, repair clamps, etc.; (b) Analysis and Improvement: Assist DWASA staff in review and analysis of current polices, procedures and practices related to causes of UFW, including, but not limited to, new water service connection application and works, customer water service repair, customer meter testing, repair and replacement, illegal connections, main extensions, and make recommendations to improve existing systems; (c) Leak Survey and Rehabilitation: Assist DWASA staff with all aspects Annex 7.1 Page 3 of 5 of leak detection and control, especially for the selection of rehabilitation districts, operation of detection equipment, field surveys and preparation of a rehabilitation program; (d) Technical Standards Assessment: Assist DWASA in reviewing various technical standards which have an impact on UFW, including meter testing and installation standards, leak repair methods; construction inspection; (e) Staff Training Assistance: Assess staff training needs and preparation of training programs for leak detection, UFW and distribution system maintenance/rehabilitation. The detailed scope of work for each of the two phases is provided in the paragraphs below: Implementation of Program - Phase 2 7. Based on the results of the first phase, the consultants will first prepare a list and detailed specifications of leak detection equipment and materials needed for the initial period of the phase. This phase is expected to last three years. Detailed scope of work will be to: (a) assist DWASA in selecting suitable zones to cover about 70,000 connections within the distribution network for the purposes of detecting and reducing water wastage as well as assessing the various components of UFW. DWASA maintains maps and records of distribution networks and house connections. However, if gaps are identified in such maps and records, the consultants shall assist DWASA staff in obtaining and updating information required for design and implementation for the program; (b) prepare a detailed program of leak detection surveys and compile records aimed at identifying major leakage areas within each sub- network, defective or unsuitable meters and other fittings, etc. This activity will also detect unauthorized connections and reduce preventable waste within consumer premises. It would also include design of suitable public education program to mobilize cooperation of consumers and educate them to appreciate the objective of this exercise; (c) review with DWASA staff facilities available for meter testing, repairs and maintenance of valves and other fittings within the system and assisting consumers to remedy faulty internal systems, etc. The consultants will also make practicable recommendations to improve or expand facilities and for setting up new facilities required for the successful implementation of this program. The consultants shall review and recommend the technical procedures for mains installation and approval of the new service connections; (d) select key DWASA personnel to work with the consultants and receive further training in particular areas of expertise required to Annex 7.1 Page 4 of 5 implement the program; (e) prepare additional training materials as needed suitable for use with skilled and unskilled workers, including audio visual materials specially designed for the purpose; (f) assess the linkage available and coordination between DWASA field operational staff, and the accounting and records section, and make recommendations where appropriate to achieve closer coordination to realize the goals of this program; (g) prepare, in consultation with DWASA staff, monitoring indicators and a reporting system designed to provide clear information on physical accomplishments and overall progress on a regular reporting basis (monthly) for this phase and phase 3 of the program; (h) assist DWASA management to forecast resource requirements (staff, equipment and budgets) as well as the organization structure needed to implement Phase 3 of the program in terms of repairs and replacement of faulty fittings, major leaks and rehabilitation of obsolete pipes; (i) assess the availability of pipes, valves and meters (if possible, locally) for replacement of defective equipment required to bring about early reduction of UFW and better monitoring of leakage; and (j) review and recommend the most economic reduction level of UFW, taking into account the costs of leak detection and repair campaigns. Implementation of Program - Phase 3 8. This phase is expected to be an on-going activity within DWASA and will draw on the examples of the first two phases to cover the remaining zones (over 80,000 connections). The responsibility of the consultants in this phase will be minimal and it is expected that only a few foreign and some local supervision consultants will be required, on a short term or need basis. The time frame for this phase will be determined by DWASA itself based on the remaining work to be done. However, it is expected that the input of the consultants will be no more than a year, after which DWASA staff will continue activities on their own. The scope of work in this phase will be to: (a) execute actual leak detection surveys, based on experience gained in the previous phases. DWASA staff will be responsible for all repairs of leaks on a continuous basis on the remaining pipelines and connections; (b) continue with and pursue intensive on the job training of key DWASA staff in leak detection as well as operation and maintenance of specialized equipment; (c) continue the assistance to DWASA staff in increasing consumer Annex 7.1 Page 5 of 5 awareness of the need for waste prevention, and carry out public education campaigns and assistance in eliminating waste; (d) assists DWASA teams engaged on the program to ensure conformity with designed methodologies, accuracy and consistency of reporting; and (e) assist DWASA to modify designed programs, techniques and scope of work to suit site conditions and circumstances, and transfer experience from other utilities involved in similar programs. Implementation Cooperation 9. The consultants will be expected to work in very close cooperation and consultation with DWASA. DWASA will provide counterpart staff to work with the consultants and field staff to implement the program. DWASA will also provide access to the consultants of its facilities including available data, maps, drawings and internal documents and suitable office space to house the consultants and their counterparts. 10. The consultants shall motivate and train DWASA staff to achieve the program objectives working closely with DWASA management, and provide recommendations to improve staff motivation toward the leak reduction program. Reports 11. The consultants will provide to DWASA and the Ministry of Local Government Rural Development and Cooperatives (MLGRDC) an inception report within 3 months from the commencement of Phase 2, with a detailed schedule for the implementation of the balance of Phase 2 and Phase 3 of the program. 12. About three months before the end of Phase 2, the consultants shall prepare a Phase 2 completion report based on an agreed format. The Phase 2 report shall be reviewed by IDA, DWASA and MLGRDC and approval given to the consultants to proceed to Phase 3 of the program. 13. The consultants shall also prepare monthly progress reports, beginning after the inception report and through the completion of Phase 3. 14. At the conclusion of Phase 3 activities, the consultant shall prepare a final completion report for the program as a whole, based on an agreed format. The report shall provide details of all data gathered, accomplishments and recommendations for a rolling program DWASA to continue with leak detection activities on an on-going basis. 15. The consultants shall also prepare the relevant operational manuals for use by field staff involved in leak detection and rehabilitation. 16. All reports should be presented in English, and DWASA shall translate the relevant sections of the reports and operational manuals into Bengali, as necessary, for field staff. Annex 8.1 Page 1 of 12 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Management and Operational Support (Twinning) Program Draft Terms of Reference INTRODUCTION 1. The Dhaka Water Supply and Sewerage Authority (DWASA) recognizes the need to improve its ability to efficiently operate and maintain its facilities, manage scarce water supply resources in an optimal way, and to provide its services in the least-cost manner possible. DWASA institutional performance however, has remained weak. The main factors contributing to this poor performance include poor institutional capability to effectively manage and operate its facilities, a lack of capable management and trained manpower, poor management information system and a general lack of commercial orientation in its operations. DWASA is aware of these short comings and the difficulties involved in transforming its operations into a commercially- oriented entity. To this extent, a major program of assistance is proposed to assist DWASA to improve its ability to efficiently operate and maintain its facilities, plan for the future and bring about changes in the attitude of utility staff in the need to adopt commercially oriented practices in operations. These terms of reference describe the arrangements for a twinning program between the twinning partner (hereinafter called the Partner) and the client (DWASA); the services which the partner will provide to DWASA to strengthen its operating efficiency, improve financial management and the capacity of its staff to manage and operate its facilities and provide water supply and sanitation services more efficiently; and the obligations of DWASA under the twinning arrangement. OVERALL OBJECTIVES 2. The overall objective of the proposed technical assistance is to develop the management, planning, operation and maintenance capabilities of DWASA and to ensure that it is operated in the most efficient, cost effective manner possible. To develop these capabilities, DWASA intends to enter into a twinning arrangement with an experienced water utility company, using experts in the management, commercial and financial administration, and operation and maintenance of water supply utilities in developed countries. The proposed twinning arrangement will be characterized by a closer involvement between the two parties than is generally obtained in a standard client-consultant relationship. It is aimed at direct transfer of managerial and technical skills and systems that involve the various functional aspects of DWASA. 3. The key objectives of the twinning arrangement would be: (a) to provide sustained technical and managerial support aimed at building up DWASA's capability to the point where, within four Annex 8.1 Page 2 of 12 years, it can independently and efficiently operate all aspects of its operations; (b) to assist in the development and implementation of organizational structure, systems, procedures and practices required by a commercial water utility; (c) to provide back-up support in carrying out the day-to-day operations. 4. DWASA has already commenced a pilot program of leak detection and repair in two zones, and has finalized a Consumer Survey, whose objectives were to identify and properly record all water and sewer connected holdings, including those not registered with DWASA, identify potential customers and establish a correct computer data-base for revenue operations. The proposed twinning program will build upon the relevant parts of the work undertaken in these programs. GENERAL STRUCTURE OF THE TWINNING PROGRAM The Relationship of the Client and Partner 5. The essential requirements for a successful twinning arrangement is to create an environment in which the transfer of technology can be optimized. The Partner as supplier of technical expertise must be able to respond to the changing needs of the client. For its part the client organization should also be prepared to improve its performance with the introduction of proposed changes. Ideally, the partner should be able to offer experience and expertise over a wide range of activities, embracing state-of-the-art methods of planning and implementation. The guiding principle of the contract would aim at risk sharing between the partner and the client through remuneration that is tied to meeting agreed targets and improvements in performance. It is expected that for this twinning arrangement expertise and experience will be offered primarily in managerial technical assistance with emphasis on: (a) management and finance; and (b) operations and maintenance. Assistance would be provided through the secondment of experienced personnel primarily from the Partners own organization (not recruited for the purpose of the twinning contract) into parallel positions in DWASA. It will be the responsibility of the Partner to organize its activities to suit the requirement of the client. In entering into the twinning agreement with the Partner, DWASA as the client will take on certain obligations to present sufficient and suitable staff for training and to provide the physical environment and facilities for the Partner to carry out his services according to the TOR. 6. In addition, IDA and the Government are involved in a dialogue to introduce further private sector participation in DWASA through a dedicated water utility operator on a long-term basis. A strategy study has been included in the project to help DWASA define options and recommend the best way forward. It is expected that the Partner will help DWASA facilitate the transition and preparation for such an arrangement. This will include collection of information and other data, analysis, and preparation of other required background material for the recommended option. Annex 8.1 Page 3 of 12 Obligations of DWASA 7. With this twinning arrangement, the obligation of the client are to provide: (a) access to the Partner to all the client's water supply, sewerage sanitation and drainage facilities; (b) available data, information maps, drawings, internal documents, including billing, collection and accounting records; (c) counterpart staff; (d) suitable office space to house the experts and their counterparts; (e) sufficient equipment and tools necessary to perform their duties as appropriate; and (f) sufficient operational funds to enable smooth operation of DWASA. 8. It is a requirement of these TOR that each specialist from the Partner's organization will work alongside DWASA counterparts, preferably in the same office. In certain cases, the counterpart will also retain his office. Allowance must be made in the contract for the refurbishment of certain offices and the provision of furniture and office equipment in addition to the technical and training equipment to be provided. 9. It will be the responsibility of DWASA to make adequate provision in its budget to ensure that local funds are in place to support the twinning arrangement. Such costs are expected to include transport costs for its own staff, out-of station allowances, and the provision of consumables. ObliRations of the Partner and Inputs 10. It is anticipated that three full time senior advisers (operations and maintenance, technical and engineering, and finance and accounting) will be needed to strengthen DWASA. These will be complemented by short-term experts in specialized areas with appropriate expertise and experience in those areas. One of the full time senior advisers will be the Team Leader. The advisers and the short-term experts will serve in operational capacities and will, together with DWASA's senior management, have joint responsibility for overseeing day-to-day operations and implementation of systems, procedures and practices. The Partner will also provide back up services from its headquarters for the strengthening DWASA's structure, systems and services as required, and technical specialist input, if needed for other tasks that will help improve efficiency. In addition, the Partner shall act as advisor to DWASA in its dealings with third parties. A detailed scope of work is provided below. 11. As indicated above, an important aspect of the twinning program is the systematic and comprehensive transfer of knowledge and skills from the Partner to DWASA, in particular to the counterpart staff working with the Partner's advisors and experts. This will include transfer of training skills Annex 8.1 Page 4 of 12 and training materials on DWASA's operations, to enable DWASA staff to carry over the training of officers after the end of the program. 