The World Bank ANDHRA PRADESH AND TELANGANA MUNICIPAL DEVELOPMENT PROJECT (P071250) REPORT NO.: RES29266 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ANDHRA PRADESH AND TELANGANA MUNICIPAL DEVELOPMENT PROJECT APPROVED ON DECEMBER 10, 2009 TO THE REPUBLIC OF INDIA NOVEMBER [ ], 2017 SOCIAL, URBAN, RURAL AND RESILIENCE GLOBAL PRACTICE SOUTH ASIA Regional Vice President: Annette Dixon Country Director: Junaid Kamal Ahmad Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager/Manager: Catalina Marulanda Task Team Leader: Raghu Kesavan The World Bank ANDHRA PRADESH AND TELANGANA MUNICIPAL DEVELOPMENT PROJECT (P071250) ABBREVIATIONS AND ACRONYMS AMRUT Atal Mission for Rejuvenation and Urban Transformation APMDP Andhra Pradesh Municipal Development Project APTMDP Andhra Pradesh and Telangana Municipal Development Project DEA Department of Economic Affairs GIS Geographic Information System GOI Government of India GOT Government of Telangana NHAI National Highways Authority of India NIUM National Institute of Urban Management PDO Project Development Objective PMU Project Management Unit ULB Urban Local Body The World Bank ANDHRA PRADESH AND TELANGANA MUNICIPAL DEVELOPMENT PROJECT (P071250) BASIC DATA Product Information Project ID Financing Instrument P071250 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 10-Dec-2009 15-Dec-2017 Organizations Borrower Responsible Agency Municipal Administration and Urban Development Department, Government of Andhra Pradesh,Municipal Ministry of Finance, Department of Economic Affairs Administration and Urban Development Department, Government of Telangana Project Development Objective (PDO) Original PDO Help improve urban services in AP, and the capacity of ULBs of AP to sustain and expand urban services OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-78160 10-Dec-2009 22-Jan-2010 23-Mar-2010 15-Dec-2017 300.00 159.26 140.74 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank ANDHRA PRADESH AND TELANGANA MUNICIPAL DEVELOPMENT PROJECT (P071250) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING PROJECT STATUS 1. An IBRD loan of US$300 million for the Andhra Pradesh Municipal Development Project (APMDP) was approved on December 10, 2009 with a closing date of December 31, 2015. Following the bifurcation of Andhra Pradesh state in June 2014, the project was restructured in October 2014 in order to divide the project between the two successor states of Andhra Pradesh and Telangana. As part of the restructuring, the project was renamed as Andhra Pradesh and Telangana Municipal Development Project (APTMDP) and the closing date of the loan was extended to December 15, 2017 to enable the two new state governments to complete project implementation and achieve the PDO. 2. The project has made good progress since the extension in October 2014. Disbursements have increased from 16.5% to 53 % currently. The disbursements were slow to pick-up earlier in this FY due to pending audit reports that have since been received. Disbursements would again pick-up now as the pending IUFRs / claims get filed in the coming months and outstanding bills of about US$ 20 million with the implementing agencies would take the disbursement to 60% once they are settled and claimed. All works contracts at the 14 participating Urban Local Bodies (ULBs) are under implementation, albeit with certain delays, and this accounts for 100% of the funds allocated for the civil works under the project. Including services, about US$ 255 million out of the US$ 300 million loan stands committed as on date. The other key activity to be completed in the extended period is the procurement and installation of water meters’ (goods) contracts for the aforesaid water supply sub-projects and the task team has been working closely with both state governments to accelerate this activity. Bidding document templates for water meters’ contracts have been agreed with both state governments and procurement has already commenced in 3 ULBs while getting ready in other ULBs – hence procurement for this activity is targeted for progressive completion by April 2018 and completion of subsequent installation within the next 4-5 months and well before end December 2018. Infact, the goods procurement is expected help faster utilization of balance funds in the extended period. 3. Given the complete institutional and administrative restructuring that took place in both states post the bifurcation, which could have not been foreseen or mitigated at the time of restructuring, project implementation was delayed for the following reasons:  The two new state governments have taken longer than was initially envisioned to put a project executing structure in place, including getting project staffing in place and trained, amending project documents (such as separate Operations Manuals and ESMFs for each state, disclosure and consultations events, etc.). For instance, in the immediate aftermath of bifurcation, many key positions in the urban departments in both states had part- time staff and this contributed to delays in decisions, approvals, etc.  Court case related to bidding of civil works in Ananthapur ULB (Andhra Pradesh) by one of the bidders that has since been settled, but the contract had to be rebid and time was lost.  