The World Bank Madhya Pradesh Urban Development Project (P155303) REPORT NO.: RES46570 INTERNATIONAL BANK FOR RECONTRUCTION AND DEVELOPMENT RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF MADHYA PRADESH URBAN DEVELOPMENT PROJECT APPROVED ON APRIL 12, 2017 TO THE REPUBLIC OF INDIA URBAN, RESILIENCE AND LAND GLOBAL PRACTICE SOUTH ASIA REGION Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Regional Director: John A. Roome Practice Manager/Manager: Catalina Marulanda Task Team Leader(s): Poonam Ahluwalia Khanijo, Abhijit Sankar Ray The World Bank Madhya Pradesh Urban Development Project (P155303) ABBREVIATIONS AND ACRONYMS BISCO : Bhopal Indore Super Corridor DEA : Department of Economic Affairs GIS : Geographic Information System GoI : Government of India MPUDC : Madhya Pradesh Urban Development Company MPUDP : Madhya Pradesh Urban Development Project PDO : Project Development Objective ULBs : urban local bodies The World Bank Madhya Pradesh Urban Development Project (P155303) BASIC DATA Product Information Project ID Financing Instrument P155303 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 12-Apr-2017 31-Dec-2022 Organizations Borrower Responsible Agency Urban Development and Environment Department, Republic of India Govt. of Madhya Pradesh Project Development Objective (PDO) Original PDO The project development objective (PDO) is to enhance the capacity of MPUDC to improve coverage of key urban services and increase the revenue of participating urban local bodies. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-87460 12-Apr-2017 12-Jun-2017 12-Jul-2017 31-Dec-2022 116.20 26.75 89.45 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Madhya Pradesh Urban Development Project (P155303) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. The US$116.20 million IBRD loan for the Madhya Pradesh Urban Development Project (MPUDP) was approved on April 12, 2017 and became effective on July 12, 2017. The closing date of the loan is December 31, 2022. The Project development objective (PDO) is to enhance the capacity of the Madhya Pradesh Urban Development Company (MPUDC) to improve coverage of key urban services and increase the revenue of participating urban local bodies (ULBs). The project comprises two components: (i) Component 1: Institutional Development; and (ii) Component 2: Urban Investments. 2. Overview. The Project has been under implementation for four years and, as of May 12, 2021 disbursement had only reached US$21.57 million (19 percent). The likelihood of achieving the PDO and implementation progress are both rated Unsatisfactory; the status of implementation of the two project components is summarized below. Project implementation has been slow since the outset. The situation has been exacerbated by the onset of the COVID-19 pandemic in March 2020. The Bank is discussing the status of the project and ways to speed up implementation with the Government of India and the Government of Madhya Pradesh, as well as MPUDC, on a regular basis. The project is in compliance with Bank fiduciary and safeguard requirements, as well as applicable loan covenants. There are no overdue audits or material unaddressed audit observations. 3. Implementation of Component 1 (US$26.5 million, of which IBRD loan US$18.6 million). Implementation of the Policy Reforms sub-component has advanced well. Revenue augmentation plans have been prepared for all nine priority urban local bodies (ULBs), and field-based teams to support the nine ULBs in revenue augmentation are fully operational. Over 1,200 ULB officials have been trained on various aspects related to Property Tax rules, budgeting and accounting, and GIS validation of property registers. On the other hand, implementation of the sub-component focusing on Institutional Strengthening of MPUDC has not started, and a substantial part of the activities will be dropped as part of this restructuring. 4. Implementation of Component 2 (US$139.2 million, of which IBRD loan US$97.4 million). This component is financing water supply and/or sewerage sub-projects that are under implementation in nine cities. A tenth sewerage sub-project is currently under bidding. Five of the ongoing sub-projects are expected to be commissioned by the December 2022 closing date. Completion of the remaining five sub-projects by the closing date is less likely based on MPUDC’s implementation record to date. 5. Risks. The overall risk achieving the PDO is rated Substantial. Environmental and social safeguards risk is rated high, while risks relating to technical design of the project, institutional capacity for implementation, fiduciary (both financial management and procurement), and “Other Risks” (which focus on the Impact of COVID-19 on Project Implementation) are rated Substantial. The project design includes appropriate risk mitigation measures, including extensive implementation support from the Bank. 6. Rationale for Restructuring. Following the Mid-Term Review of the project in March 2020, the costs of activities to be implemented under Components 1 and 2 were reviewed, and savings of US$10 million and US$3 million were identified under Components 1 and 2, respectively. These correspond