12. During the course of this arrangement, DWASA will be undertaking other initiatives to improve its operational and financial performance. These include the Leak Detection and Rehabilitation Program, and the Crash Meter Installation Program. The Partner will liaise with the consultants undertaking these programs and assist DWASA in implementation of the results of these programs. Outputs and Goals 13. To have some measure of the performance of the twinning arrangement, it is important that the Partner and the Client agree on a list of outputs and goals at the outset of the services. These could be in form of certain performance objectives and indicators, (financial, operational, institutional), including a time-frame for transferring of the responsibilities of specific activities to DWASA counterparts. It will be necessary that DWASA and the partner specify and use performance variables and targets to the extent possible. During contract negotiations, both parties will define the specific baseline values for the performance variables selected. Baseline values represent the specific values of the performance variables that most closely represent present operational trends. Fixed payment for the services rendered by the Partner will be independent of the achievement or non-achievement of the baseline values. However, to provide the partner with some upside incentives, DWASA and GOB will agree to incentive payments for superior performance beyond the initial base-line values. This feature will provide the right incentive to the selected partner and represents a sharing of benefits between DWASA and the partner. An example of the performance variables that could be used include: total water sold as a percentage of water produced; average water production from tubewells; variable cost of water per unit; and persons trained per year. 14. To ensure that the program objectives are being met, the Ministry of the Local Government will set up a Program Review Committee, headed by one Ministry official (probably a Joint Secretary) and consisting of one DWASA senior official and the Team Leader of the Twinning Program. This committee will monitor the achievement of the performance variables selected, and other issues relating to the program. Time-frame 15. The program will be carried out in two phases with a period of reporting and review between them. The first phase will be for a period of three months followed by a month for the preparation of an Implementation Proposal. This first phase will be a quick diagnostic review to identify priority areas on which significant and rapid improvement could be made to DWASA's operations,identify the outputs and goals to be achieved, and develop the methodology to be used in implementation. In addition, the Implementation Proposal will prepare detailed TOR for the short-term specialists and a time schedule for their activities and input, including the identification of their counterparts in DWASA. The Implementation Proposal will be presented in draft form at the end of the fourth month and will be reviewed by DWASA, GOB and Annex 8.1 Page 5 of 12 IDA. The second phase of the consultancy will follow approval of the final review of the Implementation Proposal, for a period of four years but the contract will be renewed on an annual basis. This is necessary to enable the contract to be terminated, once arrangements are in place to introduce in DWASA private sector operators on a long-term basis. The contract between the partner and the client will therefore include a termination clause to allow termination of the contract based on a mutual understanding of both parties that early termination is in both their interest. SCOPE OF WORK 16. The proposed program will consist of development and the implementation of the organization structure, systems, procedures, in the following broad areas: (a) Operations and Maintenance; (b) Management and Finance; (c) Management Information System; (d) Personnel Management and Training; and (e) Computerization. Detailed scope of work in each of these areas will be as follows: (a) Operations and Maintenance The scope of the work will include, but not necessarily limited to the following: (i) provision of specialist operational support, advice and direction in all aspects of water treatment and distribution, particular attention being given to operational processes, technology, distribution control practices and leakage strategy and implementation; (ii) provision of specialized operational processes, support, advice and direction in all aspects of sewage treatment and sludge disposal, preparation of action plans, programs of work, policies and operating systems to improve the operational performance of the sewage treatment works, and systematic mapplng and updating of the collection and sewer system records; (iii) inventory of all water resources connected to the system (including the proposed surface water under this project), and determining the cost of producing water from each source, assessment of means to reduce these costs, and development of operating rules to optimize use of water and minimize operating costs. This should include particularly a review of all uses of power, fuel and chemicals and recommendations for maximizing the efficiency of their use; (iv) analysis of distribution system and recommendation of a district metering system, and overall crash metering program, and provide advice and assistance to metering program consultants on the necessary meters, procurement and installation, inciuding a meter repair program; Annex 8.1 Page 6 of 12 (v) review the achievements of previous programs of leak detection and wastage control, and co-ordinate with leak detection consultants under the project, and recommend a program of further loss reduction, including both technical and non- technical losses, and leakage repair program to be carried out as part of the Proposed Fourth DWASA Project; (vi) assess surface water sources used by DWASA and make recommendations for a program to monitor water quality, including control in the use of biocides and fertilizers; (vii) advise and recommend the maintenance and rehabilitation of water supply lines, including prevention against contamination, rehabilitation of old sewer lines, desilting of sewer lines, and prepare a routine preventive maintenance program for water supply distribution system and sewer network, treatment plants, and deep tubewells, including safety inspection for all facilities; (viii) prepare an inventory of all stores, provide advice and assistance on stores, stores procedures and procurement arrangements, establish necessary holdings of spare parts and chemicals, and location of stores facilities and recommend stores maintenance procedures; (ix) recommend methods of treatment of tubewells suitable to aquifer conditions and materials used in construction of tubewells, and prepare guidelines and a program for regeneration or maintenance of tubewells; (x) develop a program to increase the awareness of the importance of efficient water use, which includes water quality, water distribution, material standards and maintenance practices, continuous monitoring of water losses and unaccounted for water, plumbing standards for interior plumbing and water efficient equipment; (xi) recommend equipment, tools, vehicles, etc., necessary for DWASA to carry out its duties, including the rehabilitation of the existing meter repair workshop, and possible advice and assistance on a maintenance program for such equipment and tools; (xii) determine suitable monitoring indicators for use by DWASA to assist in its duties and in general quality control, and in establishing a management information system utilizing these indicators; and (xiii) determine the need for laboratory facilities and prepare specifications and assist with the procurement of laboratory equipment and supplies. Annex 8.1 Page 7 of 12 (b) Management and Finance The scope of work under this area will include, but not necessarily limited to: (i) introduction of appropriate systems of cost management accounting to be used for budgeting management and improved productivity; (ii) review of DWASA's financial management systems and procedures and prepare a work program of improvements, including improved commercial financial accounting system for DWASA,and its planning and budgeting procedures; (iii) provide assistance in management accounting such as project cost accounting, stores accounting, assets accounting and evaluation, including recording, depreciation, etc.; (iv) provide advice on improvements in financial control and internal audit systems to assist DWASA in financial management; (v) provide assistance with the preparation of current cost accounts as supplements to audited historical accounts; (vi) prepare financial performance measurement indicators, to be used by DWASA in defining performance objectives and targets; (vii) assist in improvement of revenue generation, tariff management, including the implementation of a revised tariff structure and the mechanism for regular tariff reviews, and adjustments; (viii) development of improved billing, customer accounting and collection procedures, and the management and recovery of arrears, by reviewing existing commercial practices and systems, billing frequency, meter reading routes, collection practices, connection/disconnection procedure and recommend improvements; (ix) assist in strengthening and streamlining procedures for meter reading, revenue collection, and implementation of more efficient and economic procedures for bill preparations, revenue collections and arrears monitoring; and (x) develop and implement new computer based financial and control and administrative system, including general ledger, accounts payable, payroll, inventory management, purchasing, personnel records and customer billing, and the production and implementation of new operating manuals. Annex 8.1 Page 8 of 12 (c) Mana&ement Information Systems The objective in this area is to establish a management information system to assist DWASA in financial and operational decision- making. In addition, as discussed before, the Partner will also assist in collection of information required to facilitate the introduction of a private sector operator in DWASA's operations. Activities in this area will include: (i) Assist in data collection, information generation, surveys and analysis to provide statistics and reports that determine existing conditions within the Dhaka metropolitan area regarding population distribution, projected growth, income distribution, etc., to assist in water demand management; (ii) Advise on preparation of master plans and data/records, maps, plans for water supply sewerage and drainage systems for the city of Dhaka together with any available city topographical base maps using GIS; (iii) Assist in preparation of hydrological data, soil characteristics, development densities and topography of the catchment areas of the city; (iv) Co-ordinate a program of field surveys to verify data and maps on a regular basis, and update existing data maps, etc; (v) Assist in preparing technical information on DWASA operations including macrometering of water produced; micrometering consumption patterns for key consumer categories; network condition including size, material, age and description of the system by sector in the city; the condition of utility pump station reservoirs, treatment plants and other civil works of electromechnical equipment, its age, capacity, performance and maintenance records including major breakdowns; (vi) Provide assistance in the preparation of information and data needed for the decision of annual operation, maintenance and investment programs, including past records of breakdowns and previous maintenance and operating plans; (vii) assist in the preparation of commercial, financial and institutional information, including a cadaster of users, collection records, accounting practices, criteria for valuation of assets, financial policies, payroll information and personnel histories, inventory of non-operational facilities, e.g., buildings, furniture, vehicles, etc.; (viii) Review information needs for the preparation of financial technical and operational reports and determine the frequency of reporting with management; Annex 8.1 Page 9 of 12 (ix) Determine sources of information and how best to record and report the information; and (x) Develop a management information reporting package at various organization and management levels with recommended frequency of reporting. (d) Personnel Management and Training The objective in this area would be to review the present personnel management system and recommend improvement to the existing system. Particularly important is the undertaking of a comprehensive manpower and organizational study, and provision of assistance in setting up a training program and design of curricular for staff to complement the improvements in DWASA financial, operational and technical performance including preparation of performance based incentives for all staff. Specific actions may include, but not necessarily limited to: (i) undertaking a manpower and organizational study to identify the features essential to the development of an effective organization and the preparation of an organization structure to enhance DWASA's efficiency; (ii) determining the roles of current postholders and requirements (including shortfalls) for the recommended organization structure, develop appropriate skills for the positions, including a program of staff rationalization; (iii) advising on planning and organization of training programs and effective use of the DWASA training center; (iv) provision of facilities for study visits by DWASA staff to other utilities for the acquisition of specific skills in accordance with a well-prepared training program; (v) provision for the exchange and dissemination of useful professional and technical journals and other information; (vi) establishing a program for operational training, including job classification and certification, and incentives for water system operators revenue officers and billing staff to advance to higher levels of skills and responsibilities; (vii) advising on possibilities for retraining and reassignment of surplus staff to other responsibilities; (viii) providing advice on leadership training and select a small group of people to work in an overseas utility to learn advanced skills of utility management to enable them to train other staff and managers; Annex 8.1 Page 10 of 12 (ix) providing assistance in enhancement of customer relations facilities, including the development of a public education program to increase public awareness of the need for economic water use practices; and (x) preparing criteria and a program for performance objective measurement for staff and management, and assist in its establishment to allow for employee performance incentives to improve staff efficiency. (e) Computerization The computerization of DWASA's financial, billing and revenue collection activities will form an important part of the task. DWASA has already embarked on a computerization program under the Third Dhaka Water Supply Project, and the consultants will assist DWASA to expand this program. Tasks under this area will include, but may not necessarily be limited to the following: (i) the definition and analysis of existing procedures, codes, manuals and reports used by DWASA in reporting, and financial management revenue billing and collection systems and user requirements, and make recommendations on the general requirements for computerizing the general ledger, accounts receivable and payable, payroll, inventory and fixed asset systems, and all other periodic reports to be produced by DWASA; (ii) advice on systems and program specifications, and available accounting software; (iii) assistance in the selection of hardware, based on considerations of available software, facilities for obtaining servicing in Bangladesh, and potential for future expansion of capacity; (iv) assistance in the preparation of bid documents and technical specifications for both the hardware and software; and (v) assistance with testing and acceptance trials, system implementation and post-implementation review. IMPLEMENTATION AND REPORTING Implementation 17. It is expected that the consultancy will consist of a core team consisting of people in the following areas: (a) technical and engineering; (b) operations and maintenance; and (c) finance and accounting. This core team would work with DWASA throughout the period of the consultancy. These will be supported by short-term specialists in specific areas as required. The need for the short-term expertise will be identified in the Implementation Proposal, and TORs will be provided. Annex 8.1 Page 11 of 12 18. After the first three months, an implementation proposal will be produced in draft form (within a month). This proposal will: (a) establish priorities in the actions to be taken; (b) identify the outputs to be achieved; and (c) identify the methodology to be used. The proposal will also include proposals for formal training, study tours, equipment required and any administrative arrangements to be established to facilitate implementation, and proposals to improve accountability, responsibility, incentives, and sanctions for staff. 