3 Project Number: 38254-033 Loan Number: 2312 August 2015

India: North Karnataka Urban Sector Investment Program, Tranche 1 This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

Completion Report

CURRENCY EQUIVALENTS

Currency Unit – Indian rupees (Rs)

At Appraisal At Project Completion 1 Aug 2006 23 July 2014

Rs1.00 = $0.0214546234 $0.0165739904 $1.00 = Rs 46.61 Rs 60.34

ABBREVIATIONS

ADB – Asian Development Bank CDP

CLIP CMC CPS CSP DITYS DMA DMF DPD DPR EIRR EMP EOCC EPD IEC IEE FFA FIRR GAP GRC HPC HSC IEE KSCB KSFES KSPHC KUIDFC MFF NGO NKUSIP NNP O&M PBDPS PBMC PPMS PFR PMU

– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

community development plan city-level infrastructure plan city municipal council country partnership strategy country strategy and program Department of Information, Tourism, and Youth Services Directorate of Municipal Administration design and monitoring framework divisional program director detailed project report economic internal rate of return environmental management plan economic opportunity costs of capital executive program director information, education, and communication initial environmental examination framework financing agreement financial internal rate of return gender action plan grievance redressal committee High Power Committee house service connection initial environmental examination Karnataka slum clearance board Karnataka State Fire and Emergency Services Karnataka State Police Housing Corporation Karnataka Urban Infrastructure Development and Finance Corporation multitranche financing facility nongovernment organization North Karnataka Urban Sector Investment Program Nirmala Nagar Program operation and maintenance performance-based deferred payment structure performance-based management contract project performance monitoring system periodic financing request program management unit

PSP RRP SHG STP TA TEC ULB

– – – – –

private sector participation report and recommendation of the President self-help group sewage treatment plant technical assistance tender evaluation committee urban local body

WEIGHTS AND MEASURES

km – kilometer lpcd

MLD – –

liters per capita per day million liters per day

NOTES

(i) The fiscal year (FY) of the Government of India and its agencies ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2015 ends on 31 March 2015.

(ii) In this report, "$" refers to US dollars.

Vice-President W. Zhang, Operations 1 Director-General H. Kim, South Asia Department (SARD) Director S. Bonu, Urban Development and Water Division, SARD Team leader S. Mehta, Urban Development Specialist, SARD Team members E. Moises, Project Analyst, SARD

A. Orbe, Operations Assistant, SARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2

B. Project Outputs 3

C. Project Costs 6

D. Disbursements 7

E. Project Schedule 7

F. Implementation Arrangements 7

G. Conditions and Covenants 8

H. Consultant Recruitment and Procurement 9

I. Performance of Consultants, Contractors, and Suppliers 10

J. Performance of the Borrower and the Executing Agency 10

K. Performance of the Asian Development Bank 11

III. EVALUATION OF PERFORMANCE 11

A. Relevance 11

B. Effectiveness in Achieving Outcome 11

C. Efficiency in Achieving Outcome and Outputs 12

D. Preliminary Assessment of Sustainability 12

E. Impact 13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14

A. Overall Assessment 14

B. Lessons 15

C. Recommendations 15

APPENDIXES

1. Design and Monitoring Framework 16 2. Relevance of Project to Government and ADB Policies and Sector Strategies 20

3. Contract Packages 22

4. Status of Outputs and Outcomes 23

5. Loan Reallocations 25

6. Disbursements Performance 26

7. Implementation Schedule 28

8. Implementation Arrangements 29

9. Compliance with Loan Covenants 32

10. Problems, Delays, and Variations 38

11. Financial and Economic Analysis 42

12. Environmental and Social Safeguards 58

13. Assessment of Gender Inclusive Results 70

14. Activities under the Community Development Plan 81

BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan – Original 7. Project Completion Report Number

India 2312-IND North Karnataka Urban Sector Investment Program, Tranche 1 Government of India Karnataka Urban Infrastructure Development and Finance Corporation $23.42 million $33.00 million 1520

B. Loan Data 1. Appraisala – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) 8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

5 September 2005 19 September 2005 26 October 2006 27 October 2006 6 December 2006 (MFF approval)

26 January 2007 (Tranche 1 approval) 27 October 2006 (FFA signing) 23 January 2008 (Tranche 1 loan signing)b 8 May 2008c 25 April 2008 1 31 December 2011 31 December 2013 (physical closing) 23 July 2014 (financial closing) 1 LIBOR and 0.6%d 25 (term) 5 8.5% per annum for water supplye 25 years 5 years n/a

ii

9. Disbursements

a. Dates

Initial Disbursement

22 August 2008

Final Disbursement

23 July 2014 (last disbursement

01L18660D processed)

Time Interval

71 months

Effective Date

25 April 2008

Original Closing Date

31 Dec 2011

Time Interval

44.16 months

b. Amount ($ ’000)

Category or Subloan (1)

Original Allocation

(2)

Partial Cancellation

(3 = 2-5)

Last Revised

Allocation (4)

Amount Disbursed

(5)

Undisbursed Balance (6 = 4-5)

1. Works

1A. Sanitation 11,600,000 7,054,618 4,545,382 4,545,382 0

1B. Water Supply 3,800,000 -897,732 4,697,732 4,697,732 0

1C. Non-Municipal 2,400,000 2,400,000 0 0 0

1D. Investment PAF 1,500,000 306,375 1,193,625 1,193,625 0

2. Equipment 0

2A. Water Supply 500,000 500,000 0 0 0

2B. Non-Municipal 3,200,000 1,298,292 1,901,708 1,901,708 0

2C. Institutional Development

1,100,000 1,100,000 0 0 0

2D. Investment PAF 100,000 100,000 0 0 0

3. Consulting Services 5,700,000 -172,345 5,872,345 5,872,345 0

4. Incremental Rec. Cost 2,100,000 -3,110,057 5,210,057 5,210,057 0

5. Unallocated 1,000,000 1,000,000 0 0 0

Total 33,000,000 9,579,151 23,420,849 23,420,849 0

FFA = framework financing agreement; LIBOR = London interbank offered rate; MFF = multitranche financing facility; PAF = program assistance facility; ULB = urban local body. a

For MFF. b

The Government had deferred signing of the loan agreement for the first loan pending completion of start-up activities (including recruitment of program consultants), as well as to save on commitment charges. The validity of the MFF meanwhile expired on 6 December 2007 due to oversight and was subsequently revived in January 2008 (extended to 26 January 2008) to enable the signing of the loan for the first tranche.

c The terminal date of loan effectiveness was extended from 23 April 2008 to 8 May 2008.

d According to the loan agreement the borrower shall pay a commitment charge at the rate of 0.75% per annum.

e Funding for other components was provided as a grant. ULBs have been provided incentives of up to 3% interest if

they achieve three reform-based targets. For defaulted payment, the interest would be at 11% p.a.

iii

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate

ADB Gov.

Actual

ADB Gov.

Foreign Exchange Cost 5 7.2 n/a n/a Local Currency Cost 28 11.2 n/a n/a Total

2. Financing Plan ($) Cost Appraisal Estimate Actual

Implementation Costs Borrower Financed 18,400,000 12,029,000

ADB Financed 33,000,000 23,420,000 Other External Financing 0 0

Total 51,400,000 35,449,000

IDC Costs Borrower Financed 0 0 ADB Financed 0 0 Other External Financing 0 0

Total 51,400,000 35,449,000

ADB = Asian Development Bank, IDC = interest during construction.

3. Cost Breakdown by Project Component ($)

Component Appraisal Estimate Actual

Component A: Sanitation Component B: Water Supply Component C: Non-Municipal Infrastructure Component D: Inst. Development Investment Program Assistance Facility Contingencies

11,600,000

4,300,000 5,600,000 1,100,000 9,400,000 1,000,000

4,545,382 4,697,732 1,901,708

0 12,276,027

0

Total 33,000,000 23,420,849

iv

4. Project Schedule

Item Appraisal Estimate

Actual Award of Contract

Completion of Works

Date of Contract with Consultants 1. Program Consultant (Hubbali–Dharwad)

a

Dec 2006

Nov 2007

n/a

2. Program Consultant II (Balagavi)a Dec 2006 Nov 2007 n/a

3. Program Consultant III (Kalburgi)a Dec 2006 Nov 2007 n/a

4. Program Consultant IV (Ballari)a Dec 2006 Nov 2007 n/a

Civil Works Contract 1. Improvements to Water Supply System, Laying DI Pumping Main and Construction of Intake in Haveri CMC (01HVR01)

Dec 2009 Dec 2009 Dec 2013

2. Improvements to Water Supply System in Raichur CMC (01RCR01)

Dec 2009 Apr 2010 Nov 2013

3. Improvements to Water Supply System in Hospet CMC (01HPT01)

Dec 2009 Mar 2010 Dec 2013

4. Supplying and Laying of Sewer System, Constructing FAL-type STP and Drainage Link in Haveri CMC (01HVR02)

b

Dec 2009 Dec 2009 n/ac

5. Improvements to Sewerage System in Raichur CMC (01RCR02)

b

Dec 2009 Oct 2010 n/ac

6. Improvements to Sewerage System in Hospet CMC (01HPT02A)

b

Dec 2009 Sep 2010 n/a

7. Improvements to Sewerage System in Hospet CMC (01HPT02B)

b

Dec 2009 Sep 2010 n/a

8. Construction of KUIDFC Building (01UIB01) Dec 2009 Mar 2010 Dec 2013 Equipment and Supplies Dates First Procurement Dec 2009 Oct 2009 Oct 2010 Last Procurement Dec 2009 Oct 2009 May 2011 Completion of Equipment Installation

CMC = city municipal council; KUIDFC = Karnataka Urban Infrastructure Development and Finance Corporation; FAL = facultative aerated lagoon; STP = sewage treatment plant. a Engineering designs were completed in Feb 2009. The districts were formerly known as Hubli-Dharwad, Belgaum,

Gulbarga, and Bellary, respectively. b

Sewerage subprojects have been shifted to Tranche 4 and will be completed within the Tranche 4 loan period. c

Contract terminated on Nov 2012 (Raichur) and Jan 2015 (Haveri). The balance of the work for Raichur was retendered four times and for Haveri once. Suitable responses have not been received.

