Document of The World Bank FOR OFFICIAL USE ONLY Report No. RES17220 INTERNATIONAL DEVELOPMENT ASSOCIATION RESTRUCTURING PAPER ON A PROPOSED RESTRUCTURING OF CAPACITY BUILDING FOR URBAN DEVELOPMENT PROJECT (P099979) TO THE REPUBLIC OF INDIA JUNE 19, 2015 Social, Urban, Rural and Resilience Global Practice South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April 17, 2015) Currency Unit = Indian Rupee Rs.1 = US$0.02 US$1 = Rs.62.29 FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CBUD Capacity Building For Urban Development CSP City Sanitation Plan CSU City Support Unit DEA Department of Economic Affairs DEAAS Double Entry Accrual Accounting System IA Implementing Agency MoHUPA Ministry of Housing and Urban Poverty Alleviation MoUD Ministry of Urban Development NRW Non-Revenue Water PDO Project Development Objectives ULB Urban Local Body ZCSUs Zonal and City Support Units Regional Vice President: Annette Dixon Country Director: Onno Ruhl Senior GP Director: Ede Jorge Ijjasz-Vasquez Practice Manager: Ming Zhang Task Team Leader: Vasudha Thawakar Page 2 of 16 CAPACITY BUILDING FOR URBAN DEVELOPMENT PROJECT (CBUD) (CREDIT 4997-IN) RESTRUCTURING PAPER CONTENTS Data Sheet ....................................................................................................................... 4 A. Summary of Proposed Changes ............................................................................... 5 B. Project Status ............................................................................................................. 5 C. Proposed Changes ..................................................................................................... 6 Annex I: Results Framework ...................................................................................... 11 Page 3 of 16 DATA SHEET India Capacity Building for Urban Development Project (P099979) SOUTH ASIA Social, Urban, Rural and Resilience Global Practice Report No: RES17220 Basic Information Project ID: P099979 Lending Instrument: Technical Assistance Loan Regional Vice President: Annette Dixon Original EA Category: Not Required (C) Country Director: Onno Ruhl Current EA Category: Not Required (C) Senior Global Practice Ede Jorge Ijjasz-Vasquez Original Approval Date: 21-Jul-2011 Director: Practice Ming Zhang Current Closing Date: 30-Jun-2016 Manager/Manager: Team Leader(s): Vasudha Thawakar Borrower: Department of Economic Affairs, Ministry of Finance, Government of India Responsible Agency: Ministry of Housing and Urban Poverty Alleviation, Ministry of Urban Development Restructuring Type Form Type: Full Restructuring Paper Decision Authority: Board Approval Restructuring Level: Level 1 Financing (as of 21-May-2015) Key Dates Approval Signing Effectiveness Original Revised Project Ln/Cr/TF Status Date Date Date Closing Date Closing Date P099979 IDA-49970 Effective 21-Jul-2011 08-Dec-2011 27-Jan-2012 30-Jun-2016 30-Jun-2016 Disbursements (in Millions) % Curre Cancelle Disburse Undisbu Project Ln/Cr/TF Status Original Revised Disburse ncy d d rsed d P099979 IDA-49970 Effective XDR 37.10 27.36 9.74 2.35 25.01 9 Page 4 of 16 Policy Waivers Does the project depart from the CAS/CPF in content or in other significant respects? Yes [ ] No [ X ] Does the project require any policy waiver(s)? Yes [ ] No [ X ] A. Summary of Proposed Changes The following changes are proposed: (i) change in the PDO; (ii) deletion of Component 2 (Implemented by MoHUPA) and transfer of Component 2 funds to Component 1 (implemented by MoUD); (iii) change in PDO level indicators; (iv) deletion of intermediate indicators related to Component 2 and addition of new intermediate level indicators; (v) addition of description of activities to be undertaken to support national urban programs under Component 1; and (vi) extension of the Credit closing date by two years to June 30, 2018. Change in Implementing Agency Yes [ X ] No [ ] Change in Project's Development Objectives Yes [ X ] No [ ] Change in Results Framework Yes [ X ] No [ ] Change in Safeguard Policies Triggered Yes [ ] No [ X ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ ] No [ X ] Change in Legal Covenants Yes [ X ] No [ ] Change in Loan Closing Date(s) Yes [ X ] No [ ] Cancellations Proposed Yes [ ] No [ X ] Change to Financing Plan Yes [ X ] No [ ] Change