19. During the Implementation Phase, DWASA will produce tender documents for any work planned for the phase. The consultants will assist DWASA in the preparation of these documents. Operational Manuals 20. Apart from the normal progress reports detailed below, it is required that operational manuals be prepared and left with DWASA for every aspect of DWASA's activities that the Partner will be involved in, for use in day-to-day work and for use by DWASA's trainers. Manuals should be in English, and simple and easy to understand, to facilitate translation into Bengali, if necessary. Reporting Requirements 21. The following types of reports will be produced by the Partner during the course of the Twinning Program: (a) Implementation Proposal: This will be based on the results of the diagnostic assessment of DWASA to be undertaken in the first phase of the project. (para. 15); (b) Routine Progress Reports: A bi-monthly report will be produced describing progress being achieved in the respected activities for each reporting period, and the expected activities for the coming reporting period, and a description of the current problems and recommendations on possible solutions; (c) Milestone Report: At the beginning of each activity, a short inception report will be prepared summarizing the objectives of the activity, the time frame of the activity and the expected output. This will be based on the diagnostic report prepared in the first phase of the program. At the end of each activity, a second report will be prepared outlining the achievements of the activity, the tasks accomplished and follow-up steps to be undertaken. (d) Evaluation Report: An evaluation will be undertaken every year by the Partner, in conjunction with DWASA staff of the institutional development directly attributable to the program, and a report prepared. Experts from the Partner's institution not related to the activities under evaluation will assist in the evaluation to ensure a critical assessment. This report will be discussed with the Program Review Committee to check real progress on the program Annex 8.1 Page 12 of 12 and to ensure that planned activities are still in tune with Government and DWASA objectives and priorities; (e) Final Report: On completion of the assignment, a final completion report will be prepared summarizing the effectiveness of the whole program, the achievements and the lessons learned, including the follow-up required from both DWASA and the Partner to ensure sustainability of the program. The report will also make recommendations for future assistance. Annex 9.1 Page 1 of 3 BANGLADESH FOURTH DHAKA WATER SUPPLY AND SEWERAGE PROJECT LAND ACQUISITION AND RESETTLEMENT LAND ACQUISITION 1. Land required for the physical investment aspects of the project consist of the following: (a) land required on the foreshore of the Sitalakya River for the Pump station and the intake, amounting to 0.91 acres; (b) land required for the right-of-way (ROW) for the culvert from the River to the DND Canal amounting to 1.45 acres; (c) land required for the ROW for the culvert from the end of the DND canal to the treatment plant site amounting to 3.64 acres; and (d) land at the treatment plant site amounting to 54.4 acres. Of this land, 13.6 acres will be used for the proposed project. 2. Total land acquired now by DWASA for the project amounts to 6 acres, consisting of the parcels under a, b, and c above. The assessed value of this land is US$0.8 million, which is 0.5Z of the total project cost. This land acquisition has been approved by the Ministry of Land and is now complete. About 37 private plots are affected. 3. Land for the treatment plant (54.4 acres) was acquired by DWASA in 1963 under the First Dhaka Water Supply Project, in preparation for the Second DWASA project, which was expected to be a surface water option. During preparation of the second project the scope and size was significantly reduced and groundwater was used instead. DWASA retained control of the land for use in a follow-up project. The proposed project is the first surface water supply project, and 13.6 acres of the 54 acres will be developed for the plant. The assessed value of the total land is US$23.8 million. This is only a nominal value as there is not going to be any transfer of funds involved. RESETTLEMENT 4. Acquisition of the six acres involves the following resettlement issues: (a) at the Sarulia intake point, (item a above), there will be loss of foreshore, and acquisition involves removal of households on the foreshore, estimated to be around twenty. (b) on the conveyance from the intake to the DND canal (item b above), there are two fish ponds that will be affected by the culvert. Annex 9.1 Page 2 of 3 The culvert will also pass through the grounds of a school. No buildings will be affected. (c) on the culvert from the DND canal to the treatment plant site, there are six squatter shacks that will have to be removed. The rest of the culvert will be built on agricultural land (involving compensation, but no relocation); and (d) at the treatment plant site, the land is currently free of settlements because it usually water-logged. The project includes land development and filling at the site to raise the level and make the site flood free. 5. The total provision for the land to be acquired under the project is US$0.8 million. This includes cost of the land of 0.45 million and compensation for any loss of land along the ROW and for shacks along the DND canal. This is discussed below. 6. Based on the level of the relocation under these components a full socio-economic survey and resettlement action plan was not warranted. However, DWASA agreed to comply with IDA's resettlement guidelines, which require that: (a) compensation for loss of properties is paid at the real market value. (b) assistance to people who have to relocate homes or enterprises is given, in terms of securing an alternative site for relocation or compensation for relocation costs; (c) compensation for temporary or permanent loss of incomes is paid, through a nominal lump-sum payment; (d) payment of compensation is completed in full before eviction; and (e) social services/public amenities that are affected are replaced. Compensation payable for loss of temporary or permanent property was agreed between DWASA and the project affected people (PAP). DWASA was asked by IDA to confirm that arrangements for payment of compensation meet these criteria. The confirmation was received from DWASA. In addition, DWASA retained a local consultant to assist in resettlement activities, and in payment of compensation. DND CANAL 7. Raw water from the intake to the treatment plant will flow through the DND canal owned by the Bangladesh Water Development Board (BWDB). This canal was built in the 1970's for irrigation purposes, but is now being used less for irrigation, because of the expansion of the city, which has resulted in agricultural land being converted to urban land. The canal is still owned Annex 9.1 Page 3 of 3 by BWDB, but DWASA has signed an agreement with BWDB to use the canal to convey raw water to the treatment plant site. There were about 180 temporary wooden and tin shacks (built on stilts) along the canal, mainly traders, illegally sited on BWDB land. On the banks of the canal, there were about 90 washing sites, also illegally built on BWDB land. During appraisal, a quick survey showed that half of the shacks were empty. 8. To protect the quality of the raw water and prevent pollution, these shacks were removed and a fence was built on both sides of the canal. This did not result in permanent loss of income for the traders since they have relocated to a market nearby recently built by Dhaka City Corporation. However, provision was made in the project for assistance with this relocation, and compensation for temporary loss of income for the traders. This was paid through a nominal lump-sum amount. 9. The fence along the canal has resulted in loss of access to the washing sites and present unauthorized extraction for domestic and in some cases, commercial use. Included in the project is a provision of the construction of new washing points away from the canal, using groundwater (i.e. handpumps). This is being done with consultation with local communities, and DWASA has been asked to prepare a plan involving these communities, on the location of these handpumps. The impact will be positive in that the communities will have access to cleaner water. 10. Based on this position, no full resettlement action plan is warranted for these reasons: (a) no loss of land is involved along the DND canal since the land is owned by BWDB and the traders are on the land illegally; (b) the relocation will be in the same community, and will involve shifting the shacks some yards away; Prior to negotiations DWASA confirmed arrangements for the monetary compensation to be paid to the evicted traders, the modalities, and the basis for the compensation. Annex 9.2 Page 1 of 2 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Procurement ArranRements Procurement Method Proiect Works ICB NCB Other NBF Total Civil Works a. Intake Civil Works 2.1 - - - 2.1 (2.1) - - - (2.1) b. DND Canal Rehab _ _ 0.7 - 0.7 c. Treatment Plant Site Rehab - - 2.3 - 2.3 d. Culvert from DND to Site 3.8 - - - 3.8 (3.8) - - - (3.8) e. Treatment Plant 23.0 - - - 23.0 (23.0) - - - (23.0) f. Ancillary Structures 2.6 - - - 2.6 (2.6) _- - (2.6) g. Primary Transmission 21.1 - - - 21.1 (14.8) - - - (14.8) h. Secondary Transmmission 5.4 - - - 5.4 (3.6) - - - (3.6) i. Distribution Sys Rehab 10.2 - - - 10.2 (6.8) _- - (6.8) J. Exp of Service Conn - 2.8 - - 2.8 - (2.5) - - (2.5) k. Dev of Sewerage/San - 5.0 - - 5.0 - (5.0) - - (5.0) Goods and Equipment a. Intake and Pump equip 1.6 - - - 1.6 (0.9) - - - (0.9) b. Electro-mechanical - - - 53.7 53.7 c. Miscellaneous Equipment 1.5 0.2 - - 1.7 (1.0) (0.2) _ - (1.2) Annex 9.2 Page 2 of 2 Procurement Method Proiect Works ICB NCB Other NBF Total Consultancy Services a. Water Resources Management - - - 1.3 1.3 Study - - - - b. Management Operational - - 4.0 - 4.0 (Twinning) Program - (4.0) - (4.0) c. Contracting out of DWASA - - 0.8 - 0.8 Services - (0.8) - (0.8) d. Training - - 1.1 - 1.1 - (1.1) _ (1.1) e. Management Support - - 0.9 _ 0.9 (Senior Contract Staff) - (0.9) - (0.9) f. Project Preparation - - 0.1 - 0.1 - (o0.1) - (0.1) g. Construction Supervision - - 6.2 - 6.2 - (6.2) - (6.2) h. Tariff Implementation - - 0.1 - 0.1 _ (0.1) - (0.1) i. Preparation for Concession - - 0.8 - 0.8 (0.8) - (0.8) Other Land Acquisition - - - 24.5 24.5 Total 71.3 8.0 17.0 79.5 175.8 (58.6) (7.7) (14.0) (0.0) (80.3) Fourth Dhaka Water Supply Project Project Implementation Schedule 1995 1 1996 1 1997 1998 1999 2000 1 ID TaskName Q1|Q2|Q3 Q4| Q1IQ2IQ3|Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 |Q1 02 Q3 Q4 Q1 Q2|Q3|Q4|Q I Land Purchase 2 Culvert, DND Canal 3 Treatment Plant & Associated Works I; 4 Intake Sarulia O' 5 Preparation of Bid Documents 6 IDA Review and Approval I 7 Preparation of Prequalification Docume I 8 IDA Approval of Prequalification 9 Invitation of Prequalification 10 Prequalification Evaluation 11 Issue Bid Documents 12 Submission of Bids . 13 Evaluation 14 Award of Contract 15 Start of Task 6/16 16 Implementation - _ 17 Canal Rehabilitation and Site Development 18 Culvert from DND Canal . 19 Prepare Bid Documents 20 IDA Review and Approval 21 Prequalification P 1 Task _Summary _Rolled Up Progress > Project FOURTH DWASA PROJECT ~x Date: Mon 11/iB/96 Progqress Rolled Up Tasko. Milestone *Rolled Up Milestone 0 s Page 1 Fourth Dhaka Water Supply Project Project Implementation Schedule 1995 1996 1997 1998 1999 2000 ID TaskName Q1|Q20Q3 Q4OQ1IQ2Q3Q4 QQ2Q3IQ4Q1|Q2|Q3|Q4|Q10Q2|Q3|O41Q1|Q2|Q3|4O4Q1 22 IDA Approval of Prequalification 23 Invitation of Prequalification 24 Prequalification Evaluation 25 Invitation of Bids 26 Bid Evaluation 27 Award of Contract 28 Start of Task 6/25 29 Execution and ImplementationExecu 30 Treatment Plant 31 Evaluation of EM Bids 32 Award of EM contract 33 Preparation of CW Designs 34 Preparation of CW Bid documents 35 Prequalification Documents - I 36 IDA Review and Approval I 37 Invitation of Prequalification* 38 Prequalification Evaluation 39 Invitation to Bid 40 Bid Evaluation 41 Award of Contract : 42 Start of Task * 10/16 m X x Task Summary Rolled Up Progress 1'0 Project: FOURTH DWASA PROJECT o .o Date: Mon 11/18/96 Progress Rolled UpTask Milestone *Rolled Up Milestone 0 v Page 2 Fourth Dhaka Water Suppiy Project Project Implementation Schedule 1995 1996 1997 1998 1999 2000 ID Task Name Q31 | Q32 I Q3 I Q4 Q1| Q2 0Q3 Q4 1 Q2 0 03 | Q4 01 I Q2 0 Q3 Q4 Q1 Q2 Q3 |Q4 ~Q1 43 Implementation 44 Ancillary Structures i_ 45 Appointment of consultant I 46 Preparation of Bidding Documents 47 Preparation of Preq. Documents 48 IDA Review of PQ and Bid Documents : 49 Invitation of Prequalification 50 Prequalification Evaluation 51 Invitation of Bids 52 Bid Evaluation 53 Award of contract : 54 Start of Task 6/27 55 Implementation .i_ 56 Primary and Secondary Transmission O 57 Preparation of Bid Documents 58 Preparation of Preq. Documents 59 IDA Review of Preq and Bid Documents 60 Invitation of Prequalification 61 Prequalification Evaluation 62 Invitation of Bids 63 Award of Contract m Task Summary Rolled Up Progress_ o_ _ _ 0* Project: FOURTH DWASA PROJECT ProgresswRolled Upag3 Date: Mon 11/18196PrgesRldUpTk Milestone *Rolled Up Milestone Page 3 Fourth Dhaka Water Supply Project Project Implementation Schedule 1995 1996 1 1997 1998 1999 2000 ID TaskName 01 02 Q3 04 Q1 Q2 Q3 Q4 Q1 02 Q3 Q4 Q1 Q2 Q3 Q4 01 02 03 Q4 Q1 Q2 Q3 0Q4 0 1 64 Start of Task 8/29 65 Implementation __. 66 Distribution System Rehabilitation 67 Leak Detection Program 68 Start of Task 69 Implementation of First Phase Program 70 Second & Third Phase Program 71 Preparation of TORtLOI for 2nd & 3 72 Preparation of Draft Contract & Sh 73 Invitation of Bids 74 Award of Contract 75 Start of Task 3/25 76 Implementation of 2nd & 3rd Phase 77 System Rehabilitation 78 Start of Task 79 Implementation of First Year Program 80 Implementation of Second Year Progra - 81 Implementation of Third Year Program - 82 Implementation of Fourth Year Programm - 83 Implementation of Fifth Year Program 84 Tubewell Regeneration _ Task Summary _ Rolled Up Progress _ x Project: FOURTH DWASA PROJECT o. Date Mon 11118t96 Progress Rolled Up Task - w Milestone Rolled Up Milestone Page 4 Fourth Dhaka Water Supply Project Project Implementation Schedule 1995 | 1996 1997 1998 I 999 | 2000 ID Task Name Q10Q20Q3 Q4IQl |Q2Q030 Q4|01 |Q2 Q3 0Q4 Q1|Q2 030Q4 Q1Q2 Q3 Q4Q Q2 3Q4Q1 85 Preparation of Four Year Program . 