Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16579 IMPLEMENTATION COMPLETION REPORT INDIA UTTAR PRADESH URBAN DEVELOPMENT PROJECT (Loan 2797/Credit 1780-IN) May 8, 1997 Energy and Infrastructure Operations Division Country Department II South Asia Regional Office 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 EOUIVALENTS USS 1.00 = Rs. 12.29 at appraisal (June 1986) Rs. 1.00 = US$ 0.08137 at appraisal (.lune 1986) USS 1.0() Rs. 35.00 at closure (March 1996) Rs. I .00 - tUS$ 0.02857 at closure (March 1996) GOI/GOTN FISCAL YEAR April I - NMarch 31 WEIGHTS AND MEASURES m - mcter (39.37 inches or 3.28 't) km - kilometer (0.62 miiles) ha - hectare (10,000 square meters or 2.47 acres) sq. km - square kilometer (0.386 square miles) I - liter (0.22 Imperial gallons or 0.264 [JS gallons) led - liters per capita per day cu. m - cubic meter (220 Imperial gallons or 264.2 LIS gallons) Mld - million liters per day (0.220 million Imperial gallons per day or 0.264 million tUS gallons per day) Rs. I lakh - Rs. 100.000 Rs. I crore - Rs. 1(0,000,000 ABBREVIATIONS AND ACRONYMS CGA - Central Ganga Authority DA - Development Authority DCA - Developimenit Credit Agreement DEA - D)epartment ot'Economic Affairs, Ministry of Finance, GOI ERR - Economic Rate of Return GAP - Ganga Action Program CilAs - Ganga [mplemeniting Authorities GOI - Government of India GOUP - Ciovernment of Uttar lPradesh IUD - Integrated tJrban Development IPMC - Investment Planning and Monitoring Cell LA - Loan Agreement LCS - ILow Cost Sanitation OAI' - Operational Action Plan O&M - Operation and Maintenanec PA - Proicct Agreemnent PTs - IProject 'rowns PWD - Plublic Works Department SOF - Statemenit o E'xpenditure STP - Sew age 'T'rcatment Plant s/w - Staff-weeks UP - Uttar Pradesh (sometimes refers to Government of UP) UPUDP - UP UJrban Development Projcct UPIAs - UJttar Pradesh Impiemiienting Agencies WSS - Water Supply and Sanitation Vice President Mieko Nishimnizu Director Robert S. Drysdale Division Chief Jean-Francois Bauer Staff Member Michael Whitbread FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT INDIA UTTAR PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2797/CREDIT 1780-IN) TABLE OF CONTENTS Page No. PREFACE EVALUATION SUMMARY -------------------------------------------------------------------------------------------i PART I: PROJECT IMPLEMENTATION ASSESSMENT - - I A. ProjectObjectives ------------------------------------------------------------1--------- I B. Achievement of Project Objectives -------------------------------------------------------------------- 3 C. Implementation Record and Major Factors Affecting the Project --------------------------------- 9 D. Project Sustainability ----------------------------------------------------------------------------------- II E. Bank Performance --------------------------------------------------------------------------------------- 12 F. Borrower Performance---------------------------------------------------------------------------------- 16 H. Future Operations --------------------------------------------------------------------------------------- 17 I. Key Lessons Learned ------------------------------------------------------------------------------------ 17 PART II: STATISTICAL ANNEXES Table 1: Summary of Assessments ----------------------------------------------------------------------- 20 Table 2: Related Bank Loans/Credits --------------------------------------------------------------------21 Table 3: Project Timetable --------------------------------------------------------------------------------23 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual ---------------------------23 Table 5: Key Indicators for Project Implementation ---------------------------------------------------24 Table 6: Key Indicators for Project Operation ---------------------------------------------------------- 25 Table 7: Studies Included in Project---------------------------------------------------------------------- 25 Table 8A: Project Costs ------------------------------------------------------------------------------------ 26 Table 8B: Project Financing-------------------------------------------------------------------------------26 Table 9: Economic Costs and Benefits------------------------------------------------------------------- 27 Table 10: Status of Legal Covenants---------------------------------------------------------------------28 Table I 1: Compliance with Operational Manual Statements ----------------------------------------- 30 Table 12: Bank Resources: Staff Inputs-----------------------------------------------------------------30 Table 13: Bank Resources: Missions--------------------------------------------------------------------- 31 APPENDICES A. Completion Mission's Aide-Memoire B. Borrower's Evaluation Maps: IBRDNos. 19881R;28389 This document hag 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. IMPLEMENTATION COMPLETION REPORT INDIA UTTAR PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2797/CREDIT 1780-IN) Preface This is the Implementation Completion Report (ICR) for the Uttar Pradesh Urban Development Project in India, for which the Loan 2797-IN and the Credit 1780-IN, in the amount of US$20.0 million equivalent and SDR106.3 million respectively, totaling US$150.0 million equivalent, were approved on April 21, 1987 and made effective on February 26, 1988. The project had two separate parts: Part A - Uttar Pradesh (Urban Development); and, Part B - Central Ganga Authority (Ganga Action Program). On October 1, 1992 the project was restructured to permit, inter alia, financing of damage repairs in response to a serious earthquake in three northern hill districts of the State of Uttar Pradesh. To reflect the earthquake amendment, Part A - Uttar Pradesh, was sub-divided into Part A(i) - Urban Development (as before), and Part A(ii) - Earthquake Reconstruction. The Loan was canceled in its entirety on December 5, 1991. SDR7.4 million of the Credit was canceled on December 5, 1991. The Credit was closed on the original closing date of March 31, 1996 and final disbursement took place on August 19, 1996 at which time a Credit balance of SDR8.1 million was canceled. The ICR was prepared by Mr. Michael Whitbread of the Bank's Agriculture and Water Operations Division, Country Department 2, South Asia Region. The ICR was reviewed by Mr. Jean-Francois Bauer, Chief, Energy and Infrastructure Operations Division, Country Department 2, South Asia Region, and Ms. Kazuko Uchimura, Project Adviser, Country Department 2, South Asia Region. The preparation of this ICR began during the Bank's completion mission in May and June 1996. It is based on mission findings, which are included as Appendix A to the ICR, and material from project files. The Borrower contributed to the ICR by providing project and other data, including for Part A(i) the results of an independent evaluation of a large sample of schemes, and for Part B the results of several independent monitoring studies of river quality. Additionally, the Borrower provided views on the project outcome for Part A(i) which are included as Appendix B to the ICR. IMPLEMENTATION COMPLETION REPORT INDIA UTTAR PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2797/CREDIT 1780-IN) Evaluation Summary Introduction 1. The Uttar Pradesh Urban Development Project (UPUDP) had two parts: Part A, which at appraisal consisted of an integrated urban development (IUD) project in the State of UP, and Part B, which consisted of support to the Central Ganga Authority (CGA) of the Government of India in its efforts to abate pollution in the Ganga River. 2. Part A, Urban Development, followed-on from two earlier projects in the State, the UP Water Supply and Sanitation Project (Cr.585-IN) and the Kanpur Urban Development Project (Cr. 11 85-IN). Part A was a progression to a state-wide, multi-city IUD concept after several earlier single-city IUD projects in other parts of India (Table 2). Part B, Ganga Action Program, was included in the project at a late stage of preparation of Part A as a response by the Bank to a request by the Government of India to support its new policy, actively backed by the Prime Minister, of cleaning up the holy river. The project received the Board's approval on April 21, 1987. In October 1992 the project was restructured to permit, inter alia, the financing of damage repairs in response to a serious earthquake in the northern hills of the State of UP. The closing date was March 31, 1996, unchanged from the original. Project Objectives 3. There were two project objectives at appraisal which reflected the two parts. These were: (a) to support the improvements in urban sector management and institutional strengthening initiated by the GOUP and to reduce the serious deficits in urban shelter, infrastructure and services in the State; and (b) to assist the CGA in its efforts to reduce pollution levels in the Ganga River. Urban Development was the larger part. At appraisal, Part A was expected to constitute about 79 percent of total project costs, and Part B about 21 percent. The Earthquake Reconstruction introduced in 1992 was to support the earthquake damage repairs, using 'savings' under the project arising from the depreciation of the Indian Rupee. Part A was then divided into Part A(i), Urban Development, and A(ii), Earthquake Reconstruction. At closing, the breakdown of actual total project costs was as follows: Part A(i) - 80.4 percent; Part A(ii) - 10.1 percent; and, Part B - 9.5 percent. 4. Part A had several covenants relating to the policy and institutional improvements in the sector. Probably the most significant were agreed financial performance targets for implementing agencies in the 11 (later increased to 15) main project cities. In order to achieve - 1i - the physical objectives of Part A there were 10 components and sub-components relating to shelter, water supply, sewerage, drainage, low cost sanitation and municipal services. The project was designed before the Bank formally introduced its strategy for poverty reduction but Part A had a strong poverty focus in the provision of low cost sanitation, slum up-grading and sites and services, which includes price cross-subsidization for plots in favor of the poor. In addition, Part A embraced the Bank's other primary priorities for urban lending, finance and environmental improvement. 5. Although multi-faceted in its approach, the main thrust of the Ganga Action Program strategy of Part B was the interception of municipal sewage and other city pollution at the point of entry into the river, and pumping to other locations for treatment and disposal. 6. Earthquake reconstruction consisted of reinstatement of roads and bridges, irrigation works, water supplies and public buildings, particularly for health and education, in the earthquake hit region. Implementation Experience and Results 7. The Loan/Credit. The approved project consisted of a loan of US$20.0 million and credit of SDR106.3 million totaling US$150.0 million equivalent. The loan was canceled in its entirety in December 1991, along with SDR7.4 million of the credit, due mainly to slow progress with implementation. Following the final disbursement after the closing date of March 31, 1996 there was a credit balance of SDR8. 1 million which was canceled. Thus, disbursements proceeded considerably more slowly than was envisaged at appraisal, and the available resources were not fully utilized. 8. Assessment. With such a complex and varied project it is difficult to sum up the extent of achievement of project objectives. The project was successful in achieving some of its physical targets, particularly in providing: (a) equipment and works of modest size for municipal services, slum upgrading and water supply under Part A(i); (b) equipment under Part B; and (c) repair works for the Earthquake Reconstruction under Part A(ii). However, the sustainability of the Part A(i) and B schemes is in doubt due to financial weaknesses of many of the responsible agencies and their inability to finance O&M costs. Many of the larger schemes for water supply and sites and services under Part A(i), and sewage treatment under Part B, were not finished by closing. These larger schemes suffered from poor planning and procurement. Protracted litigation between the contractor and the executing agency, UP Jal Nigam, greatly delayed two major sewage treatment plants under Part B, and although the details are confusing, the root causes are traceable to inadequate disputes resolution provisions in the bid documentation. 9. Institutional performance was generally very poor when assessed against the expectations at the time of appraisal, particularly in the area of financial strengthening of the urban local bodies under Part A. Throughout implementation there were financial weaknesses in most of the large number of implementing agencies (over 40). The project has made negligible impact on the longer-term policy, strategy or institutional arrangements for the urban sector in the State of UP. - iii - 10. For Part B, the project's impact on Ganga river quality has been insignificant. Monitoring studies indicate no differences in measured water quality for key parameters at the time of closing from corresponding readings which were taken in 1986. Undoubtedly India has learned from the GAP process. NGOs and stakeholders are now engaged. However, Bank support made negligible contributions to the strategic thinking and policy formulation of the CGA or its successors, and the Bank gained little from its involvement. 11. Factors Affecting the Project. There were no major factors outside the Borrower's control affecting the achievement of the project's objectives except a substantial depreciation of the Rupee which led to the 'savings'. Delays were the biggest cause of concern with execution of the physical works, and the main causes of these delays were under the Borrowers' control. Poor planning and procurement procedures for major civil works contracts posed problems for both Borrower and the Indian contractors. As experience grew, so processing procedures for the larger schemes improved and later implementation speeded up, but regrettably not by enough to ensure that they were completed by the time of closing. Performance of the Bank 12. There were shortcomings in Bank performance at preparation, appraisal and with supervision during the early years of implementation which gave rise to major problems. The main shortcomings were as follows: (a) at identification and during preparation, there was underestimation of the supervision and management tasks, and associated costs, that would arise from such a complex and far-reaching project and actual supervision time by the Bank was 40 percent greater than the estimates at appraisal; (b) appraisal and negotiations failed to include a legal agreement with the project's main implementing agency, the UP Jal Nigam, which was responsible for over half the project expenditure and which was associated with most of the project's problems of physical implementation, an omission which greatly reduced the Bank's leverage in dealing with the problems; (c) although a programmatic project in structure, neither the SAR nor other project documents contained model schemes to guide the preparation and evaluation of individual schemes and sub-projects; (d) the Bank did not adequately appraise the Ganga component, undertook no testing of alternatives to the basic strategy, and later gave this part of the project neither attention nor resources, all of which contributed to poor implementation; and (e) overall there was lack of continuity of management, Task Managers and Bank specialist staff and consultants and, in the crucial years 1988-90 following Board approval, a serious lack of support for the project by the Bank. - iv - After 1991 Bank supervision stabilized, and the skills mix was appropriate for the tasks. But by that time the problems created by the earlier supervision shortcomings were substantially beyond repair. Performance of the Borrower 13. Part A physical implementation performance was mixed. Small schemes and procurement of equipment caused few problems and generally were properly implemented. But larger schemes, particularly of water supply and sites and services, proceeded slowly at the design and procurement stages, and were unfinished at closing. Hoped for institutional and financial improvements of the implementing agencies did not materialize. The cause was inaction, mainly by the State Government, which showed little interest in taking the necessary steps to alter the deteriorating outcome of the project. 14. Part B proceeded slowly and remained substantially unfinished at closing. Inefficiencies of the implementing agencies in preparation for procurement were mostly to blame, made worse by the UP Jal Nigam's stand-off approach to the handling of a major contractor dispute which caused delays lasting many years. 15. Earthquake Reconstruction was well executed. This outcome is consistent with overall Bank experience of its emergency recovery activities, with their clear objectives and high level of Borrower ownership. Assessment 16. Although the project successfully implemented many of the small schemes, their sustainability is in doubt as a result of the poor finances of the relevant agencies leading to insufficient O&M expenditures. Many of the larger schemes were not finished at closing. Institutional performance was not improved by the project. From 1993 to closing UPUDP was classified as a "problem" project due to failure by many agencies under Part A(i) to achieve agreed financial performance targets. At various times during the latter stages of implementation the Bank considered, and sometimes carried out, suspensions of disbursements. In contrast to this overall gloomy picture, a few Part A(i) entities did perform well. The Earthquake Reconstruction was successful. However, these modest successes were not significant enough to alter the overall assessment as "deficient". Although many factors contributed to this overall assessment, three stand out: (a) the project design was too far-reaching and ambitious; (b) the Borrower was not committed to the project objectives and urban sector reform; and (c) there were critical deficiencies in the Bank's performance, especially during the early years of supervision. Key Lessons Learned 17. Project concept and design. The Bank needs to give full attention at identification, preparation and appraisal to the potential scale of management and supervision activities of - v - multi-dimensional projects of this kind, and to proceed only if it realistically assesses that it is able to commit sufficient resources to perform these tasks. 18. The Urban Development part was ambitious and complex. The Bank needs more evidence of the long-term commitment of Government to all aspects of the project, and sector reforms, than is provided by the active participation of a few key officials during project preparation. 19. The Ganga Action Program part was not fully appraised. It was accepted for support by the Bank management at a late stage in project preparation. Inadequate appraisal contributed to poor performance during implementation. 20. There should have been a separate legal agreement with the most important of the project's implementing agencies, the UP Jal Nigam, which has autonomous corporate status. This omission greatly reduced the Bank's leverage in discussions with the Borrower about the many implementation problems with which this agency was associated. There need to be agreements in place with all the key implementing agencies. 21. Implementation and supervision. An important feature of project design was the internal performance "incentive" mechanism which permitted reallocation of funds to better performing entities and away from those performing badly. This mechanism was reasonable, credible and enforceable. However, the mechanism was not activated by the Borrower due to political resistance to imposing penalties, and poor performance went unpenalized and good performance unrewarded. The Bank has to be resolute in seeking the implementation of project incentives and penalties to achieve improved performance since, on this evidence, Borrowers are likely to be hesitant. 22. A specially constituted cell, the IPMC, monitored and coordinated Part A activities but lacked any incentive to take important decisions. Project management effectiveness would be enhanced by clear delegations of decision-making authority to the project team. 23. Bank management should investigate arrangements for partial suspension of disbursements, which currently is not possible. Partial suspension would cover situations where some project entities are performing badly and are in breach of covenants, while others are performing well and should not be penalized. 24. Contractor disputes can continue for many years and greatly delay progress. Bid documents need to be carefully prepared and, consistent with features of current Bank standard bid documents, contain appropriate disputes resolution clauses. 25. The Bank should ensure that there is reasonable continuity of the management, Task Managers, other staff and consultants working on a project. A key individual or, better still, a core team should assume project responsibility for a number of years at a time. It is especially - vi - important to maintain continuity during the period spanning preparation, appraisal and the first few years of implementation. 26. Future urban development projects. UPUDP has provided the following lessons for future urban development project lending in India: (a) close attention needs to be given to political factors at the state level to ensure there is genuine backing for urban sector policy reform; (b) large project/loan size is not sufficient leverage to secure policy change; (c) project design should be kept simple; (d) with appropriate design, multi-city and multi-sector projects can stimulate competition for funds as a spur to improved performance, but the Bank needs to be resolute in pursuing reallocation/withdrawal of funds wherever performance is unsatisfactory; (e) project design needs to reflect the scale of Bank supervision resources likely to be made available; and (f) municipalities and local water utilities are appropriate agencies for Bank support for urban services and slum upgrading, but design-and-construct agencies such as development authorities and state water undertakings, lack sufficient accountability to the public and should not be supported. 27. Future river pollution abatement projects. UPUDP provides the following lessons: (a) rigorous evaluation of the proposed policy is required to ensure it is economically and environmentally justified; (b) the strategic approach to pollution abatement needs to be tested for its cost-effectiveness against alternatives; (c) the stakeholders need to be engaged in the design and implementation process; (d) technology should be appropriate to local conditions, and affordable; and (e) agencies ultimately responsible for O&M need to be parties to any decisions on capital expenditure. IMPLEMENTATION COMPLETION REPORT INDIA UTTAR PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2797/CREDIT 1780-IN) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES 1. The Uttar Pradesh Urban Development Project (UPUDP) had two parts: Part A, which at appraisal consisted of an integrated urban development (IUD) project in the State of UP; and Part B, which consisted of pollution abatement in the Ganga River. Corresponding to these two parts, the project objectives were as follows: (a) to support the improvements in urban sector management and institutional strengthening initiated by the Government of Uttar Pradesh (GOUP) and to reduce the serious deficits in urban shelter, infrastructure and services in the State; and (b) to assist the Central Ganga Authority (CGA) in its efforts to reduce pollution levels in the Ganga River. At appraisal, Part A: Uttar Pradesh (Urban Development) was expected to constitute about 79 percent of total project costs, and Part B: Central Ganga Authority (Ganga Action Program) about 21 percent (Table 8A). Part A: Uttar Pradesh 2. Part A consisted of carrying out in the State of UP a program to improve urban sector management and strengthen institutions, and to provide critical infrastructure in the following components: shelter, including sites and services, slum upgrading and area development; water supply; sewerage; drainage; low cost sanitation (LCS); municipal services, including solid waste management (SWM), maintenance management, and traffic engineering and management. The project supported the project management cell for Part A. There was a strong poverty focus particularly in the support for slum upgrading, LCS and sites and services, which includes cross- subsidization of plot prices in favor of the poor. In addition to urban poverty, Part A embraced the Bank's two other primary priorities for urban lending, urban finance and environmental improvements. 3. The Part A components were to be implemented in 11 main towns and one new urban area. Additionally, the LCS program covered 18 smaller towns. During implementation four main project towns were added to the original 11, three from a "stand by" list included in the legal agreements and one which was new and which required an amendment to the agreements. One of the original 11 towns was dropped during implementation due to its lack of performance. -2 - 4. With the Tamil Nadu Urban Development Project, which was implemented at about the same time, Part A was the last of the state-wide integrated urban development (IUD) projects supported by the Bank in India'. UPUDP was a logical progression to a state-wide, multi-city IUD concept following several earlier single-city IUD projects in India, in Madras, Calcutta and Bombay (see Table 2). Part A directly followed-on from two earlier urban projects in the State: (a) the UP Water Supply and Sanitation Project (Cr.585-IN), which closed in 1983, which stressed the need for institutional reform in urban WSS; and (b) the Kanpur Urban Development Project (Cr. 1185-IN), which closed in 1987, which focused primarily on shelter provision but which included some infrastructure and municipal services upgrading. The principal lessons of this project were the need for: cost recovery and attention to the pricing of urban services; rent control reform; and, institutional strengthening. Part B: Central Ganga Authority 5. During preparation of Part A of UPUDP the Government of India (GOI) adopted a policy to abate the pollution of the holy river. This policy was actively promoted and supported by the Prime Minister. GOI approached the Bank for support to CGA, the responsible agency, and UPUDP was perceived as an appropriate project vehicle for this support. The Ganga Phase I program was already fully funded by the GOI so the Bank's resources were not additional. 6. Most of the Ganga river pollution originates in the cities located on the river banks. About 75 percent is untreated municipal sewage. Natural river cleansing mechanisms operate. The worst of the river pollution is at, or close to, the cities with progressive improvement downstream, although the overall profile of river pollution is affected by many other factors such as the incidence of tributaries which can dilute, or occasionally add to the pollution levels. CGA's strategy towards pollution abatement was multi-faceted and included, for example, provision of LCS, crematoria and river-front facilities in the cities along the river banks. However, the main thrust of the strategy was the interception of waste water flows at their point of entry into the river, and pumping them to another location for treatment and disposal. 