in Disbursement Arrangements Yes [ X ] No [ ] Reallocation between Disbursement Categories Yes [ ] No [ X ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ X ] No [ ] Change in Institutional Arrangements Yes [ X ] No [ ] Change in Financial Management Yes [ ] No [ X ] Change in Procurement Yes [ ] No [ X ] Change in Implementation Schedule Yes [ X ] No [ ] Other Change(s) Yes [ ] No [ X ] Appraisal Summary Change in Economic and Financial Analysis Yes [ ] No [ X ] Appraisal Summary Change in Technical Analysis Yes [ ] No [ X ] Appraisal Summary Change in Social Analysis Yes [ ] No [ X ] Appraisal Summary Change in Environmental Analysis Yes [ ] No [ X ] Appraisal Summary Change in Risk Assessment Yes [ X ] No [ ] B. Project Status Page 5 of 16 The Credit for the project was approved on June 21, 2011 and the Credit became effective on January 27, 2012. As of April 30, 2015 US$ 2.7 million (7% of the revised Credit) had disbursed from the Credit. The Project was restructured on December 19, 2013. Key changes included: (i) partial cancellation of US$15 million from the Credit; (ii) revision of the activities under Components 1 and 2; and (iii) corresponding revision of the project's results framework and disbursement schedule. Progress towards achieving the PDO and implementation progress are currently rated 'Unsatisfactory' and 'Unsatisfactory' respectively, as a result of the slow progress overall and lack of progress on activities related to urban poverty reduction. There are no overdue audit report or outstanding ineligible expenditure on the project. However, financial management has not been satisfactory: there have been delays in submission of audit reports, the audit report for FY 13-14 was submitted 12 months after the end of the fiscal year; and there have been delays in the submission of interim unaudited financial reports. The project is also in compliance with the Bank’s safeguard policies. The status of implementation of each project component is summarized below. Component 1: Capacity Building for Strengthened Urban Management (implemented by MoUD) The Component is rated as 'Moderately Unsatisfactory'. Twenty contracts (for a commitment of US$6 million, about 20% of component cost) are on-going under this Component. These contracts provide support to Urban Local Bodies (ULBs) in the areas of planning, finance, service delivery and governance. Activities for the remaining U$$24 million available under this component have been identified and procurement is expected to be initiated soon. All activities under this component are expected to be completed by June 2016. Component 2: Capacity Building for Effective Urban Poverty Alleviation and Monitoring (implemented by MoHUPA). Implementation of this component is unsatisfactory as no contract has been awarded for activities under this component. Component 3: Implementation Support. This component supports a national PMU for providing overall technical and managerial assistance during implementation of the Project. This component has been rated as 'Moderately Satisfactory'. C. Proposed Changes Change in Implementing Agency Implementing Agency Name Type Action Ministry of Housing and Urban Poverty Implementing Agency Marked for Deletion Alleviation Ministry of Urban Development Implementing Agency No Change Development Objectives/Results Project Development Objectives Original PDO The objective of the Project is to assist the Recipient in improving the systems and skills of select urban local government bodies with respect to urban management and urban poverty reduction, as well as to support the Recipient’s implementation of various urban policy and institutional reforms. Change in Project's Development Objectives Page 6 of 16 Explanation The Government has requested that activities supporting the achievement of urban poverty reduction be dropped from the project and replaced by support for the Government’s new national urban missions, in particular the national Smart Cities Mission. Proposed New PDO The objective of the Project is to assist the Recipient improve planning for urban management in select urban local bodies and in the roll out of national urban missions. Change in Results Framework Explanation: The results framework is proposed to be modified to reflect the proposed changes to the