86 Start of Program | * 1/24 87 Implementation 88 Expansion of Service Connections 89 Tertiary distribution & House connections 90 Implementation of First Year Program - 91 Implementation of Second Year Progra 92 Implementation of Third Year Program - 93 Implementation of Fourth Year Program 94 Crash Meter Installation Program 96 Preparation of Service Contract 96 Invitation of Offers 97 Award of Contract 98 Start of Program 99 Implementation 100 Development of Sewerage /Sanitation 101 Feasibility Study _________ 102 Preparation of TORILOI 103 Preparation of Draft ContracUShortlist 104 Invitation to Bid 105 Evaluation of Bids Task Summary Rolkd Up Progress_ Project: FOURTH DWASA PROJECT v Date: Mon 11118/96 Progress Rollbd Up Taskc. Milestone *Rolled Up Milestone 0 t Page 5 Fourth Dhaka Water Supply Project Project Implementation Schedule 1995 JI 9o 1997 1998 [ 1999 2000 ID TaskName 01 0Q2 0 Q3 04 | Q1 I Q2 I Q3 04 Q1 0 Q2 0 Q3 0 Q4 0 1 02 03 04[ 01 0 02 0 Q3 1 Q01 Q2 03 Q4 01 106 Award of Contract i 107 Start of Study 108 Implementation of Study 109 Physdcal Works/Sewerage Rehab/Latrlnes - 110 Start of Works *7/1 111 Implbmentatlon U 112 Institutional Strengthening L I _ I 113 Water Resources Management study y | 114 Preparation of TOR/LOI0 115 Preparation of Draft Contract/Shortlist 116 Invitation to Bid 117 Evaluation of Bids 118 Award of Contract 119 Start of Study 120 Implementation I I 121 Management Support(Twlnning) Program 122 Preparation of TOR/LO.1 123 Preparation of Draft Contract/Shortlist i 124 Invitation to Bid 126 Evaluation of Bids 126 Award of Contract Task Sumr Role Up Prgrs X Project FOURTH DWASA PROJECT v Date: Mon 11/18/96 Progress Rolled Up Tasko. Milestone *Rolled Up Milestone Page 6 Fourth Dhaka Water Supply Project Project Implementation Schedule 1995 1996 1997 1998 1999 2000 ID Task Name Q1 |0Q2 0 Q3 |0Q4 Q1 LQ2 | Q3 Q4j Q1 0 Q2 |0Q3 0 Q4 Q1 0 Q2 Q3 Q4 Q03 Q2 | Q3 Q4 Q1 Q2 Q3 Q4 Ql 127 Implementation Diagnostic Phase 128 Start of Program * 1/1 129 Implementation: 2nd Phase ._._| 130 Contracting out DWASA Services . . . - - 131 Preparation of Service Contract 132 Invitation of Offers 133 Award of contract 134 Start of Program * 12127 135 Implementation .H 136 Training . . i I . 137 Preparation of Program 138 Implementation I ' 139 Management Support (Snr. Contract Staff : I . 140 Preparation of Incentives Program 141 Appointment of Senior Staff 142 Implementation of Incentive System 143 Technical Assistance 144 Equipment 145 Needs Assessment 146 Procurement 147 Project Preparation (Ancilary Works, Ordi Proect FORT DWSA ROJCT Task Summary _Rolled Up Progress 0 Date: Mon 11/18/96 Progress Rolled Up Taskage 7 Milestone *Rolled Up Milestone ot Page 7 Fourth Dhaka Water Supply Project Project Implementation Schedule 1995 1996 1 1997 I 9§8 I 999 2000 ID Task Name Q1 Q2 Q3 | Q4 |Q1Q2|Q31Q4 I Ql I Q2 I Q3 I Q4 I Q1 Q2 I Q3 I Q4 I Q1 Q2 Q3 Q4 Q1 Q2 I Q3 I Q4 |Q1 148 Ordinance Preparation 149 Design of Ancillary Works 150 Construction Supervision & Network Ana 161 Preparation of TOR/LOI 152 Preparation of Draft Contrac/Shortlist 153 Invitation to bid 154 Evaluation of Bids 155 Award of Contract 156 Start of Supervision 3/20 157 Implementation __: 158 Strategy Study for Private participation _ . .~~~~~~~~~~~~~~~~~~Y 159 Terms of reference 160 Invitations to Tender 161 Award of contact 162 Commencement of Study 5/27 163 Strategy Study - 164 Implementation . 165 Implementation of Tariff Study - 166 Project Processing 167 Negotiations 168 Board Presentation _ Task Summary _Rolled Up Progress OD X Project: FOURTH DWASA PROJECT o vo Date: Mon 11/18/96 Progress Rolled Up Task geh W Milestone *Rolled Up Milestone 0 ~ Page 8 Fourth Dhaka Water Supply Prject Project Implenentation Schedule 1995 1996 1997 1998 1999 2000 ID TaskName Q1 02 03 [04 0Q1 2Q30401 Q2 I Q3 04 Qi Q2 Q3 Q4 Q1 02 03 0Q4 Qi 02 Q3 04il 169 Effectiveness *3/19 l * X Project: FOURTH DWASA PROJECT %0 Date: Mon 11118/96 Progress Rolled Up Task 9 o Milestone *Rolled Up Milestone gx Page 9 Annex 9.4 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Estimated Disbursement Schedule IDA Fiscal Disbursement Cumulative Bank Year Per Period Disbursement Profile US$ Million US$ Million Z Z FY97 December 31, 1996 - - - June 30, 1997 1.5 1.5 2 3 FY98 December 31, 1997 7.7 9.2 11 3 June 30, 1998 7.7 16.9 21 6 FY99 December 31, 1998 10.8 27.7 34 10 June 30, 1999 10.6 38.3 48 18 FYOO December 31, 1999 11.7 50.0 62 26 June 30, 2000 10.5 60.5 75 38 FY01 December 31, 2000 8.2 68.7 86 46 June 30, 2001 5.4 74.1 92 58 FY02 December 31, 2001 4.5 78.6 98 70 June 30, 2002 1.7 80.3 100 78 FY03 December 31, 2002 - - - 86 June 30, 2003 - - - 94 FY04 December 31, 2003 - - - 96 June 30, 2004 - - - 98 FY05 December 31, 2004 - - - 100 Annex 9.5 Page 1 of 2 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Indicative Supervision Mission Schedule 1. Bank Input to Key Activities Bank input to supervision is expected to require about 95 staff weeks. Supervision by IDA would be co-ordinated with the French Trade Commission, and will involve review of implementation progress, procurement actions, achievement of agreed institutional reform targets, and progress reports. 2. Borrower's Contribution to Supervision DWASA will be responsible for project monitoring, implementation and co- ordination of activities. The Project Implementation Unit (headed by a Project Director) will oversee all contracts, will be the focal liaison unit of supervision missions and will be responsible for providing information required by all mi.iiions. The Project Director will attend all briefing and supervision mission wrap-up meetings. 3. Supervision Input The indicative staff supervision input to key activities is given in the table below: Approximate Skills Staff Input Date Activity Required (Staff Weeksi 1. 01/97 Project Launch Workshop TM, SE, PS, ES, 12 Start of Project P0, RS 2. 05/97 Initial Review of Progress TM, SE, ES, IS, 10 in Implementation 3. 10/97 Project Supervision with TM, SE, ES, IS, 8 focus on Sanitation P0 Program, Water Resources Study, and Twinning Program 4. 03/98 Project Supervision TM, SE, PS 8 5. 09/98 Mid-Term Review of all TM, SE, IS, PS, ES, 12 Project Components TRG, P0 Annex 9.5 Page 2 of 2 6. 02/99 Project Supervision TM, SE, PS, PO 6 7. 07/99 Project Supervision TM, SE, PS, PO 6 8. 01/00 Project Supervision TM, SE, PO 6 9. 07/00 Project Supervision TM, SE, PO 6 10. 01/01 Project Supervision TM, SE, PO, WS 6 11. 06/01 Project Supervision TM, SE, PO 6 12. 12/01 Project Supervision and TM, SE, PO, ES 6 ICR TM - Task Manager (Financial Analyst) SE - Sanitary Engineer PS - Procurement Specialist ES - Environmental Specialist PO - Program Officer (Resident Mission) RS - Resettlement Specialist IS - Institutional Specialist TRG - Training Specialist WS - Urban Water Supply Engineer Annex 9.6 Page 1 of 3 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Benchmarks for Assessing Progress at Mid-term Review INTRODUCTION 1. A mid-term review of the project would be undertaken mid-way through project implementation, but in any case, no later than December 1998 to assess project management, implementation status, progress against agreed performance indicators, including privatization activities. The following benchmarks will be used to assess progress at the mid-term review:- PROJECT IMPLEMENTATION 2. Treatment Plant and Associated Works: The following targets should have been achieved: a. at least 40% of the construction of the treatment plant, including the culvert from the DND canal to the treatment plant site; b. at least 50Z of the construction of the intake and pump station at the Lakhya River; C. completion of ancillary works for the treatment plant; and d. at least 40Z of the implementation of the five year work program for the primary and secondary transmission mains installation. 3. Leak Detection and System Rehabilitation ProRrams: The following targets should have been achieved: a. completion of the first phase of the Leak Detection Program and commencement of the second phase; b. completion of the first second year program and completion of at least 60% of the second year programs for the system rehabilitation program; and c. completion of at least 30% of the tubewell regeneration program 4. Service Connections. Meter Installations and Sanitation: The following targets should have been achieved: a. completion of the first year program, and at least 40% of the second year program for the tertiary distribution and house connection; b. completion of the Crash Meter Installation program; and Annex 9.6 Page 2 of 3 c. completion of the feasibility study and master plan for sewerage and sanitation, and commencement of the physical work program; 5. Institutional Development Technical Assistance: The following targets and objectives should have been achieved: a. at least 50% of the work program on the Water Resources Management Study should have been completed; b. the diagnostic phase of the Twinning Program should have been completed, and the second phase should have started; and c'.> the strategy study should be complete, and the implementation of recommended actions for the sector reform and mobilization of private finance should have started. 6. Other Technical Assistance: The following targets should have been achieved: a. completion of implementation of the revised tariff structure; and b. preparation of a training needs assessment and incentive system for DWASA staff. OPERATIONAL AND FINANCIAL PERFORMANCE 7. Op,erational Tartets and Indicators: The following operational targets and indicators will be achieved: a. achievement of a meter coverage level of about 95Z; b. reduction of unaccounted for water to at most 39Z; c. increase the number of connections to at least 187,000; d. enhance the staff productivity level to about 17 staff per 1000 connections; and e. improve the average well productivity to about 4.0 million liters per day. 8. Financial Ratios and Leverage Indicators: The following rations and indicators will be achieved: a. a working ratio and operating ratio of 0.6 and 0.8 respectively; b. a receivables to monthly billing ratio of about three months; c. a contribution to investment of about 27Z; d. a revenue to collection efficiency of above 100Z; Annex 9.6 Page 3 of 3 e. debt service coverage of about 0.&; f. a debt to equity ratio of about 32%; and g. a current ratio of no more than 6.6. 9. These benchmarks have been based on the agreed implementation schedule and the performance and efficiency targets which are part of DWASA's Performance Agreement with the Government. These benchmarks will also be the basis of the terms of reference for IDA's mid-term review mission. BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT OWASA - Current Organization CHAIRMAN Member Mem ber Memberl Administration JEngireerhll Flnance Secreaay Chlof Engineer Commercial Manager | Deputy Deputy ~~~~Superintending SuperintendnSudtndg Executive SecrutarynSecretarErEglnesr Suelntending Engilneer (GtiIf Chief E ngeer Pecroneltammo Construcon Plnig&Engineer Plant/ Revenue Accounts a PerBoaned Servacen & MODS EtpfetOfficer Officer Preveton Board Sefvlces ~Development einMilraiePeeto sads/w51853a o o li - BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT OWASA - Proposed Organization I oard of Dirct I .Managng Direcbor comWv SecretS4 DWrmManv De taneging D gpna Managera Flnm & Adminlerallon Tachion Pkrpentl & Develpment Maienanc . '\~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- r l l . .cer m m sad&w51653b o Annex 11.1 Page 1 of 4 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Assumptions to the Financial Proiections 1. Basic Data and Assumptions (i) Population Growth Rate: The current estimated population growth rate of Dhaka City is about 4.0Z. It is assumed that this growth rate will continue for some time, but will decline to about 3.7% from 1997 to the year 2,001. (ii) New Connections: In FY95, Dhaka WASA provided nearly 11,107 new connections. Because of current limitations in water supply availability, it is not expected that this will increase significantly until after the new treatment plant is completed. It has therefore been assumed that the number of new connections will increase by 2Z between FY96 to FY98, and will increase by 5% annually from FY98 to FYOO, and 3% by the year 2001, at which the new capacity would be almost fully utilized. (iii) New Hydrants: The number of new hydrants per annum is expected to increase by the population growth rate through the project period. Hydrants will continue to be installed in slum and low income areas. (iv) Sewerage Connections: Currently, DWASA has about 45,466 connections. In the absence of a sewerage development program in the project, it is assumed that the growth in sewerage connections will be similar to the population growth rate. (v) Total Population Supplied with Piped Water: This is assumed to grow from the current 65% of the population in the DWASA service area to about 76% by the year 2001. This growth is a factor of combination in the growth of the population and installation of new connections. - (vi) Total Population Supplied through Hydrants: Currently, it is estimated that about 3.8% of the population is supplied through hydrants. This is expected to grow to 4.1% by the year 2001. (vii) Consumption per capita per day (lpcd): This is an estimate, based on past consumption patterns, as assessed in previous studies, and the feasibility study of the project. It is assumed that this will grow by 1% between FY97 up to FY99, and will remain constant after 1999, due to rationing and lack of water as growing per capita consumption cannot be fully sustained. Annex 11.1 Page 2 of 4 (viii) Production Capacity: The current production capacity is 192 IMGD, equivalent to 70,080 million gallons per year (MGY). to 101,313 MGY (277 IMGD) in FY99, when the new treatment plant is completed. (ix) Actual Production: Based on previous performance, this is assumed to increase by 3% up to 1998. Production increases by 15% in FY99 and 10% in the Year 2000 and 3% in the Year 2001. This increase in production would utilize available production capacity by the year 2001. (x) Unaccounted for Water: Currently, the level of unaccounted for water is estimated to be about 49Z. It is assumed that this will decline by about 3% annually to about 30% by the year 2001 due to the leak detection and control program, and the crash meter installation program to be implemented under the project. (xi) Available Sales: This represents the amount of water actually billed, i.e. DWASA's production less unaccounted-for-water. The quantity of water billed is less than the actual consumption, because of commercial and administrative losses, or water that is used but not billed. (xii) Tariff Increases: Between FY96 to FY00, the tariff increases reflect required tariff levels to meet agreed revenue and operating ratios targets, to cover all costs of operations and debt service charges within four years. 2. Actual and Proiected Income Statements (i) Consumption: Based on past experience, it is assumed that 88% of the water is consumed by domestic users, while 12% is used commercially. Revenue from commercial consumers is, however higher(about 30%) because of the higher tariffs for commercial consumers. These assumptions are maintained in the projections. (ii) Sewerage Revenue: Sewerage is charged at 100% of the water bill. In the past, sewerage revenue has been about 51% of water revenue. This assumption is maintained in the projections. (iii) Other operating revenue: This includes revenues like meter charges, connection fees, etc. (iv) Power: Based on increases in power costs already experienced in FY95, it is expected that power costs in FY96 and FY97 will increase by about 7%. Power costs will continue to increase because of increased abstraction costs as a result of the lowering of the ground table. Total cost increases Vill be 32% once the new treatment plant has been installed.' This is expected to level off to about 15% per annum by FY2000 (see table 5). Annex 11.1 Page 3 of 4 (v) Chemicals: Assumed to increase by 7% from FY96 and thereafter. These costs are assumed to increase by 23% in FY98 to reflect the increased chemical costs of the new treatment plant. (vi) Repairs and Maintenance: These are assumed to increase by 15% beginning in FY96. (vii) Salaries and WaRes: These are assumed to increase by 15% beginning FY96. (viii) Other Expenses: These are assumed to increase by 8% beginning in FY96. (ix) Insurance: These are assumed to increase by 3% beginning in FY96. (x) Provision for Doubtful Debt: This is assumed to be 5% of total operating revenue. (xi) Depreciation: The depreciation rates for the new assets are assumed to be: 2% for Intake, Pump Station, Culvert and the Water Treatment Plant; 5% for ancillary structures; 3% for the Primary and Secondary Distribution Systems Network and 20% for motor vehicles. (xii) Interest: Has been calculated on the following basis. 3% for the First IDA Credit, 7.0% for the Second IDA Credit, 11.5% for the Third IDA Credit, and 7.5% for the Fourth IDA Credit. In addition, DWASA has incurred two ADB loans whose interest charges are 7.0% and 12.5%. The French Assistance will be passed on to DWASA at the same terms as the IDA credit. (xiii) Payment to the Exchequer: A mandatory payment to the Government by all public corporation. It is assumed that this will be maintained at Taka 1 million. This payment represent dividends for the Government's equity investment in DWASA. 