7. The CGA strategy had not been seriously evaluated, nor was this undertaken at the appraisal of UPUDP. Accordingly, it has not been determined whether the policy of cleaning the river was a beneficial use of resources in terms of quantifiable costs and health and other environmental benefits for the cities' citizens. Nor has the strategy of interception been shown to be the best approach. One serious concern with interception, for example, is that no matter I The India: Tamil Nadu Urban Development Project (Cr.1923-IN) was due to close on September 30, 1995. It was extended to permit the further development of its successful Municipal Urban Development Fund. For a discussion of IUD experiences see, for example, OED Precis Number 35, Integrated Urban Project, Experience in Ecuador, India and Brazil (October 1992). -3 - how successful it may be, the waste water continues to pollute the cities through which it flows, mostly in open drains, on its way to the river. 2 Earthquake Reconstruction 8. In December 1992, following a serious earthquake in the previous year in remote northern hills of the State of UP, the following, third, objective was added: "...to support the 1991 earthquake damage repairs". UPUDP was considered by Bank management to be a suitable vehicle to provide prompt assistance. There were project "savings" that could be utilized arising from Rupee depreciation against major currencies. When Earthquake Reconstruction was added it became Part A(ii). Part A(i) became UP Urban Development and Part B remained, as before. The three districts of Uttarkashi, Chamoli and Tehri Gabhwal were the location for Part A(ii) (see Map IBRD 28389). B. ACHIEVEMENT OF PROJECT OBJECTIVES Part A(i) - UP Urban Development 9. Actual project costs for Part A(i) were Rs 4,018 million, or about 80.4 percent of total project costs (Table 8A). Part A(i) consisted of about 50 percent of UP's Seventh Plan and partial Eighth Plan investments in urban development and water supply. Institutional improvements were reflected in several covenants, and physical development was represented by ten project components and sub-components. The following table provides a summary assessment of the achievements with cross-references to the specific evidence on which the judgments have been based. Additional evidence was provided by the Part A(i) evaluation studies which were undertaken by the Borrower: 2 The Institute for Economic Growth at Delhi University has been commissioned to undertake an expost investigation of the net economic benefits of the GAP. The terms of reference emphasize quantification of costs and benefits. The study is using costs derived from GAP Phase I and benefits measured by contingent valuation methods and based on surveys of river users and non-participants. This study will be concluded in 1997 (See, para 21 of Annex I of Appendix A of this ICR). -4- Covenant/Component Targets/Actions Assessment Reference Carry out Operational The many actions in the The following OAP actions were not Table 10: PA S Action Plan (OAP): OAP were carried out, taken: updating of entity assets registers; 2.01(b) consisting of numerous with four exceptions appointment of commercial auditors; policy and operational mapping of utilities (except in 2 towns); changes preparation of an action plan for maintenance study. Assessment: partially achieved Project towns to meet GOUP and towns generally There was persistent and widespread Table 10: PA covenanted financial failed to take agreed failure, although a few towns did perform Sch paras 1, 7, 8 performance targets actions which were well. This failure led the Bank to consider required to meet targets and undertake partial suspensions of Part A(i). Assessment: not achieved Project towns to be Mostly this requirement Assessment: partially achieved Table 10: PA adequately staffed for was achieved at the Sch paras 2, 4 their functions to be technical level. Some performed senior posts in implementing entities remained vacant for many months UP to minimize Direct action on rent Formula based property tax assessment is Table 10: PA negative effects of rent control was not taken by being considered which will have Sch para 9 control GOUP beneficial effects on revenue generation by local bodies. However, no action occurred on the ground. Assessment: not achieved Shelter Component: SAR target was 10,000 By closing many schemes were not Annex A: Provision of Sites and plots in 8 towns, or about finished (eg road works and water and Completion Services (8.5% of actual 50,000 people mostly in sanitation facilities incomplete) nor were Mission's Aide total project cost) low income groups. By all schemes occupied. There were several Memoire paras closing, 12,700 plots had deviations from agreed allotment, funding 15-42 been provided and pricing procedures. Assessment: partially achieved Shelter Component: SAR target was upgrading Targets were achieved. No design Annex A: Provision of Slum for 58,000 h/holds, or standards were defined in the SAR, but an Completion Upgrading (5.6% of about 300,000 people in expenditure limit appears to have been Mission's Aide actual total project cost) 230 slums, later revised used to determined the extent of Memoire paras upwards to 89,000 h/holds upgrading. Some schemes were in 43-58 and 398 slums, in 13 towns satisfactory condition at closing but some needed further upgrading. Off-site infrastructure was generally missing. No assessment has been made of the community participation efforts. Assessment: achieved -5- Covenant/Component Targets/Actions Assessment Shelter Component: SAR target was coverage Assessment: not achieved Annex A: infrastructure provision of 2,920 h/holds in 6 Completion for Area Development locations in two towns. Mission's Aide (0.6% of actual total Actual implementation Memoire paras project cost) was 1,038 h/holds in 6 59-68 locations in one town. Schemes were completed by closing for only 740 h/holds in 3 locations. Financial perf. poor Water Supply This was a major All smaller schemes were completed and Annex A: Component (46.3% of component for the commissioned by closing. Major works in Completion actual total project cost) project. Implemented in four towns which were implemented by the Mission's Aide 11 towns, later increased UP Jal Nigam were delayed. In none were Memoire paras by 4. Major investments the works completed by closing although all 69-77 were proposed in 6 towns were advanced. These schemes would have including new treatment provided major benefits to towns. plants, transmission Assessment: partially achieved systems and capacity augmentation Sewerage Component Main emphasis was: All works completed by closing, although Annex A: (4.1% of actual total rehabilitation of sewerage rate of progress was often slow. Completion project cost) systems by cleaning and Component has helped with environmental Mission's Aide repairing; expanding improvements and O&M, particularly Memoire paras coverage; and some new through provision of equipment. 78-79 construction of sewers in Assessment: achieved 11 original towns Drainage Component SAR target was for 10 Some of the storm water drains are working Annex A: (5.1 % of actual total towns to prepare and well. Others have been taken over by Completion project cost) implement drainage plans sullage and sewage disposal. Many drains Mission's Aide consisting of are silted. Assessment: partially achieved Memoire para 85 rehabilitation of existing and construction of new drains. All plans were prepared and fully implemented Low Cost Sanitation SAR target was for Revised target achieved. A few units not Annex A: Component (3.1% of conversion of 51,700 utilized because superstructures were not Completion actual total project cost) latrines and provision of built. But generally a successful program. Mission's Aide 7,700 new units in 26 Additionally, community latrines are well Memoire paras towns. The target was maintained and utilized. Assessment: 80-84. later raised to 75,300 achieved converted/ constructed latrines, serving about 380,000 people. Some community latrines were also provided -6 - Covenant/Component Targets/Actions Assessment Reference Municipal Services SAR target was for Equipment procurement was fully Annex A: Component: Solid additional equipment and implemented and is mainly put to good use. Completion Waste Management improved management Staff exposure to better management Mission's Aide (3.4% of actual total practices in 10 towns practices was limited. Assessment: Memoire para 86 project cost) partially achieved Municipal Services SAR target was for 9 Equipment was purchased and is being put Annex A: Component: towns to purchase to good use. Only modest training and Completion Maintenance equipment, undertake exposure to modem practices was achieved. Mission's Aide Management (2.6% of training and studies Assessment: partially achieved Memoire para 87 actual total project cost) Municipal Services SAR targets were for On the whole, schemes have worked well Annex A: Component: Traffic preparation of transport and provide important if localized traffic Completion Engineering and proposals with support to benefits, although there are some design Mission's Aide Management (4.7% of low cost solutions, limitations. This sub-component has made a Memoire para 88 actual total project cost) purchase of equipment real, if modest impact. Assessment: and carrying out safety achieved programs. Traffic engineering and management cells were established and plans drawn up and implemented Project Management --- IPMC performed co-ordination and (1.2% of total project monitoring functions well, but lacked cost) management authority to take difficult decisions. Assessment: partially achieved Summary of Urban Development Achievements in UP 10. There were substantial variations in town performance in Part A, and between the different parts of the project. Physical development of Part A(i) tended to be more successful where expenditures were small and/or straightforward to execute, such as with procurement of maintenance equipment and slum improvement works. Components and sub-components with larger expenditures such as water supply and sites and services were not completed. The main shortcomings were with institutional strengthening, particularly the improvement of financial performance of project entities for which covenants were in only partial compliance at closing. 11. Part A(i) had limited impact on Government policy and no impact on the Government's institutional arrangements for urban policy formulation and execution. During the project GOUP produced two urban policy discussion papers. These papers contained many innovative policy and institutional proposals including some being promoted under UPUDP. However, there was little sign of these proposals being taken forward to implementation outside the project . 3 The first of these papers was, Department of Housing, State Housing Policy (August 1992). This document is far wider in scope than housing and covers most of the important issues of urban planning and policy for urban Prepared draft ICR in the field - 7 - Part B - Central Ganga Authority 12. Actual expenditure under Part B was Rs 380 million, which was 9.5 percent of total project cost, well down on the appraisal amount (Table 8A). Part B provided for consultancy advisory services and training, pollution monitoring and maintenance equipment, and priority pollution works. The program was implemented in three states, UP, Bihar and West Bengal, by local or state agencies under the overall direction of CGA. Equipment, such as sewer jetting machinery, dumper trucks and automatic water quality monitoring stations, was procured and put to good use but not all the available funds were utilized. The achievements for consultancy services and training were negligible as only Rs 0.9 million was spent on training and nothing at all on TA and studies. 13. The main expenditure was for works on major schemes in two states, UP and West Bengal. All works were substantially delayed. In UP at closing, the activated sludge STPs at Kanpur and Allahabad were, respectively, 85 and 80 percent complete for civil works and 65 and 40 percent complete for equipment (without the power packages). Delays were the result of a protracted contractual dispute (the two STPs had the same contractor, and the dispute was similar in each case). Although the details of the dispute are cloudy, the root causes were: (a) bid documentation - which was without adequate disputes resolution procedures; and (b) bid evaluation - since the contract was signed after intervention by the courts. The implementing agency was the UP Jal Nigam. It was difficult for the Bank to influence events once the dispute had got underway aside from the use of the penalties. The Bank's difficulties were compounded by the absence of a separate legal agreement with the Jal Nigam, thereby reducing the Bank's leverage in discussions on how to solve problems. This lack of agreement was despite the agency being responsible for over fifty percent of total project expenditures and having corporate status.4 14. There were problems also with a third STP, at Haridwar in UP, which was also the responsibility of the UP Jal Nigam. The STP was commissioned in May 1994, minus its power package. Installation of the power package was delayed by two years and its effectiveness was impaired after installation by an explosion resulting from deficiencies in either its design, the installation or operation. 15. Works in West Bengal were undertaken in the Calcutta Metropolitan Area and consisted mainly of 26 sewage lifting stations and 4 pumping stations in 14 schemes to intercept and divert pollution. Again, progress was very slow. Only five of the 14 schemes had been commissioned by closing although most remaining schemes were 95% complete. development. It was updated and enlarged in 1995 and was used in discussions with the Bank on a possible Second UP Urban Development Project, which the Bank later declined to support. 4 The UP Jal Nigam was established under the UP Water Supply and Sewerage Act, 1975. Jal Nigam is a State- wide agency responsible for the design and construction of WSS schemes. - 8 - Summary of Ganga Action Program Achievements 16. Part B of UPUDP remained substantially unfinished at closing. The poor implementation performance of Part B reflected the experience of Phase I of GAP as a whole, which has 5 proceeded slowly and without much overall impact . 17. Monitoring studies of Ganga River water quality undertaken under CGA's direction provide evidence that the total Program effectiveness has been slight. Initial targets were for pollution reduction of at least 75 percent. Trends in dissolved oxygen (DO) and biochemical oxygen demand (BOD) at selected observation points in the river indicate generally slow 6 improvement between 1986 and 1992, but deterioration since then . Around major cities such as Kanpur and Calcutta, where pollution was most acute, the pollution levels display no differences now from those the outset of the program in 1986 (see Annex I to Annex A of this ICR). There are many factors contributing to these poor results, but they would have been better without extensive delays to the major works. Part A(ii) - Earthquake Reconstruction 18. There were 1 ,195 schemes approved under this new part of the project under four main headings: roads and bridges; irrigation; water supplies; and public buildings, covering education and health. Total expenditure was Rs 404 million, which was 10.1 percent of actual total project costs. Implementation was slow initially with practically no expenditure in 1992, the first year. Thereafter, progress substantially picked up and 1,130 schemes (95 percent) were completed by closing. All works were of critical importance for the restoration of normal life following the earthquake. Notwithstanding the shortfall, UPUDP's earthquake reconstruction objective was achieved. Overall Assessment of the Achievement of Project Objectives 19. With such a complex and varied project it is difficult to sum up the extent of the project's achievements of its objectives. The project had some success in providing works and equipment in the provision of municipal services, slum upgrading and small water supply schemes under Part A(i), equipment under Part B and for most of the Earthquake Reconstruction works of Part A(ii). Many of the larger schemes under Part A(i) and Part B took far too long to implement and in many cases remained unfinished at closing. Institutional strengthening performance was poor when assessed against the expectations at the time of appraisal, particularly in the area of 5 Many of the larger GAP Phase I schemes are unfinished, not only those financed under Part B of UPUDP. Generally the small schemes, such as low cost sanitation and river front facilities, have been finished but their impact on river pollution levels has been modest. 6 River pollution measurement is more wide-ranging than the simple indicators of DO and BOD and includes total loads and the impact on the natural environment. Studies which have looked at a wider range of measures also suggest there has been limited impact of the GAP on pollution levels in the river. - 9 - financial strengthening of the urban local bodies under Part A(i). None of the project's Parts 7 were completed, and there was a significant balance of credit left unutilized at closing C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 20. There were no major external factors beyond the control of the Borrower affecting the project, other than the substantial depreciation of the Rupee which resulted in savings. 21. Part A(i) - Urban Development. The monitoring and coordination activities were competently performed by the specially-constituted Investment Planning and Monitoring Cell (IPMC). IPMC benefited considerably from continuity and dedication of its staff. However, IPMC lacked the authority or sufficient influence to bring about improvements to implementing agencies' performance. The Bank still considered it necessary to undertake as much supervision on the ground as possible despite the fact that IPMC were deputed to perform supervision tasks. IPMC reported to the Secretary of Housing on a regular basis but generally the Housing Department did not take management action and there was little evidence during implementation that GOUP was interested in the progress of the project, or pursuit of its objectives. The main problem was with Government. Its largely rural constituency, combined with a traditional approach to policy, may have accounted for the project's low priority. 22. Members of the IPMC were on deputation from their departments and agencies to which they would later return. For this reason, the staff may have been reluctant to engage in criticism 8 and promote punitive action, such as funds withdrawal for poor performance . 23. Implementation of some of the Part A(i) program of physical works was completed well within the project period, helped by the small-scale nature of the works. However there was a late start with the larger water supply schemes due to procurement and planning problems at the principal agency, the UP Jal Nigam, with the result that these schemes were not completed by closing. 24. Large civil works contracts posed major problems for both the Borrower and the Indian contractors, leading to delays. Consultants were not used for project management. As local experience grew, so processing procedures were improved during the second half of the project, for example with the large Jhansi water supply scheme and Agra water treatment plant which, 7 The Borrower requested an extension of one year to complete the project but this was refused by Bank management. Refusal was on the grounds of poor project performance, and in order to be consistent with the policy agreed earlier with the DEA of the GOI to remove the older projects from the portfolio as soon as practicable. s strong centralized management is a necessary condition for the success of integrated urban development projects. It is a characteristic of these projects that project monitoring and co-ordination units, like IPMC, have not possessed the necessary authority to take management decisions and, as in the case of UPUDP, have not been backed by resolute Governments. - 10- although delayed due to procurement shortcomings, subsequently proceeded during implementation more smoothly than earlier schemes. 25. The Remote Sensing Applications Center Lucknow failed in the production of aerial photographs. Hence the production of utility maps for the major cities, which were to be based on the photographs, was not undertaken except for the towns of Lucknow and Allahabad which used ground level surveys. 26. The main causes for concern in Part A(i) was the poor and continuously deteriorating financial performance of the local bodies implementing the project against targets agreed at appraisal. The fault lay primarily with the GOUP, which failed to take action within its authority to increase revenues, for example by approving requests for tax and tariff increases, and otherwise encourage local bodies to perform better by setting the right policy environment9. The local bodies themselves were also to blame. They performed poorly from the standpoint of billings, collections, maintenance of registers and other aspects of revenue generation, although there were a few exceptions. 27. Part B - Central Ganga Authority. Implementation was excessively slow. The contractor for the two major STPs at Kanpur and Allahabad and the implementing entity, the UP Jal Nigam, engaged in a protracted contractual dispute. Bid documents did not contain adequate dispute resolution procedures. Once begun, the Jal Nigam failed to find a reasonable accommodation with the contractor, assumed an entrenched position and generally seemed disinterested in arriving at a speedy solution. The implementing agencies under Part B in West Bengal also made very slow progress with the civil works contracts due primarily to weaknesses of planning and co-ordination of investments. 28. Part A(ii) - Earthquake Reconstruction. There were no problems with the implementation of this part of the project, other than initially in mobilizing contractors to work in remote hill areas. This difficulty was partly overcome by the acceptance by the Bank of the use of force account procurement procedures. Assessment of Project Risks 29. Three risks were identified at appraisal, all of them "internal" to the project and relating to Part A: (a) limitations of the appraisal and supervision capacity of IPMC - in the event this risk proved to be unfounded, but IPMC lacked the executive authority and willingness to take project management decisions and was not well supported by GOUP; 9 An illustration of the weakness of local urban finances is provided by the case of octroi which was abolished during the project period. This local tax on the movement of goods is buoyant and, in states where it exists, provides the main part of local revenues. A state "octroi compensation" grant was introduced by GOUP which was far lower than the octroi revenues which were lost to the municipalities. - 11 - (b) limitations of the institutional capacity of the towns to manage their programs - this risk proved to be mostly unfounded, probably because of the modest sizes of the individual towns' investment programs; and (c) cost-recovery and resource mobilization - this was a serious problem for which the identification of the risk was fully justified, although the risk itself was under- estimated. Other risks that should have been identified at appraisal were: (d) lack of ownership of and interest in the project by GOUP, with its largely rural constituency, made more apparent with frequent turnover of senior officials who lacked commitment; (e) poor performance by a few key agencies, most notably the UP Jal Nigam in both Parts A(i) and B, which adversely affected implementation of parts of the program; and (f) the wide geographical, sectoral and institutional spread of the project, which reduced supervision effectiveness and increased costs. D. PROJECT SUSTAINABILITY 30. Part A(i) - Urban Development. The very weak local body finances for municipal services and water supply and sanitation, which the project failed to improve, constitute the main concern. The inadequate financial situation identified at appraisal deteriorated further during implementation. Most local bodies did not generate sufficient revenue to undertake their regular O&M activities and, as a consequence, many of the facilities provided under the project are not likely to be properly utilized. 31. The LCS program is likely to be sustainable as ownership is with individual households. The sites and services and area development schemes were not fully completed at closing, and occupation levels were, at best, modest. As a result, it is likely that these shelter investments will deteriorate, making full occupation, and the sought for cost recovery, difficult to achieve. Some of the slum upgrading schemes are in need of repairs for which resources do not exist. 32. Part B - Central Ganga Authority. It is likely that the unfinished STPs and other works will be completed using GOI funds. However, there will be on-going problems with the take-over of responsibility by local government. Local governments cannot finance from their current resources the O&M costs of these facilities, nor do they posses the technical capacity to operate them. CGA agreed to a 5-year period of sharing of the financing of the on-going O&M costs, but this obligation expired in 1995. Accordingly, there is expected to be limited sustainability of the major investments under Part B. - 12 - 33. Part A(ii) - Earthquake Reconstruction. Because the works involved reinstatement, no problems with sustainability are anticipated. E. BANK PERFORMANCE 34. Identification and preparation. There were four preparation missions (Table 4), which were staffed with appropriate skills. Inputs for preparation and appraisal were 113 s/w, which was low relative to the Bank's IUD average of 176 s/w. However, the Borrower undertook substantial preparation work, including a sector study which was completed on time and the preparation of individual town investment plans. 35. The project concept, however, caused many subsequent problems. The Bank did not assess correctly the scale of the supervision and management tasks, and associated costs, that would arise from such a complex and far-reaching project. Actual supervision time by the Bank was 40 percent greater than the appraisal estimates. 36. Identification of Part B occurred about 12 months later than Part A. Possibly as a result of time pressure, the appraisal lacked an evaluation of the GAP strategy towards river pollution abatement operations, and the strategy was accepted by the Bank without review. Appraisal did review the implementation details of the CGA proposals. 37. Appraisal. There were concerns expressed within the Bank at the time of appraisal about the proposals for the management of the project. The Loan Committee raised questions about project complexity. The project concept was successfully defended against the criticisms, which later were proved justified, that there would be supervision and implementation problems. 38. As indicated above (para 13), there was no separate legal agreement with UP Jal Nigam, the State-level WSS design and construction agency. The UP Jal Nigam was associated with most of the problems of implementation, particularly the extensive delays with major water supply schemes under Part A and the STPs under Part B. The absence of a legal agreement with the UP Jal Nigam reduced the Bank's leverage to deal with these problems. 39. The wide-ranging nature of Part A, with numerous individual schemes in many different sectors being implemented in dispersed locations, called for a programmatic project design. However, the appraisal did not include any model schemes, for example, for sites and services or road improvements, which could be used to guide individual designs. 