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 25 April 2008 to 31 December 2008 S S From 1 January 2009 to 31 May 2009 S S From 1 June 2009 to 31 December 2009 S HS From 1 January 2010 to 31 May 2010 S HS From 1 June 2010 to 31 December 2010 S S

v

From 1 January 2011 to 31 December 2011 OT PP From 1 January 2012 to 31 March 2012 From 1 April 2012 to 31 December 2012 From 1 January 2013 to 30 June 2013 From 1 July 2013 to 31 December 2013 From 1 January 2014 to 30 June 2014 From 1 July 2014 to 31 December 2014

OT OT OT OT OT OT

PP OT OT OT OT OT

S = Satisfactory, HS = Highly Satisfactory, OT = On Track, PP = Potential Problem.

D. Data on Asian Development Bank Missions

Name of Mission Date No. of Persons

No. of Person-

Days

Specialization of Members

Appraisal 5–19 Sep 2005 10 150 days b, f, h, j, k, t, u,

x, y, z Re-appraisal 16–25 Aug 2006 3 30 days b, f, k Loan Negotiation 26–27 October 2006 10 days b, f, k, o Inception 19–21 Dec 2006 2 6 days b, w Review Mission 1+ TA Inception Mission

24 Sep–3 Oct 2007 4 40 days b, c, t, u

Review Mission 2 28 Nov–5 Dec 2007 2 16 days b, c Review Mission 3 3–10 Mar 2008 4 26 days a, b, c, q Review Mission 4 17–18 Oct 2008 1 2 days a Review Mission 5 4–11 May 2009 3 24 days k, i, m Review Mission 6 15–22 Feb 2010 3 20 days k, g, h Review Mission 7 16–20 Aug 2010 1 3 a Review Mission 8 4–13 Jul 2011 4 29 days k, d, n, s Consultation Mission 18–21 Oct 2011 1 4 days a Midterm Review 21–25 May 2012 1 3 days a Review Mission 9 5–9 Nov 2012 3 3 days a, d, p Review Mission 10 20–24 May 2013 2 4 days a, c Review Mission 11 20–24 Jan 2014 5 10 days a, d, c, q, n Review Mission 12 30 Jun–4 Jul 2014 2 10 days a, n Review Mission 13 16–19 Feb 2015 3 10 days a, o, m Project Completion Review Mission

11–18 may 2015 5 26 c, q, r, w, y

a = principal urban development specialist; b = senior urban development specialist; c = urban development specialist; d = safeguards specialist; e = environment specialist; f = (principal/senior) counsel; g = principal procurement specialist; h = procurement specialist; i = project administration unit head; j = senior plan and policy economist; k = urban economist; l = senior resident advisor; m = young professional; n = senior project officer; o = senior control officer; p = associate social development officer (gender); q = (assistant/associate) project analyst; r = consultant (gender); s = consultant (environment); t = consultant (water supply); u = consultant (private sector participation); v = consultant (environment and water resource management); w = staff consultant (economics); x- consultant (safeguard policy compliance specialist); y = consultant (financial specialist); z = consultant (financial).

Note: Review Missions 5-13 also discussed other tranches.

I. PROJECT DESCRIPTION

1. In 2000 the Government of Karnataka appointed a High Power Committee (HPC) for the Removal of Regional Imbalances1 between North and South Karnataka.2 The HPC proposed an investment plan of Rs 115,270 million ($2,652 million) in North Karnataka,3 with the aim of reducing intrastate imbalances. On the basis of the HPC’s recommendations and as a logical follow-up to previous Asian Development Bank (ADB) assistance4 the Government of India asked ADB to extend financing for the sector. The North Karnataka Urban Sector Investment Program (NKUSIP) was hence conceived as a multitranche financing facility (MFF)5 comprising four tranches. This MFF would have a financing plan of $440 million, with ADB contributing $270 million to address the regional imbalance in the level of basic urban infrastructure and services in 25 urban local bodies (ULBs) in North Karnataka. Tranche 1 (this project) was designed to primarily support water supply and sanitation infrastructure improvements in the three ULBs of Haveri, Hospet, and Raichur. The framework financing agreement (FFA) for the MFF was signed on 27 October 2006. The project loan for tranche 1 was signed on 23 January 2008. The loan became effective on 25 April 2008. There was a delay in loan effectiveness due to a delay in finalizing the legal opinions provided by the government.6 The loan was closed on 31 December 2013 after receiving a 2-year loan extension.

2. The planned impact of the MFF was to improve the quality of life in the 25 investment program ULBs through the provision of basic urban infrastructure with the aim of increasing economic opportunities and growth in these towns, thereby reducing interregional imbalances in the state. The outcome of tranche 1 was to provide improved basic urban services and sustainable infrastructure services for the three investment program ULBs. The loan amount under the tranche was approved at $33 million. As per the approved first periodic financing request (PFR), the project’s components were (i) improved sanitation coverage in the three project towns through the development of sewerage infrastructure leading to improved sanitation conditions for 29,500 households; (ii) improved water supply coverage in the three project towns, through enhanced bulk supply and distribution infrastructure and connecting 22,000 households to the system; (iii) improved non-municipal (firefighting) infrastructure in 23 Investment program ULBs7 and tourism infrastructure in six towns8; (iv) enhanced institutional development through the provision of a geographic information system (GIS) and other hardware; and (v) an investment program assistance facility to support with the recruitment of program consultants, incremental administration costs, and a new office building for the 1 Government of Karnataka. 2002. High Power Committee Report for the Redressal of Regional Imbalances.

Bangalore. 2 Karnataka State Planning Board. 2008. Karnataka: A Vision for Development. Bangalore. The report found that 7 of

the 8 districts that had a Human Development Index lower than India’s (0.621) were in North Karnataka. 3 The HPC proposed a multisectoral investment plan under which the urban development and tourism sectors

(included in social services) were recognized as priorities and were given an allocation of about 33% ($862 million) of the total proposed investment plan.

4 ADB. 1999. Report and Recommendation of the President to the Board of Directors: India: Karnataka Urban

Development and Coastal Environmental Management Project. Manila; and ADB. 1995. Report and Recommendation of the President to the Board of Directors: India: Karnataka Urban Infrastructure Development Project. Manila. Both were implemented by the Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC).

5 ADB. 2006. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche

Financing Facility India: North Karnataka Urban Sector Investment Program. Manila. 6 There were discrepancies in the name of the project and of the Karnataka Urban Infrastructure Development and

Finance Corporation (executing agency) in the legal opinions, which needed to be corrected. To accommodate for this, ADB extended the deadline for loan effectiveness by 15 days, from 23 April to 8 May. Refer B. Loan Data (n.b) for reason for delay in loan signing subsequent to the approval of the MFF.

7 All program ULBs except Nippani and Rabkavi–Banhatti.

8 Badami, Basavakalyan, Bidar, Bijapur, Gulbarga, and Hospet.

2

executing agency (para. 18). The project scope changed during the course of implementation primarily to address budgetary constraints and implementation challenges (paras. 7 and 31).

3. The executing agency for the MFF is the Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC), which had previously implemented two ADB-assisted projects (footnote 4), as well as other externally funded urban sector projects.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

4. The project’s relevance derives from the established positive correlation between economic growth and provision of urban infrastructure, which is central to the Government of Karnataka’s urban development policies and initiatives. The project was aligned with the policies and sector priorities of the governments of India and Karnataka and ADB (Strategy 2020)9 (Appendix 2). The MFF supported the various government 10 and ADB policies 11 on the importance of robust infrastructure development to promote growth and provide better access to services, with investments in water and sanitation being critical for the promotion of inclusive growth.