3. Source and Uses of Funds - (i) Government Equity and Foreign Grants: It is assumed that GOB's contribution (equivalent to 35.8% of the total project cost) will be passed on to DWASA as equity. (ii) Other grants: These represent GOB budget allocations to finance DWASA's other project expenditures in flood drainage services. Based on the agreement between DWASA and GOB, it is assumed that GOB would allocate about 75% of the cost of these expenditures. (iii) Japanese Grant: This will finance the Water Resources Management Study. Annex 11.1 Page 4 of 4 (iv) IDA Loans (Third Proiect): These represent amounts disbursed in FY93 and FY94. The project closed in June 1994. (v) IDA Loans (Fourth Project): These represent disbursements for the project expenditure, equivalent to about 46% of the total project cost. (vi) Other Loans (Foreign): These represent disbursement of ADB loans under the First Drainage and Flood Protection Projects. (vii) Debt Repayment: It is assumed that IDA and ADB and the French Government loans are repaid in twenty five years from the date of disbursement, including five years of grace. (viii) Other Capital Expenditures: This represents capital expenditures for works financed by DWASA, the Government, and bilateral donors, and includes drainage works, sewerage and selected plant rehabilitation, and other fixed assets. (ix) Investments: No new investments in fixed deposits are anticipated during the project period. It is expected that there will be a reduction of existing investments, as funds are used to meet debt service arrears under the First, Second and Third IDA credits. This is reflected in a reduction in accumulated cash position, whose balances include investments in fixed deposits. 4. Balance Sheet (i) Gross Fixed Assets: It is assumed that 70% of the fixed assets investments in any year are treated as capital works-in-progress and then transferred to fixed assets in the next year. 30% is transferred to fixed assets in the same year. (ii) Intangible Assets: These represent goodwill and other intangible assets. (iii) Net Accounts Receivables: This has been assumed to gradually decline to three months of total operating revenue by 1998. (iv) Stores and Inventory: It is assumed that there will be a reduction in stores and inventory between FY96 and FY97 because of the sale and disposal of obsolete and unused stores. From FY98, stores and inventories are assumed to increase by 3% per annum. (v) Other current Assets: Assumed to increase by 1% per annum. (vi) Accounts Payable: Assumed to be three months of power and chemical costs. Annex 11.2 Table I DANOLADEWH FOURTH DHAKA WATER SUPPLY PROJECT BASIC DATA AND ASSUMPTIONS yer ending June 0 low low 1964 1NS IBM 1667 1166 1s6 2000 2D00 I - I I Prli- d I POPULATION(OO) 0.991.1 7,206.6 7,64. 7,077.9 8,3060 68,646 6,96.4 9,297.2 69,41.2 9,691111 DWASA ServIc Aea 6,0160 6,21L. 1,427.6 S664.0 6,673.6 6,67.1 6,62.7 6,6666 6,760.2 7,060.11 Populatlon Growth PAN 4.62 4.6% 4.5% 4.1% 4.1% 3% 2.% &% 67% sr rv PIPED WATER SUPPLY New Conneotr 664 1067 10,0 11,107 11,=o 11,66s 11,767 12.677 12.661 1.36111 Total Connectins 119,763 160.486 141223 162,436 16376 176,321 167,108 160.466 212,410 226,61 Supplied with pipd WeJfr Percentage SuppNed 66.3% 61.7% 66.6% 64.6% 67.6% 61.1% 71.2% 73.0% 74.7% 76*14 Total Population ('0O) 2,674.2 6,217.8 6,461,6 3,716.1 3,976.6 4,237.3 4,604.2 4,7637 6,076.1 6377 HYDRANT SUPPEY New Hydrants 0 0 20 21 22 22 23 24 26 201 Total Hydrants 1,60 I,' 1,66 1,660 1,701 1,724 1,747 1,771 1,737 1,62f Supplied through Hydra-tf Percentage SuppIed .7% 3.7% 3.6% .38% .09% .6% 4.0% 4.0% 4.1% 4.1%1 Total Population (000) 261.3 2760 26.8 604.4 621.0 337.2 664.4 372.6 301.9 412.11 Population per oonnect_n 24.63 24.67 24.62 24.S9 24.27 24.17 24.07 2066 2AU. 26.6 Population per Hydrant 169.4 16 174.1 161.2 166.6 166.6 202.6 210.4 216.1 226.;! SEWERAGE CONNECTIONS 66,66 39,412 41,601 43,608 41,408 47,612 49,680 61,666 4,216 36s,66 CONSUMPTION Piped Waler Consumption per eaptdap (iped) 90.9 01.6 2.7 66.7 66.L 69.4 102.6 106.4 1066 107.1i Total Consumption O) 50.4 *4.9 70.6 78L6 64.6 62S 101.S 110.8 116.8 127.' Hydrants: Consumption per cepiteldsy (Ipod) 7rh6 76J 77.3 71.0 00.4 62.6 66.6 87.8 88.7 U9JI Total Coneumpton (MCQ) 4.6 4.0 4.0 5.2 6.7 .1 6.6 7.2 7.6 S. TOTAL WATER CONSUMPFION (AY) Piped Water 21,607.6 26017.6 26,773.6 27,1S1.L 60,762.0 33,77.3 66,073.0 40,410.3 43,356.6 46,362Z0 Hydrants 1,A7.6 1,676. 1,790.0 1,90.7 2,009.7 2,23S.0 2,424.8 2,826.7 2,780.0 2,1904I TOTAL ANNUAL CONSMLAPTION (May) 2,276. 26,76.0 27,56.7 20,89.2 32 S1.7 36,016.2 39,402.7 43,0791t 46,142.6 49,34.4 AVERAGE PER CAPITA .O) 6.7 *0.6 01.6 62. 9LS 90.1 101.1 104.1 1062 106,4J PRODUCTION Production CapAt (M(OY) 60,156.0 62,217.1 06,676.7 70,060.0 71,06t.0 71,065.0 71,06L.0 101,61&3 101,313,3 101,316.1 Actual ProducoIn ("Y) 4",2u.6 64,100.1 67,260.0 66,046 60,716.3 62,66. 64,412.9 74,074.8 79,260.0 61,667.1. Unaccounted dor Wr &L0% 6ta0% 41.1% 41.0% 46.0% 42.0% 36.0% 66.0% 260% 60.0'14 Avalable or Sale 21,266.6 26,431.6 29,414.2 60,662.4 33,3664 36,271.3 36,291.0 47,407.0 66,104.2 67,146.1. TAFMFFS Donestic (per 1000 al 12.62 14.40 166 18.64 16.4 16.69 18.96 16.96 18.96 18.60 Commercial (per 1000 9a 40.70 46o.o 61.4 11.48 61.48 66.00 1.70 61.70 61.70 61.70 Tariff Increase 0.0% 15.0% 10.0% 0.0% 0.0% 7.0% 120% 0.0% 0.0% 0.04b Annox 1 1. Table BANGLADESlH FOURTH CIIAKAWATER SUPPLY PROJECT CTUAL AND POJECTED INCOME STATEMENTS yew ondlng June30 1902 196 1994 196 19" 1907 1W6 19w 2000 2001 Production Capa le(Mhy o0,166s. 621267.1 1 6,97,s7 70,080.0 71,O68.O 71,06O. 71,065.0 101,313.1 101,213.3 101.t13.3 Actual P.oduotb nMVY 48,23e.0 14,109.1 57,230.0 68,241.9 60,718.3 62,33.6 64,4129 74,074.8 79,260.0 81,637.8 Unaccounted for lar e.0* 660* 41.6* 41.0* 48.0* 42.0* 29.0* 36.0* 33.0* 10.0% Available for Bab (MG3Y) 31,26.6 21,431.3 23,416.2 30,U624 33,393.4 36,271.3 32,291.9 47,407.9 83,104.2 57,146.5 Domosric Consumptbon (6IQ) 19,864.6 23,770.3 27,U6.2 286974.1 29,368.2 31,918.6 34,876.6 41,718.9 46,731.7 60,2u6.9 Commercial Consumptin (MOY) 1,679.2 1660.9 1,331.1 3,676.1 4,007.2 4,362.6 4,716.0 5681.9 6,372.5 0,867.0 RWiENUE ('000) Dou.netIc 24t,076 322,157 421,616 427,210 406,413 840,910 656,26o 791,626 se1,96 964 414 Cb.nrmrcla 64,267 73,172 76,239 169,364 206,2961 239,763 290,896 360,92 8930,186 423 063 310,641 s9329 498,604 tt61678 671,711 760,67 947,166 1,142,60 1,260,126 1,377,667 8awvrejmi ReVenue 183,061 222265 297,640 341,648 377,643 438.902 a2,eo 642,4W9 719,99 774,482 Other Operating Rewnue 186,26 41,439 37,226 29,6e0 32,366 36,270 36,444 41,904 4,6,761 49,787 TOTAl. OPEFATIN REVENUE 470,060 669024 821,676 112,906 1,061,711 1,264,644 1,816,116 1,827,213 2,046.800 2,201,636 DIFiECT EXPENSES 0ooo) toer 196,113 266810 26.6689 634,688 366,901 406,392 426,404 617,193 68,1t76 641,U4 Chemicals 10,416 11,944 14,226 18,863 16,633 16,227 36,839 51,644 60,517 67,144 RepaMs and Malntiarnc 61,252 26,961 60,A26 38,262 41,049 47,798 90,601 119,047 140,266 163.jw Direci Salarle and sM 44",16 48,111 72840 63,421 91,934 110,324 126,873 146,904 167,769 12D,67 Other E.pen.we 49,966 8e,681 7e,116 6,72 90,426 97,660 106,472 113,911 123,024 132,10 Total Direct Expenroo 330,772 403,099 401.739 662,677 61J,169 e60,396 781,090 947,690 1,078,770 11,1196,20 ADMINISTRATION EXPENSES Saries 36.267 47,067 70,967 61,612 1,1616 107,#91 124,121 142,739 164,160 ¶68,72 Other Expenses 7,206 8,420 12,740 14,014 16,136 16,346 17,664 19,06 20,692 22,:i39 Insurance 6e 96 12s 126 130 134 136 142 141 161 Provision for Doubtful Debt 2t,170 30,879 39,717 49,648 64,066 62,742 76,906 91,361 102,276 110,112 Total Administrative Expenses 66,740 66,661 123,647 148,396 163,206 187,164 217,619 263,306 267,183 321,:!64 Total Workfng Expenee 397,812 489,760 618,266 696275 776,374 687,662 1,006,909 1,2oo,90 1,368,934 1,620,c74 Income before Depreciation 61,516 166,284 206,293 264,631 308,327 387,292 612,207 e2e,306 679,666 1 6e1,72 Depreciation 118,701 117,927 14O,669 128,303 162,145 167,604 223,003 22,878 22,710 236,c64 Operati,r; Profit (24,163 51,337 86,644 16,362 166,190 196,69 269,204 403,426 462,1686 448,696 Add: Other Income 74,414 67,641 32,666 6,219 W8e84 34,661 36,263 326,98i6 66,677 t7,410 Incom befor Interest 40,281 116s,68 66,192 201,647 187,076 234,260 324,467 439,368 488,613 413,1 8 Interest 6,706 107,794 166,114 164,140 164,913 230,160 327,187 404,196 426,961 442,8FS Met Profit 4,676 11,091 (7,923) 6 7,407 23164 (9300) (2,700) 38,190 6t3,6;72 40,810 Payment to the Exchequer 0 0 1,000 1,00 1,000 1,000 1,000 1,000 1,000 1,0J10 Net Earnings 4,876 11,091 ("6,922) 6407 21,164 (6,900) (3,700) 64,190 6211672 39,Zt0 Ann*x 11.2 Tabbe3 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT ACTUAL AND PPRJECTED SOURCES AND USES OF FUNDS STATEMENTS yer ending June 30 1992 1993 1964 1366 1998 1967 1@66 1960 2000 2001 t~~~~~~~~ Foete^ 1-d -- SOURCES OF FUNDS p000) Inoorn/Loes) trorn Operadtion 4,676 11,0@1 ([8,92) 386407 21,164 (660 (3,700) 34,190 e2,M2 S9,M Depreciation 115,701 106,336 140,Ng 128,303 162,146 187,604 223,003 222,078 228,710 236,1614 AdMuetmrntn 0 11,861 0 0 0 0 0 0 0 0 Interes Expense 0 0 0 0 0 0 0 0 0 0 Total Funds from Operations 120,276 129,018 71,748 160,710 173,30t 180,874 219,302 267,088 28@,282 276,294 EQUITY AND GRANTS Govornment(IDAProIt) 169,200 *0.360 0 144,707 8,4086 6t,807 364,867 116,032 103,686 26,383 Governmont(Other) 0 0 860,406 861,364 471,221 430,406 387,368 426.101 611,321 6614, ?1 Japanese Grant 0 0 0 0 9,476 12,672 11,607 9,963 6,917 1,574 Other Granla (ADS) 1,260,280 174,264 301,400 447,700 6,000 0 0 0 0 0 Total Equity/Grants 1,44,480 114,814 J@1,806 1,123,771 1,107,10@ 841,868 744,829 862,067 022,104 691,474 LONG TERM DEST Government 2h,976 0 0 0 0 0 0 0 0 0 IDALoane(ThirdProJeot) 1t7,919 200,841 228,102 0 0 0 0 0 0 0 IDA Loans (Fourth Project) 0 0 0 36,044 701,067 843,866 768,736 332,986 294,462 64,43 French Loan 0 0 0 7,410 360,662 406,336 336,086 64,004 31,941 0 Other (Foreign: AD) 168,9S6 27,700 49,400 44,600 14,000 0 0 0 0 0 Total Long-Term Debt 373,629 226,641 278,002 67,964 1,076,806 1,24@,224 1,121,667 666,662 S26,3S9 i4,443 Tota Inflow of Funds 1,943,646 1,022,176 1,241,666 1,674,464 2,36CM 2,271,4 2,0U,528 1,196,147 1,267,776 1,021,412 APPLICATION OF FUNDS infras. Improvement Proj.(AD8) 17,600 44,200 70,800 44,200 0 0 0 0 0 0 Intagr. Flood Proj. (ADO) 0 112,000 260,000 446,000 210,000 0 0 0 0 0 Other Capital Expenditure 1,047,664 a60,632 821,470 86ii,331 603,396 453,066 407,7U2 448,627 636,263 3 ,, oS Fourth IDA Project 0 0 0 186,800 1,424,300 1,684,600 1,468,600 816,000 436,300 61,400 Third IDA Project 276,741 66,048 0 0 0 0 0 0 0 0 Debt Repayment 46,000 41,000 63,6 60,307 80,060 74.161 77,336 79,860 64,204 137,1170 Interest Payment 18,000 21,000 0 0 0 0 0 0 0 0 Inveetmenta 101,162 0 0 0 0 0 0 0 0 0 Other 30,464 l6,102 0 0 0 0 0 0 0 0 Working Capital Chanee (82,610) (1,946) (126,720) (32,366) (76,161) (80,369) 37,196 26,218 (36,364) (86,(40) Total Uses of Funds 1,461,161 1,066,966 1,170,446 1,270,261 2,660,84 2,122,740 1,691,667 1.071,661 1,028,373 8e3,c42 Not Cash Positon 462,4a4 (43,76) 62,106 104,163 116,032 146,743 96,941 124,666 211,406 1t6,t70 Aocumulated Cah Positon 674,968 631,194 66,W302 1,067,48i6 1,218,4il7 1,401,229 1,486,171 1,619,768 1,831,172 1,068,841 Annex 11.2 Table 4 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT ACTUAL AND PROJECTED BALANCE SHEETS yar ending June30 1902 1003 1904 1996 1066 1907 1066 1906 2000 2001 I Actud 1 -I Projected Gross Fixd Assets 3,606,428 3,894,t48 4,984,618 6,047,760 7,715,789 9,643,490 11,367,314 12,576,806 13,390,964 14,066,820 lose: Depreciation 1,159,666 1,266,001 1,400,670 1,632,973 1,686,118 1,872,721 2,096,724 2,318,602 2,646,312 2,751,376 Net Fixed Assets 2,448,76M 2,826,647 3,677,948 4,614,787 6,030,671 7,670,776 9,271,600 10,268,203 10,546,t42 11,276,444 Intan gible Assets 2,394,916 2,750,493 2,750,493 2,750,493 2,750,493 2,760,493 2,750,493 2,750,493 2,760,483 2,760,893 Work-in-Progres 66,438 434,479 316,787 483,977 1,033,644 1,313,893 1,367,131 1,121,167 1,284,561 1,300,i88 Deferred Expenses 263,813 302,487 302,4e7 302,487 302,447 302,467 302,467 302,487 302,4t7 302, 87 Investments 0 0 0 0 0 0 0 0 0 0 TOTAL LONG-TERM ASSETS 5,190,920 5,116,088 6,947,89t 8,061,724 10,117,271 12,037,631 13,801,861 14,432,330 15,183,163 16,726,192 CURHENT ASSETS Net Accounts Receivables 278,414 379,643 365,398 404,662 348,287 304,883 369,918 448,327 490,066 538,1112 Stores and Inventories 424,604 226,023 213,772 192,396 196,167 204,112 210,236 216,542 223,036 229,'29 Advances for Material 136,570 152,501 154,789 157,110 150,447 161,888 164,267 168,761 169,262 171,,91 Other Current Assets 32,687 59,386 59,948 60,548 61,154 61,766 62,383 83,007 63,637 64, i73 Cash Balance 974,066 931,194 903,302 1,097,445 1,262,487 1,401,220 1,496,171 1,619,766 1,831,172 1,989,141 Total Current Assets 1,547,431 1,747,716 1,787,209 1,912,060 2,017,5680 2,133,858 2,301,903 2,512,393 2,787,088 2,993,147 TOTAL ASSETS 7,038,360 7,863,802 8,734,906 9,973,764 12,134,837 14,171,490 15,093,874 16,944,723 17,970,208 16,721,f39 ECUITY AND LIABILmES Government Equity 1,320,916 1,411,286 2,001,671 2,877,742 3,500,375 4,338,287 6,071,209 5,613,342 6,228,530 8,918,e30 Reserves 261,610 296,816 296,815 2906,816 290,816 206,816 296,816 296,816 296,616 296,116 Other Grants and Funds 3,286,273 3,659,637 4,160,937 4,04,637 4,884,113 4,806,76 4,908,393 4,918,348 4,926,263 4,926,e37 Asset Revaluation RFscrve 427,020 427,020 427,020 427,020 427,020 427,020 427,020 427,020 427,020 427,020 Accumulated (Deftlit/Proflt 681 11,772 (67,151) (20,744) 420 (6,510) (10,210) 23,980 86,562 126,782 Total Not Worth 5,266,600 6,006,410 6,620,292 7,989,470 9,117,743 9,902,396 10,603,228 11,279,503 11,964.179 12.606,083 LONG TERM LOANS Government 0 0 0 0 0 0 0 0 0 0 IDA Loans 1,698,768 1,727,666 1,622,314 1,06t,061 2,226,949 2,900,124 3,709,346 3,906,823 4,183,961 4,126,903 Other Loans (ADB) 0 27,700 77,100 121,600 138,600 136,160 133,338 129,040 122,120 116,330 OtherLoans(French) 0 0 0 7,410 386,9062 772,300 1,108,284 1,162,266 1,193,839 1,175,471 Total Long-Term Loans 1,696,788 1,765,298 1,690,414 1,725,081 2,731,510 3,908,584 4,950,946 5,268,131 6,500,320 6,416,7T4 CURRENT LIABILITIES Current Portion of L-T Debt 0 0 62,307 609,060 74,181 77,336 79,806 54,204 137,979 200,410 Accounte Payable 89,446 69,413 78,190 116,464 127,301 140,124 153,431 187,683 213,738 234,0 t6 Other Current Lisbiet 8,666 42,961 c65,60 74,641 84,132 06,048 116,266 136,202 163,902 176,116 Total Current LiablIie 156,102 102,004 20tt,199 250,263 285,584 312,608 348,602 407,089 606,709 609,6e2 TOTAL EOUITYILABILITIES 7,036,360 7,683,602 6,734,905 9,973,764 12,134,837 14,171,480 16,993,674 16,944,723 17,070,208 18,721,529 DEBTIEOUITY RATIO 23.20% 22.61% 19.93% 17.76% 23.05% 26.19% 31.66% 31.79% 31.48% 29.91% AnneK 11.2 Tabe 6 BANGLADESH FOURTH DHAKIA WATER SUPPLY PROJECT SCHEDULE OF OPERATING COSTS 1992 1993 1904 1996 1996 1997 1996 1990 2000 2001 QUANTITY OF WATER PRODUCED 48,250 64,109 67,230 66,947 60,715 62,637 64,413 74,075 79,280 81,638 of which: Tubewoel 46,326 81,946 64,941 66,689 68,287 60,036 61,630 6,111667 80,841 50,004 NarayanganjTreatment Plant 966 1,082 1,148 1,179 1,214 1,261 1,127 1,296 1,387 1,420 ChandnigatTrgatmentPlant 966 1,0S2 1,146 1,179 1,214 1,261 1,127 1,296 1,367 1,429 Saidabad Treatment Piant 0 0 0 0 0 0 1o,s26 14,618 1,846 18,777 UNIT COSTS OF WATER PRODUCED TUBEWELLS Electricity (raka/oOO al 4.10 4.86 8.30 8.7? 