40. Supervision. Great reliance was placed on IPMC to act as the supervision "intermediary" for Part A(i), a role for which it was untested. Although there was no lack of effort by IPMC to interact with project entities, undertake field visits and perform co-ordination duties, the Bank felt the need to go into the field during supervision missions. In the event the actual Bank supervision time greatly exceeded expectations and took up 257 s/w compared with the appraisal estimate of 180 s/w. The Bank-wide IUD supervision average is 187 s/w. - 13 - 41. Yet, despite the high supervision inputs by the Bank, the completion mission was of the opinion that there were supervision shortcomings (Annex A, para 114). Some of these were: (a) no project launching workshop for IPMC and CGA; (b) no Bank briefing to the Borrower on procedures and good practices; (c) high turnover of Bank staff and consultants between identification and final supervision, but especially for the three years following effectiveness, with resulting lack of continuity;'0 and, adding further to the lack of continuity, (d) six different Task Managers spanning the 19 missions between identification and closing. There was no recognized expert for the important Shelter component during supervision. 42. Changes in mission composition and TM responsibilities after effectiveness sent unfortunate messages to the Borrower about the strength of the Bank's interest in the project's outcome. Further, as pointed out in the Borrower's evaluation (Appendix B), small differences in advice given by many different Bank personnel led to Borrower confusion, particularly evident in the early stages of the project in the area of procurement. Later Bank procurement functions were transferred to the New Delhi Office where advice was more consistently applied and was more accessible to the Borrower. 43. The Bank was keen to promote large contracts for civil works, which went somewhat against the Borrower's preferences for packages of smaller contracts. The Bank's procurement preferences may have been appropriate for the longer term development of procurement management. However, the policy caused many problems and substantial delays through being implemented ahead of adequate acceptance of and experience by the Borrower and Indian contractors. The Borrower did not use consultants to assist with procurement management, which might have mitigated some of the problems. 44. Supervision activities for Part B were dominated by issues arising out of the very slow progress with the large civil works contracts. Consideration was given by Bank management to suspension of disbursements because progress with the STPs had come to a halt, but the dispute was resolved before action was taken and work again proceeded, although it remained unfinished at closing. 45. The Funds Re-allocation Mechanism. A covenant of the project permitted reallocation of project funds away from under-performing entities to other entities performing better, and which were more able to utilize them (Table 10: PA Sch. 2). This was a potentially powerful incentive device to secure greater efficiency in implementation and covenant compliance. There were no problems with the specification of the mechanism; it was reasonable, credible and enforceable. But the mechanism was unused, in spite of the widespread failure to reach financial performance targets by project entities. Since the Borrower was extremely hesitant about penalizing these poor performers the Bank should have been resolute. The mechanism for re- tO Altogether 31 different Bank staff members and consultants went on mission between identification and closing, of which 18 went once only. The February 1988 mission was staffed entirely by consultants, none of whom worked on the project beforehand, nor subsequently. Most of this lack of continuity occurred at about the time of the Bank re-organization in 1987, which unfortunately was a most critical time for the project. - 14 - allocation would have been used to maximum effect with early application, after about two years of implementation. But this was the time when the Bank's supervision was at its least effective (para 41), and the opportunity was lost. 46. Problem Project Status. In 1993 the project was classified as a "problem" project by the Bank due to the poor financial performance of the implementing entities in Part A(i). Normally, problem project status requires that within a year there is either restructuring, suspension of disbursements (or closure), or an upgrade of status. As financial performance of the entities, if anything, continued to decline, a status upgrade was not possible. Nor was restructuring feasible. 47. Accordingly, the Bank considered suspension of disbursements due to the poor financial performance of implementing entities against covenanted targets. Some entities were in compliance of the relevant covenants even though the majority were not. Penalizing the good performers was undesirable so only partial suspension would have been appropriate. Partial suspension is not possible under Bank procedures, and as a result the suspension route was not taken and the project persisted as a problem project until closing. 48. However, the Bank did suspend disbursements for another reason, audit objections. Suspension was against the statements of expenditure to which many audit objections under Part A(i) related until the issues had been clarified to the auditors' satisfaction. The auditors' objections were all eventually dropped and suspensions lifted. IPMC played a valuable role in assisting with clarifications leading to the dropping of objections. 49. Part A(ii) - Earthquake Reconstruction. Bank supervision of Part A(ii) was undertaken out of the New Delhi Office, and not by the project TM. Despite the urgency involved and the remoteness of the location, the identification and appraisal of this new part of the project was thorough. This was followed by an early supervision mission, and subsequent short mission visits to the earthquake region by staff from the New Delhi Office. The Bank supervision of the Earthquake Reconstruction was satisfactory. F. BORROWER PERFORMANCE 50. Identification/Preparation/Appraisal. There was close involvement of the Secretary of Housing of GOUP and his senior professional staff throughout the initial stages of the project cycle for Part A. This involvement provided encouragement to the Bank to proceed. The Borrower was active with making inputs to project preparation and was responsive to the Bank's requirements, for example, in commissioning a sector study. The selection of project towns was not a rigorous process, nor were the town's investments systematically evaluated. Nevertheless, the bottom-up process of preparation led to Borrower ownership of the town plans, and as guidelines for implementation, the town plans were adequately prepared. 51. The programs proposed were expected by GOUP to be completed in five years. Indeed, to reflect this optimism, the SAR included details for a five-year project cost/disbursement - 15 - profile as well as the Bank standard profile of eight years. Eight years was the figure actually used for the appraisal and was the approved project period, but the Borrower failed to complete the larger water supply, sewerage and shelter schemes in this ample time period. 52. Implementation. Part A(i) components other than water supply and shelter were completed about two years ahead of closing. The schemes which were completed were mostly relatively small and uncomplicated. Progress was slowest and least satisfactory for larger schemes . In particular, for the shelter sub-components of sites and services and area development, the development authorities were slow and ineffective in project execution. For the larger water supply schemes, and the STPs under Part B, the UP Jal Nigam was late in starting and displayed considerable inefficiency in executing its procurement functions. 53. The Housing Secretary's efforts during preparation of Part A were not sustained by all of his successors during implementation when there was evident lack of interest and commitment to the project by the GOUP. 54. The Borrower's audits were late initially, but on time after FY91. However, there were many audit comments and objections for several of the Part A(i) implementing agencies (see para 48). 55. The Borrower's performance regarding institutional strengthening, particularly strengthening of finances of implementing agencies under Part A(i), was almost a complete failure. There were two agreed targets each year of implementation for each implementing agency to achieve. At the time of closing, only 14 of the 60 agreed financial targets were met by local implementing entities, and none of the entities achieved both targets (Table 5). There was progressive deterioration in entities' financial performance against targets throughout the project. GOUP was as responsible for this failure as the entities themselves, as it failed to pursue the necessary reforms at state level and did not grant tax and tariff revisions when they were applied for. Many of these reforms were agreed with the Bank in action plans as the project proceeded. The entities also failed to take necessary action, which was most apparent with the collection of bills. 56. CGA was the project intermediary for Part B, and state agencies implemented the program under CGA's direction. CGA often failed to take decisions in a timely fashion and interfered in the work of the state agencies. Yet CGA was unable to exert influence to resolve the major dispute between the UP Jal Nigam and the contractor that led to the extensive delays with the Kanpur and Allahabad STPs. 57. The UP Jal Nigam demonstrated no interest in reaching a settlement in a timely way with the contractor for the two STPs. There were difficulties, also, at Haridwar STP where the UP Jal Nigam was also the implementing agency. The facility remained without the installation of the 1l For Part A(i) about 40 percent of the total project cost was for small schemes, and 60 percent for large. - 16- dual fuel engine for two years after the work had otherwise been finished. The impasse was due to cash-flow problems experienced by the contractor which, almost certainly, could have been overcome by a willing implementing agency. 58. Part A(ii) - Earthquake Reconstruction. All stages in the project cycle were satisfactory for this part of the project, apart from the initial slow start with implementation which arose from difficulties with contractor mobilization in the remote hill areas. G. ASSESSMENT OF OUTCOME Part A(i) - Urban Development 59. The overall achievement of Part A(i) has been rated as deficient. Some of the sub- components involving small expenditures were implemented in a satisfactory fashion. Larger schemes progressed slowly and remained incomplete at closing. Most of the institutional strengthening objectives were not achieved, particularly in the critical area of financial performance. 60. The Economic Rate of Return (ERR) was calculated for water supply (Table 9). The project's four major water supply schemes remained incomplete at the time of closing and hence their benefits were not revealed. The ERR calculated on actual costs and benefits, which was 8 percent, is likely to be an underestimate of the returns over the longer term. The ERR fell well short of the SAR estimate of 13 percent. The shortfall arose mainly from lower measured benefits in the actual case compared with appraisal. 61. Section D, above, concluded that the sustainability of Part A(i) components is likely to be poor or non existent due to the poor financial performance of the implementing entities, resulting in their inability to finance the on-going O&M costs. Part B - Central Ganga Authority 62. Part B of the project was incomplete by closing, resulting in failure to achieve most of the objectives, and the overall rating is deficient. GOI is providing funds to complete the works. The performance of Part B mirrors the poor overall performance of Phase I of the Ganga Action Program. No ERR was calculated for Part B but costs were higher than those appraised as a result of the delays. The benefits would be small relative to costs incurred because of the unfinished nature of the investments. The sustainability of the investments is likely to be poor since most require substantial on-going O&M expenditures by local entities for which there are inadequate funds. In the case of the three STPs in UP, considerable technical competence is required for operations which does not readily exist within the relevant local agencies. - 17- Part A(ii) - Earthquake Reconstruction 63. This part of the project was executed well and is expected to achieve all its objectives in a cost effective manner. Consisting of reinstatement of assets destroyed or damaged by the earthquake, this Part is expected to be sustainable. 64. The favorable performance of the Earthquake Reconstruction part, which was small relative to the others and introduced only in 1992, is insufficient to outweigh the deficient rating for Parts A(i) and B. The overall assessment of outcome for the project is therefore rated as "deficient". Although many factors contributed to this overall assessment, three stand out: (a) the project design was too far-reaching and ambitious; (b) the Borrower was not committed to the project objectives and urban sector reform; and (c) there were critical deficiencies in the Bank's performance, especially during the early years of supervision. H. FUTURE OPERATIONS 65. No special arrangements are in place for the technical, financial, commercial and institutional arrangements for project operations. In most cases the investments will constitute assets of municipalities and other local bodies and will be operated and maintained as part of the entities' continuing responsibilities. There are serious doubts as to the effectiveness of these investments because of the technical and financial weaknesses of these implementing entities. 66. The GOUP has disbanded the IPMC following project closure and no dedicated state- level institutional arrangement exists under Part A(i) to monitor and evaluate the systems that have been established. 67. During the latter stages of UPUDP the GOUP requested the Bank to consider a Second Urban Development Project (footnote 3). However, in the light of the poor performance of UPUDP, the Bank did not respond positively to this request. Similarly, the National Rivers Conservation Directorate, which is the successor to the CGA, also requested the Bank to consider financing a GAP-type project for the Satluj River in Punjab, and possibly others elsewhere in India. Again, in the light of the poor performance of Part B of UPUDP, and doubts about the 12 overall strategic approach, the Bank did not respond positively to this request, I. KEY LESSONS LEARNED 68. Project concept and design. The Bank needs to give full attention at identification, preparation and appraisal to the scale of management and supervision activities of complex and multi-dimensional projects of this kind, and to proceed only if it realistically determines that it is able to perform these tasks. 12 In addition to the Bank's involvement, the ODA of the UK and the Dutch Government supported Phase I of the GAP. Both are proposing to give support to Phase 11. - 18- 69. The Urban Development part of this project was ambitious. The Bank needs more evidence of the long-term commitment of Government to the project's objectives and urban sector reforms than is provided by active participation of a few key officials during preparation. 70. The Ganga Action Program part of UPUDP was not adequately appraised. It was accepted for support by the Bank management at a late stage in project preparation. The inadequate appraisal contributed to poor performance during implementation. 71. There was no separate legal agreement with the most important of the project's implementing agencies, the UP Jal Nigam, which has autonomous corporate status. This omission greatly reduced the Bank's leverage in discussions with the Borrower about the many implementation problems with which this agency was associated. There need to be agreements in place with all the key implementing agencies. 72. Implementation and supervision. An important feature of project design was the "incentive" mechanism which permitted reallocation of funds to better performing entities and away from those performing badly. This mechanism was not activated by the Borrower due to a reluctance, on political grounds, to impose the penalty of withdrawal of funds. The Bank has to be resolute in seeking funds reallocations as an incentive to improved performance since Borrowers are likely to be hesitant. 73. IPMC monitored and coordinated Part A activities, but lacked the incentive or will to take important decisions. Project management would be enhanced by clear delegations of decision- making authority to the project team. 74. Bank management should investigate the possibility of arrangements for partial suspension of disbursements for projects with numerous implementing entities. Partial suspension would cover situations where some of the entities are performing badly and are in breach of covenants, while others are performing well and should not be penalized by a suspension. 75. Contractor disputes can continue for many years and greatly delay progress. Bid documents need to be carefully prepared and, consistent with features of current Bank standard bid documents, contain appropriate disputes resolution clauses. 76. The Bank should ensure that there is reasonable continuity of its management, Task Manager, other staff and consultants working on a project. A key individual or, better still, a core team should assume project responsibility for a number of years at a time. It is especially important to maintain continuity during preparation, appraisal and the first few years of implementation. 77. Future urban development projects. UPUDP has provided the following lessons for future urban development project lending in India: (a) close attention needs to be given to political factors at the state level to ensure there is genuine backing for urban sector policy - 19- reform; (b) large project/loan size is not sufficient leverage to secure policy change; (c) project design should be kept simple; (d) with appropriate design, multi-city and multi-sector projects can stimulate competition for funds as a spur to improved performance, but the Bank needs to be resolute in pursuing reallocation/withdrawal of funds wherever performance is unsatisfactory; (e) project design needs to reflect the scale of Bank supervision resources likely to be made available; and (f) municipalities and local water utilities are appropriate agencies for Bank support for urban services and slum upgrading, but design-and-construct agencies such as development authorities and state water undertakings, lack sufficient accountability to the public and should not be supported'3. 78. Future river pollution abatement projects. UPUDP provides the following lessons: (a) rigorous evaluation of the proposed policy is required to ensure it is economically and environmentally justified; (b) the strategic approach to abatement needs to be tested for its cost- effectiveness against alternatives; (c) the stakeholders need to be engaged in the design and implementation process; (d) technology should be appropriate to local conditions and affordable; and (e) agencies ultimately responsible for O&M need to be parties to the capital expenditure decisions. 13 Support to municipalities would be consistent with the objectives of India's recently enacted 74th. Constitutional Amendment on municipalities, which promotes decentralization of powers and responsibilities. - 20 - PART II: STATISTICAL ANNEXES Table 1: Summary of Assessments A. AciAehieveinentofO bje es Substa PialO Neligible Not ntial a) aplicble Macro policies O O O U Sector policies O O * n Financial objectives O O * O Institutional development C1 O * O Physical objectives O * 0 O Poverty reduction O * E O Gender issues O O E U Other social objectives O O O U Environmental objectives O O * O Public sector management O O * E Private sector development O O O U B.rn Un l Uncertain C. Bank performance Hihly Stiarctory Marginally Deficient Satisfactory Satisfactory Identification O O O U Preparation assistance O O * O Appraisal E E O U Supervision E E E U :D.; iBoroe pefr mce Preparation E E * E Implementation E E E U Covenant compliance E E U Operation (if applicable) E E E U E. Assessmen o outo H:: igh4ysatisfactory Satisfactory Deficient O E U - 21 - Table 2: Related Bank Loans/Credits Loan/ Credit Purpose Year of Status l ____________________ ________________________________________ approval Preceding Operations 1. Second Calcutta UD Single city integrated urban development (IUD) 1978 Closed Project (Cr.0756-IN) project to extend and rehabilitate city's urban service systems, and upgrade capacity of local bodies 2. Second Bombay WSS Construction of water supply and distribution 1979 Closed Project (Cr.0842-IN) works and sewerage improvements, slum sanitation provision, water conservation and TA 3. Second Madras UD Single city IUD project including: development 1981 Closed Project (Cr.1082-IN) of plots; slum improvements; provision of buses; l_________________________ municipal services; and, TA 4. Kanpur UD Project Project focused mainly on sites and services and 1982 Closed (Cr. 1185-IN) slum upgrading; also included infrastructure and l municipal service improvements and TA 5. Third Calcutta UD [ Single city IUD project, involving the spreading 1983 | Closed Project (Cr. 1369-IN) of infrastructure and service improvements l outside of metrocore 6. Madhya Pradesh UD Project mainly focused on shelter and sanitation 1983 Closed Project (Ln.2329-IN) improvements, in 10 cities l 7. Bombay UD Project Single city IUD project including: land 1985 ICR-Active (Cr.1544-IN) infrastructure servicing; slum upgrading; local l government finance and administration, and l services; and, TA. l 8. Gujarat UD Project Appraised as a state-wide multi-city IUD project 1986 Closed (Cr.1643-IN) with emphasis on: shelter; infrastructure; slum l upgrading; solid waste; and, institutional l strengthening. Restructured with large rural WS component _ 9. Third Bombay WSS Project involved: expansion of WS and sewerage 1987 ICR-Active Project facilities in the city; sanitation for urban poor; (Cr.1750/Ln.2769-IN) and, improvements to irnplementation capacity Following Operations l l 1. First Madras WSS Ground water supply, distribution and waste 1987 | Closed Project water improvements in city with small LCS (Cr. 1822/Ln.2846-IN) component and institutional improvements l _ l - 22 - Table 2: Related Bank Loans/Credits (cont'd) | 0LoanlCredit- Purpose Year of Status ___ ___ ___ ___ ___ __ ___ ___ __ ___ ___ ___ ___ ___ ___ ___ __ a p p ro v l 2. Tamil Nadu UD State-wide multi-city IUD project with all main 1988 SPN-Active Project (Cr.1923-lN) sectors included: institutional improvements; municipal services; shelter; traffic management and transport 3. Hyderabad WSS Expansion of WS to city, rehabilitation and 1990 SPN-Active Project strengthening of existing WSS systems, with (Cr.2115/Ln.3181-IN) LCS component and institutional strengthening 4. Second Madras WS Project included: major scheme to bring 1995 | SPN-Active Project (Ln.3907-0/6 IN) additional water to city; distribution and conservation improvements within city; and, TA 5. Bombay Sewage Project included: construction of 2 outfall 1996 SPN-Active Disposal Project sewers; pumping facilities; sewage treatment; (Cr.2763/Ln.3923-IN) sewerage system improvements and rehabilitation; and, slum sanitation Table 2 lists all urban development and urban water supply and sanitation (WSS) projects in India for the 10 years of preceding, and the years following, UPUDP approval. The UP Water Supply and Sanitation Project (Cr.585-IN) is not included in the Table as it was approved over 10 years beforehand although, with Kanpur UD Project which is included in the table, it was a directly related project. Year of approval is Bank fiscal year. Under Status: ICR-Active indicates that the Credit/Loan has closed but the ICR has not been finalized; SPN-Active indicates that the project is being implemented and is under active supervision. - 23 - Table 3: Project Timetable Steps in Project Cycle Date Planned Date Actual Identification (Initial Executive Project Summary) 28-Jan-86 Preparation (pre-Appraisal mission) 07-Apr-86 Appraisal 23-Jun-86 23-Jun-86 Negotiations 28-Jan-87 28-Jan-87 Board presentation 21-Apr-87 21-Apr-87 Signing 21 -Dec-87 Effectiveness 26-Feb-88 Mid-termn review 26-Apr-93 Project completion 31 -Mar-95 31 -Mar-96 Credit/Loan closing 31-Mar-96 31 -Mar-96 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual (US$ million) FY 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Appraisal Estimate Total: 6.0 24.0 48.0 73.5 97.5 117.0 133.5 145.0 150.0 150.0 Actual Credit 8.4 16.2 28.9 46.1 61.4 73.1 82.2 99.3 111.7 127.1 Loan 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total: 8.4 16.2 28.9 46.1 61.4 73.1 82.2 99.3 111.7 127.1 Actual as Percentage of Estimate: 140.0 67.5 60.2 62.7 63.0 62.5 61.6 68.5 74.5 84.7 Effectiveness date: 26-Feb-88 Date of final disbursement: 19-Aug-96 - 24 - Table 5: Key Indicators for Project Implementation !KeyImplementation Indicators Estimated Actual 1. Expenditure against project (SAR) targets - overall: - Part A(i) Urban Development Rs 2,271 million Rs 3,234 million - Part A(ii) Earthquake Reconstruction Rs 404 million - Part B Ganga Action Program Rs 590 million Rs 345 million 2. Physical progress against project (SAR) targets: - Part A(i) Urban Development: 825 physical progress indicators Overall physical achievement physical progress monitored by sub- were defined - too numerous to was about 87% by closing component by town, with each sub- include here, but Quarterly component having between 2 and 11 Progress Reports containing the indicators data are on project file - Part A(ii) Earthquake 1195 schemes in total 1130 schemes (95%) were Reconstruction: physical progress completed at closing monitored by scheme - Part B Ganga Action Program: 17 civil works schemes in total, Haridwar STP 99% physical progress with civil works consisting of 3 large sewage Kanpur STP 60% monitored by scheme treatment plants (STPs) in UP Allahabad STP 52% and 14 smaller schemes in West West Bengal (total) 95% Bengal complete at closing 3. Financial Performance of 480 targets were defined - too At closing, only 14 out of the 60 implementing agencies in Part A(i) numerous to record here, but final year targets were exceeded Urban Development: Quarterly Progress Reports (23%). None of the 2 performance targets were defined for containing the data are on project implementing entities exceeded each year of project implementation (8 file the targets for both of the years) for each municipal body (15) financial perfornance indicators and each water supply and sanitation entity (15). The 2 indicators were: (a) ratio of internally generated revenue to revenue expenditure; and, (b) percent collection of total demand For item 1, expenditure progress for Part A(i) was monitored against individual targets by town (19 items), and by sub- component (13 items). - 25 - Table 6: Key Indicators for Project Operation IL Key Operating Indicators: Estimated Actual None. Key indicators of project operation were not defined in the SAR. The Minutes of Negotiation also do not provide any information on whether indicators were discussed. Nor subsequently, during implementation, were any indicators defined. Table 7: Studies Included in Project Purpose as derined Study at appraisal Status Impact of study Water loss prevention T.A. study Completed No implementation follow- and leak detection through Water supply tariff To rationalize charging Completed No impact on cost recovery. study elements, and make cost