5. The Government of Karnataka conducted project preparatory studies, the output of which were ULB city-level infrastructure plan (CLIP) reports identifying subprojects in all the investment program towns. All the CLIP reports were high quality and included a comprehensive analysis of current situations, needs, and gap assessments, subproject identification and their financial and economic appraisal. 12 These incorporated ADB’s due diligence and safeguard policy requirements for the purposes of loan processing. Sufficient public consultation with relevant stakeholders took place at the ULB level.13 The project design is considered satisfactory, consistent with the government’s objectives of reducing interregional disparities in the state.

6. The MFF modality provided long-term support for the investment program, enabling the flexibility required for the states’ complex initiative involving 25 ULBs with different needs and absorptive capacities. ADB’s report and recommendation of the President (RRP) incorporated key lessons from previous urban development projects, particularly those implemented in the state of Karnataka, thus strengthening the project’s adequacy of design. These key lessons included the need to (i) select towns in a demand-driven and locally rooted way- ULBs identified needs and subprojects through the preparation of CLIPs; (ii) commence project preparatory activities in advance, prior to loan signing; (iii) include tertiary and household infrastructure (house connections, meters, and networks) in the scope of the project, to enable the full utilization of bulk infrastructure provided under the loan. 14 However, in spite of the sound

9 ADB. 2008. Strategy 2020. The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020.

Manila. 10

Government of India. 2002. 10th Five-year Plan (FY2002–FY2007); Government of Karnataka. 2009. Urban Development Policy for Karnataka (Draft).

11 ADB. 2003. Country Partnership Strategy: India, 2003–2006. Manila.

12 CLIPs demonstrated the widespread social and environmental benefits as well as economic internal rates of return (EIRRs) of 12% or more for sample subprojects.

13 Town-level consultation workshops and baseline studies were conducted.

14 This is a major lesson from the Karnataka Urban Development and Coastal Environmental Management Project, where the bulk water project facilities could not serve their intended purpose because tertiary and household level infrastructure was not provided under the loan

3

analysis, measures for the mitigation of risks related to contract failures were found to be inadequate during the project’s implementation stage (para. 31).

7. The project had to be modified in October 2011 due to unanticipated cost escalations resulting from (i) higher bid premiums for civil works packages relative to engineering estimates due to India's tight market condition caused by the country's rapid urban infrastructure development, coupled with bidder concerns over timely payments (as the implementing agencies were small municipalities) and difficulties in mobilizing resources to interior towns; and; (ii) frequent fluctuations in the rupee-dollar exchange rates during the project design period (2007-2008). Thus, in order to implement the critical water supply and sanitation subprojects15 (which had escalated by $7.5m), activities with duplications in other programs were eliminated and subprojects with a low degree of preparedness were transferred to subsequent tranches (para. 11). House service connections (HSCs) and metering could not be installed due to this funding constraint. Furthermore, the slow progress of construction, especially sewerage works, necessitated a loan extension of 2 years in January 2012. Despite the extension, the sewerage works could not be delivered under the tranche (para. 13) and were transferred to tranche 4 in 2013 at the request of the government. These changes have decreased the project’s relevance, although the MFF modality has enabled linkages between tranches, thus enabling completion of works across the facility.

8. The project was categorized as effective gender mainstreaming and the gender strategy, participation strategy and activities conducted under the gender action plan (GAP) with the help of nongovernment organizations (NGOs) created much-needed awareness about hygiene, water, and waste management, and the willingness to pay for house connections (both water supply and sewerage) and volumetric tariffs. The activities conducted under the GAP and community development plan (CDP) are presented in Appendixes 13 and 14.

9. The project continues to be pertinent in the context of the government’s renewed focus on urban reform through its various flagship programs like the Smart Cities Program and Swachh Bharat Abhiyan,16 the latter of which focuses heavily on urban sanitation. The focus on devolution and institutional strengthening of ULBs was fundamental to the project’s conception.

B. Project Outputs

10. The project was conceived as a first tranche under the first pilot MFF in the urban sector. The guidelines for MFFs were not clearly developed at the time and hence a separate design and monitoring framework (DMF) for the tranche was not made at project outset. The DMF presented in Appendix 1 was not created until 2011 after the establishment of the e-operations system.17 Furthermore, the DMF failed to capture the full range of project outputs, including the implementation of the CDP (hygiene and tariff awareness) and the GAP (women’s preparedness for the project). The GAP was not adequately designed, as it lacked baseline data and targets and used vague indicators and terminology.18 It was also not aligned to the DMF (Appendix 13, para. 4), thus making it difficult to assess the linkages of the GAP activities to the project outputs. This DMF also does not reflect the project’s original scope prior to the cost escalations (para. 7) and was not subsequently updated to reflect further changes in scope

15

The CLIP baseline studies identified water and sanitation to be top priorities in the ULBs. 16

Translated as Clean India Program. 17

E-operations (eOps) is ADB’s internal online project performance monitoring system. 18

GAP activities were conducted under the CDP component, financed under tranche 2. The project GAP comprised

thirteen core activities spread across three focus areas (project design, project implementation and monitoring, and institutional development) and eleven objectives.

4

when sewerage subprojects and house connections were transferred to tranche 4.19 Project outputs were only partially successful as a result of these shortcomings.

11. In order to implement the more critical water supply and sewerage subprojects that were affected by cost escalations (para. 7) one package of fire-fighting equipment and the tourism packages were transferred to tranche 220, some institutional development activities were taken up by the state government, and the institutional development activities for the procurement of $1.1 million of GIS and other hardware were discontinued in order to avoid duplication with the Karnataka Municipal Reform Project (World Bank). Performance against outputs as reflected in the DMF is presented below.21

1. Water Supply Infrastructure

12. Water supply subprojects, including works for bulk, treatment, and distribution networks, have been successfully completed in the three project towns, with additional treatment capacity of 9.08 million liters per day (MLD) (100.08% of target), 256 km of new pipe networks (102.4% of target), and rehabilitation of 9.14 km of existing pipe networks.22 The 2-year loan extension period enabled the successful completion of all the water supply subprojects that had suffered from initial construction-related delays (Appendix 10). Although the HSCs (22,000) and metering could not be installed (para. 7), the project benefited 49,233 households, including 245 female-headed households (FHH) with enhanced water availability. This includes 1,464 households23 that have taken up HSCs on their own accord (including 109 FHHs) on account of the 152 project awareness campaigns conducted by the implementing NGOs (INGOs) that were engaged for the community development activities (para. 25). This benefitted 11,875 community members (with 66.3% female participation). The 24 training manuals and modules developed by the apex NGO as a part of the information, education, and communication (IEC) campaign have also helped in this regard. As a result of the project interventions access to water supply has been improved, as the average water availability in the three towns has increased. The water availability in Hospet has increased from 100 liters per capita per day (lpcd) to 125 lpcd. In Raichur, the increase has been from 110 lpcd to 125 lpcd, and in Haveri, from 30 lpcd to 60 lpcd. In addition, 2,175 people in Haveri and Hospet, who are dependent on standposts (connected to the main distribution network), have also benefitted from increased water supply.

2. Sewerage Infrastructure

13. The sewerage subprojects in the three towns could not be completed and the balance of works has been transferred to tranche 4 (loan 3088). The scope of sewerage works included the construction of three sewage treatment plants (STPs), with a total treatment capacity of 51.7

19

The DMF continued to reflect the HSC numbers as well as sewerage outputs. 20

This included the transfer of tourism activities to later tranches (Basavakalyan and Gulbarga to tranche 2; Bidar to tranche 3; and Badami, Bijapur, and Gulbaraga, which were expected to be taken in tranche 4) in the absence of proposals from the Department of Tourism; and the discontinuation of Hospet’s proposal as a result of the inability to obtain required permits from the Archeological Survey of India.

21 Contribution to the results framework (RFI): Households with new or improved water supply (number)= 49,233 with improved water supply (target was 22,000 households with new water supply connections); households with new or improved sanitation (number)=0 (target 45,000 households additionally served with access to sewer systems); Wastewater treatment capacity added or improved (cubic meters per day) = 0 (target of additional capacity of 51000 cubic meters per day); Water supply pipes installed/ upgraded (length of network in kilometers)= 256km+9.14km (target 250km and 30km);

22 Project design included 265 km of network, of which 11 km in Hospet was undertaken by Karnataka Urban Water Supply and Drainage Board (KUWSDB) using its own funds, leading to a savings of Rs5.9 million for tranche 1.

23 Of the 49,233 households that benefitted, 47,769 were already connected to the water supply system prior to the project. All households are currently unmetered.

5

MLDs,24 sewerage networks totaling 410.7 km, and 2.9 km of drains.25 At loan closing, 39% of the original loan allocation toward this component had been disbursed and the completion of works under tranche 1 stood at 67% for Haveri, 32% for Hospet, and 22% for Raichur, including the completion of 146.6 km of networked sewers. The project was envisaged to provide 45,000 additional households (DMF target) with access to sewerage services, although HSCs were removed from the project scope due the budget constraints (para. 7). The HSCs will now be provided by the ULB (paid for by the beneficiary) after the completion of works under tranche 4 by October 201626. However, a total of 176 households (including 30 FHHs) in Hospet and Raichur have taken up sewerage connections on their own initiative, and 665 households (including 163 FHH) have invested in household latrines, motivated by the outreach activities conducted by the INGOs in the project towns (para. 12).