Obtaining regulatory clearances and completing land acquisition / resettlement. This led to delays in civil works contract implementation since work could not be commenced on certain stretches till such clearances were in place (for instance, clearance of National Highways Authority of India (NHAI) was required for laying the pipeline along national highway stretches). 4. All of these issues have now been addressed and this extended time would be critical to both states to be able to complete the remaining activities by December 2018 and satisfactorily achieve the project development objectives. Both states have submitted action plans for completing all project activities during the extended period. Since all civil works contracts have been procured and based on current status of physical progress / implementation, their completion in the extended period is realistic and achievable. The World Bank ANDHRA PRADESH AND TELANGANA MUNICIPAL DEVELOPMENT PROJECT (P071250) 5. The project is in compliance with Bank fiduciary and safeguards policies and there are no overdue audit reports or pending audit issues 6. Implementation Progress by Component  Component 1, State level Policy and Institutional Development. This component has supported state level actions and enabling frameworks for rolling out capacity enhancement initiatives at ULBs (under Component 2). It supported the state-wide design of e-governance and mapping initiatives that were subsequently rolled out at ULBs, setting up of state level PMUs to oversee implementation of these initiatives, and other supporting actions.  Component 2, Municipal Capacity Enhancement. This component has primarily supported municipal e- governance, GIS mapping, and training activities at ULBs. Implementation of municipal e-governance activities is substantially complete in AP, with multiple activities now computerized and live at 107 ULBs, including on-line building permissions, grievance redress, and citizen interface. The municipal e-governance contract(s) in Telangana is now being revised as GoT has already implemented some of these activities using state funds. GIS mapping activities have been completed in 69 ULBs across both states (meeting the original results target) and are underway in other ULBs.  Component 3, Urban Infrastructure Investments. The 14 participating ULBs across AP and Telangana have completed civil works procurement to improve water supply services and contract implementation is well underway. Upon completion, these interventions are expected to benefit over 1.2 million urban residents. However, some of the ULBs (especially in Telangana) will need additional time beyond the loan closing date of December 15, 2017 to complete sub-project implementation and successfully commission the systems in order to achieve service delivery outcomes.  Component 4, Project Management and Implementation support. This component has supported the preparation and implementation of all investment sub-projects at participating ULBs, including preparation of detailed project reports, establishment of PMUs at ULBs for contract supervision, and Third Party Quality Consultant support. The balance of funds available under this component is being used for the preparation of urban infrastructure interventions at other ULBs that may be funded under various GOI urban programs, such as Smart Cities and AMRUT. 7. Action plan for Project Completion : Both states have submitted action plans along with their DEA request with targets dates for completing on-going activities within the extended time-period. The Bank team has reviewed this and find it satisfactory. Since all civil works contracts have been procured and based on the current status of physical progress / implementation, their completion in the extended period appear realistic and achievable. Further, it may be noted that there is no pending land acquisition under the project. II. DESCRIPTION OF PROPOSED CHANGES 5. Based on the requests from the Government of Andhra Pradesh and Telangana, and the subsequent recommendation of the Department of Economic Affairs (DEA), this proposed restructuring seeks to extend the Loan closing date of the project by about 12 months, to December 31, 2018. As per DEA’s stipulation, no new civil works will be undertaken during the period of the proposed closing date extension. The World Bank ANDHRA PRADESH AND TELANGANA MUNICIPAL DEVELOPMENT PROJECT (P071250) 6. Accordingly, revised disbursement projections would be incorporated keeping in view the extended implementation period. I. SUMMARY OF CHANGES Changed Not Changed Change in Loan Closing Date(s) ✔ Change in Disbursement Estimates ✔ Change in Implementation Schedule ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Results Framework ✔ Change in Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) The World Bank ANDHRA PRADESH AND TELANGANA MUNICIPAL DEVELOPMENT PROJECT (P071250) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-78160 Effective 31-Dec-2015 15-Dec-2017 31-Dec-2018 30-Apr-2019 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2010 20,000,000.00 20,000,000.00 2011 1,477,623.05 1,477,623.05 2012 1,290,895.79 1,290,895.79 2013 12,242,646.65 15,234,483.48 2014 14,488,834.51 10,731,974.68 2015 15,000,000.00 16,929,229.62 2016 65,500,000.00 54,550,556.14 2017 85,000,000.00 32,365,899.63 2018 85,000,000.00 65,000,000.00 2019 0.00 82,419,337.61