Recommendations not recovery. recommendations implemented Outline development To assist long-term Completed for Necessary basis for strategic strategy development planning in Lucknow and planning, and for intensive cities part elsewhere discussion of development options Circulation plan and Assist in evolving Completed Effective. Basis on which functional plans for appropriate policies and individual schemes were initial traffic schemes provide technical support at implemented city level Baseline traffic study ditto ditto ditto Individual towns ditto ditto ditto traffic plans Traffic and transport ditto ditto ditto study for 11 Group A towns Low cost sanitation To assist with project Completed Essential input to the (LCS): updating of planning implementation of the LCS feasibility studies for program Group D towns LCS feasibility studies ditto Completed ditto for Group A and B towns Maintenance To assist project towns to be Not done None management study more effective Utility mapping and Precondition for systematic Two towns Effective in Allahabad and inventory maintenance completed Lucknow Manual of accounting Not identified at appraisal Completed Under consideration by GOUP systems of local bodies at closing All the studies included in the project were for Part A(i) - Urban Development. There were no studies under Part A(ii) - Earthquake Reconstruction and Part B - Ganga Action Program - 26 - Table 8A: Project Costs <--- Rs Million ---------> <----- US$ Million -----> i It.. -y-De:tails -;: :00000000000::DOWAppraisal Actialf Appral D:: AAtu F'Stiae __ Estimate Part A (i) Uttar Pradesh - Urban Development 2,271 3,234 174.7 141.3 Part A (ii) Uttar Pradesh - Earthquake Reconstruction 0 404 0 12.4 Part B Ganga Program 590 380 45.4 13.0 Design, Supervision and Management 231 - 17.7 Total 3,092 4,018 237.8 166.7 Project costs include physical and price contingencies. Appraisal estimates are for an assumed eight year Bank-wide sector profile implementation period. Details of local/foreign breakdown for actuals are not available. Accordingly, totals only are shown. The magnitude of the actual design, supervision and management costs is not known. Table 8B: Project Financing (US$ Million) Source Appraisal Estimate Actual IDA Cr.1780-IN 130.0 127.1 (54.7%) (76.2%) IBRD Ln.2797-IN 20.0 0.0 (8.4%) (0.0%) Government of Uttar Pradesh 74.5 38.2 (31.3%) (22.9%) Central Ganga Authority 13.3 1.4 (5.6%) (0.8%) Total Project Cost 237.8 166.7 (100.0%) (100.0%) Increases in the Bank disbursement percentages introduced during 1991 account for most of the increase in the proportion of Bank contributions to the financing of the project, compared with estimates made at appraisal. - 27 - Table 9: Economie Costs and Benefits Year Capital Incremental Total Incremental Incremental Total Incremental (FY) Costs Operating Costs Gross Benefits Net Benefits Costs Net Benefits Costs (70% labor) (70% labor) 1991 442 35 477 50 -428 406 -356 1992 132 62 194 87 -107 164 -78 1993 130 85 215 120 -95 183 -63 1994 94 121 215 127 -87 183 -55 1995 199 163 362 180 -183 308 -129 1996 197 140 336 197 -141 286 -91 1997 140 140 197 55 119 76 2028 140 140 228 55 119 76 2029 140 140 229 55 119 76 ERR 4% ERR (70% labor) 8% The economic analysis employed the same methodology as was used in the SAR (Annex 11). The economic rate of return (ERR) was calculated for water supply and sanitation investments only. The analysis combined all the entities with water supply and sanitation components. Capital costs were obtained directly from project records. Operating and maintenance costs were measured from the accounts of the implementing entities incrementally from FY90, the year preceding the first year of investment. Benefits were measured using the implementing entity revenues, also measured incrementally from FY90. However, in the SAR analysis revenues were assumed to be equivalent to benefits whereas in this analysis the revenues have been factored up to give the measure of benefit. The factoring up of revenues was by about 50%, which reflects an adjustment for the poor revenue collections performance actually experienced during the project compared with the assumptions made at appraisal. (Benefits accrue, of course, whether or not the beneficiaries make, and the entity collects, the payments for the services). Also, to be consistent with the SAR, benefits have been increased by 0.5% p.a. after FY94 (see SAR, Annex I1, para 3). Incremental O&M costs and benefits are assumed to be constant from FY97 for 40 years from start of construction. For ease of presentation, intervening years 1998 to 2027 are not shown in the table. All costs and benefits were in Rs millions, converted to constant (FY89) prices. As with the SAR analysis, the ERR was calculated twice: first, assuming that the economic value of labor is equal to the nominal wage rate; and second, with a shadow wage rate (assumed to be 70% of the nominal wage rate), in each case applied to the wages component of both the O&M and capital costs. Results were as follows: SAR Actual ERR (100% labor costs) 10% 4% ERR (70% labor costs) 13% 8% The lower actual ERRs compared with the SAR reflect delays in the implementation of the water supply and sanitation program, and lower than anticipated revenues even after taking account of poor collections performance. It should be noted that the actual ERRs probably will be higher than estimated above. Some water supply schemes were unfinished at closing, and hence their prospective benefits, and some of their costs, are not reflected in the analysis. In the SAR at para 6.01 some estimates of the ERR were provided for sites and services, slum upgrading and area development components (respectively, 12%, 13% and 11%). However, lack of data precluded the calculation of the actual ERRs for these three components. - 28 - Table 10: Status of Legal Covenants Covenant j;Pteseif0 lfbltlnti yfuillmnt Description of Agte**ncnt Section type ~ tatu~ ~late date Covenant Comments DCA 3.01 5 C GPD to cary out Part B with due diligence 3.02(b) 3 C Borrower to make available (a) Revised allocation reflecting SDR83.9 m equiv. to UP of earthquake reconstruction which up to SDRIO m may be agreed and approved by Bank allocated to new earthquake Board in Dec-92 reconstruction component; and (b) SDRI 5.0 m to GPD 3.03 5 C Procurement of goods and services as per Sch 4 3.04 5 C 31-Mar-88 GPD and Ganga Implementing Agencies (GlAs) to carry out Part B through an OAP to be reviewed, amended and agreed annually with Bank/IDA 4.01(a) I C GlAs to maintain adequate records and accounts for Part B 4.01(b) 1 C 31-Dec-88 GlAs to have project accounts audited annually and audit certs to be submitted within 9 months of end of FY 4.02 1 C 30-Sep-88 Special account to be audited annually and audit cert to be submitted within 6 months of end .__ ___ _______of FY 4.03 l C 31-Dec-88 GlAs to maintain separate records, accounts of SOEs requiring separate audit opinion .________ ______within audit cert under 4.01(b) LA 3.03 3 C Borrower to make available .__________ __________ _______ ___________ ___________ proceeds of loan to UP PA 2.01(a) 5 C UP to carry out Part A with due diligence 2.01(b) 5 CP 31-Mar-88 UP to carry out Part A through (a) Mostly in compliance. implementation procedures in Following items in OAP were schedule to this agreement; and not completed by closure: (b) OAP to be reviewed, amended surveys and updating of assets and agreed annually with registers; appointment of Bank/IDA commercial auditors; utility mapping (except in Lucknow and Allahabad); action plan for _____ __ _ _____ __ _ _________ _____ _______ ____maintenance study 2.02 5 C Procurement of goods and services for Part A as per Sch 4 of __ _ _ _ _ _ _ _ _ _ _ ________ ________ DCA 3.01 3 C UP to make proceeds of Credit available to project towns (PTs) 3.02(a) I C UP implementing agencies (UPIAs) to maintain adequate records and accounts of Part A - 29 - Original Revised Covenent Present filfilImett fulfillment Desotiption of Agreement Section type status 4date d.tt Covettan Comments 3.02(b) 1 C 31-Dec-88 UPIAs to have project records and accounts audited annually and audit cert to be submitted within 9 months after end of FY 3.02(c) I C 31-Dec-88 UPIAs to maintain separate records, accounts of SOEs requiring separate audit opinion within audit cert under 3.02(b) PA Sch 2 C PTs which fail to meet financial Only one town dropped con't para I performance targets or lag in project from project for non- implementation may have their capital performance. Four funds reallocated to better performing additional towns added towns, or standby towns Sch 5 C Low cost sanitation cell to be Done. But implementing para 2 adequately staffed limited program. Some funds reallocated from this component Sch I C UP to keep IDA informed of any para 3 proposed changes in role of UPIAs Sch 5 C TEMCs to be established in Agra, TEMCs established but para 4 Varanasi, Allahabad and Lucknow, and fully qualified staff only in be adequately staffed prior to 3 (Lucknow position commencing traffic engineering works vacant) Sch 5 C UP to consult with Bank/IDA prior to para 5 changes in investment programs in PTs Sch 2 C Lease and HP agreements for Sites & Generally in compliance. para 6 Services and Area Development In few cases affordability components to take account of may have been adversely repaying capacity of beneficiaries and affected by down payment ensure full cost recovery requirements and pricing policies of DAs Sch 2 CP PT s to cover O&M and debt servicing Minority in compliance, para 7 costs on their water supply and Majority of PT s have sewerage operations failed to be in compliance Sch 2 CP PT s to generate revenues to finance Overall financial para 8 increasing proportions of revenue performance has been poor expenditures. PT s revenue when measured against performance to be closely monitored OAP financial by IPMC performance targets Sch 12 CP UP in consultation with GOI to (i) Direct action not taken by para 9 minimize negative effects of rent GOUP. However, method control; (ii) furnish information on the of property tax assessment actions taken to Bank/IDA; and, (iii) is being changed to take steps to implement agreed formula-based approach proposals which will have beneficial effect on the generation of I property tax revenues Covenant type: 7. Involuntary resettlement Status: 1. Accounts/Audit 8. Indigenous people C - Complied with 2. Financial performance/generate revenue from beneficiaries 9. Monitoring, review and reporting CD - Compliance after Delay 3. Flow and utilization of Project funds 10. Implementation NC - Not Complied with 4. Counterpart funding I1. Sectoral or cross-sectoral budgetary or other resource CP - Complied with allocation Partially 5. Management aspects of the Project or of its executing 12. Sectoral or cross-sectoral regulatory/institutional action agency 6. Environmental covenants 13. Other - 30 - Table 11: Compliance with Operational Manual Statements No significant lack of compliance with applicable Bank Operational Manual Statements. Table 12: Bank Resources: Staff Inputs Stagye of Planned: ReVised Actual project cqcle Week US$000 Weeks US$000 Wees I US$000 Through Appraisal n/a n/a n/a n/a 82.4 183.2 Appraisal - Board n/a n/a n/a n/a 31.0 78.6 Supervision n/a n/a n/a n/a 257.0 623.9 Completion n/a n/a n/a n/a 18.6 44.5 TOTAL n/a n/a n/a n/a 389.0 930.2 Table indicates n/a where information is not available from the Bank's MIS. Completion Actuals are final estimates. - 31 - Table 13: Bank Resources: Missions Performance Rating Stage of Month/ Number Days Specialized Implemen- Develo- Types of probtems Project Cycle Year of Persons in staffskills tation status pmeot Field represented impact Through Oct-84 4 13 ME, FA (2), SE - appraisal Apr-85 5 5 ME, FA, SE(2), - - _ O&M Nov-85 4 10 FA, SE(2), - - _ O&M Apr-86 7 17 FA(2), O&M, _ _ _ Trans, SE(2), ME l Appraisal Jun-86 5 15 FA(3), SE, ME through Board approval Board approval May-87 5 9 SE(3), FA, ME Limited utilization of through retroactive financing facility. effectiveness Financial performance of impl. entities under Part A below targets (by 50%) Feb-88 3 l SE, ME, FA _ - Effectiveness confirmed at conclusion of mission. Slow utilization of funds. Monitoring arrangements, accounts, audits and entity finl. performance need attention Supervision Nov-88 6 12 SE(2), ME, 2 2 Part A: Slow progress with Plan, FA, Proc studies. Financial perf. of local bodies poor. Quart. progress reports (QPRs) not done. Part B: Contract award for 2 (of 3) sewage treatment plants (STPs) delayed by litigation. QPRs not done. TA funds not utilized. Jul-89 4 13 Plan (2), FA(2) 2 2 Part A: Local bodies deteriorating financial situation. IPMC needs strengthening. Part B: Slow physical progress and procurement problems May-90 5 21 Plan(2), ME(2), 2 2 Part A: 4 new towns to be FA included but concem over financial strength of the existing 11. Part B: continuing procurement problems with STPs, but litigation appears to be concluding Apr-91 12 19 Plan, ME(3), 2 2 Part A: Selected procurement SE(2), Proc, problems. Continuing concems FA(3),DC, LCS over financial weakness of local bodies. Part B: audits late - suspension of disbursements followed - 32 - Oct-91 6 14 Plan, ME(2), 2 2 Part A: Local body financial SE, FA, Proc performance poor. Audits late, with numerous audit comments on local bodies - suspension of disbursements against audit objections followed. Part B: none May-92 5 17 Plan, ME(2), 2 2 Part A: Some modest FA, Proc improvement in financial perf. of local bodies but still well below target. Progress with mapping of towns disappointing. Commercial auditors not appointed. Training progress disappointing. Part B: Slow progress with construction of STPs. Appraisal of Earthquake Reconstruction part Apr-93 4 18 Plan, ME, SE, 2 2 Mid-term Review Mission. Part FA A: Slow contTact award. Deteriorating perf. of local bodies. Audit objections resolved. No progress with Class C towns (Singrauli). Part B: Dispute with contractor at 2 STPs continues Oct-93 4 6 FA, Plan, SE, 2 2 Part A: Slow progress with few ME remaining major works. Continuing concem about financial performance of local bodies. Part B: slow progress at STPs Dec-93 2 1 ME, SE Earthquake supervision Feb-94 3 5 FA, SE, ME 2 2 Part A: Few remaining large contracts proceeding slowly. Financial performance of local bodies continues to deteriorate. Part B: Audits late. Contracts at 2 STPs canceled - work stopped. Earthquake reconstruction: Slow progress initially Sep-94 3 11 F, SE, ME S U Part A: Financial performance of local bodies is only remaining major problem. Part B: Cancellation of STP contracts causing uncertainty. Earthquake reconstruction: Progress considerably picked up Mar-95 2 4 ME, SE Earthquake supervision Jul-95 2 16 FA, SE S U Part A: Financial performance of local bodies continues to fall well short of targets. Part B: U Work on STPs started again. Earthquake reconstruction: Good progress Oct-95 1 3 FA Mission considered a request for - 33 - extension of closing date to permit completion of Parts A and B. Part A: Financial performance of local bodies still poor. Part B: Progress on STPs picked up. Completion May-96 4 14 FA, SE, Plan, Env Key to specialized staff skills: FA - Financial Analyst; SE - Sanitary Engineer; ME - Municipal Engineer; Ec - Economist; Env - Environmentalist, LO - Loan Officer; L - Lawyer; O&M - Operations and Maintenance specialist; Proc - Procurement specialist; Train - Training specialist; LCS - Low Cost Sanitation specialist; R&R - Relocation and Rehabilitation specialist; Inst - Institutional specialist; DC - Division Chief There were two separate Appraisal missions, one each for Parts A and B of the Project. Appraisal mission for Part A was from 23-Jun-86 to 08-Jul-86 and consisted of 3 persons, FA(2) and ME. Appraisal mission for Part B was from 07-Jul-86 to 1 9-Jul- 86 and consisted of 2 persons, SE and FA. The Earthquake Reconstruction part was appraised in May-92. - 34 - Appendix A 08-Jul-96 INDIA UTTAR PRADESH URBAN DEVELOPMENT PROJECT (Ln.2797/Cr.1780-IN) 10-May through 16-Jun-96 Completion Mission AIDE-MEMOIRE I. Background 1. The mission. A World Bank mission visited India between 10-May and 16-Jun-96 for the completion the Uttar Pradesh Urban Development Project. The mission members were Messrs. Michael Whitbread (SA2AW), S. Sarkar (SA2RS), H. Unger (ASTEN) and Evan Rotner (Consultant). Mr. Whitbread (Project Task Manager) acted as mission leader. 2. Mission objectives. The mission objectives were to: (a) identify, assemble and otherwise request data and contributions which are required to complete the project's Implementation Completion Report (ICR); (b) review the physical progress and performance of the project in relation to the project objectives at the time of Loan/Credit closure on 31-Mar-96; (c) review the project's institutional strengthening achievements; (d) review the status of training, studies and consultants' assignments; (e) identify unfinished parts of the project; and, (f) alert the Borrower to remaining project obligations. 3. During the last supervision mission in Oct-95, and in subsequent communications, the mission had explained the procedures and requirements for ICR preparation, especially the preparation of the Borrowers' contribution. Bank guidelines and relevant examples of previous ICRs for other projects had been provided to project officials. The Government of UP (GOUP) had appointed consultants to undertake an evaluation of a sample of individual schemes under Part A (i) - Urban Development, and the consultants' work, though incomplete at the time of the mission, was helpful to the mission. For Part B - Ganga Action Program (GAP), in addition to reviewing the status of the project, the mission assembled information on GAP's overall achievements using the extensive available documentation (the mission findings on the GAP are summarized in Annex 1). 4. Mission tasks. For Parts A (i) - Urban Development, and A (ii) - Earthquake Reconstruction, the mission held discussions with officials of the GOUP; and, for Part B - GAP, the mission held discussions with the National River Conservation Directorate (NRCD), formerly the Ganga Project Directorate (GPD), of the Ministry of Environment and Forests (MoE&F) of the Government of India (GOI). Field visits to inspect projects and schemes were made to the cities of Kanpur, Lucknow, Meerut and Agra for Part A (i), and to Kanpur and Varanasi for Part B. Discussions were held with local officials of the implementing agencies in these cities. A list of key persons met is at Annex 2. - 35 - 5. All mission members wish to record their appreciation for the courtesies extended to them and for the assistance and cooperation of all agencies and individuals concemed. The findings and conclusions of the mission for Part A (i) were discussed at a State-level wrap-up meeting chaired by the Secretary, Housing in Lucknow on 1 1-Jun-96. For Part B, there was a wrap-up chaired by the Joint Secretary of GAP of the NRCD in Delhi on 14-Jun-96. II. Summary of Agreed Actions No A-M Agreed Action By Whom By When para I 129 First part of draft report of GOUP Evaluation consultants sent to Cons. with 31-Jul-96 Bank IPMC and GOUP 2 129 Second part of draft report of GOUP Evaluation consultants sent Cons. with 31-Oct-96 to Bank GOUP 3 128 Submit the balance of withdrawal applications to Bank IPMC 31 -Jul-96 NRCD 4 128 Submit audits of SOEs for fiscal year 1995/96 to Bank IPMC 31 -Dec-96 NRCD 5 128 Comply with covenants for period of Credit GOI Continuous GOUP 6 129 Assist with preparation of ICR by providing required information IPMC 31-Jul-96 to Bank as indicated in text of A-M. IPMC to provide 31 -Mar-96 NRCD or as indicated Quarterly Progress Report to Bank in text of A-M 7 129 Bank to circulate draft ICR to GOUP and NRCD for comment Bank 15-Sep-96 8 129 Comments on draft ICR to be forwarded to Bank GOUP and Within one NRCD month of receipt 9 129 Borrowers' Evaluations for the ICR to be forwarded to Bank GOUP and 31-Oct-96 NRCD 10 129 Draft final ICR sent to Bank management for review Bank 14-Nov-96 11 21 Prepare estimates of expenditure required to "complete" S&S DAs schemes 12 27 Cease collection of earnest money from EWS and LIG S&S plot DAs applicants 13 42 Prepare realistic action plans and forecasts to "complete" S&S DAs with 01-Sep-96 schemes and send to Bank GOUP 14 67 Provide information to Bank regarding current disposition of IPMC with 31-Jul-96 Development Area Agreements, down payments and loan Kanpur DA payments 15 82 Undertake survey of LCS latrines not in use and advise GOUP with 31 -Jul-96 beneficiaries. Send results to Bank IPMC 16 84 Provide Bank with data on no. of community latrines IPMC 31 -Jul-96 17 107 Define and implement a program of patch-and-repair works in the Municiplities upgraded slums 18 129 Last part of report of GOUP Evaluation consultants sent to Bank Cons with 31-Dec-96 GOUP I _I -36 - II1. Status of the Project at Completion Part A (i) - Urban Development 6. Project management arrangements. All of the implementing agencies at the time of appraisal reported ultimately to the then Housing and Urban Development Department (HUDD). Accordingly, overall project management, monitoring and coordination was with the HUDD and responsibility for the project was specially focused in a Investment Planning and Monitoring Cell (IPMC) within HUDD. The Chief Executive Officer for the project was therefore the HUDD Secretary to GOUP. The costs of the IPMC were funded out of the Credit. 7. For day-to day project management, the IPMC was initially headed by a Chief Urban Planner on deputation, like all the members of the IPMC, from the HUDD. All the members were senior officials. IPMC was officially assigned key project management and supervision functions, particularly for reviewing the project towns' investment programs and deleting, substituting and including new investments and standby towns. Its most important power was that it advised the State Finance Department regarding funds-release for project activities. 8. For town level project management, provision was made for local Project Management and Coordinating Committees which were to gather monitoring and other information and supply it to the IPMC. 9. Sector management, technical assistance and training. This component of the project was envisaged to: support the establishment and operation of the IPMC and the Traffic and Transport Appraisal Unit; prepare water supply schemes; prepare outline development strategies for urban areas; support traffic engineering and management cells in the five largest "KAVAL" towns; support consultants services for improving accounting and MIS in project entities; support a number of studies; and, provide training for officials and staff of GOUP and project entities. 10. The project finalized all the above tasks with the exception of the improvement to the accounting and MIS of the entities. The project failed to appoint any of the proposed eleven (later reduced to six) independent commercial auditors to advise on systems. The assets registers of the water supply entities were not systematically revalued and up-dated. 11. However, a tariff study was completed, although this was undertaken in-house by IPMC working with the Jal Nigam, rather than by consultants. Double-entry accounting based on the Kanpur experience in the earlier Kanpur Urban Development Project (KUDP) was introduced in the Jal Sansthans and Development Authorities, but not in the municipalities (except Aligarh). A municipal accounting manual was developed by consultants which is being considered by GOUP for its general applicability. 12. IPMC provided the mission with an updated list of studies which were completed under the project. - 37 - 13. Although no targets were set at appraisal, the training achievements were modest. 110 training courses ranging from three to five days duration were organized, benefiting about 2,000 personnel of the local bodies and IPMC. 14. Expenditure on sector management and training fell well short of the appraisal expectations, at Rs 41.0 million compared with Rs 49.2 million in the SAR. 15. Shelter. Sites and Services. All the schemes in the project, at the time of appraisal, had land already acquired by the Development Authorities (DA) responsible for sites and services (S&S). Meerut was the exception, as this town was brought in to the project several years after appraisal. The land requirement for 8 schemes was estimated to be about 122 hectares (ha), a gross density of about 82 plots/ha. About 8.3 hectares of land for commercial and small business plots were to be included in the schemes. Sites ranged in size from 4-60 ha, in Varanasi and Kanpur respectively. Most of the sites were relatively small, in the range of 10-30 ha, equivalent to 800 to 2,000 plots. 16. Land acquisition is usually a large impediment in land development and other schemes in urban areas. It has not been an implementation problem in S&S projects in UPUDP, except apparently for a few small pockets in individual schemes. Other factors than land acquisition, therefore, are responsible for delays in scheme construction and occupation by beneficiaries which are discussed below. 17. The SAR originally targeted about 10,000 house plots in all income categories. 78% of residential plots were intended to be affordable to Economically Weaker Sections (EWS) and Low Income Group (LIG) households with incomes of up to Rs 700/mo and between Rs 701 and 1500/mo respectively in 1986, the time of the appraisal. The production target was revised upwards in 1992 to 13,250 plots, due to the greater availability of Credit resources. In fact, at least five out of eight of the schemes fell short of the target proportion of plots for EWS and, in six schemes, the target percentage of EWS and LIG plots in total plots was not reached. 18. Schemes were to be implemented in at least eight category A and B towns, and possibly additional ones depending on the financial performance of implementing agencies. Up to Feb- 96, 12,700 plots in 8 towns had been "completed" according to the IPMC data provided by the implementing agencies. However, during site visits in Lucknow, Kanpur and Meerut, the mission found that road works were not completed and water and sanitation facilities were not fully operational. This raises doubts about the extent to which services on other schemes, which the mission was not able to visit, have been completed and are functioning. 19. Expenditure up to Dec-95, was Rs 363.4 million on all S&S schemes against the SAR expenditure target of Rs 314.9 million; an estimated increase in costs of 16% compared to a 33% increase in the number of plots. Clearly there are numerous unfinished works and "completed" works which need to be put right to function, and on which additional expenditure is needed. 20. The total estimated costs of S&S to make all services function adequately will clearly exceed recent cost estimates because of delays in contract execution caused by the Development - 38 - Authorities. The mission was assured by DAs that funds had been provided in the 1996/97 budget of the concerned agencies to complete the schemes. By reviewing a few major schemes, it is apparent that the costs to completion have been steadily rising during the project implementation period, for example: (c) In Lucknow, the Sep-95 Quarterly Progress Report (QPR) showed Rs 48.2 million IPMC-approved cost to complete works contracts; the SAR estimated Rs 69.5 million cost, but the QPR Dec-95 estimate of costs was Rs 98.0 million, which also includes off-site roads. (d) In Kanpur, the Sep-95 QPR showed Rs 101.8 million cost to complete; the SAR estimated Rs 121.8 million cost and the Dec-95 estimate of costs remained at Rs 101.8 million. (e) In Gorakhpur, the Sep-95 QPR showed Rs 53.6 million cost to complete; the SAR estimated Rs 26.1 million cost and the Dec-95 estimate of costs was Rs 53.6 million. 