6.16 6.61 7.07 7.87 8.10 8.87 Chemicals (Taka/ooo gal) 0.16 0.18 0.17 0.19 0.20 0.21 0.22 0.23 0.24 0.25 Maintenance 0.18 0.18 0.21 0.24 0.27 0.31 0.36 0.42 0.44 0.66 NARAYANGA4J TREATMENT PLANT Electricity (rakOWo gal 242 2.66 2.88t 3.00 3.16 3.31 3.47 3.6 3.83 4.02 Chemicals (TaklOoo gal) 1.94 1.94 2.18 2.29 2.41 2.63 2.66 2.79 2.93 3.07 Maintenance 0.36 0.36 0.41 0.48 0.88 0.63 0.72 0.83 0.96 1.10 CHANDNIGAT TREATMENT PLANT Electricity (Taka/000 gal) 3.14 330 3.70 3.88 4.07 4.26 4.4t 4.72 4.96 6.20 Chemical (Tak.j0V0 gl) 1.68 1.66 1.87 1.96 2.06 2.16 2.27 2.39 2.61 2.63 Maintenance 0.24 0.24 0.28 0.32 0.37 0.42 0.48 0.66 0.64 0.73 SAIDABAC TREATMENT PLANT Eleciriity (Taka000 gl) 0.00 3.90 4.10 4.30 4.51 4.74 4.90 S.23 6.4C 6.76 Chemicals (Taka/000 ga 0.00 1.61 1.99 1.78 1.U6 1.96 2.06 2.16 2.27 2.38 Maintenanoe 0.00 2.U1 3.02 3118 3.33 3.80 3.68 3a. 4.08 4.26 OPERATING COSTS TUHEWELLS Electricity 189,747 262,179 291,060 326,773 360,136 396,906 364,825 428,924 484,686 819,990 Chemicals 6,949 8,048 9,68e 10,68 11,426 12,367 11,137 12,889 14,268 16,012 Maintenanco 8,330 9,360 11,373 13,471 16,986 18,900 18,666 23,803 28,682 13,040 NARAYANGAII TREATMENT PLANT Electriity 2,336 2,760 3,2t0 3,136 3,634 4,136 3,913 4,726 8,300 5,741 Chemicals 1,874 2,000 2,601 2,704 2,926 3,163 2,903 3,614 4,061 4,302 Maintenance 347 390 474 661 S66 788 816 1,079 1,328 1,673 CHANDNIGAT TREATMENT PLANT Eloctricity 3,031 3,671 4,230 4,675 4,948 5,361 8064 6,118 6,870 7,430 Chemicals 1t,3 1,796 2,140 2,314 2,603 2,707 2,6S1 3,093 3,476 3,766 Maintenance 232 260 316 374 443 628 644 720 8U 1,049 SAIDABAD TREATMENT PLANT Electricity (raka/ooo gal) 0 0 0 0 0 0 62,901 77,429 91,340 11t8,1t3 Chemicals (TakIoo galQ 0 0 0 0 0 0 21,848 31,977 37,723 '4,663 Maintenanco 0 0 0 0 0 0 30,068 67,178 67,461 11,86 TOTAL OPERATING COSTS ELECTPIJCTY 196,113 288,510 290,880 334,S13 368,90e 406,392 426,404 517,103 868,176 61,364 CHEMICALS 10,416 11,944 14,226 1,Ui3 16,A8I3 18,227 36,6830 81,644 60,617 t7,tt44 MAINTENANCE 8,016 9,990 12,143 14,407 17,068 20,213 86,062 82,670 9.,317 1t1,668 OTHER REPAIRS & MAINTENANCE 22,344 15,964 18,136 20,866 23,964 27,682 31,719 3S,477 411,48 48,241 Annex 11.3 Page 1 of 2 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Water and Sewer Tariffs (Rates effective as of October 1994) Current Tariffs Structure 1. Category Wise Water Tariff Cateaorv Unit Taka per Unit Residential and Community (Metered) '000 Gallons 15.84 '000 Liters 3.49 Commercial and Office (Metered) '000 Gallons 51.48 '000 Liters 11.35 Industrial (Metered) '000 Gallons 51.48 '000 Liters 11.35 2. Non-metered Connections (a) Residential and Community: 22.62% annual valuation of holding/annum. (b) Commercial and Office: 22.62% of annual valuation of holding/annum. (c) Industrial: 22.62% of annual valuation of holding/annum. Note: Sewer rate is equal to water rate for all water/sewer connected holdings. 3. Non-Connected Holdings Sewer not connected but sewer line within 30 meter of holding: 5.85% of annual valuation of holding per annum. 4. Construction Period Rates (Taka per month) These rates apply to buildings that are still under construction. Connection Size Domestic Rate Commercial Rate 0.75" 442.75 1,265.00 1" 759.00 2,277.00 1.5" 1,518.00 4,554.00 2" 3,162.50 9,487.00 Note: Minimum rate for both water/sewer connections: Tk 16.45/month Annex 11.3 Page 2 of 2 5. Service Connection Fee Water Sewer Diameter Meter Fee Connection Fee Diameter Residential Commercial 0.75" 968.00 300.00 4" 200.00 250.00 1" 2,150.00 1,000.00 6" 500.00 500.00 1.5" 6,350.00 3,500.00 8" 1000.00 1000.00 2" 6,350.00 3,500.00 ProDosed Tariff Structure - From 0 to 17.5 m 3 per month Taka 3.00 per '000 liters - Additional consumption between 17.5m3 to 27.5m3 per month Taka 5.00 per '000 liters - Additional consumption between 27.5m3 to 37.5m3 per month Taka 7.00 per '000 liters - Additional consumption above 37.Sm3 Taka 9.00 per '000 liters - Industrial and commercial consumption Taka 11.00 per '000 liters Annex 12.1 Page 1 of 3 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Performance Indicators 1. A set of quantifiable and measurable Performance Indicators for DWASA will be used to monitor the achievements of the agreed targets. These targets will be defined in the Performance Agreement to be signed between DWASA and GOB. The objective of these indicators would be: (a) to supervise the management of DWASA by results, and on the basis of clearly defined and pre-established criteria rather than by sporadic intervention; (b) to clarify the perception of managers and GOB/MLG about DWASA objectives; and (c) to motivate DWASA managers by linking the relationship between actual and desired performance to a set of monetary and non-monetary incentives. 2. The targets include physical, technical and financial indicators and targets, and definitions are given below. Main Definitions used for the Performance Indicators I. Operational Indicators: (a) Service Coverage Level: This is the percentage of the population that is supplied with water either through house connections or standposts. DWASA will achieve the minimum agreed each year. (b) Meter Coverage Level: This is the percentage of the connections that are metered, to the total connections in DWASA's service area. DWASA will achieve the minimum percentage agreed each year. (c) Unaccounted for Water: This is the percentage of water lost in the system during production and distribution, to total water produced. This includes technical and non technical losses. DWASA will achieve the agreed level of lower. (d) No. of End-Year Connections: This is the absolute number of connections that DWASA would achieve each year. The number would be agreed annually, based on an assessment of water available. (e) Consumption (Liter/Capita/day): This measures service quality and provides information on adequacy of water production and ability to provide water on demand. Consumption levels will be agreed on the basis of water available. DWASA will achieve the minimum level agreed. (f) Average Hours of Service/Per Day: This will be reported on a monthly basis to determine service reliability. This will be agreed depending on the expected amount of water available, and DWASA will attempt to achieve 24 hour service. Annex 12.1 Page 2 of 3 (g) Production Capacity: Total amount of water produced as a percentage of installed capacity. DWASA will achieve the agreed capacity levels subject to capability od distribution network. II. Efficiency Indicators (a) Staff Productivity Index: The ratio measures the efficiency of DWASA as a utility by relating the number of staff with the number of connections. The ratio is calculated as staff per '000 connections. (b) Personnel Costs/Operational Costs Index: This measures the ratio of personnel costs to operational costs. This ratio will be reviewed simultaneously with the SPI above. DWASA will achieve a ratio of 22Z or less. (c) Unit Operational Cost: This is the unit operational cost per cubic meter (M3) of water produced. This includes only direct costs, e.g., electricity, chemicals maintenance. This ratio will be measured separately for deep tubewells and treatment plant costs. DWASA will achieve agreed unit costs or less. (d) Tube well Productivity: This will measure the productivity of DWASA tubewells, to be measured in million liters per day. DWASA will achieve agreed levels or more. III. Financial Indicators (a) Working Ratio: The ratio of operating costs to operating revenues. Operating costs exclude depreciation and interest payments. Operating revenues include revenues from water and sewerage connection fees, well licensing and reconnection fees. The ratio should be below. (b) Operating Ratio: The ratio of operating costs to operating revenues. Operating costs is the ratio includes all expenses, together with depreciation. (c) Accounts Receivables/Monthly Billing: Expressed in month equivalent of sales, this is the ratio between the year-end accounts receivables and operating revenues, multiplied by 12. DWASA will achieve a receivables/monthly billing ratio of three months by FY97. (d) Percentage Contribution to Investment: The proportion of capital expenditures financed by the net internal cash generation. Net internal cash generation is defined as operating profit plus depreciation. DWASA will maintain the ratios agreed annually,and contribute no less than 25Z to its investment program by FY98. Annex 12.1 Page 3 of 3 (e) Collection/Revenue/Efficiencv: This is the percentage of collections to total billed revenue. DWASA will achieve a minimum of 90x. IV. Leverage Indicators (a) Debt Service Coverage Ratio: This measures the extent to which internal cash generation covers total debt service. It is total internal cash generation (operating profit plus depreciation) divided by total debt service (interest and principal). DWASA will achieve the minimum or above the debt service coverage agreed with the Government annually. (b) Debt Equity Ratio: This is the total long term debt divided by the total long term debt and equity. DWASA will achieve agreed levels of D/E ratio or below. (c) Current Ratio: The level of current assets to current liabilities. DWASA will achieve agreed current ratio levels, or higher. Annex 12. 1 FOURT OIHA WATER SUPLY PROJECT Table 1 PEFFORMANO ANM M TOWR NI;t INIATOR8 yew ending * Junoao 10 194 196 tt 1907 1tt6 1W 2X0C 2(001 OPERATIONAL TARGETS Mtter Coverage Level 71.8% 73.0% 80.0% $5,0% 90.0% $LO% 36.0% 95.0% 6L.% Unnaccounted for Waler 33% 40% 43% 4% 42% 33% 30% 30% 30% End-Year Connocton 13t0,439 141,32 162,436 163.736 176,321 187,10t 133.418 212430 226,831 OPERATKONAL INDICATOFS Water Service Coverage Lewi 664% 67.0% 69.0% 71.5% 734% 76.2% 77.0% 78.7% 0.4% Consumption (titrslcaplWday) 31 92 #2 96 s6 101 104 106 106 Average houre of ervboeldey a a 10 13 1i 17 is 1s 1d Productlon Cepctiry 67% U 3% 34% 11% U% 31% 73% 76% 01% EFFICIENCY INDICATORS Staff Productivity Inedx (stff/000 oonn) 23 21 20 la 17 10 16 14 13 PersonneVOprating Cot Index 11.7% 13.0% 20.0% 20.4% 20.7% 20.4% 20.3% 20.8% S1.7% UnitOperatingCoeVDTW(Tk1m3) 6L13 5.4i .20 6."6 7.13 7.06 8L21 3.32 3.47 Unit Operating CoeVtSWTP CI/m3) 6.70 7.U5 7.t6 8.40 6.00 9.40 9.96 10.64 11.17 Avrg Welt Produ*lty (m eday) 2La 2.7 2.0 a8 4.0 4.0 4.0 4.0 4.0 FINANCIAL RATIOS Working Ratio 0.7 0.7 0.7 0.7 0.7 0.0 0.6 0.7 0.7 Operating Ratio 0.8 0.9 0.0 0.8 0.8 0.6 0.6 0.8 0.8 Pceivabtle Monthtly iNng 7.4 6.5 6.0 4.0 o 3.0 ao 6o 6.0 Contribution to Inveement 21.6% 33.2% 30.4% 156.% 10.4% 27.3% 36.0% 33.6% 117.3% Collction/fevenue Effalency IQ04% 6.0% 36.0% 36.0% 100.0% 100.0% 100.0% 100.0% 1111t.0% Tariff Incrare 16% 10% 0% 0% 7% 12A 0% 0% 0% LEVERAGE INDICATOF8 Debt Service Coveae 0.8 0.2 0.8 0.1 0.7 0.6 0.0 1.0 0.8 DebtlEqulty Ratio (%) 22.61% 10.33% 17.70% 23.06% 26.10% 31.86% 31.73% 31.40% 23.91% Current Ratio 17.1 6.7 7.4 7.1 0.6 6.6 6.2 6.6 4.9 Annex 13.1 Page 1 of 10 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Economic Analysis The economic analysis of the project was undertaken by considering the marginal costs of deep tubewells (DTW) and the surface water treatment plant (SWTP), to arrive at the economic least cost solution for the investment program. The paragraphs below describe the methodology used, and the underlying assumptions. The first section discusses the long run marginal cost and the least cost solution, while the second section discusses the costs and benefits of the recommended program. The analysis is based on a review of the feasibility study, complemented with information collected by IDA missions during appraisal. Marginal Cost and Least-Cost Solution 1. Given the nature of the proposed expansion program and the current conditions of water supply in Dhaka, it is necessary to analyze the comparative costs of water supplied by DTWs and SWTPs. According to the BCEOM Study, the cost of a DTW field (15 tubewells) producing 395 l/s (7.5 IMGD) is US$ 11.74 million, including land acquisition. Its maintenance cost is US$ 184,400 per year; and its operation cost (electricity, chlorine, labor) is US$ 378,500 per year.1 It produces up to 12.45 million m per year. However, its rate of production may decline due to the aggregate effect of ground water abstraction, or because it may affect the production of other DTWs, or because the development of other tubewells may affect it. According to DWASA officials, pumping costs for DTWs have increased due to lower water levels, and unscheduled repairs have also increased. In order to estimate unit costs, maintenance costs have been increased by 10% to reflect possible unscheduled repairs which have become frequent, and total output has been decreased by 10% to account for probable losses during repairs. The basic cost per m3 (i.e., without decline in production) is Tk 7.11 (Table 1). 2. These costs may be eompared with the cost per m3 of the proposed plant at Saidabad since all of its output will be taken up by the system once it-starts operating. According to the updated cost provided by DWASA and BCEOM, the capital cost of the Saidabad plant producing 2.63 m3/s is Tk 7.65 per m3; its operation and maintenance cost is Tk 2.34 per m3 for a total of Tk 9.99 (US$ 3 0.2498) per m 3. The above costs are based on estimated prices to be paid by DWASA for construction and operation of DTWs and the Saidabad SWTP. When these costs are adjusted for taxes and other transfers to reflect economic values, they decrease slightly to 6.12 Tk/m3 for water produced by DTWs without taking into 1 The original costs (BCEOM Study, Annex L) have been adjusted using an inflation rate of 5.22% for 1992-94 (from Consumer Price Index) and an exchange rate of 40 Tk/US$. Annex 13.1 Page 2 of 10 account the risks discussed below. The cost of the Saidabad SWTP decreases to 9.09 Tk/m3. These adjustments do not affect the comparison between these two alternatives.2 4. In order to properly compare these two alternatives, however, it -i-. necessary to take into consideration the probable decline in production given existing conditions of water levels. The probability of obtaining a reduced production increases as the water table declines. It has been observed that, for the study area, the rate of decline of the water table has been 0.8 m per year.3 This has resulted in an increase in the required depth of the upper well casings from 30 to 60 meters. Water level depths, which outside the city are adequate for the use of hand pumps (8 m), are now more than 20 m in the central areas of Dhaka (Motijheel, Old Dhaka, Gulshan). In some areas they have declined almost 20 m since 1965. According to an ADB report, further development of groundwater will require that: (1) most of the existing DWASA DTWs (200) and private (350) be reconstructed and reset at deeper pump settings; (2) adequate sites be found to construct additional DTWs. These effects would increase unit costs significantly. 5. Table 2 estimates unit costs for DTWs under different rates of decline. The cost per m3 of water produced by the SWTP (Tk 10) is equivalent to the production cost of DTWs at a 5% annual decline rate. This may be considered the marginal cost of potable water service in Dhaka, since DTWs cannot be built at the required rate in the short run and their expected decline rate may be higher than 5%. In fact, according to the Environmental Impact Assessment, further abstraction could be limited in some areas: "water supply can be provided from the present underground resources only until 1994/95 ... for a restricted area around Dhaka."4 Fifty additional DTWs would have to be built just to replace the proposed Saidabad I plant; construction of these tubewells in the short run could cause serious damage to the current system. It could require the replacement of most existing DTWs, both public and private. That is, an attempt to expand ground water production rapidly could result in massive expenditures to replace most tubewells. 2 Adjustments were made for taxes, which could be as high as 48% for some imported items, and the Standard Conversion Factor of 0.90 provided by the Bank. No adjustments were made for labor because, although abundant, most processes (especially in construction) are as labor intensive as possible and wages are considerably low, with the minimum wage at the equivalent of US$ 1.00 per day. 3 Seminar on Water Supply for Dhaka, July 1994. 