PDO and project activities by: (i) changing the PDO level results indicators; (ii) deleting intermediate indicators related to Component 2; (iii) revision of intermediate indicators under Component 1 to better reflect activities funded; and (iv) adding intermediate level indicators to measure the results of new activities being funded under Component 1. Change in Legal Covenants Explanation: The main change in the legal covenants for this Project is as a result of the revision to implementation arrangements, i.e., MOHUPA no longer part of the Project, hence it being removed from Sections I.A.1(a), (b), I.A.2, II.B.1 and II.B.3. Finance Description of Ln/Cr/TF Agreement Date Due Status Recurrent Frequency Action Covenant Reference The main change in the legal covenants for this Project is as a Sections result of the revision I.A.1 (a), to implementation Not yet IDA-49970 (b), I.A.2, arrangements, i.e., 31-Oct-2015 New due II.B.1 and MOHUPA no longer II.B.3. part of the Project, hence it being removed from states sections. Financing Change in Loan Closing Date(s) Explanation: The closing date of the Credit is proposed to be extended by 24 months to June 30, 2018 to enable on-going and planned activities, as well as new activities proposed under this restructuring, to be completed. Original Current Closing Proposed Closing Previous Closing Ln/Cr/TF Status Closing Date Date Date Date(s) IDA-49970 Effective 30-Jun-2016 30-Jun-2016 30-Jun-2018 30-Jun-2016 Page 7 of 16 Change to Financing Plan Explanation: There is no change in the financing plan. A restructuring was done in December 2013 in which USD 15 million was canceled. The proposed financing plan is being changed only to reflect the correct numbers as on date. Source(s) At Approval Current (from AUS) Proposed BORR 0.00 0.00 0.00 IDA 60,000,000.00 60,000,000.00 45,000,000.00 Total 60,000,000.00 60,000,000.00 45,000,000.00 Change in Disbursement Arrangements Explanation: Disbursements from the Credit will no longer be made by MoHUPA. Pursuant to DEA's letter dated December 4, 2014, the cut-off date for MoHUPA's expenditures is October 31, 2014. While MoHUPA will no longer remain the implementing agency, it will be eligible to claim expenditures incurred till October 31, 2014 on account of the Project Management Unit (PMU) and incremental operating expenditures post restructuring but no later than October 31 2015. An expenditure of approximately INR 10.40 million is expected to be additionally claimed by MoHUPA post restructuring. Disbursement Estimates Change in Disbursement Estimates Explanation: The disbursement estimates are proposed to be revised to reflect disbursements to date and the payment schedules of on-going contracts and anticipated contracts under the restructured project. Fiscal Year Current (USD) Proposed (USD) 2012 0.00 0.00 2013 46,378.93 46,378.93 2014 1,057,121.63 1,057,121.63 2015 2,362,200.26 500,000.00 2016 8,780,678.11 3,000,000.00 2017 14,000,000.00 20,000,000.00 2018 18,753,621.07 20,396,499.44 Total 45,000,000.00 45,000,000.00 Components Change to Components and Cost Explanation: Component 2 is proposed to be deleted. The Government of India announced the Smart Cities Mission and the National Rejuvenation Mission in May 2014 as part of a set of four new national urban programs. Funds allocated to the Capacity Building Page 8 of 16 for Effective Urban Poverty Alleviation and Monitoring Component (where no activities have been undertaken so far) are proposed to be transferred to the Capacity Building for Strengthened Urban Management Component towards support to these national urban programs, in particular the Smart Cities Mission and the National Rejuvenation Mission. The additional allocation will finance the preparation of City Plans for selected 100 Smart Cities (estimated cost US$7 million) and Credit Rating reports for a selected number of Smart Cities (estimated to cost US$ 1.5 million). The balance of US$1.5 million is being retained as contingency for activities to be identified during implementation. The project Procurement Plan has been updated to reflect the proposed additional activities. Procurement for the preparation of City Plans and Credit Rating Reports is currently at the Request for Proposals (RFP) stage. The new activities currently proposed have been found