21. The SAR estimated the total costs for S&S including contingencies at Rs 314.0 million. In 1991, the target cost was increased by 16% to Rs 363.4 million. It seems likely that more than Rs 363.3 million will be needed to complete the works to a minimum standard. But a realistic estimate of the probable costs for functional completion of services on schemes remains to be developed by the DAs. The mission recommends that the preparation of a realistic estimates of the expenditures required to put each scheme in working order be included in the operational action program of the ICR to complete the project in accordance with its valid original objectives. 22. Final designs and bid documents had been completed or were in advanced stages of preparation at appraisal for all S&S investments in project towns. Accordingly, contracts for all or most of the on-site infrastructure and EWS houses were let early in the project implementation period as all the implementing agencies already had the required land in possession. The contract completion periods of about two years were typical for these types of work in India by public housing agencies such as the DAs implementing the UPUD. For example: (a) in Kanpur, most contracts let in Jan-90 were to complete in Mar-92; (b) in Lucknow, most contracts let in Dec-90 were to complete in Jan-92; (c) in Allahabad, most contracts let in Mar-87 to Jul-87 were to complete in Oct-88 to Dec-88. 23. In reality, the project contract records and site inspections by the mission indicate that, as of Dec-95, many of the site development contracts which had started in 1990/91 were scheduled to complete only in 1996 on sites at: Kanpur; Allahabad; Lucknow; Meerut and Moradabad; and possibly the other sites in Varanasi and Gorakhpur. 24. IPMC has not recorded in its QPR any data connected with marketing of plots, such as the date of marketing in individual city schemes or the number of applications received. Nor was - 39 - IPMC instructed or specifically requested by the Bank in the SAR or the Legal Agreements to keep such records. 25. The mission found that the DAs had advertised house plots early in site construction periods (1991 in most cases). The applications for plots were on the average over four times the number of plots put up for sale in Kanpur, for example. Plots were allotted (on the basis of lotteries for all but HIG plots, if applications exceeded the number of plots offered) and registration or earnest money fees of 10% of the plot price were paid by beneficiaries, mostly in 1991/92. From the cash flow statement of the KDA and the Meerut Development Authority (MDA), both DAs were very slow to refund earnest money to the applicants. 26. On affordability, the DAs' conventional practice, which they have continued during project implementation, is in violation of specific provisions in Attachments to the Minutes of Negotiations (MON). The MON rightly specified that no earnest money needed to be put up with applications for plots. This provision was intended in particular, to make the plots offered affordable to the EWS. It is well known that most EWS and LIG families have little or no savings from which to put up earnest money or down payments. Accordingly, the DAs' practice of requiring earnest money must be constraining applications from EWS families who were intended to be about 60% of beneficiaries of S&S schemes. 27. The mission recommends that in the post-project closing period, DAs do not require earnest money from at least EWS and LIG plot applicants. 28. Affordability of plots to EWS and LIG beneficiaries was also further adversely affected by DAs' plot down payment requirements and the excessively large size of the EWS 3 and 4 plots (37 and 42 m2 respectively) and the high prices for these plots. For the Kanpur S&S scheme, in the Feasibility Study prepared at the time of appraisal, down payments for EWS plots ranged from 12 to 18%. This was too high for EWS families. Furthermore, plot prices for the lowest income EWS 1 plot, which had no on-plot superstructure, were set so high that 16.7 % of beneficiaries' income was to go towards plot loan debt service, leaving only the balance of about 9% of household income for debt service on a Building Loan of Rs 2,500, too small to even build a simple one room shelter. While the EWS 2, 3 and 4 plots had fully-constructed walls and roofs on them, 25% of income would be consumed on the plot and superstructure loan and no debt service capacity remained for simple finishing of the house. Other charges, such as electricity and property tax (where relevant) also were not included in the costs of housing for estimating affordability, so the percentage of household income which would be used for shelter was underestimated. 29. When the plots were advertised several years later (in 1991), when incomes and plot prices had to be adjusted for the passage of time and for actual contract site servicing costs, the DAs departed further from pricing and affordability requirements. In the Kanpur S&S scheme, household income was taken at a uniform Rs 1,000/hh/mo for all plot types. This was probably acceptable for the top of the EWS, but it was much higher than the income of the lower strata of EWS urban incomes which were probably of about Rs 550/hh/mo. Furthermore, KDA increased the plot price (to Rs 425/m2 for all EWS plots) and the percentage of down payments to plot - 40 - price to 25%. The 25% down payment was applied to all income groups. So, KDA both diminished the affordability of plot down payments to the EWS while enhancing the down payment affordability to the Middle and Higher Income Groups (MIG and HIG), and diminishing its early cash inflow from the MIG and HIG plot sales which normally should provide most of the early cash in these schemes. 30. At the time allotment letters were issued to beneficiaries, the Hire Purchase Tenure Agreement (HPTA) and Lease Note was to be issued with authority for beneficiaries to deposit HPTA loan payments in a designated bank. At this time it may be deduced from the QPR contract data, that on-site infrastructure construction was 40-80% complete, and most contracts had been let at fixed prices with no provision for escalation. Accordingly, the DAs were in position to know their scheme costs provided that contract implementation delays did not require revisions in the rates paid to contractors, re-bidding contracts, or increases in the few contracts which were left to the later stage of scheme construction. 31. The data made available to the mission suggests that when allotments and land leases were completed with beneficiaries, HPTA were not executed by the DAs in many of the schemes, despite understandings in attachments to the MON. 32. The MON also provided that applicants would have to apply for particular plots consistent with their household income. The mission was informed during its visit to the Kanpur S&S scheme, that EWS and LIG applicants were free to apply for these plots regardless of income. 33. The Terms and Conditions of HPTA agreed in the MON provided for transfer of title on the basis of 90 year leases, while payments for plots, less the down payment, would be at not less than 12% per annum for not less than 20 years for the EWS and six years for all other plots. The percentage of down payments applicable for each income group and plot type was not specified in the MON or Agreements, nor were beneficiary affordability limits, expressed as percentage of household income available for servicing plot and house loan project debt and other housing costs. For these target parameters, the appraisal team appears to have relied on precedents established in the earlier Kanpur Urban Development Project, which was the precursor to UPUD. 34. The DAs appear to have adhered to the terms and conditions established in the MON for HPTA. Except that, as mentioned above, down payments were increased in accordance with DAs' normal practices which the DA seemed to have targeted. In addition, this made loan payments fit within the 25% of household income affordability limits. 35. Occupation of sites, on the basis of observations made during mission visits to sites in Kanpur, Meerut and Lucknow, is meager. However, in Kanpur 800 EWS plots out of 2,400 were occupied, and 85% of EWS I plots were occupied. EWS plots on which core housing had been built were very sparsely occupied. On the Lucknow site, several hundred LIG plots (out of a total of more than 1,700) had fully constructed row houses on them. They had been completed in 1994. LDA had built these row houses as deposit works for societies of plot holders. Construction had been financed by an external institution. Hardly one of them was occupied. - 41 - 36. In mission discussions in the field with the few occupants, it appeared that water supply was erratic and sparse and may have become available only recently, and that other services like street lights and the sewage system were not fully operational. On both sites, only a few MIG or HIG houses had been constructed. No school buildings or other community facilities were to be seen on any of the sites visited by the mission. Nor was there any construction on plots designated for commercial purposes. In the absence of residential occupants, there was naturally no market for the commercial plots and the DAs were waiting for occupancy to increase before marketing them. 37. Almost certainly, occupancy has been delayed for several years after plots were advertised and allotments made because essential on site services, like water, were not available, even after infrastructure contracts were said to be complete (in the QPR). The mission was informed that, about 1992, KDA as a whole encountered financial problems. It ceased paying contractors on its Bank-funded scheme, to "divert" its resources to its other development activities. It should be noted that the Bank-funded S&S projects, at least in the larger towns like Kanpur and Lucknow, are only a small part of the DA's overall program. 38. The information provided in the QPR for most sites shows large differences between the number of plots allotted and the number of leases (presumably for land) completed. From the data available, it is unclear whether HPTAs were issued to allottees at the time of allotment as required by agreements with the Bank in the MON. 39. Regarding financial arrangements and cost recovery performance, the QPRs do not contain any specific information about down payments for plots, registration fees, and HPTA loan payments, and these data were not available to the mission. However, there has been a lag of several years between allotments and the payment of HPTA down payments and that the detailed records will show large differences between the demand for periodic HPTA payments (over 20 years) and the recoveries. This suggests that the cash flow from the projects must be way below what was targeted for the full recovery of almost 100% of capital costs in the SAR. From the evidence available, a negative cash flow on each scheme would be expected. 40. Thefunding arrangements for schemes provide terms to the DA which modestly cushion them against the negative financial impacts of the delay in recovering their project investments from sales revenues. First, the DAs' loans from GOUP have a five year grace period for repayment of principal. On the other hand, DAs' borrowing interest rate was increased to 12.25% (compared to 8.75% at appraisal) by GOUP as its borrowing rate from GOI increased during the implementation period. Correspondingly, DAs increased their lending interest rate to beneficiaries to 13.0% per the Agreements with the Bank. Secondly, GOUP funded as loans 100% of scheme investments by DAs in excess of DAs' S&S scheme expenditures. The Project Agreement and MON contain no specific agreements regarding GOUP onlending terms to implementing agencies, nor is there a component-specific funding plan in the SAR. However, Section 3.01 of the Project Agreement provides that GOUP would make the proceeds of the Credit available to the project towns on terms and conditions satisfactory to the Association. During implementation therefore, IDA could have required GOUP to lend only part of the S&S investments to DAs, and reduced the grace period. This would have put financial pressure on the - 42 - DAs to accelerate their sales programs and relate them more closely to their investment programs and project cost recovery and affordability requirements. 41. A scheme cash flow statement obtained from KDA indicates that KDA loans of Rs 101.8 million, obtained from GOUP for its scheme, exceeded its capital investment of Rs 90.2 million on the scheme. By the end of 1995/96 KDA had a net positive balance between its scheme receipts and payments of Rs 49.4 million. In effect, GOUP may be funding KDA's debt service and supporting KDA's inefficient revenue generation. 42. The mission recommends that GOUP requires all DAs to prepare realistic revised multi-year marketing, investment, pricing, revenue and affordability forecasts and action plans in not more than two months. The out-turn of these forecasts should conform to the cost recovery affordability and beneficiary targets agreed with the Bank and should form part of the set of actions to be completed after project Closing. These forecasts should be sent to the Bank no later than 01-Sep-96. 43. Shelter: Slum Upgrading (SUP). The SAR originally targeted upgrading for 350,000 people (about 58,000 households) in 230 slums, on about 510 hectares of land. The average estimated densities of 114 hh/ha, or average plot sizes of about 65 m2, are not high and consistent with urbanized rural villages on the urban fringe. Upgrading provides basic services such as, hand pump water supply, access via paved pedestrian paths and street lights. Provisions for community facilities such as pre-schools are not funded under any of the project components. The project provided for project funds to be on-lent to municipal bodies for off-site infrastructure, and to beneficiaries for individual water connections and low cost sanitation. 44. The SUP target was revised upwards to 89,130 households (about 534,780 people), due to the greater availability of Credit resources and at Feb-96, a total of 89,130 households in 13 towns and 398 slums, indeed, had received improvements. Accordingly, the revised target number of households and the construction of on-site basic services had been completed and in service by the time the project closed. 45. In terms of upgrading standards, neither the SAR or the legal documents, including the MON, establish specific physical or performance standards. A standard is implied in the SAR (Annex 5) which states that GOUP proposed to "supplement the ongoing Environmental Improvement of Slums under its Minimum Needs Program (MNP) with project funds to ensure an adequate level of upgrading." The MNP standard at the time of appraisal was Rs 250 per capita and the estimated average SUP cost was Rs 476. However, shortly after appraisal this was raised to Rs 435. This suggests the project essentially implemented the MNP standards. 46. The mission visited a selection of SUP neighborhoods in Lucknow, Kanpur, Meerut and Agra. The majority of the neighborhoods visited had been upgraded several years ago. So, there was an opportunity to observe whether the implemented works had been implemented satisfactorily, were functioning, being maintained and delivering direct and indirect benefits. Most of the neighborhoods visited were old rural villages that had become embedded in the expanding urban area. A few were inner city slums. The majority of upgraded slums are in the - 43 - urban periphery, as anticipated in the SAR, and probably because most slums in the city proper had been previously upgraded under GOI and GOUP funded programs. 47. Physical works were similar in most cases. Internal roads have been paved in fired brick, sloped to drains on both sides. Drains were sometimes formed as brick channels; in other cases a runway was provided against a curbing. No sub-base gravel was provided. In some narrow lanes, the bearing capacity was insufficient to take repeated loading of small trucks and carts and had rutted out. There were numerous instances in which stones put on drain crossings had collapsed or were blocked due to lack of maintenance. 48. In most slums there were drainage problems leading to standing water containing sullage, silt, garbage and sewage. Blocked drains were filled with chemical dyes in one area in Meerut, where there were a large number of power looms mixed with residential dwellings and market areas. The drainage problems are due to: inadequately-formed or damaged slopes; lack of drain cleaning; collapse of drains due to excessive pathway vehicular loads; house construction over and in drains; deposits of manure and soil due to cattle being kept on some premises; in many cases, lack of work on off-site drains needed to drain the neighborhood proper; and, in the absence of a CP program, a failure to define and communicate to and with communities their own and the municipality's separate responsibilities for maintenance. 49. Hand pumps, with a small 3-4 foot diameter, circular concrete catchpan and bore wells have been provided. In some cases, street lighting also has been provided. There were several places where the Low Cost Sanitation (LCS) component of the project had been used to provide households with on-plot sanitation. In one case observed by the mission SULAB had built and staffed a washroom and toilet facility. Figures were not available from IPMC as to how many LCS had been implemented under the project in SUP areas. In a significant number of cases, installed handpumps were not working. Also in many cases there was inadequate provision for properly draining water away from the handpump area. 50. Generally, the municipal authorities met by the mission were vague about the on-site physical and performance standards to which all services had been implemented. In one dense and further-densifying inner city SUP neighborhood in Agra, the municipality had installed conventional sewer lines and city piped water supply was available. However, the mission was told that a significant number of houses in the area had not connected themselves to the sewer lines. 51. With regard to off-site infrastructure to support SUP, many of the environmental problems seen by the mission in upgraded slums were due to inadequate or no consideration being given to off-site works in the upgrading plan for a slum area. On-site drainage problems in particular were frequently due to lack of work on small and in some cases, large, off-site drainage channels. For sanitation, SUP relied on the project's sewerage and LCS components. While in some slums LCS and conventional sewers have been installed under the project, the planning and implementation of SUP seems generally to have stopped at the slum border. Off- site infrastructure requirements have not been incorporated in SUP plans for neighborhood on- - 44 - site works, although site engineers with whom the mission met where aware that some off-site works like storm drains funded by the project would help drainage in SUP neighborhoods. 52. The on-site construction and performance standards are generally adequate, provided that the municipal engineers understand the performance required in particular areas. However, the mission saw numerous instances in which the absence of performance requirements and attention to off-site conditions, or the need to link other project components with SUP, caused the SUP schemes to fail to reach their full benefit potential. 53. Regarding costs, up to Rs 250 per capita under the MNP as grant, or such other threshold that GOI might establish from time to time, supplemented with project funds, established the target cost of SUP at about Rs 476 per person (SAR costs of Rs 166.5 million to cover 350,000 people). The component cost was later revised to Rs 236.5 million. As at Feb-96, Rs 234.2 million was spent on SUP, covering 85,053 households, according to the Monthly Progress Report (MPR), or about 510,320 people. The average per capita project expenditure therefore is Rs 459 per person, compared to the SAR costs of Rs 476 per person. 54. GOUP was to providefunds to municipalities as grants up to Rs 250/capita at the start of the project, now at Rs 435/capita, for expenditure and loans (from project funds) for on-site services under SUP, and off-site infrastructure to support SUP under the water, sewerage and drainage components. The actual grant/loan ratio depends on the MNP per capita expenditure established from time to time by GOI. In theory, if the MNP per capita expenditure were increased, the project grant to loan ratio to municipalities would increase. 55. The mission was unable to establish what funds, if any, were borrowed by municipalities for basic on-site SUP services. It may be guessed that all the funds for SUP on-site basic services were provided to municipalities by GOUP as grants, even though GOUP would have had to borrow project funds from GOI at GOI's annually established terms and conditions. GOI's terms and conditions for loans to states had by 1995 become substantially more than the terms and conditions for GOUP onlending to implementing agencies that prevailed at appraisal (8.75% interest 5 years grace on principal repayment and 20 years term). Because of the probably large or 100% grant funding of SUP, GOUP's subsidy to municipalities for SUP probably increased during the project period. 56. Whether actually funded as part loan and part grant as it appears was intended by the project, or all grant, because of the municipalities' failure to generate net resources for debt service during the project period, the SUP component was effectively a grant-funded program. 57. The SAR also anticipated that community participation (CP) would be sought in planning the improvements, with individual home improvement to be carried out on a self-help basis (SAR Annex 5, para 7). How and when CP would be enlisted goes unmentioned in the SAR; and it seems that there was no CP in SUP. The mission did see many cases in which residents of SUP neighborhoods were improving their houses substantially with their own resources and this may be taken as a direct positive benefit of SUP. - 45 - 58. Generally, municipal engineers seem to be working against a specific Rs/capita expenditure target. When asked by the mission why some particular item of work, which would have improved a scheme, had not been done, the answer invariably was that the expenditure on the work would have exceeded the Rs per capita expenditure limit (of Rs 435 presumably). Thus, the following factors adversely affected the benefits of SUP: the municipalities' perception of on-site per capita expenditure costs of SUP as a fixed constraint; the lack of integration in scheme designs of off-site works under other project components; absence of specific service and environmental performance standards for which SUP was to be implemented; and, the provision for works costing more than the per capita expenditure limit to be loan and not grant-funded. For SUP schemes the upgrading design and costs for an area should emerge from performance requirements; and the implementing agencies should be required to identify, cost and implement off-site investments that are needed to make on-site investments in basic services function. 59. Shelter: Area Development. The SAR targeted Area Development (AD) for 17,500 people (about 2,920 households) in six sites on about 57 hectares of land in Kanpur and Allahabad. AD was actually implemented only in Kanpur where six sites with 1,038 households were targeted and the MPR reports, 740 had been serviced on three sites by the end of Feb-96. 60. The areas targeted for AD are unserviced unauthorized settlements and communities developed through private subdivision. The SAR contention that about 60% of the households in such areas are in the EWS categories seems questionable to the mission. The average estimated densities of 31 hh/net ha, or average plot sizes of about 200-300 m2, in these AD areas are relatively low and consistent with what is affordable in urban areas by upper LIG and MIG income groups. 61. For AD areas, the component aims to provide roads, stormwater drainage, street lighting and connections to off-site water and sanitation services. While the mission had too little time to probe deeply, it appears that AD services are provide at the usual municipal standards. From the SAR, the average cost/gross ha for AD on 57 ha works out at Rs 68 compared to the average SAR cost/gross ha for SUP work of Rs 33/gross ha and Rs 236 /gross ha for S&S. The difference between DA and S&S development costs/ gross ha is probably due to the fact that, in AD areas, off-site water, sanitation and roads are already available, whereas in S&S they must be created at a substantial additional scheme cost. The Kanpur Area Development Authority implemented the AD schemes in Kanpur. 62. The SAR estimated the cost of AD at Rs 38.0 million for Kanpur and Allahabad. The revised target cost of AD was established as Rs 23.5 million for Kanpur and Rs 1.4 million for Allahabad to make a revised total cost/expenditure target for AD of Rs 24.9 million. 63. The AD schemes in Kanpur were contracted in 3 areas (Indrapuri, Tulsi Nagar and Hitkaari Nagar I and II) early in the UPUD project period, between Jun-89 and Jan-92. These contracts were to be completed in Aug-90 for Indrapuri and Jan-93 for the rest. 64. As of Jun-96, works had not yet been completed. In Dec-95, only Rs 14.4 million of contracted cost of Rs 22.4 million had been spent and completion was targeted for 31 -Mar-96 at - 46 - an estimated cost of Rs 24.9 million. The delay in implementation is due to the financial problems which KDA experienced in 1992. In Kanpur, budget provisions have been made by KDA in the current financial year 1996/97 to complete AD. Services were still being constructed by the same contractors to whom these small works were awarded in 1992 and appeared to be nearing completion on the one AD site which the mission visited in Kanpur. 65. Regardingfinancial arrangements, Area Development costs of the DA are to be recovered from resident/owners (RIO) of plots in AD areas. The terms of agreement (Attachment 4 of MON) provide for the service improvement costs to be born by resident/owners as follows: (a) 25% of the scheme cost apportioned to the R/O as a down payment against costs; (b) 12%/year interest charged on the balance of costs apportioned to the RIO as a loan; (c) repayment to the DA of a loan in 24 quarterly equal installments (eg. 6 years); (d) R/O agreement that building boundary walls could be demolished by the DA in order to construct services; and (e) in case the RIO failed to pay loan installments as required in accordance with provisions in the UP Urban Planning and Development Act 1973, hypothecation to the DA of the R/O's land and structure for the entire period of the loan. 66. The mission had insufficient time to gather information about the amount of down payments paid by R/O for AD and whether they are still being held by KDA. Also information was not available regarding loan payments by RlOs. In the light of the long delay in KDA's implementation of AD schemes, KDA should have postponed loan payments and at least paid a market interest rate on R/O down payments. However, the MON agreement between DA and RIO is silent about KDA's obligations in cases where it experiences delays in implementing the AD scheme. From the QPR for Dec-95, it emerges only that out of 740 households in AD schemes, agreements were completed with 445, and KDA had issued bills for loan payments to 365. 67. The mission requests that the IPMC and KDA provide specific information to the Bank regarding the current disposition of Agreements, down payments and loan payments by 31-Jul-96. 