4 BCEOM and EPC, Dhaka WASA IV and Saidabad Surface Water Treatment Plant, Environmental Impact Assessment, Draft Final Report. April 1994. Annex 13.1 Page 3 of 10 Table 1 - Dhaka Water SuppLy, Comparative costs of DTWs and the Saidabad I SWTP DTWs (1) 5Saidabad SWTP (1)_ Year Production | Costs tTk million) Production Costs (Tk million)_ (mittion m3P) l(million m3)l Investment 0 & M Investment1 I M 1 149.33 207.34 2 149.33 2438.28 3 11.52 40.62 2438.28 4 11.52 40.62 82.94 193.74 5 11.52 40.62 82.94 193.74 6 11.52 40.62 82.94 193.74 7 11.52 40.62 82.94 193.74 8 11.52 20.05 40.62 82.94 193.74 9 11.52 40.62 82.94 193.74 10 11.52 40.62 82.94 193.74 11 11.52 40.62 82.94 193.74 12 11.52 40.62 82.94 193.74 13 11.52 40.62 82.94 193.74 14 11.52 40.62 82.94 193.74 15 11.52 20.05 40.62 82.94 193.74 16 11.52 40.62 82.94 193.74 17 11.52 213.57 40.62 82.94 193.74 18 11.52 40.62 82.94 193.74 19 11.52 40.62 82.94 193.74 20 11.52 40.62 82.94 193.74 21 11.52 8.16 40.62 82.94 193.74 22 11.52 20.05 40.62 82.94 193.74 23 11.52 40.62 82.94 193.74 24 11.52 40.62 82.94 193.74 25 11.52 40.62 82.94 193.74 26 11.52 40.62 82.94 193.74 27 11.52 40.62 82.94 193.74 28 11.52 40.62 82.94 193.74 29 11.52 20.05 40.62 82.94 193.74 30 11.52 40.62 82.94 193.74 31 11.52 -15.86 40.62 82.94 193.74 Present values 81.07 290.52 285.92 527.21 4035.52 1231.52 Marginal cost Tk/m3 3.58 3.53 7.65 - 2.34 Total marginal cost Tk/m3 7.11 9.99 Total marginal cost USS/m3 0.1778 0.2498 Sources: (1) Annex R. 6. Under these circumstances, a reasonable strategy is to build the proposed SWTP and meet remaining deficits with a cautious DTW expansion plan. The remaining question is whether the cost per m3 for surface water has been minimized. From the history of the attempts to develop surface water sources in Dhaka, it seems that considerable work has been done over the past 30 years to develop and evaluate alternatives which have been now narrowed down to the proposed plant. Any alternative previously studied has been considerably more expensive. At this time, the Saidabad plant is the only technically viable alternative whose costs can compete with those of DTWs. Annex 13.1 Page 4 of 10 Table 2 - DTWs marginal cost of production by rate of decline Annual rate of Cost Cost decline (%) Tk/m3 US$/m3 0 7.11 0.18 1.0 7.70 0.19 2.0 8.29 0.21 3.0 8.88 0.22 4.0 9.46 0.24 -- 5-.0 -10.04 0.25 6.0 10.62 0.27 7.0 11.19 0.28 8.0 11.75 0.29 9.0 12.31 0.31 10.0 12.86 0.32 Source: Table 5. Benefit Cost Analysis 7. In the previous section, it was shown that the best available alternative for expansion of the water supply capacity for the study area is a combination of the Saidabad plant and DTWs provided that the latter are developed taking into consideration possible water abstraction problems. The Saidabad plant should be started immediately due to the size of the projected deficit in the short run and the impossibility to fully substitute it by DTWs. In this section, the benefits and costs of this solution, included in the investment program, are calculated. The project is defined as all the activities in the first ?hase of the investment program required to increase gross capacity by 2.63 m Is and reduce losses from 34% to 20% in the next 10 years. Therefore, the project not only includes the construction of Saidabad I but the construction and rehabilitation of primary and secondary distribution lines and the improvement of DWASA's operating performance through technical assistance, including a leak detection program. 8. Benefits. The benefits of potable water consumption are measured by its value to consumers. This value is measured by the area under the demand curve. In the absence of demand studies for the particular case of Dhaka, the demand curve may be estimated by consumers willingness to pay as revealed by the maximum amount that consumers are willing to pay for water. As mentioned Annex 13.1 Page 5 of 10 previously, this is nearly 27 Tk/m3 or nearly 8 times the domestic tariff, not including time spent on procuring it. This is based on purchases of approximately 4 gallons for Tk 0.50. This is consistent with observations in many other countries where this figure may be as much as 50 times the average tariff. If consumers are willing to pay Tk 27 per m 3 for consumption at the level of 30 lpd, average annual consumption would be 59.45 million mi3. On the other extreme, if the price were close to zero, per capita consumption would be only limited by the amount of appliances and other uses by households,and it could be near 300 lpd. To many consumers with a household connection, the marginal cost of water is zero since many of them do not have metered connections or meters do not function. For these and other consumers for whom the water bill is a very small fraction of their income,5 consumption is only limited by the amount of requirements in their households. This "maximum" consumption was estimated at 595 million m 3 per year. Given these two points, the rest of the demand curve may be determined as long as its elasticity along its different segments is "reasonable." The demand curve, estimated under these conditions, is given by the following equation: Q - 595 - 19.835 P where Q measures demand in millions i3 per year and P is the price per m3. This function is described in Table 3. It should be noted that the equilibrium condition, Price - Marginal Cost, is achieved at Tk 10 per m3, where demand is 200 lpd and elasticity -0.50. The corresponding capacity would be available in 1998. 9. Annual gross benefits are measured by the area under the demand curve showing the increased supply from the Saidabad I plant and the reduction in losses made possible by the rehabilitation and improved operation of the network. As expected, for the current level of supply, consumers would -be willing to pay as much as Tk 15 per m3 . The current domestic tariff is Tk 3.49 3 per mi. At this tariff, consumers demand as much as 265 lpd, almost three times their current consumption (Table 3). Estimated benefits are shown in Table 4 and 5. s For example, consumers with an income of Tk 20,000 (US$ 500) per month who consume 60 m3 per month pay less than 1Z (Tk 197 or US$ 4.92) of their monthly income for water. Annex 13.1 Page 6 of 10 Table 3 - Dhaka, Description of the estimated demand function for water (Q=a+bP) Quantity Intercept SLope Price Consumption Price Required Required Q a b P Lpd Elasticity SuRply Capacity m`/yr Tk/m3 mn/s m3'/s 59.45 595 19.835 27 30.00 9.01 1.89 2.53 79.29 595 19.835 26 40.01 6.50 2.51 3.37 99.12 595 19.835 25 50.01 5.00 3.14 4.21 118.96 595 19.835 24 60.02 4.00 3.77 5.05 138.80 595 19.835 23 70.03 3.29 4.40 5.90 158.63 595 19.835 22 80.04 2.75 5.03 6.74 178.46 595 19.835 21 90.05 2.33 5.66 7.58 198.30 595 19.835 20 100.05 2.00 6.29 8.43 218.14 595 19.835 19 110.06 1.73 6.92 9.27 237.97 595 19.835 18 120.07 1.50 7.55 10.11 257.81 595 19.835 17 130.08 1.31 8.17 10.95 277.64 595 19.835 16 140.08 1.14 8.80 11.80 297.47 595 19.835 15 150.09 1.00 9.43 12.64 ** 317.31 595 19.835 14 160.10 0.88 10.06 13.48 337.15 595 19.835 13 170.11 0.76 10.69 14.33 356.98 595 19.835 12 180.12 0.67 11.32 15.17 376.82 595 19.835 11 190.12 0.58 11.95 16.01 396.65 595 19.835 10 200.13 0.50 12.58 16.85 * 416.49 595 19.835 9 210.14 0.43 13.21 17.70 436.32 595 19.835 8 220.15 0.36 13.84 18.54 456.16 595 19.835 7 230.15 0.30 14.46 19.38 475.99 595 19.835 6 240.16 0.25 15.09 20.23 495.83 595 19.835 5 250.17 0.20 15.72 21.07 515.66 595 19.835 4 260.18 0.15 16.35 21.91 525.78 595 19.835 3.49 265.28 0.13 16.67 22.34 535.50 595 19.835 3 270.19 0.11 16.98 22.75 555.33 595 19.835 2 280.19 0.07 17.61 23.60 575.17 595 19.835 1 290.20 0.03 18.24 24.44 595.00 595 19.835 0 300.21 0.00 18.87 25.28 ** Aprox. current consumption; * equilibrimn Level (Price = MarginaL Cost) 10. With the project, the volume of water supplied and demanded will be the equivalent of 12.58 m3Is and the equilibrium price would be Tk 10 per m3. Benefits are shown in Table 4 as the sum of "value of net capacity" (increase in consumption times price), since all production will be consumed when available, and consumer's surplus. These are then the gross benefits of the project per year; discounted at a 10% rate of return over 30 years, they amount to Tk 11,855.41 million (US$ 296.39 million). 11. Costs. Project costs include the construction, operation and maintenance of the Saidabad plant and the cost of improving the distribution network, including technical assistance, without which the benefits of the plant would not be fully realized. Investment costs are distributed over a seven year period. Annual costs include operation and maintenance. The present value of costs, at a 12% discount rate, is Tk 5995.63 million (US$ 149.89 million). For purposes of estimating economic costs, the value of the land for the Saidabad site was taken as 50% of its estimated price since the land is a vacant lot owned by DWASA most of which remains under water during the monsoon and no alternative use has been planned. Gross taxes on specific items were deducted from total costs and the Standard Conversion Factor of 0.90 was used to adjust local costs. Annex 13.1 Page 7 of 10 12. Economic Returns. Given the above costs and benefits, net benefits of the project amount to Tk 5859.78 million (US$ 146.49 million). The economic rate of return is 22.26%. As shown in Table 9, net benefits are almost equal to total costs which means that even if costs are increased by close to -100%, the project would still be economically feasible at a 12% discount rate. Moreover, if only 50% of the estimated benefits are obtained, the project is still feasible. 13. The main factor affecting project feasibility is the value of water but, as mentioned previously, the willingness to pay is substantial and the estimate used may be conservative given the water supply situation in Dhaka and its probable development in the coming years. It must be noted that population growth estimates may also be conservative. In sum, estimated benefits are substantial as expected in a large and growing city with a large fraction of low income population, low coverage and relatively low consumption due to supply restrictions. 14. It must be noted that the benefits come from both the increased-2ap*ity and the loss reduction activities. Capacity expansion by itself - that is, without reduction of losses - would be an economically marginal investment given the high value of water. Its net present value would be US$ 16.3 million (at a 12% discount rate) and its IRR, 16%. Although loss reduction activities by themselves are highly profitable in economic terms, with a net present value of US$ 38.47 and an IRR of 29.3% (see Table 5), by themselves they do not resolve the problem of rapidly growing deficits in any significant manner. Furthermore, even though the IRR is higher for the loss reduction program, the net present value (the first order condition in this case) of the overall project is more than six times greater. Annex 13.1 Page 8 of 10 TabLe 4 - Dhaka, Economic Costs and Benefits of the Water SuppLy Expansion Program Saidabad Increased VaLue of Consumer's Gross Net Year Capacity Losses net Price net surplus Benefits Costs Benefits M m3 (M) capacity Tk/m3 capacity M Tk N Tk M Tk M Tk Mm ?N Tk 1996 0 0.34 0.00 0 0.00 0.00 0.00 0 0 1997 0 0.34 4.15 16.99 70.48 0.43 70.92 2012.83 -1941.91 1998 0 0.33 8.71 16.76 145.96 1.91 147.87 1287.17 -1139.30 1999 0 0.32 13.07 16.54 216.07 4.30 220.37 1006.70 -786.33 2000 83 0.31 74.69 13.43 1003.18 140.63 1143.81 516.63 627.18 2001 83 0.30 79.88 13.17 1051.95 160.83 1212.77 306.27 906.50 2002 83 0.28 90.25 12.65 1141.34 205.30 1346.63 306.27 1040.36 2003 83 0.26 100.62 12.12 1219.88 255.19 1475.07 306.27 1168.80 2004 83 0.24 110.99 11.60 1287.59 310.50 1598.09 306.27 1291.82 2005 83 0.22 121.36 11.08 1344.45 371.24 1715.69 306.27 1409.42 2006 83 0.20 127.37 10.78 1372.46 408.95 1781.41 306.27 1475.14 2007 83 0.20 127.37 10.78 1372.46 408.95 1781.41 306.27- 1475.14 2008 83 0.20 127.37 10.78 1372.46 408.95 1781.41 306.27 1475.14 2009 83 0.20 127.37 10.78 1372.46 408.95 1781.41 306.27 1475.14 2010 83 0.20 127.37 10.78 1372.46 408.95 1781.41 306.27 1475.14 2011 83 0.20 127.37 10.78 1372.46 408.95 1781.41 306.27 1475.14 2012 83 0.20 127.37 10.78 1372.46 408.95 1781.41 306.27 1475.14 to 2032 83 0.20 127.37 10.78 1372.46 408.95 1781.41 306.27 1475.14 Present VaLues (12X discount rate) Million Tk N 11855.41 5995.63- - 5859.78 Present VaLues (12% discount rate) MiLLion USS 296.39 149.89 146.49 Internal Rate of return 22.26 N = miltion Annex 13.1 Page 9 of 10 Table 5 - Dhaka, Economic Costs and Benefits of Loss Reduction Activities Saidabad Increased Value of consumer's Gross Net Year Capacity Losses net Price net surplus Benefits Costs Benefits M mu (X) capacity Tk/m3 capacity N Tk M Tk N Tk N Tk Mm Nf MTk 1996 0 0.34 0.00 0 0.00 0.00 0.00 0 0) 1997 0 0.34 0.00 10.32 0.00 0.00 0.00 27.29 -27.29 1998 0 0.33 4.36 10.19 44.36 15.27 59.63 342.61 -282.98 1999 0 0.32 8.71 10.05 87.58 31.10 118.68 436.43 -317.7i 2000 0 0.31 13.07 9.92 129.64 47.52 177.16 348.53 -171.3i' 2001 0 0.30 17.42 9.79 170.56 64.50 235.07 350.50 -115.4'; 2002 0 0.28 26.13 9.53 248.96 100.20 349.16 253.09 96.07' 2003 0 0.26 34.84 9.26 322.77 138.19 460.95 144.45 316.5C 2004 0 0.24 43.55 9.00 391.98 178.47 570.45 65.33 505.13 2005 0 0.22 52.26 8.74 456.61 221.05 677.66 78.39 599.27' 2006 0 0.20 60.97 8.47 516.65 265.92 782.57 91.46 691.12 2007 0 0.20 60.97 8.47 516.65 265.92 782.57 91.46 691.12 2008 0 0.20 60.97 8.47 516.65 265.92 782.57 91.46 691.12 2009 0 0.20 60.97 8.47 516.65 265.92 782.57 91.46 691.12 2010 0 0.20 60.97 8.47 516.65 265.92 782.57 91.46- 691.1Z 2011 0 0.20 60.97 8.47 516.65 265.92 782.57 91.46 691.12 2012 0 0.20 60.97 8.47 516.65 265.92 782.57 91.46 691.12 a 2032 0 0.20 60.97 8.47 516.65 265.92 782.57 91.46 691.12 Present value (12% discount rate) Tk N 3479.56 1538.67 1940.89 Present value USS 86.99 38.47 48.52 IRR 29.28% M = million Tariffs and Affordability 15. As shown above, the marginal cost of water is nearly 9 Tk/m3 (US$ 0.22 per m3), not including the cost of sewerage. The industrial and commercial 3 tariff is already at Tk 11 per m . It is possible to design a tariff structure which would increase the tariff for those income groups which can easily afford an increase. The current tariff is almost 5% of monthly income for the lowest income level (Taka 1,440.00 per month) for a household consuming 20 m3 per month. However, family units at this income level would not have water service; instead, they make daily purchases in small amounts and pay up to Tk 0.50 for a four-gallon container. The feasibility study showed that low income families use on average 30 litres per capita per day, i.e., 6 m3 per month for a household with 6.5 members, or 1% of the minimum income. If the tariff is increased to 10 Tk/m3, the water bill would be 4% or less of income for all but those with an income under Tk 5000 per month. 16. Although in 1993-94 DWASA showed a surplus in its financial accounts, its allocation to maintenance and rehabilitation are in sharp contrast to its needs. Of the total Tk 854.3 million reported in revenue, only Tk 39.5 million were allocated to maintenance - mainly for emergency repairs - and practically nothing to rehabilitation. If adequate amounts were allocated for these activities, financial losses would be significant. Therefore, even if Annex 13.1 Page 10 of 10 tariffs are not increased substantially in the short run, as required by the marginal cost criterion, they will have to include more realistic levels of costs to finance adequate maintenance and rehabilitation. Conclusions 17. Dhaka's public water supply is relatively low; it provides only 136 lpd and, with estimated losses of 34%, average consumption from the DWASA system is only 90 lpd. Coverage is about 65% of the population, but there are more than 25 persons per connection. DWASA provides only a fraction of the requirements of the industrial, commercial and government sectors. Private operators supply most of their own requirements. DWASA's performance in production and demand management needs considerable improvement. The distribution network is in poor condition, and the quantity and quality of the service are deficient. Capacity will have to be expanded substantially in the near future to cope with a fast growing population, economic growth and a relatively low consumption currently. 18. One of the first priorities for the Government is to reorganize the water supply sector. This requires an adequate regulatory framework for DWASA as well as for private sector producers. It also requires an adequate demand management program for DWASA as the main supplier for residential users. The activities planned under the proposed Fourth Dhaka Water Supply Project, namely the construction of additional capacity, the rehabilitation of the distribution network and the improvement of DWASA's management will address the sector's basic problems. The economic analysis shows that investment in these activities will generate substantial returns, as expected in a situation where a large fraction of the population lack adequate water service and pay a high price for small volumes of water to satisfy their basic needs. The project as a whole has an internal rate of return of 22%. Annex-14.1 Page 1 of 8 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Summary of Prolect Environmental Impact Assessment Introduction 1. The Environmental Impact Assessment (EIA) of the Fourth Dhaka Water Supply Project presents the findings of an investigation undertaken on behalf of Dhaka Water Supply and Sewerage Authority (DWASA). The level of analysis performed was on the basis of the project being designated as Category B, as defined by the World Bank's Operational Manual 4.01. This category requires a lesser level of environmental investigation than for projects that are designated Category A, which requires full environmental assessments. 