3. Non-Municipal Infrastructure (equipment)

14. The scope of the support provided toward the non-municipal infrastructure component was decreased from 23 to 16 ULBs to counter the effect of the civil works cost escalations (para. 7). Firefighting equipment for 16 ULBs was procured in eight packages and was successfully completed. The equipment includes 33 water tenders, 3 advanced rescue vans, 3 medium rescue vans, 3 water bowsers, 10 breathing air compressors, 27 portable pumps, and a telescopic platform.

4. Institutional Development

15. There was a change in financing for this component as it was not necessary to procure the GIS and other hardware (para. 11). Although there was no money disbursed under this output, the project continued to support the Directorate of Municipal Administration’s (DMA’s) institutional reforms under the Nirmala Nagar Program.27 Through the loan covenants, the project supported reforms that would increase revenues in order to improve the financial base of the ULBs. The project’s targeted outputs included: (i) the application of a fund-based accounting system in all 25 project ULBs, which has been successfully completed; (ii) the preparation of a properties base with the aim of increasing property tax revenues to at least 75% coverage; (iii) the improvement of water tariff collection efficiencies; (iv) the introduction of a volumetric tariff for the water supply; and (v) the introduction of sewerage tariffs.

16. A self-assessment system and/or capital value system for property tax has been undertaken in all project towns to improve the efficiency of tax collection. For 2013–14, the collection efficiencies were 82.2%, 60.4%, and 71% for Raichur, Hospet, and Haveri respectively. Water tariff collection efficiencies are still not on par with the collection efficiencies for Raichur, Hospet, and Haveri, being 21.5%, 26.5%, and 32.3%, respectively. The collection efficiencies have dropped since appraisal 28 and it was found that water tariff collection efficiencies had a direct correlation with the political will toward improving collection efficiencies.29 The introduction of a volumetric tariff has been instituted by a government order30 for water supply and these will come into effect with the introduction of metering and household connections (tranche 4). Currently, the uniform flat rate for unmetered domestic water 24

This includes 20 MLD STP in Raichur, 27 MLD STP in Hospet, and 4.71 MLD STP in Haveri. 25

This includes 1.75 km of secondary drains in Hospet and a 1.15 km drain in Haveri. 26

Loan closing date for L3088 (tranche 4) is 5 December 2016 27

Translated as Clean Town Program. 28

At appraisal the efficiencies were 68% for Raichur, 78% for Hospet, and 51% for Haveri. 29

Tariff collection efficiencies have been found to be higher in previous years when there was better enforcement of rules against non-payment (connection cut off) as a result of stronger political will.

30 Govt. Order No. NAE o7 UWS 2011, Bangalore; dated 7 July 2011.

6

connections has been increased from Rs45 per month to Rs120 per month in all towns (2012) as per the same government order, in accordance with which the ULBs have also passed a general resolution to levy user charges on completion of subprojects, including sewerage subprojects.31

17. The GAP activities have also supported institutional development and have helped to (i) increase the project implementation capacity of 119 counselors, including 29 women, by conducting three training programs; and (ii) build the gender capacity of 237 Karnataka slum clearance board (KSCB) and ULB staff by providing training on gender-related aspects of the project; these trainings witnessed 37% female representation.

18. In addition, the civil works for the KUIDFC office building (Urban Infrastructure Bhawan) under the investment program assistance facility32 output have been successfully completed, although these were delayed by 33 months (Appendix 10). The interior works for the six-storey building are currently ongoing under tranche 3.

C. Project Costs

19. At appraisal, the total cost of the project was estimated at $51.4 million (ADB financing of $33 million or 64.2% and Government of Karnataka contribution of $18.4 million or 35.8%). Actual total expenditure at completion was $35.45 million, comprising a $23.42 million loan from ADB (66.1%) and $12.03 million (33.9 %) spent by the government. The ADB contribution for tranche 1 is slightly more than the ADB-government split outlined in the financing plan, which was a 61-39 ratio for the overall facility.

20. Driven by cost escalations (para. 7) and implementation delays (para. 23), tranche 1 had to accommodate a number of changes, including a loan extension of 2 years that was approved in January 2012, a change of scope, and a partial cancellation of $9,302,264 of the loan funds in August 2013 due to the cancellation of the sewerage infrastructure output, the cancellation of the unutilized loan balance in 2014, and cost reallocations33 in October 2011, August 2013, and April 2014. Cost reallocations were done to accommodate (i) the increased cost of water supply and sanitation subprojects (para. 7); (ii) the effects of partial loan cancellation ($9,302,264); and (iii) the payments for works completed and/or services rendered under each component. Costs were reallocated from water supply equipment (procurement of meters), 34 non-municipal infrastructure, 35 unallocated costs, and institutional development 36 to finance the increased costs incurred under water supply and sanitation infrastructure, consulting services, and incremental recurrent costs. Appendix 5 shows the reallocations among the various project components and the proportionate changes in cost allocations.

21. The cancellations and reallocations reduced the loan amount by 29% from $33 million to $23.42 million and increased ADB’s cost financing share from 64%37 to 66.1%. Although this cancellation affected the project outputs and outcomes (i.e., the sewerage subprojects would not be delivered), the value of the partial cancellation ($9,302,264), which approximately met the value of the undisbursed balance in the sewerage contracts, was transferred to tranche 4 to

31

Under the subproject eligibility criteria of the FFA it was agreed that the tariff would be no less than Rs10 per month, to be implemented within 6 months of service provision.

32 Not reflected in the DMF.

33 Done through minor changes in scope.

34 These were absorbed into the civil works packages.

35 The remaining packages were transferred to tranche 2.

36 Undertaken by the government at its own expense under separate programs.

37 As indicated in the PFR.

7

enable the completion of the balance of works across the MFF timeframe. The overall cost overrun for the water supply subprojects was Rs48.75 million ($0.82 million). However, the dollar exchange-rate fluctuations have helped to cushion this. Factoring in the exchange fluctuations, the cost overruns were 9% in Hospet ($0.3 million), (-) 1.4% in Haveri ([-] $0.03 million), and 19.7% in Raichur ($0.55 million).

D. Disbursements

22. Of the approved ADB loan amount of $33 million, $23.42 million (70.96%) was disbursed based on actual costs incurred under various subcomponents. Loan proceeds were disbursed via the reimbursement mode, in accordance with ADB’s Loan Disbursement Handbook (2015, as amended from time to time). The statement of expenditure procedure was used for reimbursements up to a value of $100,000. At appraisal, it was projected that disbursements would be slow in year 1 and then gradually pick up. However, during implementation, the disbursements were slow during the first 3 years, amounting to a cumulative $10.55 million (about 32% of total loan allocation and 45% of the total loan utilization). The reasons for slow disbursement included (i) procurement delays arising from the retendering of packages resulting in delayed start of works (para. 23); (ii) slow utilization of funds due to poor engineering design (necessitating design revisions), delays in the preparation of bidding documents, and poor contractor performance, leading to delays in execution of works (paras. 30, 31); and (iii) delays in timely submission of claims by contractors and subsequently in raising reimbursement requests. Appendix 6 presents an analysis of the disbursement performance. As per the project agreement requirements, KUIDFC submitted annual audited financial statements and annual audited project financial statements to ADB in a timely manner.

E. Project Schedule

23. Project scheduling for tranche 1 was not done at appraisal, as the guidelines for MFFs were not well developed at project outset.38 Appendix 7 evaluates the project’s implementation performance post contract award, on the basis of the executing agency’s project scheduling. The original loan closing date was extended from 31 December 2011 to 31 December 2013 as delays were encountered on account of (i) slow start-up associated with the recruitment and mobilization of program consultants (para. 28); (ii) delays in obtaining permits from local authorities and rights of way (Appendix 10); (iii) difficult and limited access for pipe laying (including rocky strata), especially for sewerage works; (vi) lack of proper due diligence by program consultants during design preparation, which necessitated revisions in drawings; (vii) procurement delays: retendering of packages was necessitated due to lack of technically qualified bids and high bid prices; 39 (viii) an extended monsoon period in 2010; and (ix) unrealistic construction schedules limited to 18 months, which was found to be inadequate.40

F. Implementation Arrangements

24. The State of Karnataka, acting through the KUIDFC, was the executing agency for the project. The head office of the KUIDFC in Bangalore, in coordination with the regional office in Hubballi, constituted the program management unit (PMU), which was responsible for program coordination among stakeholders, monitoring, implementation, and reporting. The PMU was headed by the managing director of the KUIDFC, who functioned as the program director at the

38

Project scheduling was done for the subsequent tranches upon greater refinement of the MFF guidelines. 39

These include package 01HPT 02B for STP construction in Hospet and 01RCR 02 for sewerage works in Raichur. 40

Experience in India suggests that works of similar scope typically require 24–48 months for completion.