68. As for lessons, the AD schemes had substantial promise since about 45% of the housing stock in UP cities is in the form of unserviced unauthorized settlements and communities developed through private subdivision. Had the KDA not run into financial difficulties in its own non-Bank-funded investment program (ten to 20 times larger than the Bank-funded KDA schemes), the AD schemes might have been completed much earlier, and a promising experiment - 47 - could have demonstrated a replicable method of improving services for a large proportion of households in UP cities. 69. Water Supply. The augmentation of water supply constituted 28 % of the total project cost at appraisal and covered 11 major towns, later increased by four. Major investments were proposed for the six towns of Kanpur, Agra, Varanasi, Allahabad, Lucknow and Jhansi where new treatment/filtration plants (with aggregate nominal capacity 720 Mld) were proposed. There were, in addition in these towns, improvements in zonal transmission (82 km pipeline in aggregate) and some rehabilitation of the existing water treatment plants and the distribution systems (150 km of pipes, and construction of 13 reservoirs). In other towns, the water supply capacity augmentation involved construction of 67 deep tube wells, laying 302 km of pipelines and construction of 27 overhead reservoirs, and some rehabilitation measures. 70. Mostly the Uttar Pradesh Jal Nigam (UPJN) was responsible for the plan, design, and execution of the construction works on behalf of the owner (Jal Sansthan (JS) or local body). However, Varanasi was a notable exception where the entire responsibility of construction of the headworks and the treatment plant and the clear water storage and pumping arrangements were taken-over by the Varanasi Jal Sansthan. On successful completion and commissioning of the works by UPJN, they were to be turned over to the owner to operate and maintain them. The Jal Sansthans and the local bodies also carried out some small works in their respective areas. 71. All the water supply augmentation based on ground water was completed and commissioned by the Credit closing date. However, except in Allahabad, works in major towns where additional treatment capacity of surface water were proposed viz. Kanpur, Agra, Varanasi, and Lucknow, were delayed and in none of these town were the works completed by closure. 72. In Kanpur, the 200 Mld water treatment plant had been commissioned in May-95 after successful pre-commissioning trial, but the non-completion of the raw water transmission main and the settling tanks restricted the overall production. These works are expected to be completed and commissioned by end of Jul-96. The mission visited the water treatment plant and found the construction quality is of acceptable standard. The mission was informed that the JS carry out strict water quality monitoring and they are satisfied with the performance of the filtration plant even during high turbidity of raw water in the monsoon. This plant is still operated and maintained by the contractor who constructed it. He is assisted by the staff of Kanpur Jal Sansthan. 73. In Agra, the capacity of the existing treatment plant was increased by the provision of a 90 Mld filtration plants in Feb-90. The construction of the new 144 Mld treatment plant and its associated works such as intake, pumps, raw water and clear water transmission mains are expected to be completed and commissioned by Oct-96. Construction of the treatment plant and other civil works were 95% complete at Credit closing, but there have been delays in supply and erection of pumps, and with the electrical connections. 74. In Varanasi, the water treatment plant of 250 Mld capacity had been commissioned in Jun-95. But the clear water feeder main of 7.3 km to pump water to the zonal reservoirs which is - 48 - being constructed by the UPJN at the risk and cost of a failed contractor, is not yet complete. It was indicated to the mission that this will be completed by Sep-96. Previous missions were given various dates of completion of this important work by the UPJN, but the progress is not satisfactory. The lack of construction management and organization skills and equipment in the UPJN local unit at Varanasi is delaying the benefits of this investment. 75. A 100 Mld capacity water treatment plant in Lucknow was commissioned in Feb-94 and is being operated by UPJN. The mission visited the plant and was satisfied with the general upkeep. Attempts by the UPJN to hand over the plant to its owner, the Lucknow JS have not yielded any positive results. The JS is not equipped with skilled personnel to take over the operation and maintenance. 76. The works on the distribution extensions in Lucknow are in progress and are due to be completed by end of Sep-96. 77. Due to non-completion of about 3.5 km clear water rising main, the 110 Mld Jhansi water supply scheme has not been commissioned. Present indications are that the scheme will be commissioned by Sep-96. However, an emergency water supply scheme financed under the project based on a battery of tubewells at Baratha basin was completed and 8 Mld has been available to the town since early 1994. The distribution extensions works in the town were not complete at the Credit closing. 78. Sewerage. The main emphasis of this component was to: rehabilitate the existing sewerage systems by cleaning and repairing, and expanding the coverage with provision of service connections (up to 15,000 new connections) to maximize the utilization of the existing networks. There has been some construction of new sewers to replace old sewers which were beyond repair or had inadequate capacity. All the eleven original Group A and Group B towns participated in this component. The works on this component were largely completed by Closure, though the rate of progress was generally slow in Kanpur, Barielly, Dehradun and Nainital. 79. The mission was informed that the sewerage component helped significantly in environmental improvement by way of making the sewers functional and eliminating the surcharged conditions spilling the sewage on the street through the manholes. The respective operation and maintenance agencies have benefited from the sewer cleaning equipment and the mobile gully-pit emptiers and are using them effectively. However, the generally weak financial condition of these entities raises the question of whether the equipment will be maintained in good serviceable condition. 80. Low-Cost Sanitation (LCS). The low-cost sanitation program was implemented in 26 towns (eight A and B towns and 18 D towns) with an initial target to convert some 51,700 bucket conservancy systems to ventilated improved pit latrines with pour flush, and the construction of about 7,700 new units. Whereas the implementation of LCS program in Group A and B towns was directly handled by the local bodies, the LCS cell in the Directorate of Local Bodies supervised the program in the 18 Group D towns. Kanpur had an annual target of 2,500 units -49 - (SAR para 2.11) for the whole project implementation period. Construction of community latrines was also provided for under this and the SWM sub-components. 81. An initial thrust in implementation led to early upwards revisions in the original targets, but this momentum could not be sustained, largely because of beneficiary affordability constraints with down-payments. Similar programs existed alongside the project where only a nominal down-payment was required (GOUP program and the GAP) or where the latrine was provided totally free of charge (Indo-Dutch scheme in Kanpur). The Bank advised GOUP to review the conditions of different programs and to introduce some uniformity, but the Bank's offer of increased grant assistance from the project failed to generate much interest. Nevertheless, 75,305 units have been converted/constructed under the project. Of these, 13,890 units were in Kanpur. 82. Financial assistance was provided for construction of new units up to the plinth level, leaving the superstructure for the beneficiary to build. Such arrangements have led to the non- utilization of toilets in some cases where superstructures were not built. Implementation was without community education and user motivation. No data were available on the latrines not in use. The mission recommended that the GOUP, through the local bodies, should conduct a survey in each town of the number of latrines not in use, and educate the beneficiaries on the use and benefits of these latrines and advise on the construction of superstructure. The mission requested a report be furnished to the Bank before 31-Jul-96. 83. Despite these difficulties, the sustainability of the LCS benefits seems likely, especially for those which have been converted to twin-pit pour-flush latrines as the families in these cases have been using individual household latrines before their conversion. 84. The community latrines constructed under the Project are maintained by using the "pay and use" model developed by Sulabh. Some of the latrines are maintained by Sulabh themselves. So far, the experience is reportedly good as the latrines are well maintained and kept clean. IPMC have agreed to provide data on numbers of community latrines by 31-Jul-96. 85. Drainage. Ten of the Group A and B towns implemented the drainage component. Proposals for each town were based on an initial assessment of the drainage problems and the measures required. Plans were prepared by the respective Nagar Mahapalikas except for Moradabad, Saharanpur and Barielly where they were prepared by UPJN. The drainage plan for Lucknow was prepared under the guidance of Indian Institute of Technology (IIT), Kanpur. Generally, the drainage work constituted rehabilitation (cleaning and repairs) of existing drains and construction of some new drains. The mission's field visit to various locations in four towns indicated that, mostly, these storm water drains are being used for disposal of sullage and, in some places, sewage. The mission further observed that although there are some efforts to desilt the drains before the monsoon, the local bodies appear not to be able to maintain the drains in proper functioning condition since many are clogged. 86. Municipal Services: Solid Waste Management (SWM). The project assisted with the introduction of more efficient handling practices. The main procurement was of vehicles and - 50 - equipment. Some of this has been put to good use and is being maintained in a satisfactory manner and is having a significant impact. More sophisticated equipment has, in some cases, failed to be properly maintained and is off the road. 87. Municipal Services: Maintenance management. This sub-component was intended to focus on improvements to management practices, with the procurement of equipment in support. There have been only modest amounts of training and exposure to modem practices, despite the needs. The equipment, such as for road surface patch repairs and drain cleaning, is being put to good use. 88. Municipal Services. Traffic engineering and management. Traffic engineering and management cells were established in all KAVAL towns, with fully qualified traffic engineering staff in three. These TEMCs have developed circulation plans to help identify schemes, and have implemented low cost solutions to reduce congestion and improve safety such as intersection improvements, crossings, one-way circulation systems and signals. On the whole, these schemes have worked well and this component has made a real, if modest, impact. However, sometimes the schemes are rendered less than fully effective by the need to adopt compromise designs which have the effect of minimizing encroachments onto the road margins. With improved enforcement the benefits would be greater, and greater attention could be given to the provision for pedestrians. The municipalities have also encountered some difficulty in securing the removal of electricity poles from the road spaces in cases of road widening and re- orientation of the traffic lanes. More road signage and "white lines" would also increase the effectiveness of improvements. Total expenditure on this component (Rs 115.8 million) was more than the anticipated SAR amount. Part A (ii) - Earthquake Reconstruction 89. Repairs and restoration of Oct-91 earthquake damaged infrastructure were undertaken such as roads, bridges, irrigation channels and structures, drinking water facilities, schools, health centers and other public buildings in three hill districts (Uttarkashi, Tehri Garhwal and Chamoli). These emergency works were to be implemented in a period of two years from 01- Oct-92 by various GOUP departments under the overall administrative and financial control of the Divisional Commissioner of Garhwal Division. 90. Implementation was very slow in the beginning. There was practically no expenditure in the first year. However, thereafter progress substantially picked up and GOUP continued with the implementation to the Credit closing date and achieved substantial success with implementation of the program in spite of considerable practical difficulties in the remote hill locations. 91. Set out below are the schemes approved by the Empowered Committee and completed up to the Credit closing. The 65 not completed schemes which were in progress will require Rs 39.6 million further expenditure, for which GOUP already has provided the funds. All incomplete works are expected to be completed by Sep-96. -51 - No. of Estimated No. of Actual Items of Works approved cost schemes expenditure schemes (Rs million) completed (Rs million) A. Roads & Bridges ................................................................................. ........................................... ................I.................... ...................... Reconstruction 128 56 8 128 55.9 Improved communication 56 106.9 50 101.5 ................ ............................................................. ........................................ ........................................ ........................................ ............................. Gawana Bridge 1 10.9 1 10.9 ................................................................................. ........................................ ........................................ ........................................ .... ......................... B. Irrigation 113 14.9 113 14.6 Minor Irrigation 88 3.0 88 3.0 .. ..................................... I..................................... . ........................................ ........................................ ........................................ ............... .............. C. Water Supplies 295 33.1 292 31.5 ............................................. .................................... ........................................ ........................................ ........................................ ............................. D. Public Buildings Education (a) Primary 450 95.0 407 82.6 (b) Secondary 50 96.0 38 78.8 Health 14 27.4 13 25.6 ................................................................................. ............... f..... ................. ...................... ............................... ......... ... ................. Total: 1195 444.0 1130 404.4 92. Earlier missions have confirmed that the bridges, primary and secondary schools, and the hospitals and primary health centers have been reconstructed to good standards. All these works were of critical importance to restoration of normal life and essential services in the region following the earthquake. Part B - Ganga Action Program 93. This Part provided for: (a) consultancy advisory services and training; (b) pollution monitoring and maintenance equipment; and (c) priority pollution works. The Ganga Project Directorate, now the National Rivers Conservation Directorate (NRCD), under the Ministry of Environment and Forests had overall responsibility for sanctioning investments under this component, but the concerned state governments were responsible for execution of schemes in their areas. The agencies responsible were as follows: Bihar Bihar State Water Supply and Sewerage Board (BISWAS) Uttar Pradesh Uttar Pradesh Jal Nigam (UPJN) West Bengal Calcutta Metropolitan Development Authority (CMDA) and the State Public Health Engineering Directorate (PHED) 94. The full status of (a) and (b) above was not available to the mission. NRCD agreed to provide this information by 17-Jun-96. Included under (c), priority pollution control works, was the construction of three sewage treatment plants in Uttar Pradesh, at Haridwar, Kanpur and Allahabad, and various interception and diversion works in West Bengal. There were no pollution control works in Bihar under the project. 95. Bihar. Four sewer jetting machines, one gully pit emptier, and two pay loaders were procured in Sep-91 for Patna Municipal Corporation (PMC). The jetting machines and pay loaders are reported to have been found useful by PMC. - 52 - 96. Uttar Pradesh. The bids for three activated sludge sewage treatment works with anaerobic sludge digestion were invited using ICB procedures and on a turn-key basis from prequalified contractors. The contract included designs, civil works, mechanical and electrical equipment, commissioning, and initial operation against performance requirements. The civil works part of the Haridwar contract progressed well and the STP (without the power package) was commissioned in Mar-94. However, the construction of the STPs at Kanpur and Allahabad was severely delayed and remained incomplete at Credit closing. Ciitywn Treatment te Capacity Completion status at Credit closing Of STP i (Mid) Kanpur Activated sludge process 135 Civil works 85% complete; mechanical and with anaerobic sludge electrical works 65% complete; estimated digestion completion (w/o power package) and pre- commissioning trial by Dec-96. . ...................... ......... ...... ...................................................... ............... .............. ........................... ..... ........ ............................................................................. Allahabad Activated sludge process 60 Civil works 80% complete; mechanical and with anaerobic sludge electrical works 40% complete; estimated digestion completion (w/o power package) and pre- commissioning trial by Feb-97. Haridwar Activated sludge process 18 STP (w/o power package) commissioned in with anaerobic sludge Mar-94. The commissioning of power digestion package is likely by Oct-96. 97. Sewage Treatment Plant Haridwar. The effluent quality has been satisfactory and within the prescribed discharge standards (BOD = 20 mg/l and suspended solids = 30 mg/l). However, the treated effluent quality was affected by occasional prolonged power failure. It was reported that, in normal power supply conditions, the performance of the STP was found satisfactory even with an overload of about 10% during the peak tourist season. 98. The supply of the dual fuel engine was through the tur-key contract but was installed outside the contract. The engine has been run on diesel mode for a considerable period while stabilization of the anaerobic digesters was continued. The mission was disturbed to learn that the commissioning of power package will take even more time as the roof of one digester was damaged by an explosion caused by air entry through cracks developed in the body of the digester. These cracks were reported to have developed by vibrations induced by the operation of the engines. This raises doubts about the adequacy of design, specifications, quality of construction and supervision. The mission was informed that relaying of the roof is in progress and it may be possible to commission the power package by the end of Oct-96. 99. West Bengal. The priority pollution control works were undertaken in Calcutta Metropolitan Area only. These works consisted of the construction of 26 sewage lifting stations, and 4 main pumping stations in 14 schemes to intercept and divert sullage to sewage treatment plants. The progress has been very slow. By the end of Credit closing, only 5 of the 14 schemes - 53 - have been commissioned. However, most of the remaining schemes are over 95% complete. The likely dates of commissioning of these works were not available to the mission. One sewer jetting machine and four gully pit emptiers were purchased under the Project. Covenant Compliance 100. Part A. All covenants for Part A of the project were in compliance at Closure with the exception of three which were in partial compliance, as follows: (a) despite tariff revisions in 1994, some of the project towns do not cover their O&M and debt servicing costs on their water supply and sewerage (WSS) operations (PA Schedule para 7)); (b) as has been the case for several years, there was a low level of achievement of financial performance of project towns against agreed financial performance targets in the operational action plan, OAP (PA Schedule para 8). Although data were incomplete at the time of the mission, it appears that, in 1995/96: none of the 15 municipalities achieved both financial targets and only four achieved one target; and, only one of the 15 water supply entities achieved both targets, with six having achieved only one target; and (c) GOUP has not taken action directly to minimize the negative effects of rent control during the period of the project (PA Schedule para 9). However, the method of property tax assessment is being changed from annual rental value to a formula assessment based on plot coverage and other physical factors. This will have the effect of removing the negative impact of rent control on the generation of property tax revenues. 101. The execution of Part A of the project was covenanted to be in accordance with the extensive OAP (PA Section 2.01 (b)). Most of the OAP has been completed. The following are the OPA action items not completed at closure: (a) Item 4 - Finance: surveys of WSS assets for updating assets registers; revaluation of WSS assets; appointment of independent commercial auditors; and (b) Item 5 H - Maintenance and Mapping: utility mapping was not carried out due to failure to deliver aerial photography surveys by the Remote Sensing and Application Centre, Lucknow, except for Lucknow which was executed outside the project, and also Allahabad, which was physically surveyed at ground level; action plan for maintenance study was not undertaken, due to failure of consultants to submit reasonable final proposals. 102. Part B. All covenants for Part B were in compliance at closure. - 54 - Project costs and disbursements 103. The IPMC provided details of total project costs for Part A (i) at closure, and the Additional Relief Commissioner, Pauri, provided details for Part A (ii). GPD agreed to forward to the Bank the year-wise final total project cost data for Part B by 17-Jul-96. 104. Disbursements from the Credit as at 11-Apr-96 were SDR 78.2 million (US$ 108.8 million equivalent), or 79% of the available Credit amount. GOUP and GDP are preparing and submitting withdrawal applications having regard to the deadline of 31-Jul-96. The utilization of the Credit is expected to be about 92% by 31-Jul-96. The Credit savings, on this basis, would be about SDR 8.0 million (about US$ 12.0 million). IV. Unfinished Works Part A (i) - Urban Development 105. Shelter. None of the S&S schemes visited by the mission could be said to be finished, despite the information recorded in the MIS that contracts have been completed. Services such as water supply are either not available at all, or are inadequate. And much of the on-site infrastructure remains incomplete or is in a state of disrepair. As a result, the schemes have a very low level of occupation, or none at all. Section III above includes mission recommendations as to the actions that are required complete these schemes. GOUP agreed to consider these recommendations and produce proposals within a short time-frame. 106. Similarly, the Area Development schemes are not fully complete. The DAs need to finalize works. This may then set a better example to other areas of unauthorized development where further, much needed, area development schemes could be implemented. 107. The slum upgrading schemes are complete. However, with the passage of time there has been some deterioration in the infrastructure provided. The mission recommends that the municipalities establish a program of patch-and-repair works in the upgraded slums to bring them back to standard. 108. Water Supply. Several works of major water supply schemes remained incomplete at the Credit closing. The schemes and their costs to completion, and the estimated date of completion, are given below: - 55 - Name of city Major Works Incomplete Estimated post Estimated 01-Apr-96 cost to completion complete (Rs date million) ......................I............. .......... ................................................................................... .................... ........ ....... ................................... ........... ....................... 1. Raw water transmission main 18.0 31-Jul-96 2. Settling tanks Nos. I & 2 ................................................. ................................................................................... .............. ..................................... ............I................................. 1. Feeder main 6.0 31-Jul-96 2. Settling tank ................................................. ................................................................................... .............. ..................................... .............................................. 1. Erection of pumps 20.0 30-Sep-96 2. Water treatment plant 3. Raw/clear water Trans. mains ................................................. ................................................................................... ............................... .................... .............................I................ 1. Distribution extensions 2.0 31-Jul-96 2. Storage reservoir ................................................. ................................................................................... ............................... .................... ............ ................................. 1. Clear water rising main 11.0 30-Sep-96 2. Erection of pumps 3. Distribution extensions 109. Municipal services. Most schemes executed under the project were modest in size, and all have been completed. Part A (ii) - Earthquake Reconstruction 110. The 65 incomplete schemes were: improvement of communications - 6; water supply - 3; primary school buildings - 43; secondary school buildings - 12; and medical buildings - 1. These works are in progress and will require Rs 39.6 million, post 01-Apr-96, to complete for which GOUP has already provided funds. All these incomplete works are expected to be completed by Sep-96. Part B - Ganga Action Program 111. The major works not completed at Closure were as follows: STP Major work incomplete Estimated post Estimated 01-Apr-96 cost to completion complete date (Rs million) Kanpur I Sewage treatment plant 44.0 Dec-96 2. Power package 67.1 not known .Allahabad 1. Sewage treatment plant 31.6 Feb-97 2. Power package 35.0 not known ...................a...i a ...1 . w ... package..........................n..................o......................o... t o...k... n ..... w n.....................O c-..... ........96............................................... - 56 - V. Implementation Performance Views of the mission 112. Overall management of the project. For Part A (i) the IPMC played the central monitoring and co-ordinating role. The monitoring reports and general attention to the details of the project implementation were carried out by IPMC in a dedicated and satisfactory fashion. The IPMC lacked management authority and were not much able to influence events on the ground which hampered the achievement of objectives in key areas. There was, for example, only one dropping of a non-performing town from the project in accordance with the project Agreements, in spite of persistent performance failures by many more towns, 113. The GPD acted as the management organization for Part B. The project constituted only one part of the GAP, so no special arrangements were established for the project. As with the IPMC, the GPD was better able to act as a monitoring and co-ordinating agency than as implementation managers since all key decisions were for the implementing agencies to take, such as UPJN. 114. Looking back over the project, the mission is of the opinion that the supervision performance of the Bank was largely ineffective and lacking in important respects in its contribution to the achievement of project objectives. This aspect of implementation performance will need to receive special attention in the Implementation Completion Report, which should go into details of the reasons for the Bank's failures, and draw out lessons. 