to loan savings of US$7 million and US$2.1 million under these components, for a total of US$9.1 million in loan savings. In its letter of April 23, 2021, the Department of Economic Affairs (DEA), Government of India (GoI), forwarded to the World Bank the Government of Madhya Pradesh’s request for cancellation of these savings from the loan. The World Bank Madhya Pradesh Urban Development Project (P155303) II. DESCRIPTION OF PROPOSED CHANGES 7. The proposed cancellation of US$9.1 million will result in changes to component costs and disbursement estimates (see Section IV), as well as to the Results Framework. The end target of the intermediate indicator “number of participating ULBs implementing agreed revenue mobilization reforms” is proposed to be reduced to match the final number of ULBs accessing investment loans under the Project, while the intermediate indicator “BISCO region development preparation completed” is proposed to be deleted, as this activity is being dropped. The proposed cancellation will affect the amount allocated to the disbursement category. In addition, the disbursement forecast is proposed to be revised based on the cumulative disbursements to date and the estimated disbursements during the remainder of the project. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Loan Closing Date(s) ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ The World Bank Madhya Pradesh Urban Development Project (P155303) Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) 1. Institutional Development 26.50 Revised 1. Institutional Development 16.50 2. Urban Investments 139.20 Revised 2. Urban Investments 136.20 Front end fee 0.30 No Change Front end fee 0.30 TOTAL 166.00 153.00 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE CANCELLATIONS Value Reason Current Cancellation New Ln/Cr/Tf Status Currency Date of for Amount Amount Amount Cancellation Cancellation LOAN IBRD- Disburs 116,200,000.0 107,100,000.0 RESTRUCTUR USD 9,100,000.00 23-Apr-2021 87460-001 ing 0 0 ING, COST SAVINGS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-87460-001 | Currency: USD The World Bank Madhya Pradesh Urban Development Project (P155303) iLap Category Sequence No: 1 Current Expenditure Category: Gds, Wks, CS, Trng, OC 115,909,500.00 26,457,863.50 106,809,500.00 70.00 70.00 Total 115,909,500.00 26,457,863.50 106,809,500.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2017 0.00 0.00 2018 9,999,999.96 6,361,839.00 2019 33,999,999.96 4,320,917.00 2020 29,000,000.04 5,725,129.00 2021 26,000,000.04 12,942,626.00 2022 14,000,000.04 40,000,000.00 2023 3,200,000.04 39,749,462.00 The World Bank Madhya Pradesh Urban Development Project (P155303) . Results framework COUNTRY: India Madhya Pradesh Urban Development Project Project Development Objectives(s) The project development objective (PDO) is to enhance the capacity of MPUDC to improve coverage of key urban services and increase the revenue of participating urban local bodies. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 Project Development Objective Number of projects completed by MPUDC 0.00 60.00 (Number) Number of participating ULBs reporting average annual growth rate in own source revenue of at 0.00 5.00 30.00 least 10% per annum since base year (Number) Number of people in urban areas provided with access to Improved Water Sources under the 0.00 80,000.00 280,000.00 project (Number) Number of people in urban areas provided with access to Improved Sanitation under the project 0.00 50,000.00 340,000.00 (Number) PDO Table SPACE The World Bank Madhya Pradesh Urban Development Project (P155303) Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 1. Institutional Development Volume of subproject financing approved by MPUDC 0.00 132,000,000.00 (Amount(USD)) Number of participating ULBs implementing agreed revenue 0.00 8.00 10.00 mobilization reforms (Number) Action: This indicator has been Revised Number of participating ULBs preparing a zero base budget 0.00 2.00 5.00 following State budgeting manual (Number) Number of staff trained directly under MPUDP in revenue improvement, accounting & 0.00 100.00 300.00 budgeting, environmental and social safeguards, procurement and financial management (Number) BISCO region development NA None preparation completed (Text) Rationale: Action: This indicator has been This sub-component activity (BISCO regional development) has been dropped at GoMP's request. Marked for Deletion 2. Urban Investments The World Bank Madhya Pradesh Urban Development Project (P155303) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 Number of improved water supply connections provided through the 0.00 15,700.00 55,000.00 Project disaggregated by gender and caste (Number) Number of improved sanitation connections provided through the 0.00 10,000.00 68,000.00 Project disaggregated by gender and caste (Number) Participants in consultation activities during project 0.00 10,000.00 45,000.00 80,000.00 100,000.00 implementation (number) (Number) Participants in consultation activities during project 0.00 4,500.00 20,250.00 36,000.00 45,000.00 implementation - female (Number) IO Table SPACE . The World Bank Madhya Pradesh Urban Development Project (P155303)