8

head office, and by the executive program director (EPD)41 at the regional office. In addition, four divisional offices, each headed by a divisional program director (DPD),42 were established in Balagavi, Ballari, Hubballi, and Kalburgi43 to supervise the implementing agencies under the MFF. Haveri was under the Hubballi divisional office and Hospet and Raichur came under the Ballari office. The program consultant teams were also based in the divisional offices. Clarity in the scope of implementation between the executing and implementing agencies and program consultants helped to streamline project implementation. However, frequent changes of key personnel, including program consultant specialists and project-level engineers, 44 affected project continuity. Appendix 8 shows the implementation arrangements for the MFF.

25. Under the MFF, a state-level empowered committee provided oversight for the entire investment program and decided on major issues, such as counterpart funding, implementation bottlenecks, land disputes, and special procurement. The committee also approved the subprojects for implementation (based on the CLIPs) by deciding on subproject priorities. District-level program steering committees were formed in each of the 13 districts to monitor the implementation of subprojects and institutional reforms in the ULBs, as well as to coordinate approvals and clearances among various agencies. Five tender evaluation committees were also set up to evaluate tenders and provide recommendations on issues related to all works that were then forwarded for approval to the ULB commissioners. In addition, an institutional structure was created with an apex NGO at the center and 25 implementing NGOs45 (one for each town) to ensure systematic planning, implementation, and monitoring of GAP and CDP activities. Sex-disaggregated data were compiled, maintained, and regularly updated for all beneficiary-related indicators across the facility and the NGOs regularly tracked the impact of GAP activities.46 Data on the same were maintained. Although complex, these implementation arrangements ensured clear delineation of roles and responsibilities and helped generate synergies between each governance level (state, district, and local body) as well as at the community/beneficiary level (through NGOs). Implementation arrangements could have been further strengthened by specifying clearer involvement of the line agencies for better coordination between project and external agencies such as railways, electricity, and highway authorities (for example, for ease of obtaining clearances).

G. Conditions and Covenants

26. KUIDFC has complied with most loan covenants associated with the project. The following commitments, however, have been only partially complied with: (i) improvements to bill collection efficiencies were due no later than 31 December 2013 47 ; performance remains inadequate (26.76% average); (ii) compliance with statutory provisions on labor, such as health and safety 48 welfare, sanitation, and working conditions at site, were found wanting; the conditions in many labor sites and worker camps were found to be below the required health and safety and social safeguard standards; and (iii) site management plans49 were not prepared 41

There were delays in appointing the Executive Program Director in charge of the regional office in Hubballi and this post was only filled after the local elections of May 2008. EPD reports to program director.

42 With direct reporting to the Executive Program Director.

43 These were formerly known as Belgaum, Bellary, Hubli, and Gulbarga respectively.

44 Many of whom are on deputation from other line departments (e.g., the Public Works Department [PWD]).

45 The Apex NGO was contracted in July 2011 and the NGOs for the project towns were contracted in June 2012.

46 This was done especially with regard to the components related to credit and thrift activities of self-help groups (SHGs) (para. 42) and household-level personal investments in sanitation.

47 The original agreed date for compliance was 31 December 2011 (75% collection efficiency); it was subsequently extended for tranche 1 (and 3) through a loan amendment.

48 Including HIV/AIDS programs, adequate sanitation facilities at site, proper barricading/securing measures, and enhancement of health and safety equipment (use of personal protective equipment).

49 ADB missions requested these, but they were not mandatory under the then safeguard guidelines.

9

by contractors despite repeated attention drawn to these issues by ADB. As site management and monitoring systems were still being developed during tranche 1, it was not possible to determine compliance with statutory labor employment provisions.50 KUIDFC is taking a firm stance on these issues now and is gradually improving site management, housekeeping, and health and safety compliances in ongoing projects.

27. In addition, some covenants can only be met when the infrastructure is fully implemented and functional. Although volumetric tariffs have been established through a government order (n. 30), real volumetric tariffs for water and tariffs for sewerage will be implemented only after the installation of water meters and provision of HSCs (tranche 4). There has also been delayed compliance with certain covenants: (i) surveys conducted to determine the real volumetric tariff by measuring the actual amounts supplied to the three project ULBs incurred a 6-month delay and were completed in June 2008; (ii) lending agreements between KUIDFC and the ULBs were not finalized until June 2009; (iii) the completion of the project performance monitoring system (PPMS) were delayed by 4 months.51 However, these delays did not affect the performance of the project. The status of compliance with loan covenants is given in Appendix 9.

H. Consultant Recruitment and Procurement

28. Consultants and an apex NGO were selected and engaged using ADB’s quality- and cost-based selection procedures and the implementing NGOs were engaged using consultant qualification selection procedures, in accordance with ADB’s Guidelines on the Use of Consultants (2013, as amended from time to time). The consulting services for program consultants were provided in four packages, corresponding to the four divisional offices (para. 24). Three consultant firms were mobilized over these four program consultant packages; one firm was awarded the contract for Ballari and Balagavi districts.52 The RRP had proposed the recruitment of a consultancy firm to manage and update the PPMS. However, this was later added to the scope of the program consultants to enable easier coordination. In addition, a consultant firm was engaged for the architectural and interior design of the KUIDFC office building. Despite advance action, the recruitment of program consultants was delayed by almost a year (completed in Dec. 2007) as a result of which procurement and contract awards were also delayed; civil works packages were not awarded until 2010. For the program consultants, a total of 432 person-months of service were provided under tranche 1.

29. Procurement conformed to ADB’s Procurement Guidelines (2013, as amended from time to time) and was in agreement with methods prescribed in the loan agreement. All civil works were awarded through national competitive bidding. Initially, program consultants took time to prepare the bidding documents. Thereafter, the bidding document review procedure53 was at times lengthy as it entailed frequent correspondence between KUIDFC and ADB to reach consensus on contract clauses and modifications required as per ADB guidelines. Tender evaluations were done as per ADB’s guidelines. Tender evaluation committees were constituted for each package to receive, open, and evaluate the bids received. Procurement for civil works packages has been challenging because it is difficult to get larger, more competent contractors

50

These included equal pay for equal work of equal value (gender parity). 51

According to the loan covenants, the PPMS was to be established within 3 months of loan effectiveness (i.e., 3 months from 25 April 2008). However, it could only be formally instituted in August 2008.

52 A single firm was allowed to submit bids for a maximum of any two of the four program consultant packages and could be awarded a maximum of two packages based on the evaluation of its bids.

53 ADB’s concurrence was obtained for the first bidding document. The final bidding documents were prepared by the program consultants as per the first bidding document approved by ADB.

10

to bid for projects in interior towns where many smaller dispersed works such as pipe laying are involved.

I. Performance of Consultants, Contractors, and Suppliers

30. The performance of consultants was less than satisfactory. The high turnover of personnel in consulting firms and the low quality of some experts, coupled with inadequate pre-design investigations and proper due diligence during preparation of detailed project reports (DPRs), led to delays in the finalization of designs, bid documents, and the issuance of technical drawings. There were delays in mobilization of key staff in the initial stages. The poor quality of consultant’s reports led to design changes and associated contract variations in a few subprojects. KUIDFC has had to fill the gap through its in-house resources on many occasions. Contract management on the part of the consultants was also found to be inadequate.

31. The executing agency was dissatisfied with the performance of the contractors. The majority of sewer laying contractors failed to deliver on time and two of the sewerage contracts (Haveri and Raichur) 54 had to be terminated due to poor performance and an associated fundamental breach of contract. The original agreements for the sewer laying contracts included an unrealistic execution schedule (18 months) resulting in cost overruns and more than 100% time overruns. Contractors demonstrated an inadequate understanding of the complex urban context and exhibited failure and/or delays in deploying materials, equipment, and personnel55 at site. In addition, the contractors’ lack of familiarity with quality control requirements and contractual provisions of externally aided projects led, in some cases, to delays in the settlement of variations and claims. Other issues encountered included inadequate contractor liquidity, lack of adequate planning, poor safeguard compliance at site (para. 26) and the subcontracting of critical and substantial activities at times. No issues were reported with the performance of suppliers.

J. Performance of the Borrower and the Executing Agency

32. The performance of the borrower and executing agency were satisfactory. The borrower (represented by the Department of Economic Affairs) chaired regular tripartite review meetings with ADB and KUIDFC, which helped resolve issues and monitor project progress. In addition, the Government of Karnataka provided adequate counterpart funds. The empowered committee set up under the investment facility has met 35 times,56 to offer guidance and monitor overall progress of the project. Government officials were also very engaged and helped resolve issues faced during project implementation. However, the performance of the implementing agencies was less than satisfactory due to a lack of capacity regarding project implementation and inadequate knowledge of contract management.