satisfactory, including for safeguards. Current Proposed Current Cost Proposed Cost Action Component Name Component Name (US$M) (US$M) Capacity Building for Capacity Building for Strengthened Urban Strengthened Urban Management Management and Support 30.50 41.00 Revised to roll out of National Urban Missions Capacity Building for Marked for Effective Urban Poverty 10.50 0.00 Deletion Alleviation and Monitoring Implementation Support Implementation Support 4.00 4.00 Total: 45.00 45.00 Other Change(s) Change in Institutional Arrangements Explanation: As a consequence of deletion of Component 2, MoHUPA is proposed to be deleted as an implementing agency and MoUD is proposed to be the sole implementing agency. Change in Implementation Schedule Explanation: The proposed revised implementation schedule for the project, which is acceptable to the Bank, reflects the current estimates for completion of on-going contracts and proposed new contracts to be awarded. Appraisal Summary Appraisal Summary Change in Risk Assessment Explanation: The Sector Strategies and Policies risk has been changed from Moderate to Low. The Project will support the roll out of new national level urban programs which GoI will launch in June 2015, making the focus clearer. Also, the restructured project is consistent with the Bank Group’s India Country Partnership Strategy (CPS) for FY201-17, which states that “accelerating urbanization is central to India’s growth, development and poverty reduction”. It would contribute to CPS Engagement Area 2, Spatial Transformation: strengthened institutional capacity of urban governments and improved urban services. Page 9 of 16 Systematic Operations Risk-Rating Tool (SORT) Risk Category Rating 1. Political and Governance Moderate 2. Macroeconomic Low 3. Sector Strategies and Policies Low 4. Technical Design of Project or Program Moderate 5. Institutional Capacity for Implementation and Sustainability Moderate 6. Fiduciary Moderate 7. Environment and Social Low 8. Stakeholders Moderate 9. Other OVERALL Moderate Explanation Page 10 of 16 Annex I: Results Framework Capacity Building for Urban Development Project Project Name: Project Stage: Restructuring Status: DRAFT (P099979) Team Leader(s): Vasudha Thawakar Requesting Unit: SACIN Created by: Vasudha Thawakar on 25-Nov-2014 Product Line: IBRD/IDA Responsible Unit: GSURR Modified by: Vasudha Thawakar on 03-Jun-2015 Country: India Approval FY: 2012 Region: SOUTH ASIA Lending Instrument: Technical Assistance Loan Project Development Objectives Original Project Development Objective: The objective of the Project is to assist the Recipient in improving the systems and skills of select urban local government bodies with respect to urban management and urban poverty reduction, as well as to support the Recipient’s implementation of various urban policy and institutional reforms. Proposed Project Development Objective (from Restructuring Paper): The objective of the Project is to assist the Recipient improve planning for urban management in select urban local bodies and in the roll out of national urban missions. Results Core sector indicators are considered: Yes Results reporting level: Project Level Project Development Objective Indicators Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target Revised Number of ULBs having Number Value 0.00 0.00 20.00 improved their systems in at Date 27-Jan-2012 22-May-2015 30-Jun-2018 least two of the areas covered (Finance, planning, governance Comment Likely to be and service delivery) achieved as ULBs have initiated improvements. Number of ULBs having Number Value 0.00 0.00 20.00 Page 11 of 16 improved their systems in at Date 27-Jan-2012 22-May-2015 30-Jun-2016 least two of the areas covered Comment New Number of ULBs with City Number Value 0.00 0.00 5.00 Strategic Plans financed under Date 01-Jun-2015 01-Jun-2015 30-Jun-2018 the Smart Cities Mission. Comment New Number of policy level studies Number Value 0.00 3.00 5.00 completed and disseminated. Date 27-Jan-2012 01-Jun-2015 30-Jun-2018 Comment These have been financed under the project. Marked for Number of ULBs whose Number Value 0.00 0.00 30.00 Deletion capacity with respect to urban Date 27-Jan-2012 22-May-2015 30-Jun-2016 management and urban poverty reduction has been strengthened Comment Marked for by the