115. Water Supply and Sewerage. The UPJN, which was primarily responsible for the planning, design, bidding documents, bid invitation, award work and supervision of the water supply and sewerage schemes, failed to perform adequately in respect of the large schemes. However, their performance in respect of the smaller schemes such as the deep tube-wells in Bareilly, Moradabad, Gorakhpur, Aligarh, Saharanpur, Ghaziabad, Jhansi, Dehradun and Meerut, with local distribution networks and storage reservoirs, was successful though often with delays. 116. The decision on award of "turn-key" contracts usually took over a year as the award recommendations were scrutinized at various levels in UPJN. This situation had considerably improved over the project period with UPJN's realization that this exercise is not required. 117. In some cases, there was inadequate engineering preparation and appraisal viz. Kanpur, Agra. In some others, there was poor management and administration of the "turn-key" contracts viz. Lucknow. In Kanpur and Varanasi, both of the above were inadequate. Exceptions are: the Allahabad scheme which, although delayed, did not face major problems during implementation; and, the new Jhansi-Babina water supply scheme. The UPJN improved its overall engineering and supervision to a significant level from the experiences of the schemes taken-up before the Jhansi scheme though it was unfortunate that the clear water transmission mains at Jhansi could not be completed before Closure due to difficult strata. - 57 - 118. The Jal Sansthans were involved in the execution of some smaller works and performed satisfactorily. The Varanasi Jal Sansthan was faced with tremendous contractual problems in their execution of the 100 Mld filtration plant and 150 Mld water treatment plant and the associated intake and transmission arrangements. However, by renegotiating the contract they had overcome the difficult situation and were able to complete the contract though with substantial delay. However, the JSs in Lucknow and Kanpur, where the new water treatment plants have been completed and commissioned, failed to take over the plants as they were not able to equip themselves with the skilled personnel required. 119. GOUP and UPJN/JSs failed to appreciate the need for the maintenance studies, though these were agreed with the Bank. In the absence of these studies it seemed impossible for UPJN/JSs to identify the measures required to improve technical, financial and managerial performance. 120. Low-Cost Sanitation (LCS). The implementation experience was mixed. The achievement of 75,305 units surpassed the SAR target of 59,400 units. The local bodies which gave loans to the beneficiaries are not making sufficient effort, in most of the cases, at recovery. 121. Ganga Action Program. Generally, the works have progressed very slowly particularly in respect of the priority pollution works. Only 5 schemes out of 14 have been completed in Calcutta Metropolitan Area although the balance are mostly 95% complete. There were contractual disputes resulting termination of contracts in two cases. Generally slow progress with the construction of critical part of schemes, delay in obtaining electric connections, and lack of coordination between various agencies caused substantial delays in completion of these schemes. 122. The implementation performance of UPJN in respect of the three sewage treatment plants in Uttar Pradesh under GAP is similar to the poor performance with the major water supply works under Part A (i). There were excessive time overruns in all cases, although the unresponsive contractor, in the Kanpur and Allahabad cases, was also a significant factor. Views of the Borrower 123. Both GOUP and the NRCD expressed the view that they wished to reserve their judgments on the implementation performance until their respective Borrower Evaluation contributions to the Implementation Completion Report. VI. Operational Plan and Sustainability 124. Part A. Sustainability of the water supply and municipal services components largely depends on improvements to the finances of the local bodies charged with operating and maintaining the assets. A second issue for sustainability is the general lack of suitably skilled manpower, particularly for water supply and sanitation. In both these cases the prospects for long-term sustainability are not good. The project has failed to make any significant progress in strengthening the local body institutions concerned. - 58 - 125. Long-term sustainability of the S&S and Area Development schemes is problematic until such times as the schemes are fully completed and occupation, particularly of S&S, picks up. In the short-term the prospects for the S&S schemes are bleak, with continuing deterioration of the assets through neglect. This makes it imperative that the DAs prepare proposals to restructure the schemes to bring about their completion and occupation. 126. The mission agreed with GOUP key indicators of project operation. 127. Part B. Sustainability of the equipment and minor assets created under Part B of the project is unlikely to be problematic. However, for major works, and particularly the STPs in UP, the same problems of lack of resources and skilled manpower arise as for water supply and sanitation under Part A, since it is the intention that these STPs will be handed over to the local bodies to operate and maintain. The outlook is not encouraging given the substantial resources required and the relatively advanced technology which has been deployed in these plants. VII. Follow-up Actions in the Post-closure Period 128. The mission reminded the Borrower of the project obligations which remain, including those entered into under the Agreements, during the post-closure period. These are: (a) all withdrawal applications should be submitted to the Bank for eligible expenditures incurred up to 31-Mar-96 by 31-Jul-96; (b) audits of SOEs for the fiscal year 1995/96 should be submitted in accordance with the audit covenant by 31 -Dec-96; (c) the GOUP and NRCD will continue to assist with the preparation of the ICR in accordance with the agreements reached with the mission (see Section VIII below) and, additionally, GOUP and NRCD should each prepare their own Evaluation of the project for inclusion in the ICR which was agreed to be submitted to the Bank by 31-Oct-96; and, (d) in accordance with the Agreements the Borrower is obliged to comply with covenants, as appropriate, during the period of the Credit. - 59 - VIII. Program for ICR Preparation 129. The following program for ICR preparation was agreed: Agreed Action By Whom By When ............ ........... ............ , . ................................................................ ........................................................ .... ...... ...........- ...... Final IPMC Quarterly Progress Report for Part A (i) for IPMC 3 1 -Jul-96 31 -Mar-96 and other data requested and not supplied at the time of the mission, to be forwarded to Bank. ..................................................................................................................................... ....................... ........................................................ ............. First draft report of GOUP's Evaluation Consultants for Consultants with 31-Jul-96 Part A (i) schemes to be sent to Bank IPMC and GOUP ~~~~~~~~~~~......................................................................................................... ............................................ ............ .......................................... .... Draft of ICR (Bank portion including tables) to be Bank 15-Sep-96 forwarded to Borrower for comment. Second dra t report of GOUP's Evaluation Consultants Consultants with 3 1 -Oct-96 for Part A (i) schemes to be sent to Bank GOUP .... .................... ......................... .............................. .................................... ............................... ....................................................... .............. .................. Comments on Bank's draft ICR to be forwarded to (i) IPMC staff, Within one month Bank liaising with GOUP of receipt of draft ICR from Bank (ii) NRCD .... ...................... .......................... ................................ .................................... .......................... ....................................................... ................................ Borrower's Evaluation to be sent to Bank (i) IPMC staff, 31 -Oct-96 liaising with GOUP (ii) NRCD Final draft of ICR (complete version including Bank 14-Nov-96 Borrower's Evaluation) to Bank management for review. ............................................................................................................................. ...................................... .................. ..................................... ............. Final part of report of GOUP's Evaluation Consultants Consultants with 31-Dec-96 for Part A (i) schemes to be sent to Bank GOUP - 60 - Appendix 1 to Completion Mission's Aide-Memoire STATUS OF GANGA ACTION PROGRAM PHASE I I. Background and Context 1. As a result of concern at the highest level over the rapidly deteriorating water quality of the River Ganga the GOI established, in 1985, the Central Ganga Authority under the chairmanship of the Prime Minister. Subsequently, in 1986, the Ganga Action Plan (GAP) was launched and the Ganga Project Directorate was established in the Ministry of Environment and Forests (MoE&F) to coordinate the implementation of schemes conceived under the GAP. 2. The immediate objective of GAP was to improve the water quality of the river, while the broader objective was to restore its biological health. These objectives were in the first phase to be achieved through the implementation of coordinated program of schemes in Uttar Pradesh (UP), Bihar and West Bengal (WB). The originally proposed 261 schemes mainly comprised: interception at its point of entry into the river, and diversion, of polluted wastewater; additional municipal sewage treatment plants (STPs) receiving the wastewater; low cost sanitation facilities (LCS); various other schemes such as electric crematoria and river front bathing places; and, other schemes for the biological regeneration of the river, as follows: CATEGORY UP BIHAR WB TOTAL Interception and Diversion Schemes 40 17 31 88 Sewage Treatment Plants 13 7 15 35 Low Cost Sanitation 14 7 22 43 Electric Crematoria 3 8 17 2 River Front Facilities 8 3 24 35 Other Schemes for Biological 28 3 1 32 Regeneration of River Total 106 45 110 261 3. As is evident from the large number of interception/diversion and sewage treatment schemes, almost half of the total number, the emphasis of the initial GAP concept was on reducing the highly visible wastewater flows directly into the river. These schemes were relatively easy to implement and promised high impact. 4. GOI has sanctioned (as of 01-Jan-96) capital expenditures for GAP of Rs 3787 million which compares with the 1988 sanctioned amount of Rs 2563 million. Cost revisions are now expected to lead to total GAP phase I capital costs of Rs 4260 million, to which can be added GOI's share of O&M costs of Rs 253 million and expenditures on R&D, NGOs and GPD establishment of Rs 168 million (see the cost summary in Attachment 3). Outlays for GAP phase - 61 - I constituted about 30% of the MoE&F's budget, and represented about 0.6% of the GOI Central Plan for all sectors and about 0.3% of the Central and State and UT Plans combined. 5. The Governments of the Netherlands and the United Kingdom, as well as the World Bank in the UP Urban Development Project, have supported GAP through financing of selected schemes as follows (see also Attachment 4): Donor/Schemes Commitment Expenditure (Dec-95) (Rs millions) Netherlands (integrated sanitation 459 434 Grant in Kanpur and Mirzapur) U.K. (TA for water quality monitoring) data n/a Grant World Bank (works and equipment 428 364 Loan in UP, Bihar and WB) 6. Following substantive completion of GAP phase I, GOI has approved GAP phase II. Phase II is a scheme of pollution abatement of the Yamuna and Gomti Rivers which are tributaries of the Ganga, at an estimated cost of Rs 4210 million. Under GAP phase II there will be equal contributions from the Center and the state governments concerned. The Government of Japan through an OECF loan of Rs 4010 million equivalent is supporting the Yamuna component. The U.K. Government is supporting the Gomti component. 7. Additionally, GOI has approved in principle an outlay of Rs. 10,000 million over ten years, with 50% of the funding coming from the Center, for the National River Action Plan (NRAP). NRAP will involve an approach similar to GAP covering the grossly polluted stretches of rivers across the country with the aim of improving the water quality of the entire river concerned. II. Findings and Observations GAP Phase I Implementation Experience 8. Implementing Agencies' Perspectives. GOI and the implementing agencies consider the basic technical concept of GAP as appropriate and sound, i.e. reducing the pollution load entering the river from point and non-point sources and establishing sewage treatment plant systems. This is evidenced by phase II and the NRAP which continue to apply this concept, albeit with some minor modifications as noted below. 9. The program as conceived, involving five key ministries with the Prime Minister chairing quarterly progress meetings, had a very high profile and raised general awareness of river water quality degradation. GAP received maximum attention and cooperation from the public in general as well as from polluting industries. - 62 - 10. Other important elements of the concept were waste-to-energy conversion, using methane gas generated by sewage sludge digesters to fill the energy needs of some of the activated sludge STPs, and effluent reclycing through sewage farms. 11. A wide range of supporting programs are considered to have enhanced the basic approach to reduction of river pollution. These included: water quality modeling and monitoring; bio- conservation through captive breeding of scavenging turtles; cleaning of clogged sewer systems; relocation of dhobi ghats; desilting and renovation of tanks and ponds on the river banks; river bank erosion control and landscaping; and, water supply and solid waste management schemes in slums located along the banks of the Ganga. 12. NRCD reports that by the end of 1995, 211 out of the 261 schemes have been completed. Out of a total of approximately 1400 million liters per day (Mld) wastewater flowing into the River Ganga from Class I towns (population over 100,000), 873 Mld was targeted to be intercepted and 654 Mld (about 47% of the total and 75% of the target) have been intercepted. STPs for 485 Mld have been commissioned. About 2,750 community toilets and 47,700 individual toilets have been commissioned under the LCS schemes. 13. NRCD is satisfied with the extent of learning and experimentation which took place during implementation. One of the successes was the low-energy Upflow Anaerobic Sludge Blanket (UASB) system of wastewater treatment which was introduced through the Netherlands- financed component in two pilot and two full-scale STPs, two of which are treating tannery wastes. The active participation and involvement of a number of universities, institutes, and private sector firms, especially in the monitoring and evaluation of the GAP, are also very positive aspects of program implementation. 14. NRCD reports a positive health impact of the program. Results available so far indicate clearly that there is a decreasing trend in the incidence of water-borne diseases, such as diarrhea, helminthic infection, skin diseases, respiratory tract infections, etc. in the relevant cities. NRCD's impact evaluation is based on the results of a considerable number of monitoring and evaluation studies and projects. 15. GPD sponsored various academic and scientific institutes to: carry out monitoring and evaluation studies which gathered water quality data; review and assess the implementation of works and schemes and their performance; and, assess the acceptance of schemes by the population concerned. GDP has installed five automatic water quality monitoring stations (AWQMS) along the River Ganga which are now maintained and operated by the Central Pollution Control Board in co-operation with the UPPCB and Bihar PCB. Technical assistance provided by the U.K. (ODA) included water quality monitoring and modeling. 16. The CPCB Annual Report 1994/95 presents the finding that along the Ganga at all monitored locations the quality classification was D, fit for propagation of wildlife and fisheries, while the target classification was B, bathing quality. The critical parameter in this assessment was the total coliform count, which exceeded the desired standards. - 63 - 17. The trends of the observed water quality parameters are somewhat inconclusive. It is disturbing that whereas DO and BOD trends in the summer averages for 16 stations on the Ganga were positive for most stations during the years 1986-92, there was a deterioration of these two key parameters for the period 1992-95. This deterioration could be due to increasing abstractions of surface and groundwater (the latter affecting the summer base flows) which would result in lower dilution of the pollution loads. Other possible explanations are increasing pollution loads which cannot be dealt with adequately by the completed schemes, or inefficiency or partial failure of interception and treatment works. 18. Under GAP efforts were also made to encourage polluting industries along the Ganga to install effluent treatment plants (ETPs). The Annual Report of MoE&F 1993/94 shows that most industries had complied, others had closed down, and prosecution had been launched against six. CPCB reported that early in 1996, for the first time, two industries were closed by court order after they did not comply with effluent standards. Generally, the courts have been active in supporting efforts to deal with polluting industries which failed to comply with standards. 19. Some of the evaluation and monitoring studies also report that there has been acceptance and use of the LCS facilities, and facilities such as electric crematoria and bathing places implemented under GAP. However, these studies found that there was insufficient public participation in planning, and low awareness of their importance. 20. NCRD reports that the captive breeding program of the scavenging turtle has been successful, and that large numbers of turtles have been released. 21. In early 1996, NRCD with ODA support commissioned the Institute for Economic Growth (IEG) in co-operation with other Indian and external organizations to carry out a study of the net economic benefits of GAP. The study is expected to be concluded in early 1997 and, for the first time, will attempt to quantify user and non-user benefits covering health, recreation, conservation, biodiversity and bequest (inter-generation) benefits. Surveys employing contingent valuation techniques will be carried out in 15 cities covering about 2,000 households. The study will also assemble data on all GAP-related costs, such as those incurred by state and local governments and industries. The results of this study will be used to shape future policy, especially with regard to sustainability of the GAP. 22. Donors' Perspectives. The Government of the Netherlands, in 1994, carried out a study to review the implementation experience of its "Environmental and Sanitation Engineering Project" in Kanpur-Mirzapur under GAP. The Dutch have supported GAP through integrated urban environmental operations in these two locations. The study judged that the project has been able to meet the objectives of GAP and has contributed significantly to improving conditions. The study found that the establishment and involvement of a community development cell in Kanpur was useful for initiating community-based activities. 23. The Dutch evaluation also considered the experience from Kanpur and Mirzapur relevant for application elsewhere, especially as far as integrated planning and implementation of sanitary infrastructure, and introduction and application of new technologies such as UASB, are - 64 - concerned. With regard to the latter, the evaluation study claims that: UASB plants are lower in capital costs; require fewer mechanical systems (prone to breakdown); due to their minimal energy requirements, are lower in O&M costs; and, compare favorably in an overall cost comparison with conventional activated sludge treatment plants. 24. However, the Dutch have concluded that projects and programs directed towards improved urban environments and reduction in the pollution load of surface water, should have substantial components for local institutional development and for community participation and health awareness. Accordingly, the Government of the Netherlands in 1995 started the Ganga Institutional and Development (ICD) Project whose main objective is to develop and strengthen the capacities of municipalities to ensure proper and sustainable O&M of capital works financed under GAP-related investments (see also Attachment 5 for more details). 25. Closely related to the Ganga ICD Project, the Netherlands Ministry for Development Cooperation is now in the process of appraising the Ganga Action Plan Project which will provide financing of NLG 48 million (US$27.3 million) for capital investments in Kanpur South for sewerage, water supply, solid waste management and on-site sanitation, plus technical assistance to the implementing agencies. 26. The UK's ODA in phase I provided technical assistance for setting up water quality monitoring systems. ODA is now preparing to implement a support project which will focus on city-wide improvements in Lucknow on the Gomti River. The ODA-financed project will emphasize institutional development, drawing together the different urban agencies to eventually result in a city-wide masterplan. Two NGOs have been engaged to prepare community improvement projects in two service areas which will also contribute to the masterplan. A technical support project will finance urgent works. 27. As mentioned above, OECF has approved a loan of Rs 4010 million equivalent for GAP phase II implementation on the Yamuna River. 28. Other Perspectives. The mission met representatives of NGOs concerned with the cleaning up of the River Ganga and technical persons familiar with GAP. It was observed that smooth implementation has been hampered by inter-agency differences, and differences between administrators, engineers and scientists, over the concept and approach. 29. Some have cast doubts on the sustainability of the program. Although physical implementation achievements were good, frequent power outages cause adverse impacts on the operation of treatment plants and the reduction of pollution loads. A Kanpur-based NGO claimed that: some drains are still discharging wastewater into the Ganga; tannery wastes are still discharged untreated into the river during power outages; many dhobis continue their operations along the banks; a trade in turtles has not stopped; garbage disposal and defecation on the banks also continue; and, corpses and animal carcasses are still dumped into the river. 30. There are differences of opinion over the location, frequency and interpretation of water quality monitoring. No sampling is undertaken near the banks where most of the human - 65 - activities take place. There is also disagreement amongst observers over the significance of the various parameters, especially Total and Fecal coliform counts which are the most relevant parameters as far as human health aspects are concerned. 31. The UASB wastewater treatment process is considered by some to be too complex for Indian conditions. It has been suggested that where their effluent meet certain requirements industries should be encouraged to explore joint wastewater treatment with municipalities. Commentators have suggested that industries need to be given more incentives, preferably through water pricing and groundwater licensing and charges, to conserve water and adopt waste-reducing, "clean technologies" in their production processes. 32. GAP is seen by NGOs and others as a government program with too little people's participation. The argument put forward is that if government were more open and willing to engage in an active dialogue, GAP would move more into the public domain and the still largely untapped resources of community associations and NGOs could be harnessed against pollution. III. Operational Plan 33. GPD/NRCD's plan for the O&M of all facilities implemented under GAP is that the local governments are to take over O&M responsibility and funding after the end of phase I. The relatively high operation costs and the financial constraints at the local government and state levels may put this plan into jeopardy. - 66 - Attachment 1 LIST OF REPORTS RECEIVED AND REVIEWED BY THE MISSION The Ganga. A Scientific Study. Editors C. R. Krishna Murti et al. Northern Book Centre. N. Delhi, 1991. Statistical Review of Ganga Action Plan (GAP). Phase I (as of 01/01/1996). Government of India, Ministry of Environment & Forests. 1996. Ganga Action Plan. Water Quality Bulletin - March 1996. Government of India, Ministry of Environment & Forests. 1996. Ganga Water Quality Monitoring Project, Technical Report No. 1 on Water Quality of Ganga in Bihar (October 1993 - February 1996). Dr. R.K. Sinha & Dr. K. Prasad. Patna University, Patna. 1996. No. M-12014/54(1)/85-GPD. Final Technical Report for Ganga Action Plan. Phase I in Bihar State. July 1993. Monitoring & Evaluation Project. Dr. R.K. Sinha. Patna University, Patna. 1993. No-7-1/92-HSMD. Monitoring Evaluation of GAP & HSMD Works at Haridwar-Rishikesh. Fatehgarh & Kanpur. July 1993. University of Roorkee, Roorkee. Ganga river Water Quality Monitoring for Rishikesh. Haridwar & Garhmukteshwar. (September 1993 - September 1995). 1995. Pollution Control Institute, Bharat Heavy Electricals Ltd. Haridwar. Monitoring and Evaluation Study of GAP Works at Allahabad. Mirzapur and Varanasi. 1993. Motilal Nehru Regional Engineering College, Allahabad. Down to Earth (April 15. 1996), When a River Weeps. Anjum Sharma,. Delhi. Annual Report 1993-94, Ministry of Environment and Forests, Government of India. Inspection Report (of wastewater treatment facilities on River Ganga), NEERI, 1994. (Note: Exact title of report not known) Environmental and Sanitary Engineering Project, Integrated Approach and Replicability. March 1994. Government of India, MoE&F, GPD and Government of Netherlands, MoE&F, Directorate General of International Cooperation. Annual Report 1994-95. Central Pollution Control Board, Ministry of Environment and Forests. Delhi. - 67 - Status of Water Supply and Wastewater Collection. Treatment and Disposal in Class I Cities. 1988. Central Pollution Control Board. Delhi. Status of Water Supply and Wastewater Collection. Treatment and Disposal in Class II Towns. 