33. The executing agency showed strong commitment to the project throughout its preparation and implementation and also provided support to improve the performance of contractors 57 and consultants. The executing agency incorporated lessons learned from

54

The balance of works for Raichur have been retendered four times and the Haveri sewerage contract has been retendered once (under tranche 4). However, suitable responses have not been received for either, as the bid premiums were found to be very high.

55 The lack of adequate project managers and other supervisory staff present on site also led to poor monitoring and quality control of the construction labor.

56 Meetings were held generally on a quarterly basis.

57 In particular, the executing agency organized contractors’ conferences to acquaint contractors with ADB guidelines and project details (land availability, status of clearances from line departments, etc.).

11

previous projects, particularly those relating to land acquisition58 and obtaining clearances in advance from other line departments. Strong nodal officers in the PMU and regional and divisional offices have helped to strengthen processes, monitoring, compliance, and reporting procedures, especially pertaining to environmental, social, and gender issues. The executing agency has increased its understanding of the MFF modality over the course of the project.

K. Performance of the Asian Development Bank

34. The performance of ADB was satisfactory. Fourteen supervisory missions were fielded to monitor project implementation. ADB project officers were extremely proactive in dealing with requests from the borrower and executing agency and acted promptly, reviewing and approving bid documents,59 awards, and other matters such as contract variations, loan reallocations, partial cancellations, and processing the loan extension. The Government of Karnataka appreciated ADB’s commitment and responsiveness during project implementation as well as its monitoring and transparent procedures, which helped avert local interference thus ensuring smooth project implementation. ADB also provided capacity building support to the executing and implementing agencies by conducting seminars and trainings on the MFF modality and procurement and disbursement-related issues 60 . Throughout implementation, ADB strongly pushed for better contract management and followed up on ULB financial reforms, although with limited success. A higher degree of due diligence on the part of ADB could have helped to adequately foresee start-up complications and mitigate the effects of poor consultant and contractor performance.

III. EVALUATION OF PERFORMANCE

A. Relevance

35. The project was consistent with the government’s and ADB’s sector strategies at appraisal and remains so at completion (Appendix 2). The project directly supported the HPC report’s investment action plan for the reduction of regional imbalances in Karnataka through the promotion of economic growth emanating from investments in urban infrastructure. Feasibility studies demonstrated the widespread social and environmental benefits as well as economic internal rates of return (EIRRs) of 12% or more for sample subprojects. The project’s relevance was enhanced by focusing efforts on the more strategic needs of water and sanitation infrastructure and complementing this at the community level through CDP activities (paras. 12, 13). Despite the project’s relevance to strategic needs, however, the changes in its scope, namely, the shifting of sewerage outputs, metering, and house connections to tranche 4, reduced its overall relevance. Furthermore, although the project design was relatively sound, it could not ensure sufficient measures for the mitigation of key risks, particularly those related to contract failures. Hence, the project is rated as merely relevant.

B. Effectiveness in Achieving Outcome

36. The envisioned outcome of tranche 1 was improved basic urban services and sustainable infrastructure services for three investment program ULBs, the indicators being

58

For example, assessing land requirements before the DPR stage and getting land allotments before tenders are called.

59 At times it was difficult to reach a consensus between ADB and KUIDFC on certain contractual clauses, however, which resulted in minor delays in finalization of the bidding documents.

60 Two seminars on ADB disbursement and procurement procedures were conducted (jointly with KUIDFC) in Hubballi and Ballari in Feb 2010 under technical assistance (TA) 4780.

12

increased water supply and sewerage coverage in Raichur, Hospet, and Haveri. All sanitation and sewerage outputs will not be completed until the termination of tranche 4. No sanitation related outcomes have yet been achieved under the project, therefore. In addition, although a majority of the water supply outputs have been successfully delivered (bulk water supply improvements), the outcomes for water supply subprojects could not be achieved as anticipated because the last mile of connectivity in terms of HSCs and metering could not be included in the tranche. The full breadth of the project’s outcomes will be achieved with the completion of works under tranche 4.61 Hence, the project thus far has been rated less than effective. This tranche being part of a pilot MFF, there was no clear guidance on DMFs, implementation, and other procedural aspects. In spite of this, the project has managed to push through with implementing the water supply outputs and moving the sewerage outputs to another tranche. The MFF modality has been leveraged to ensure that the outcomes of this project can be delivered across the facility, although this particular tranche has been less than effective.

C. Efficiency in Achieving Outcome and Outputs

37. The loan extension enabled to an extent the countering of implementation challenges associated with start-up delays and poor contractor performance and thus the successful completion of the water-supply subprojects. The resulting improved water supply has improved the quality of life in Haveri, Hospet, and Raichur.

38. The findings from the revaluated economic analysis demonstrate that although the EIRRs for the water supply subprojects (26.43% for Raichur, 17.63% for Haveri, and 26.6% for Hospet) were found to be lower than the appraisal values for all three towns (46.28% for Raichur, 19.32% for Haveri, and 35.75% for Hospet) due to cost and time overruns and a reduction in project coverage beneficiaries, 62 , these values continue to be well above the economic opportunity cost of capital of 12% and are hence economically viable. It is not possible to re-evaluate the EIRR for the sewerage subprojects that were moved to tranche 4, as the works are incomplete and two packages are yet to be retendered. The process efficiency of the project has been low on account of (i) the necessity for a 2-year loan extension; (ii) a reduction in the loan amount by 29% after cancellation and transference of $9.3 million to tranche 4 (for completion of sewerage subprojects); and (iii) reallocations for changes in scope (para. 20). Hence, overall the project is rated as less than efficient. The economic analysis is presented in Appendix 11.

D. Preliminary Assessment of Sustainability

39. Operational sustainability: At appraisal, the outcomes were thought to be likely sustainable because the need for the project and subproject identification emanated from the ULBs themselves (para. 5). The project further supported municipal reforms to ensure sustainable service delivery. The financial internal rate of return (FIRR) for the water supply subprojects was negative during appraisal. This continues to be the case63 because of the poor water tariff collection efficiencies (para. 16). However, if the effect of the devolution of funds from the state government to the ULBs is taken into account, then the FIRR shows positive results, thus indicating that the government grants are helping to bridge the financial gap of meeting the regular operation and maintenance (O&M) expenditures. The financial analysis is presented in Appendix 11. This low water tariff collection efficiency coupled with low personnel

61

An additional 67,500 households will benefit from the completion of sewerage works and associated water and sewerage house connections under tranche 4.

62 House connections were included in the appraisal stage but could not be incorporated under the tranche.

63 The impact of the revised tariff was considered in the assessment of FIRR after project completion.

13

capacity64 at the ULB level implies that the ULBs currently lack sufficient capacity to adequately operate and maintain the assets and/or infrastructure that have been created. ULBs are also relying on external support though KUIDFC and contractors (through a defects liability period) to meet their regular maintenance requirements. KUIDFC has agreed to extend its full support through the stronger involvement of divisional offices until the O&M of the 24x7 water supply subprojects65 (under tranche 4) are taken over by private contractors. However, ULB capacity and ownership of the project continues to be weak, which will affect the project’s long-term sustainability.66 Operational sustainability can be improved subject to KUIDFC’s strong interim support to ULBs coupled with an increase in tariff collection efficiencies and the introduction of volumetric tariffs.

40. The water supply subproject designs have enhanced the sustainability of the water sources by augmenting water supply by connecting seasonal and perennial water sources in order to meet the supply shortfall during the summer months. The outreach activities conducted under the CDP have increased awareness of the benefits of improved sanitation and hygiene and are expected to lead to an uptake in HSCs. Such positive commitment will be critical for the sustainability of the infrastructure that is being delivered under the MFF. In spite of these positive contributions toward project sustainability, the project has been rated as less than likely to be sustainable due to concerns over operational sustainability.

E. Impact

41. The project’s impact was the improvement of urban infrastructure and services, resulting in an overall improvement in the quality of life in project ULBs and the related increase in economic opportunities and growth in North Karnataka and reduction in imbalances between North Karnataka and the rest of the state. The per capita real income comparison between the assisted districts and the rest of the state was selected as the impact indicator. Although the per capita incomes have increased in the assisted districts, these are merely one or two towns in each district and hence the increase is not necessarily due to the project interventions and can also be attributed to the spillover effects of other programs. A more viable impact indicator, such as a reduction in the incidence of water-borne diseases in the project towns, would have been a better indicator as this would have been an easily measurable direct impact of the project. As the sewerage subprojects, HSCs, and metering were transferred to tranche 4, the full environmental and health benefits envisaged due to improved water, sewerage, and drainage networks will only be fully realized upon the completion of the sewerage subprojects and associated 24x7 water supply schemes (under tranche 4), which shall extend the coverage of piped water as per the prescribed norms of the government’s policy.67

42. The impact of the project is however rated as significant. The water supply subprojects have led to a considerable increase in the bulk water supply as a result of which ULBs are now able to address water shortages during the summer months. The community development activities were highly successful, resulting in beneficial socioeconomic outcomes for

64

All project ULBs have a small team of engineers (3–4), only 1 of which is dedicated fully to water supply. 65

Under the MFF, 24x7 schemes are proposed in 13 ULBs, including Raichur, Hospet, and Haveri (tranche 1 towns), Ilkal, Gokak, Nippani, Gadag–Betageri, Bidar, Basavakalyan, Shahbad, Yadgir, Sindhanur, and Ballari. Under the 24x7 contracts the operator contractors will build the system for 100% coverage and run it on a continuous pressurized basis for a period of 5 years.