provision of a City deletion as the Support Unit corresponding Component is being dropped. Intermediate Results Indicators Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target Revised Number of participating ULBs Number Value 0.00 0.00 20.00 having prepared plans for Date 27-Jan-2012 22-May-2015 30-Jun-2018 service delivery- water/ sanitation/drainage. Comment Likely to be achieved as contract awarded for preparation of CSPs and NRW Page 12 of 16 Strategies and work is in progress. Number of participating ULBs Number Value 0.00 13.00 13.00 having prepared City Sanitation Date 27-Jan-2012 22-May-2015 30-Jun-2016 Plans (CSP) Comment New Number of cities having Number Value 0.00 0.00 30.00 completed GIS mapping and Date 01-Jun-2015 01-Jun-2015 30-Jun-2018 approved by ULBs Comment New Number of City Strategic Plans Number Value 0.00 0.00 50.00 prepared and approved by Date 01-Jun-2015 01-Jun-2015 30-Jun-2018 ULBs and MoUD to support national Smart Cities Mission Comment New Number of cities for which Number Value 0.00 0.00 50.00 credit rating exercise and Date 01-Jun-2015 01-Jun-2015 30-Jun-2018 financial improvement plan is completed and approved by Comment MoUD Marked for Number of participating ULBs Number Value 0.00 0.00 5.00 Deletion having developed NRW Date 27-Jan-2012 22-May-2015 30-Jun-2016 Strategies Comment Marked for deletion as the indicator has been incorporated in another relevant intermediate indicator. Revised Number of ULBs with Number Value 0.00 0.00 20.00 Page 13 of 16 up-to-date City Development Date 27-Jan-2012 22-May-2015 30-Jun-2016 Plan Comment Likely to be achieved as contract has been awarded and work is in progress. Number of ULBs with Number Value 0.00 0.00 20.00 up-to-date City Development Date 27-Jan-2012 22-May-2015 30-Jun-2016 Plan Comment No Change Number of Municipal Official/ Number Value 0.00 2200.00 2500.00 Elected Representatives trained Date 27-Jan-2012 22-May-2015 30-Jun-2016 on issues of Urban Governance/ Management Comment Likely to be achieved as further trainings are planned. Marked for Number of Policy Related Number Value 0.00 4.00 3.00 Deletion Studies Completed Date 27-Jan-2012 01-Aug-2014 30-Jun-2016 Comment Added as a PDO indicator. Revised Number of MoUs signed Number Value 0.00 29.00 30.00 between MoUD and ULBs for Date 27-Jan-2012 22-May-2015 30-Jun-2018 implementation for TA activities undertaken under the Comment Likely to be Project. achieved. Number of MoU signed. Number Value 0.00 29.00 30.00 Date 27-Jan-2012 22-May-2015 30-Jun-2016 Comment Page 14 of 16 Marked for Number of participating ULBs Number Value 0.00 0.00 30.00 Deletion supported in terms of Capacity Date 27-Jan-2012 22-May-2015 30-Jun-2016 for implementation of UPA Programs Comment Marked for deletion as the corresponding Component is being dropped. Marked for Number of Municipal Official/ Number Value 0.00 0.00 500.00 Deletion Elected Representatives trained Date 27-Jan-2012 22-May-2015 30-Jun-2016 on issues of Urban Poverty and Programs. Comment Marked for deletion as the corresponding Component is being dropped. Revised Number of participating ULBs Number Value 0.00 0.00 15.00 having prepared plans for Date 27-Jan-2012 22-May-2015 30-Jun-2018 improved delivery of financial systems- property tax/ double Comment Likely to be entry accounting. achieved as contract has been awarded and work is in progress. No.of participating ULBs Number Value 0.00 0.00 15.00 having migrated to Double Date 27-Jan-2012 22-May-2015 30-Jun-2016 Entry Accrual Accounting (DEAS) Comment Marked for Number of participating ULBs Number Value 0.00 0.00 10.00 Deletion having improved their system Date 27-Jan-2012 22-May-2015 30-Jun-2016 for Property tax administration. Comment Marked for Page 15 of 16 deletion as the indicator has been incorporated in another relevant intermediate indicator. Marked for No. of participating ULBs that Number Value 0.00 0.00 5.00 Deletion have introduced a citizen Date 27-Jan-2012 22-May-2015 30-Jun-2016 interface measure. Comment Marked for deletion as the activity is being dropped. Revised No. of procurement activities Number Value 0.00 7.00 25.00 completed Date 27-Jan-2012 22-May-2015 30-Jun-2018 Comment No. of procurement activities Number Value 0.00 7.00 25.00 completed Date 27-Jan-2012 22-May-2015 30-Jun-2016 Comment Page 16 of 16