2. The assessment focused on the potential positive and negative impact of the proposed surface water treatment plant and related components on the environment and surrounding areas, and the likelihood of the existing environment affecting the operation of the proposed works. The purpose of the assessment was to ensure that the proposed project is environmentally sound, and to identify and determine mitigation measures that may be necessary to minimize or avoid negative environmental impact, and suggest modifications to the proposed project components that may be advisable to maximize environmental benefits. Organi z at ion 3. Although the project was determined to be in Category B, the assessment is organized in the format outlined for a full Category A EIA. This included an overview of the environment and current legislation, an assessment of potential impact, an analysis of the environmental impact of alternatives to the proposed project, development of a management action plan to mitigate negative impacts, and identification of institutional needs to implement environmental assessment recommendations. Findings 4. The Fourth DWASA Project marks the start of a major surface water development program for DWASA. By the year 2020, the intention is to have a capability of 200 IMGD. The EIA has focused in the first phase of this development program. A major long-term benefit of the project will be the provision of treated water to supplement groundwater abstraction and help reduce drawdown of the latter. However, the major long-term benefits are those connected with water quality; firstly, the chemical and other treatments will produce potable water in comparatively large volumes and, secondly, distribution of the treated water in the new water mains implemented during the project will make treated water available for the first time to about 500,000 consumers, with great amenity and public health benefits. The positive impacts will be strengthened by the concurrent program of leak Annex 14.1 Page 2 of 8 detection and rehabilitation which will enable greater water pressures to be maintained in the system and help prevent contamination from external sources. 5. The third benefit is that in taking steps to preserve the quality of its raw water supplies, DWASA will be improving the physical environment along the DND Canal (for the Saidabad Development) and in the rivers providing the raw water. This automatically implies measures to protect river catchments from pollution, and the EIA makes clear recommendations for inter- agency co-operation and the development of legal and other controls for water protection 6. This development of controls is essential, since maintenance of raw water quality cannot be guaranteed in the future: what few planning regulations exit can be easily flouted, monitoring and compliance checking are minimal or non-existent, and there is no effective legislation under which persistent offenders can be prosecuted for environmental pollution. The passing of the 1994 Environmental Pollution legislation and supporting Environmental Quality Standards is vital, and DWASA should press strongly for adoption. Strengthening of the planning procedures is also urgently needed and, as a first step, compulsory notification of the Department of Environment (DOE) is recommended for all new industries or other developments likely to make harmful discharges. This_ should be a mandatory part of new industry registration (where tax and other concessions are incentives to register) and the DOE, in consultation with DWASA and planning authorities, such as RAJUK, should ensure that harmful discharges are banned from rivers and related catchment areas used as surface water treatment plant raw water sources. 7. This vulnerability of the river waters to major urban, industrial, and agricultural development is the major negative impact of external environmental influence on the project; minor effects can also be expected from small developments along rivers. 8. The project itself is expected to have five specially negative impacts: (a) the production of increased volumes of wastewater concomitant with the extra supply of water; (b) the restriction of certain urban and industrial enterprises in locations which have otherwise favorable development characteristics, such as communication, etc.; and (c) three specific effects of the Saidabad development on the DND Canal and at the SWTP site: (i) the removal and relocation of washing points; (ii) the removal and relocation of shacks at present used for small businesses; and (iii) the production of large volumes of sludge. Annex 14.1 Page 3 of 8 9. In parts of Dhaka City, notably the Old City and in the west of the area to be supplied by DWASA IV, the sewerage system is in poor condition, inadequate or non-existent. Mitigation measures will be a part of the forthcoming Sanitation and Sewerage Study under the project. Siting of industries is already a part of the zoning policies of the RAJUK which is in the process of preparing the Dhaka Metropolitan Development Plan; DWASA needs to liaise closely with this planning process. For the actions on the DND Canal, a specific mitigation plan is proposed, to be undertaken by the development contractor to fence the area along the DND Canal, in consultation with DWASA. 10. Mitigation of the possible impacts of sludge production will be achieved by the use of settling lagoons and the periodic disposal of the sludge in sanitary landfill operations. 11. Minor impacts, such as possible accidental spillage of chemicals, will be mitigated by normal operating and safety procedures. 12. Finally, the investment in major surface water developments automatically means that DWASA must take a broader view of environmental developments for a wide area around Dhaka. It is recommended that DWASA set up an Environmental Cell, developed from its existing Quantity Control Department, to be a focus of environmental expertise and training within the Authority and to undertake the necessary environmental monitoring actions. Summary: Key Recommendations DWASA must take the initiatives above, and the following actions: Immediate Actions 1. Send an outline of the proposed surface water treatment plan developments to the main planning organizations, and restrictions required on the rivers to be used as raw water sources, especially Lakhya/Balu River. 2. Press for the rapid passing of the new environmental legislation, already within the Parliamentary system and the Gazetting of Environmental Quality Standards. Short-Term Actions 3. DWASA needs to put into place a short-term monitoring program under an overall Environmental Monitoring Plan, with the establishment of an Environmental Advisory Panel to advise on environmental problems. The DWASA water laboratory should be rehabilitated and upgraded to start a major program of water quality monitoring. Long-Term Actions 4. Formulation of an overall water resources development policy to cover both surface and groundwater developments. Annex 14.]1 Page 4 of 8 5. Continuing monitoring of groundwater and surface water quality and quantity and the effects on the environment. 6. Preparation of integrated plans for protection of raw water quality. Annex 14. 1 Page 5 of 8 T4bje A: Sumnary of Environmental Impacts of Construction and Operation of Surface Water Treatment Plant and Associated Works Components Positive Impact Negative Impact (A) Sarulia Intake, Road access to replace footpath to M.A. Satter School, Loss of small areas of foul ponds and of fish/washing pump site and local settlement and river foreshore. ponds. culven to DND Canal. No housing land acquisition needed. Need to provide alternative system for 3 house drain outfalls. Loss of small foreshore area. Short-term disruption from construction activities. (B) DND Canal (i) Fencing Protection of water quality for both the SWTP Social impacts: beneficiaries and users of DND Canal water. - Removal of about 180 shacks. Assistance with security of fish stocks. - Removal of 93 washing points (65 pucca, 37 katcha). Upgrading of pedestrian and vehicle crossings. - Closure of unauthorized water offtakes. Prevention of unauthorized water abstractions. Canal maintenance (removal of sludge and weed) slightly more difficult. Fence and canal maintenance and security costs. Minor inconvenience during construction. (ii) Canal Improved water flow and water quality; constant level. Deposition of river sediments; cleaning every 5 to 10 upgrading and years. operation Regular canal maintenance. (iii) Replacement Improved pedestrian and vehicular access from Area I Increased incentive for urbanization in Area I: of river to Dhaka-Demra-Narayanganj Road. deteriorating drainage/irrigation systems. crossing Clv) Cut-off drain Pollution from road prevented form entering canal. along road (v) Land Land belongs to BWDB; agreement signed for DWASA acquisition management. (vi) Cross dam Prevention of pollution form southern portion of canal. Penstock opening will allow pollution to pass from southern portion of canal. Cessation of water flow in southern section of canal: increased pollution risk. (C) Culvert from DND No additional land acquisition. Short-term disruption in Kajla during construction. Canal to Saidabad No relocation of existing structures needed. (D) Saidabad SWIP No land acquisition needed; no relocation of Minor compensation for part loss of fish ponds. and access road compensation for present housing. construction Short-term disruption form construction activities: Infill of septic ponds along access road. (i) Significant short-term noise and dust produced by transportation of machinery and materials (especially infill) to site, and construction activities for SWTP and access road. (ii) Increased congestion from construction traffic on local roads and Saidabad. Ciii) Loss of cultivation activities by DWASA staff at SWTP site. Annex 14. 1 Page 6 of 8 Components Positive Impact Negative Impact (E) Saidabad SWTP Production of treated water for large numbers of Minor increase in local road traffic (chemical supply Operation consumers in Dhaka. etc.). Disposal of sludge. Occasional noise of stand-by generator and (Stage 11 onwards) noise of mechanical de-watering machinery. Possible spills/discharges of chemicals (notably chlorine) and oils (e.g., stand-by generator and transformer oil). Possibility of other accidents during routine operation and maintenance (e.g., drowning, electrocution). (F) Water Distribution Distribution of treated water to water-short areas of Short-term disruption while mains are installed along System Dhaka City. city streets: noise, dust and increased traffic congestion. Increased flow in sewers may reduce septic condition and H,S generation. Increased volumes of waste water needing disposal; reduced septic conditions in sewers may allow growth Higher pressures will help to reduce contamination. of pathogenic organisms. Table B: Summary of Mitigation Proposals for Main Negative Impacts of Construction and Operation of Surface Water Treatment Plant and Associated Works Site and Impact Proposed Mitigation Possible Alternative to Avoid/Reduce Impact (A) Sarulia Intake, pump site and culvert to DND Canal (i) Loss of fish pond area Compensation. I (ii) Construction noise, dust and traffic Contractor to minimize by appropriate work program. (B) DND Canal (i) Removal of shacks Combination of relocation and compensation. Pipeline transmission of water to Saidabad: too costly. (ii) Removal of washing points Provision of alternative pump-fed washing areas, with suitable drainage measures. Leave on canal: raw water contamination. (iii) Closure of unauthorized water offtakes Leave on canal: reduced water volumes; demands from other users. (iv) Pollution from, and in, canal south of check dam (v) Extra wastewater in Area I Control volume by use of existing BWDB Katchpur pumps. Controlled land development: encroachment too rapid for In long-term, new facilities when DWASA takes over area. Rajuk/DCC to control. (vi) Sediment deposits and weed growth Regular de-silting and weed clearance. Dewatering basins at Saidabad: extra construction cost - desilting still needed. (C) Treatment and access road construction Ci) Removal of shacks along access road Relocation on adjacent empty ground and compensation. Alternative access road: too costly. (ii) Construction noise and dust Contractor to minimize by appropriate working methods. (iii) Traffic congestion during construction Contractor to restrict main trips on roads to off-peak periods. Alternative access: too costly. (D) Treatment Plant Operation (D (i) Increased road traffic No special measures _ 0 - Cii) Sludge disposal Dewatering and use in sanitary landfill Disposal to Khal: environmentally unacceptable. O-h 4- (iii) Noise Containment of machinery in buildings; muffling of stand-by geneator Site and Impact Proposed Mitigation Possible Alternative to Avoid/Reduce Impact (iv) Chemical spills and discharges Safe transport, handling and storage procedures. Concrete pads and containment barriers for storage tanks, to limit liquid and solid spills. Ventilators to disperse chlorine. Standard health and safety procedures during operation. (E) Water Distribution System (i) Increased waste watcr volumes Review and improvement of sewerage and sanitation provisions in Dhaka under DWASA IV studies and TA (ii) Increased traffic congestion and social Routes selected to minimize difficulties; contractor to adopt Alternative routes: increased costs, similar problems. disruption duiring construction appropriate working practices. rD coN O H~ Annex 15.1 Page 1 of 2 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECT Selected Documents and Data Available in the Project File 1. Acqua Consultants. Consumer Survey 1992-93, Final Report. December 1993. 2. ADB. Managing Water Resources to meet Mega City needs. A case study for Dhaka City. 3. Acqua Consultants. Consumer Survey 1992-93. List of Non-DWASA Deep tubewells. 4. Bangladesh Project Management Institute. DWASA Productivity Study. 1991. 5. BCEOM Consultants. Environmental Impact Assessment of the Fourth DWASA Project. April 1994. 6. BCEOM Consultants. Feasibility Study of the Fourth DWASA Project (3 volumes). May 1992. 7. BCEOM Consultants. Distribution System Analysis, May 1994. 8. CDM & EPC. Saidabad Site Feasibility Study. February 1992. 9. CDM, MMD, EPC. Water Treatment Plant at Demra and Other Works. 1990. 10. DWASA, BCEOM & EPC. Proceedings on Seminar on Water Supply for Dhaka and Saidabad Water Treatment Plant. July 7, 1994. 11. Fierro, Marco. Economic Analysis, September 1994. 12. EPC, MMD, CDM. Dhaka Region Groundwater and Subsidence Study. May 1991. 13. GKW Consultant. Leak Detection and Waste Prevention Program, 1992 (2 volumes). 14. Government of Bangladesh. Water Supply and Sewerage Ordinance 1963 and Amendments. 15. S.F. Ahmed & Co. Final Report on Verification of Consumer Survey 1992- 93. December 1993. 16. Solomon & Chidley. Analysis of Lakhya River Water/Benthos Samples at Proposed Demra Water Treatment Plant Site. May 1986. 17. UNICEF. The Status of Water and Sanitation Access in Urban Slums and Fringes in Bangladesh, Volume 1, Situation Analysis. Annex 15.1 Page 2 of 2 18. Assessment of Proposed Program for a Surface Water Supply Source for the City of Dhaka. August 1986. 19. Deep Aquifer Exploration Project, Bengal Basin, Bangladesh. 20. Dhaka Water Supply and Sewerage Authority Management Information Reports. 21. Van der Eb, Tariff Study for DWASA. December 1994. IBRD 27130 BANGLADESH FOURTH DHAKA WATER SUPPLY PROJECTr PROJEc1 P POPOEDOW DilUulitNd SYSTEM SAXOAAADWATERTREATMENTIPANT| v) ) MTAON AM RG%K, STATION ,EXSWTNG FACUlTIES: - RIARY TISMIK)TION UTIES - PM SEWERAGE URNS WHATED.UR SHA E3 B ,-IT~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I INDIA {Dhok? - ' KILOfMErERS Ai;- wI < E=,A(GNE\;Ao. .:AZF ,r ...... El \DV 20' 1 l - ~5Xg ...................................... ) = \ W \\ I v t95° X \ \ b * S r.t / R 1t~~~~a IMAGING Report No: 16144 BD Type: SAR