66 ULBs will also have to devise viable plans for the O&M of the sewerage infrastructure, as well as for the provision of sewerage connections, dedicating adequate staffing and resources for these.

67 The government’s policy aims for 100% coverage of households with piped water supply with the prescribed norms [i.e., 135 lpcd for city corporations (CCs), 100 lpcd for city municipal councils (CMCs), and 70 lpcd for the other ULBs]. Hospet, Raichur, and Haveri are CMCs.

14

participants, over 88% of whom were women. The GAP and CDP activities have promoted project receptivity and increased awareness on issues related to water, sanitation, and hygiene. These have contributed to an increased uptake of house connections, including among FHHs by conducting project-related awareness campaigns (Appendixes 13, 14); the awareness promotion campaigns have motivated 2,305 families to invest in better household hygiene68 by way of household taps, underground drainage, sewerage, and household latrines, with concomitant benefits to women/girls considering the gender based disadvantages associated with inadequacy in these services. Access to economic opportunities for women has been increased by training 6,606 self-help group (SHG) members, representing 575 SHGs, to build their capacities and credit rating/credit worthiness. Training and capacity building have enabled 2,292 women from 215 SHGs to access Rs13 million of loans from commercial banks to invest in income generation activities (as well as their homes), earning profits to the tune of Rs0.16 million.69 The dedication of the NGOs has been remarkable and 11 of 13 the GAP activities were successfully implemented (Appendix 13). Awareness related to hygiene, water, and waste management and enhanced capacities of female community members and elected women representatives to oversee the quality of implementation of physical works have contributed to long-term capacity development within the sector.

43. The project’s minimal anticipated negative environmental and social impacts have been largely mitigated by following safeguard monitoring and implementation and ensuring proper resettlement and environmental management frameworks (Appendix 12). Although the project was approved prior to ADB’s Safeguard Policy Statement 2009, a grievance redressal committee (GRC) was established for the facility soon thereafter. Two GRC meetings were held in Hospet to address resettlement issues and all issues pertaining to those affected were successfully resolved70 (Appendix 12). There are no outstanding grievance redresses under tranche 1. The executing agency has continued to refine its safeguard monitoring processes based on the lessons learned from earlier tranches.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

44. Overall, the project is rated less than successful. The project was relevant, as it directly supported sector and country needs. However, the project could not be completely implemented as appraised due to unanticipated cost escalations and overruns and implementation delays as a result of which it has been rated as less than effective. The project has been less than efficient and is less likely to be sustainable as a result of weak project ownership, poor capacity, and poor tariff collection efficiencies at the municipal level. The project design failed to include sufficient risk mitigation for failed contracts, poor contract management, poor municipal capacity, and the particular challenges of implementing projects in interior towns. The project has leveraged the MFF modality to deliver project outcomes across a latter tranche of the facility.

45. A total of 85% (11 of 13) of the GAP activities have been successfully implemented. These have enabled and sustained women’s economic opportunities and awareness about hygiene, as is evident in the shift in spending priorities at the household level (para. 10, Appendix 13). The project has helped build women’s human capital and has provided women

68

The outreach activities have also enhanced people’s willingness to pay volumetric tariffs. 69

A total of 54% of SHG members accessed loans to finance their own business ventures, such as tailoring, vending, etc.

70 No GRC meetings were held in Raichur as no issues were raised. There was no resettlement under the project in Haveri.

15

with increased access to economic opportunities. It has enhanced women’s voices and decision-making capacities as well (paras. 17, 42). B. Lessons

46. The following lessons are derived from the project: (i) There is a need to develop a database of reliable consultants for executing

agencies. KUIDFC can prepare a performance evaluation report of the consultants, which can be input into this database. Furthermore, to ensure better performance, consultancy contracts can be developed with bonus and penalty clauses based on deliverables achieved.

(ii) Construction schedules for sewerage contracts should be realistic to avoid the repeated need for contract extensions.

(iii) Project designs should include greater focus on ensuring the provision and delivery of service and maintenance of assets. This can be done by incorporating a stronger institutional development component specifically targeted at creating/ strengthening maintenance units within the ULBs and institutionalizing O&M procedures, through adequate training and capacity-building measures.

(iv) Community development activities have proved to be a major asset to this project and have led to enhanced acceptance of the project and associated behavioral changes.71 Commencing these activities retroactively prior to loan approval will enable community involvement in the project during the design and implementation phases as well.

(v) There should be a dedicated budget for GAP implementation (Appendix 13).

C. Recommendations

1. Project Related

47. Future monitoring: ULB tariff collection efficiencies should continue to be monitored annually to ensure improvements.

48. Covenants: The covenants requiring the introduction of volumetric tariffs were unrealistic considering that metering and household connections were not included under the project. Also, the ULBs will only be able to levy sewerage tariffs after the completion of the sewerage infrastructure under tranche 4. These covenants should be waived for this project.

49. Further action or follow-up (i) The old water supply systems need to be dismantled after the house connections

have been made to the new system under tranche 4. (ii) Additional external support for institutional strengthening should be sought to

improve the ULBs’ O&M capacities. (iii) KUIDFC should complete all the remaining project outputs originally envisaged

under the approved water supply and waste water subprojects either under subsequent tranches or from its own resources.

50. The project performance evaluation report should be prepared in 2019, by which time the remaining project components in all three towns will have been completed and functional for at least 2 years. 71

People are keenly awaiting the benefits of household connections and sewerage services and are generally willing to connect and to pay extra for the improved services.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance

Indicators/Targets

Monitoring Mechanisms Assumptions and Risks Actual Achievements

1. Goal/Impact 1. Improvement of

urban infrastructure and services, resulting in overall improvement in quality of life in project ULBs; and related increase in economic opportunities and growth in North Karnataka and reduced imbalances between North Karnataka and the rest of the state

By the end of the

investment program implementation period for three ULBs (2015): reduction in the gaps between per capita real income in assisted districts and the state average

Census data (2011) Annual economic

survey of Karnataka (2014–15) by the Directorate of Economics and Statistics

Assumptions Parallel development

will continue to occur in other key sectors, including transportation, power, industry, education, and financial.

Political support for development in North Karnataka will continue

Risks Acceptance and

implementation of the required reforms in tariffs, taxes, and user charges are limited.

General perception of North Karnataka as a potential development zone in comparison to the rest of the state remains poor despite infrastructure improvements

Between 2005–06 and 2012–13 the per capita income (based on Net District Domestic Product or NDDP at current prices) increased from Rs34,715 to Rs74,554 in Ballari district; from Rs17,197 to Rs42,581 in Haveri district, and from Rs16,382 to Rs47,752 in Raichur district, registering an average increase of 121.9% between these years.

a

Appendix 1 17

Design Summary Performance

Indicators/Targets Monitoring

Mechanisms Assumptions and Risks Actual Achievements 2. Outcome

2.1 Improved basic urban services and sustainable infrastructure services for three investment program ULBs

Sanitation

Coverage of sewerage in Haveri (60%)

Coverage of sewerage in Hospet (60%)

Coverage of

sewerage in Raichur (60%)

Quarterly progress reports

ULBs’ annual statistics

Quarterly progress reports

ULBs’ annual statistics

Assumptions Tariffs set at

appropriate levels and collected efficiently

Households’ willingness to connect

Risks

Water resources may deteriorate because of upstream activities and/or pollution.

Investment program ULBs may be tempted to minimize operational costs through inappropriate operation of the facilities provided.

Works transferred to tranche 4.

Water Supply Coverage of

piped water supply in Haveri (70%)

Coverage of piped water supply in Hospet (85%)

Coverage of piped water supply in Raichur (70%)

Coverage of piped water supply in Haveri = 9,580 HSCs (54% coverage)

Coverage of piped water supply in Hospet = 14,876 HSCs (87%)

Coverage of piped water supply in Raichur = 24,762 HSCs (64%)

Water supply works (bulk and distribution infrastructure) have been successfully completed. Connections will be provided under tranche 4, thus further increasing coverage.

3. Outputs 3.1 Implemented

investment program for institutional development

Implementation of property tax as amended in the Karnataka Municipal Act, 1974 with 75% coverage

Program performance monitoring system reports

Quarterly progress reports

ULBs’ annual statistics

ADB review mission reports

Assumptions Qualified and trained

staff remains in PMU. Beneficiaries are

willing to connect to water supply and sewerage networks.

Implementation is as per Karnataka Municipal Act, 1974. Property tax collection efficiency for FY2013–14 for Haveri, Hospet, and Raichur was 71%, 60.4%, and 82.2%, respectively.