1988. Central Pollution Control Board. Delhi. Environmental Policies. An Overview. R.C. Trivedi, CPCB. September 1992. Prepared for USAID, HUDCO. Swatcha Ganga Campaign. Sankat Mochan Foundation & Swatcha Ganga Research Laboratory. 1995. Varanasi, UP. A Brief History of Ganga Pollution Control at Varanasi. Dr. Veer Bhadra Mishra. Undated. Varanasi, UP. Preliminary Feasibility Study on Interceptor Sewer Along Ghats at Varanasi. Memorandum by Sankat Mochan Foundation (SMF). 1995. Varanasi, UP. Comments on the Pre-Feasibility Report on Interceptor Sewer Prepared by SMF. Office of the General Manager, Ganga Pollution Prevention Unit, UP Jal Nigam, Varanasi. 1996. - 68 - Attachment 2 SOME QUOTES ON THE RIVER GANGA "One should not be amazed at the notion that this Ganges is really Power, for is she not the Supreme Shakti of the Eternal Shiva, taken the form of water? This Ganges filled with the sweet wine of compassion, was sent out for the salvation of the world by Shiva, the Lord of Lords. Good people should not think that this Triple-Pathed River to be like thousand other earthly rivers, filled with water." Ganga Mahatma, Kashi Khanda "A symbol of India's age-long culture and civilization, ever-changing, ever-flowing and yet ever the same Ganga." "A symbol, a memory of the past of India, running into the present, and flowing on to the great ocean of the future." Jawahar Lal Nehru June 21, 1954 "Ganga is the symbol of India's culture, the source of our legends and poetry, the sustainer of millions. Today it is one of the most polluted rivers. We will restore the pristine purity of the Ganga." Rajiv Gandhi, Prime Minister Address to the Nation, January 5, 1985 "A small, often unnoticed but essential requisite of most Hindu rituals involves a simple invocation to water. The person takes a handful of water and calls upon the Ganga, Yamuna, Saraswati, Godavari, Narmada, Sindhu and Kaveri to manifest themselves in that water. The simple message here is not of religion but of reverence for water - water as precious, water as basic for sustenance of life and water as symbol for purity." K.C. Sivaramakrishnan Preface, The Ganga - A Scientific Study - 69 - Attachment 3 TOTAL COST OF GANGA ACTION PLAN (Rs Million) 1 2 3 4 5 6 7 STATE NO OF NO OF SANCTIONED SANCTIONED REVISED TOTAL CLASS I SCHEMES COST COST COST EXPECTED TOWNS AT AT ESCALATION 31-Oct-88 01-Jan-96 (6 - 4) UP 6 106 1142 1496 1848 706 Bihar 4 45 336 503 533 197 WB 15 110 1085 1788 1879 794 TOTAL 25 261 2563 3787 4260 1697 Estimated 253 expenditure towards GPD's share of O& M Estimated 168 expenditure on R&D, NGOs, GPD establishment etc. GRAND TOTAL 4681 - 70 - Attachment 4 SUMMARY OF EXTERNAL ASSISTANCE TO GAP PHASE 1'4 .. . . . . . . . . . . . . . . . . . . . . . . . . ........... . . ..... .,. . . . . . .. . . . . . . . .. . . . . . . .. . . . . . . . .. . . . . . . .. . . . . . . . .. . . . . . . .. . . ... . . . . . . . . . .. . . . . . . . World Bank Assistance From Dec-87 Rs million Item Amount Actual Expenditure Physical Committed Expenditure to in 1995-96 Progress to 31-Dec-95 31-Mar-96 ......................................................................... ...................................................................................................................... ........................ ....... Priority pollution control works STP Haridwar 40 69 0 96% STP Kanpur 186 113 3 70% STP Allahabad 80 90 2 65% Total Uttar Pradesh 305 272 5 Total West Bengal 123 108 3 98% Grand Total 428 380 8 Dutch Assistance From Apr-87 Item Amount Actual Expenditure Physical Committed Expenditure to in 1995-96 Progress to 31-Mar-95 31-Mar-96 ......................................................................... . .................................................................................................................... . ........................... ..... Integrated Sanitation Project, Kanpur ll Schemes 261 230 26 97% Integrated Sanitation Project Mirzapur 9 Schemes 198 204 0 100% Grand Total 459 434 26 Excludes ODA technical assistance, and World Bank assistance for equipment for Bihar and training. - 71 - Attachment 5 GOVERNMENT OF NETHERLANDS SUPPORT TO GAP Starting 1987, the Netherlands Government has financially and technically supported the Indian Ganga Action Plan through the implementation of the Environmental and Sanitary Engineering Project in the cities of Kanpur and Mirzapur in the State of Uttar Pradesh. This project, which is scheduled to end in May 1996, primarily focused on the construction of works for sewerage, sewerage treatment, drainage, water supply, solid waste collection/disposal and on-site sanitation. The project has devoted considerable attention to the training of Indian engineers for operation and maintenance, community development and public and occupational health related activities. In total the Netherlands contributed NLG 35 million (US$20.0 million) for capital investments and NLG 30 million (US$17.0 million) for technical assistance to the Kanpur/Mirzapur project. Having regard to considerations of sustainability, the Netherlands has stressed the importance of developing and strengthening the capabilities of the local implementing municipal agencies in Kanpur and Mirzapur. The Ganga Institutional and Development Project (Ganga ICD Project) started in March 1995 with the main objective to develop and strengthen the capacities of the municipal organizations in such a way that proper and sustainable operation and maintenance of the capital works financed under the Kanpur/Mirzapur project, and the awaited GAP Support Project, are guaranteed. The Ganga ICD Project, which is executed by the Netherlands consultant BMB/Euroconsult, is assisting Kanpur Jal Sansthan (KJS), Kanpur Nagar Nigam (KNM) and Mirzapur Nagar Palika (MNP) in defining reasonable targets for improving the performance and preparing business plans and revenue enhancement plans. At present the Netherlands Ministry for Development Cooperation is appraising the GAP Support Project. The Project is scheduled to start in June 1996, when the Kanpur/Mirzapur project ends. The GAP Support Project will finance approximately NLG 48 million (US$27.3 million) of capital investments in Kanpur South for sewerage, water supply, solid waste management and on-site sanitation. The GAP Support Project will provide a limited technical assistance to the Indian implementing agencies and support a project Planning and Coordination Unit (PPCU). - 72 - Appendix 2 to Completion Mission's Aide-Memoire LIST OF KEY PERSONS MET Part A GOUP Mr. A.P. Singh, Principal Secretary Housing Mr. Nripendra Misra, Principal Secretary Finance Mr. R.B. Bhaskar, Secretary Urban Development Mr. V.N. Channa, Chairman UP Jal Nigam Mr. P.K. Pandey, MD UP Jal Nigam Mr. V.K. Dewan, Principal Secretary Institutional Finance Investment Planning and Monitoring Cell (IPMC) Mr. R. Jaiswal, Senior Specialist Mr. Manmohan, Financial Analyst Mr. O.P. Tripathi, Financial Analyst Mr. N.R. Verma, Senior Specialist Mr. M.I. Siddiqui, Consultant (Law) Mr. S.L. Nagdev, Consultant Mr. U.C. Das Gupta, Consultant Mr. G.K. Trivedi, Consultant Mr. R.D. Roy, Assistant Engineer Mr. R.S. Tewari, Executive Engineer Agra Mrs. Baby Rani Morya, Mayor Nagar Nigam Mr. M.L. Kadam, Municipal Commissioner Mr. R.C. Agarwal, Chief Engineer Nagar Nigam Mr. M.S. Mehta, Executive Engineer Nagar Nigam Mr. R.K. Tripathi, GM Jal Sansthan Mr. Zafar Naim Khan, Executive Engineer Jal Sansthan Mr. C.M. Srivastava, Superintending Engineer UP Jal Nigam Mr. Swraj Kumar, Executive Engineer UP Jal Nigam Mr. R.K. Agrawal, Executive Engineer UP Jal Nigam Mr. S. Dayal, Finance Officer Jal Sansthan Kanpur Mrs. Sarla Singh, Mayor of the Nagar Nigam Mr. P.C. Chaturvedi, Chairman KDA and Divisional Commissioner Mr. A.K. Upadhaya, Secretary KDA - 73 - Mr. S.C. Misra, Chief Engineer KDA Mr. Pawan Kumar Jain, Executive Engineer KDA Mr. R.N. Singh, Additional Secretary KDA Mr. B.C. Chandola, Mukaya Nagar Adhikari Mr. Harpal Singh, Deputy Mukaya Nagar Adhikari Mr. S. Ahmed, Chief Engineer Nagar Nigam Mr. Mahendra Singh, Executive Engineer Nagar Nigam Mr. M.L. Sharma, Executive Engineer Nagar Nigam Mr. Pradeep Tewari, Executive Engineer (Traffic) Nagar Nigam Mr. K.K. Sahgal, Lucknow Jal Sansthan Mr. Vijaya Kumar, Superintending Engineer, UP Jal Nigam Mr. T.D. Daryana, Executive Engineer UP Jal Nigam Lucknow Mr. Sanjay Agarawal, Mukhya Nagar Adhikara Nagar Nigam Mr. Ganga Deen Yadav, Vice Chairman LDA Mr. Vivek Mehra, Superintending Engineer LDA Mr. Dawan Ram, Executive Engineer LDA Mr. A.K. Khanna, Executive Engineer Lucknow Nagar Nigam Mr. Batoon Singh, Executive Engineer Lucknow Nagar Nigam Mr. Rashid Ahmad Khan, General Manager Lucknow Jal Sansthan Mr. B.N. Misra, Executive Engineer Lucknow Jal Sansthan Mr. S.M. Zaheer, General Manager UP Jal Nigam Mr. B.D. Gupta, Executive Engineer UP Jal Nigam Meerut Mr. H.L. Virdi, Commissioner Mr. Rajiv Kumar, Vice Chairman MDA Mrs. Anshuli Arya, Mukhya Nagar Adhikari Mr. S.L. Goel, Superintending Engineer, UP Jal Nigam Mr. R.L. Goyal, Executive Engineer, UP Jal Nigam Mr. K. Singhal, Executive Engineer, UP Jal Nigam Mr. Shashi Bhusan, Chief Engineer MDA Mr. R.P. Singh, Executive Engineer MDA Mr. R.P. Verma, Ex-Executive Engineer Nagar Nigam Meerut Earthquake Reconstruction Mr. P.S. Jangpangi, Additional Relief Commissioner Pauri - 74 - Part B Mr. J.C. Kala, Joint Secretary, National Rivers Conservation Directorate, MoE&F Mr. K. Mohan, Advisor, NRCD, MoE&F Mr. Ansar Ahmed, Director, MoE&F Mr. Brijesh Sikka, Joint Director, NRCD, MoE&F Mr. Wiswanath Anand, Project Director (National Program), NRCD, MoE&F Dr. Virendravats, Additional Director, NRCD, MoE&F Mr. V.K. Gupta, Chief Engineer, U.P. Jal Nigam, Lucknow Mr. S.M. Sharma, GM, Yamuna Pollution Control Unit, U.P. Jal Nigam, Ghaziabad Mr. A.C. Vermeer, Sector Specialist, Environment, Royal Netherlands Embassy Dr. K.C. Sivaramakrishna, former Project Director, Central Ganga Authority and Secretary, Ministry of Urban Development GOI Prof. Dr. M.N. Murty, Institute of Economic Growth, Delhi University Enclave Mr. A.J. James, Visiting Fellow, Institute of Economic Growth, Delhi University Enclave Sumita Misra, ICSSR Visiting Fellow, Institute of Economic Growth, Delhi University Enclave Mr. Ian Curtis, Water and Sanitation Office (WSO), ODA, British Embassy Mr. N.C. Gupta, Executive Engineer & Project Manager, U.P. Jal Nigam, Varanasi Mr. J.P. Mani, Project Engineer, U.P. Jal Nigam, Varanasi Mr. V.B. Mishra, President, Sankat Mochan Foundation, Varanasi Mr. R.C. Trivedi, Senior Scientist, Central Pollution Control Board, MoE&F Mr. D.V.S. Gupta, GM Ganga Pollution Control Unit, UP Jal Nigam Kanpur Mr. Y.N. Chaturvedi, Chief Engineer, UP Jal Nigam - 75 - Appendix B Borrower's Evaluation This Appendix contains the Evaluation of Part A, Urban Development, by IPMC and the GO UP. Although retyped, it has been included here unedited apart from the corrections to afew minor typing errors in the original. The evaluation was received by the Bank on November 22, 1996. No evaluation of Part B, Ganga Action Program, was made for this ICR by the National Rivers Conservation Directorate of the Ministry of Environment and Forests of the Government of India, the successor to the CGA. This ICR is for Part A of the UP Urban Development Program amounting to SDR 73.90 million. The ICR was prepared by Investment Planning & Monitoring Cell of Housing Department, Government of Uttar Pradesh, India. It is based on the information received from the project Entities and Consultants. Project Through two previous project in U.P. viz., UP Water Supply and Sewerage Project (Cr. 585-fN) and Kanpur Urban Development Project (Cr. 1185-IN), the Bank attempted to lay the basis for improvement in urban sector policies, and wider dissemination of required policy adjustments. Project objectives The overriding objectives of the UP Urban Development Project were to support the policy adjustments, and the institutional strengthening programmes of the GOUP, and to reduce the serious deficits in urban shelter, infrastructure, and services. To that end, the GOUP set objectives to improve sector finances by improving cost recovery, and resource utilization and mobilization; sector management by strengthening sector organizations; and infrastructure & services, by extending and improving water supply, sanitation, drainage, solid waste collection, maintenance, and traffic management for the urban population, especially the urban poor. Basically there were three broad aspects of the project: (a) reducing deficits in physical infrastructure; (b) instituting institutional strengthening measures; and (c) improving sector finances. - 76 - To this effect it included the following items addressing a complex set of sub-objectives: (a) development of about 122 ha in 8 cities; (b) upgrading of 89130 h/holds in 13 cities; (c) improvement of solid waste disposal services in 15 cities; (d) other urban infrastructure (water supply, sewerage, storm drainage etc.); and (e) institutional strengthening at local and State level through technical assistance and training. On the physical front, the project sought to reduce deficits in urban shelter, infrastructure and services. It aimed at increasing the public sector supply of affordable land, infrastructure and shelter particularly for low income families. To assure progress in the longer run, the project aimed at strengthening planning, administration and financial management in local bodies and project entities in urban management. Sector finances were to be achieved through policy adjustments covering, inter alia, pricing and cost recovery through raising of tariff (water and sewer taxes/rates), resource mobilization through reassessment of property taxes and incorporating octroi reforms. A suitable financial action plan was pursued to achieve these aspects. Evaluation of objectives The broad objectives and the sub-objectives of the project were quite relevant and appropriate for the State. However, the detailed goals aimed through the different project components suffered adversely owing to financial and institutional weakness of most of the municipal and other project agencies that were to implement these components. The physical objectives of the project were achieved to a highly satisfactory level, although initially institutional weakness of many implementing agencies did lead to delays in design, procurement and implementation. Despite an increase in water tariff ranging from 50% to 100% most of the water undertakings were not able to meet their O&M costs due to a rising wage bill and rising power dues in the context of modest improvement in collections. Likewise the growth in municipal revenue income exceeded those projected for the project cycle but the revenue expenditures maintained a much faster growth owing largely to a rising establishment cost. Nevertheless, some of the municipalities did perform creditably in raising their revenue income by 181% to 573% within a ten-year period from 1983/84 to 1993/94. Corresponding to this, rise in revenue expenditure h as been more so that the ratios between revenue income and expenditure have fallen short of the projected performance level in most cases. Quinquennial assessments as scheduled 1992 (since then interrupted) could have substantially improved the situation. Nevertheless the fact remains that collections have not reached the desired level as projected under the project cycle. While most municipal bodies can just about balance their revenue accounts with the aid of government grant (actually a proportionate legitimate share) and - 77 - subsidies, the water and sanitation undertakings are in substantial deficit, and operation can only be financed on non-payment of bills, particularly for power. A major concern in all towns is the magnitude of arrears towards which active steps are being taken to reduce arrears through improved billing, resort to courts, adverse publicity, etc. Those actions were instrumental in significant upward movements in revenue during the project period with varying magnitudes. In a sense therefore the institutional strengthening that resulted from the Project can be termed as satisfactory. This applies especially in relation to the objective of raising municipal income which was touched in most areas under the Project. Success in this area was brought about by improving tax and tariffs as well as improved collections of the corresponding dues even though gaps persist. In the context of the project, the project entities benefited through their increased capacities for urban planning, and GOUP was able to support several cities in improving their financial management although they fall short of the corresponding project sub-objectives. Project sustainability The Project brought improved solid waste management in various cities with increased capacity of their mechanical workshops to maintain the fleet provided under the project and have also improved primary collection. Given adequate back up measures for increased maintenance funds available from municipal funds, the sustainability of the component seems likely to endure. The sustainability of the low-cost sanitation component likewise seems quite likely, provided adequate guidance on the use and operation o f the units are backed up by public awareness. Despite financial prospects being less encouraging, similar conclusions can be drawn for the water supply and sanitation component executed in view of significant raising of the Water Supply and Sewerage rates by almost 100% over the project period. Overall, however, the wider sustainability of the intended benefits of the project presently appears to be uncertain given the enforcement of various follow up measures that are needed. The validity of sustainability largely depends on the ability of the municipalities to raise the resources for appropriate O&M. Presently GOUP still (directly and/or indirectly) provides subsidies to the cost of debt service, replacement and future investment. Factor s affecting project performance A factor that posed difficulties and hampered progress under the Project was the complexity of operations involving a large number of sub-projects and executing agencies. There was also a perceptible lack of coordination of the respective project activities at the entity level - a fact which placed considerable burden on the IPMC, which performed creditably mainly focusing on reports - 78 - and general attention about details of project implementation, adherence to procurement procedures and quick following on request for disbursement of funds to the project entities. Another factor that hampered time bound project execution was the relative inexperience of most of the project entities to plan and handle externally aided large sub-projects in terms of requisite preparation, appraisal and managerial expertise. These became explicitly clear during the project cycle in terms of a general lack in programme management and lack in sound construction management under the Water Supply and Sanitation Sector, and inadequate managerial and marketing experiences under the shelter programmes. Project preparation in some places was found to be inadequately planned especially under the Water Supply Sector where the requisite capacity of the distribution networks were not matched to fully utilize the treated water from treatment plants constructed under the project. The detailed study was conducted to finalize the water treatment methodology at Agra prior to reinviting the bids. In the initial stage the implementation were delayed due to insistence by the Bank for a lump sum turn key contracts package, which were not in practice in the State of UP in treatment works and sites & service. Later, the Bank allowed functional slices of the package which succeeded. More input of World Bank missions was desirable to prepare detailed specifications of large treatment plant works and equipment procurement. In initial stage of the project implementation, the Bank has neither provided any standard tender document and nor provided any training to prepare bid documents. Later on the World Bank felt the importance and provided document and training. The New Delhi Office provided good support in preparing specifications at the final stage particularly at Agra Water Treatment Works. Similarly the procurement issues for large contracts were decided at Washington office and at later stage when Bank's New Delhi Office started to resolve the procurement issues, the interactions with project entities became easier resulting in faster decisions. Identification of sites for development under the Sites and Services programme often failed to grasp the implications posed by shifting of approach roads on the marketability of the created assets as at Meerut. To reduce the water flooding in urban areas a city drainage plan needs to be prepared prior to implementing any drainage works. The drainage master plan was submitted to the Bank for Allahabad town. The UNDP/TAG was awarded consultancy for preparing the feasibility report for 18 'D' towns; the TAG has not provided any report till today. The towns ultimately prepared the project themselves. Utilization of credit suffered because of in-built partition between U.P. Urban and Ganga Programmes described in Development Credit Agreement. Due to diversion of credit and cancellation of loan and inclusion of 4 towns, a wave of uncertainty developed regarding availability or credit. At the fag end of the project Government of India desired to utilize the credit - 79 - irrespective of Ganga Programme, but it was too late to include and complete the projects, which could have been more useful to utilize the infrastructure developed under the project. An important issue affecting performance of project objectives and which cropped up during implementation was constraints posed by running parallel several programmes of the State whose terms and conditions were in conflict with those proposed under the project. The thrusts given under the Project towards certain sub-objectives were thereby diminished owing to this extengency e.g. s/s programme, S/U programme and low cost sanitation programme. Besides there has been a felt need for introducing reforms in the prevailing systems covering inter-alia grant of award, procurement, contractual systems, maintenance servicing, costing and pricing. Time extension The Bank had approved to include four more towns and some additional works in ongoing towns. Thus the physical and financial target was raised to about 150%. The Bank has not allowed justified extension of time for six months even after request by the Government of India. Though the requisite funds were released to project towns by the State Government. All the procurement issues were resolved and physical progress was excellent. The major water supply works at Kanpur, Agra, Varanasi & Jhansi and sites & service works at Kanpur and Meerut were not completed within credit closing date March 31, 1996. Now most of works are nearly completion and likely to complete by the end of December 1996. Key lessons learned 34. While the project objectives and sub-objectives of the project were quite relevant and appropriate for the urban sector there is a need to address multi-sectoral concerns which involve multiple agencies by way of an integrated development approach. 35. There is a need to bring about the required legal and institutional reforms in order to tackle the broader aspects of sectoral objectives. An increased investment programme is not necessarily a panacea to bring about this change in focus. 36. In order to address multi-sectoral concerns and improve project performance, there has been a felt need for exposure to appropriate training programme related to large scale projects and their proper management. It is necessary to strengthen the performance of urban institutions in this regard in order that the programmes are implemented more efficiently. 37. Frequent changes in key personnel and staff in the Project entities has been a problem in implementing coherent long term programmes. The continuity of key personnel is an important element in developing adequate commitment to such multi-sectoral programmes and in realizing their objectives. 38. Frequent changes in key personnel within the Bank's mission team have been a problem in setting priority of objectives and procedures of procurement. Several mission's team were too - 80 - bulky in numbers, but without proportionate contribution. Few persons visited once or twice resulting delays in implementation due to variance in approaches. 39. The role mandate and authority of an intermediary body like the IPMC should be expanded to strengthen its capacity to influence events on the ground for timebound implementation performance, achievement of financial objectives and improvements to financial management in the participating agencies. 40. In view of current experiences under Turnkey sub-projects, a trade-off needs to be made between need for quick large scale projects and smaller more manageable and ultimately more sustainable projects in line and within existing capacities of the institutions and slow pace of financial devolutions in case of the municipalities. 41. In addition to the possession of land, the preparation of detailed specification with finalization of at least 25% bid document should be ensured prior to negotiation of the project, so that implementation may be started immediately after effective date of the Agreement with the Bank. Ratings A. Achievement of Objectives Macro policies - Substantial; Sector policies - Substantial; Financial objectives - Partial; Institutional development - Partial; Physical objectives - Substantial; Poverty reduction - n/a; Gender issues - n/a; Other social objectives - Substantial; Environmental objectives - Substantial; Public sector management - Partial; Private sector development - n/a. B. Project sustainability - Likely C. Bank performance Identification - Satisfactory; Preparation assistance - Deficient; Appraisal - Satisfactory; Supervision - Deficient. D. Borrower performance Preparation - Satisfactory; Implementation - Highly satisfactory; Covenant compliance - Satisfactory. E. Assessment of outcome - Satisfactory. - 81 - IBRD 19881R 76' 78- tto The bou..dori,es, colors derominations and any other inf-ormti- sh-w HIMACHAM PRA DECSH thply on d.' pat on this ma do not The YWorld Bankp G rp. an jdgment ontelga \ ~~~~~~~~~~~~~~~~~~~~~~~status of any territory. or acceptance of such f~ ? UR AH C H I N A bou,ndor;rs. CF/ UITAR K(ASHI _ , ENRA -ij~ CHAMOLI HAR YANA IGA, TEHRI GARHWAt . ' Ns'c 000 4 7 PllSt H I L L ) PITHORAGARH 2't SAHAR PUR A PAURI r' -r *1 < 11 t\ / ~~~~~~~~~~ALMORA tZ' ., INDIA { MUZAFFARNAGAR o8nl ,/ .[.Its,ni 43 ) UTTAR PRADESH URBAN DEVELOPMENT PROJECT t. MEERUT N-v t a AINITAL 2e g.rUP Program lJc.d.b RAMPUR ~~~~~~~~~~~~~~ECONOMIC REGION BOUNDARIES r h*O A _ (STAND BY) TOWNS W E S E N J' DISTRCT HEAD'UARTERS 8.1.110,' I EILLY PILIEHI* STATE CAPITAL J >oBu-db- HAHr N,ATIONAL HIG.WAYS HAfYANA $ < BROAD GAUGE RAILROADS -l' t) < <,, o ) J rp) KNEfI y ' - O tO ~ES 2DRIC O ES MATHURA J AICGARN ETAM BAHRAICH -MAINUST,R GONDA _ MAINPURI ~~~~~~~~~~~~ C N~~~~~~TRAGOAKPU fr -' .TJPARRUKAI4A TI ĥARA AI B B ASTI V GORAK HPUR L. E C k UNNAO GrhU MADHrYA. 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Design UnDi o The Warld Bo-k Ihe bounrdries, colors, enominatonP -nd -ny other inormation shown on thi, nap do n-t iply, on he part of To olpurI Th. World Rook Group, o-y judgme-t ToosGayo on the bgol status o, any terriory, or. ny endorseoment or acceptance of To Bhopal '-._ WA'EST Darjjljog .-TDsu BIHAR 0 100° 200o BE NGAL Ja lapoahi i -OBalurghait e5Chh ro, tljPtSmsu oN o so 0 100 200 ToBalurgh1 200 KILOMETERS ˘9 . 9 Vomana,T Dv ahpoILME ER T logral'Pzari B e ,Nawodoh -lcutt To B N ABoarmu To DhaTGkatok A uroogobad <, 0 To Roipur *. t ooro CA LCUTrA 1\ m o U TO Bhubaneshrr To Napu Toi Bhuhoesha MAY 1 997 IMAGING Report No.: 16579 Type: ICR