Application of the Fund-Based Accounting System (FBAS)

Successfully applied in all three project ULBs

Introduction of volumetric water tariff (all three ULBs with water supply subproject before commissioning)

The uniform flat rate for unmetered domestic water connections has been increased from Rs45 per month to Rs120 per month in all towns (2012) as per Govt. Order No. NAE o7 UWS 2011. The introduction of volumetric tariff has been instituted vide the same government order for water supply and these will be effectuated with the introduction of metering and household connections (tranche 4)

18 Appendix 1

Design Summary Performance Indicators/Targets

Monitoring Mechanisms

Assumptions and Risks Actual Achievements

3.2 Implemented investment program for non-municipal infrastructure (equipment)

Procurement of firefighting service equipment (16 ULBs)

Program performance monitoring system reports

Quarterly progress reports

ULBs’ annual statistics

ADB review mission reports

Assumptions Qualified and trained

staff remains in PMU Timely budget

allocation and disbursement

Risks Frequent non-

responsive biddings Price increase of

equipment

Successfully procured for all 16 ULBs

3.3 Implemented investment program for sanitation- sewerage

Households additionally served with sewers (45,000 HH)

Assumptions Qualified and trained

staff remains in PMU Timely budget

allocation and disbursement for the staff and O&M expenditure

Risks

Price increase of

construction materials Frequent non-

responsive biddings Any natural calamity

that may hinder construction work progress

All sewerage packages could not be completed and have been transferred to tranche 4

Wastewater treatment capacity added (51 MLD)

Raichur and Haveri sewerage contracts were terminated and are yet to be successfully retendered. Wastewater treatment works will be completed under tranche 4.

Length of new sewers built (410 km)

Length of new sewers built (146.6 km). Balance works contracts will be completed under tranche 4.

3.4 Implemented investment program for water supply

Households additionally served with new piped connection (22,000 HH)

Program performance monitoring system reports

Quarterly progress reports

ULBs’ annual statistics

ADB review mission reports

Assumptions Qualified and trained

staff remains in PMU Timely budget

allocation and disbursement for the staff and O&M expenditure

Risks Price increase of

construction material Frequent non-

responsive bidding Any natural calamity

that may hinder construction work

House service connections to be made in all three towns under tranche 4 under the 24x7 water supply contracts.

Water production capacity added (9 MLD)

9.08 MLD of water production capacity added (Hospet)

Length of new pipe network built (250 km)

256 km of new piped network built.

Length of the existing pipe network rehabilitated (30km)

9.14 km of existing piped network rehabilitated in Haveri.

Appendix 1 19

ADB = Asian Development Bank; DMF = design and monitoring framework; HH = household; HSC = house service connection; km = kilometer; MLD = million liters per day; O&M = operation and maintenance; OCR = ordinary capital resources; PMU = program management unit; ULB = urban local body. Note: No separate DMF was prepared for any of the tranches at the outset of tranche 1. A DMF was prepared subsequently after MFF guidelines were further developed and the eOps system was introduced in 2011. a

The relevant statistical tables from the economic survey of Karnataka (2014–15) used for the analysis are from the year 2012–13. Haveri falls in Haveri district, Raichur in Raichur district, and Hospet in Ballari district. b

No other activities were indicated in the DMF.

4. Activities Key Activities

Output 2. Implemented investment program for non-municipal infrastructure (equipment) b 2.1 Procurement of firefighting service equipment to be completed by 15 June 2011

Input ($ million)

ADB Government Total

23.420 (OCR) 12.029 35.449

20 Appendix 2

RELEVANCE OF PROJECT TO GOVERNMENT AND ADB POLICIES AND SECTOR STRATEGIES

1. The North Karnataka Urban Sector Investment Program (NKUSIP) was conceived at the Government of India’s request to provide sector assistance based on the recommendations of the High Power Committee’s (HPCs) report for the reduction of interregional balances in the state of Karnataka. 1 The project and the multitranche financing facility (MFF) have been dovetailed for enhanced relevance to the governments of India and Karnataka’s sectoral and policy perspectives. The facility design and project was highly relevant to India’s country partnership strategy (CPS) at appraisal (2003–2006),2 which placed a huge emphasis on the development of improved infrastructure and leveraging greater private sector participation (PSP) in the urban sector. Private sector participation is being leveraged under build and operate contracts for the 24x7 water supply subprojects being implemented in 13 towns (including all tranche 1 towns) under the MFF. The project continues to be relevant to the current India CPS (2013–2017).3 One of the CPS’s five main thrusts is the provision of robust infrastructure development to promote growth and provide better access to services. 2. The project was consistent with the government’s policy objectives on devolution of functions and strengthening of the institutional capacity of urban local bodies (ULBs).4 The project supported institutional reforms at the municipal level, including the development of the property tax base and improvement in collection efficiencies. At appraisal, the project (and the entire investment facility) was aligned with the government’s Tenth Five-Year Plan (FY2002–FY2007), which emphasized urban reforms as critical for growth and poverty alleviation and focused on equitable growth and reform. The Tenth Five-Year Plan also focused on good governance and better provision of urban services through PSP in service delivery, which the investment facility has keenly supported (para. 1). The project continues to be relevant to the government’s current Twelfth Five-Year Plan (FY2012–FY2017), which identifies programs for the provision of improved sanitation and drinking water coverage as key investments for the promotion of inclusive growth and for reducing interregional inequalities. 3. The project was also aligned to the Urban Development Policy for Karnataka: Draft (2009),5 which recognized that urban development will be constrained without an adequate strategy to strengthen infrastructure in four key areas: (i) drinking water supply, (ii) sanitation, (iii) solid waste management, and (iv) transport. The policy also emphasized the development of appropriate mechanisms to enable cost recovery in water supply as well as institutional reforms. The private sector participation, envisaged under the project (para. 1) is directly relevant to this objective. 4. To enable more locally rooted systemic planning, the government of Karnataka conducted the project preparatory works including the preparation of city-level infrastructure plans (CLIPs) for all towns, which identified the urban infrastructure gaps and associated needs, along with the identification of subprojects. This process was consultative6 and as CLIPS were

1 Government of Karnataka. 2002. High Power Committee Report for the Redressal of Regional Imbalances.

Bangalore. 2 ADB. 2003. Country Partnership Strategy: India, 2003–2006. Manila.

3 ADB. 2013. Country Partnership Strategy: India, 2013–2017. Manila.

4 The Constitution (74th Amendment) Act, 1992. New Delhi. http://indiacode.nic.in/coiweb/amend/amend74.htm

5 Government of Karnataka. 2009. Urban Development Policy for Karnataka:Draft. Urban Development Department,

Bangalore. 6 Consultations at various levels (i.e., Government of Karnataka, districts, ULBs, and wards) were held in the

process of developing the CLIPs. Consultation workshops were held with those affected, district and municipal

Appendix 2 21

made by the ULBs themselves,7 this promoted project ownership. The MFF modality was highly suited to the investment program as it provided the flexibility to support the different needs and absorptive capacities of the ULBs. It also helped to enhance the sequencing of the components based on the priorities, experience, and preparedness of project ULBs. 5. In addition, the institutional reforms that formed a part of the project were not stand-alone initiatives, as these were designed to have direct synergies with ongoing municipal reforms being conducted throughout the state. This included the Nirmala Nagar Program (NNP) (started 2002),8 which aimed at strengthening decentralization by enhancing the accountability and financial soundness of ULBs in Karnataka and enabling them to deliver improved services. The Government of Karnataka’s own thrust toward mainstreaming municipal reform provided a fertile landscape for further pursuing project-related reforms. It aimed at generating both financial and technical capacity in the ULBs to operate and maintain the resultant infrastructure. The project-supported reforms were pursued through the loan covenants and mainly included water and sewerage tariff reforms and other measures for improving the financial base of ULBs (through greater tax collection efficiencies).9

6. The Government of India’s current strong emphasis on urban development through its various flagship programs, such as the Smart Cities and Swachh Bharat (Clean India) programs, is testament to the fact that urban development (and particularly the strengthening of basic urban infrastructure) continues to be a top priority for the country as a whole. Hence, programs like NKUSIP, which actively support improved urban infrastructure and service delivery, continue to be important in the development landscape of India.

7. In addition, the focus of the project’s design on providing improved water supply and sanitation facilities made the project particularly relevant to the Millennium Development Goals, in particular, goal number 7: access to improved sanitation facilities and an improved water supply source, and goal number 1: eradication of extreme poverty. However, the full impacts will only be felt with subproject completion (sewerage) and delivery of associated household level infrastructure under tranche 4.

officials, elected representatives, and nongovernment organizations (NGOs) for the selection and prioritization of proposed subprojects in each town.

7 With assistance from program consultants recruited by the government as a part of advance actions undertaken for

the project. 8 ADB funded the rolling out of the NNP in 57 ULBs of Karnataka, which included all the 25 selected ULBs under

NKUSIP. From 2006 the World Bank–supported Karnataka Municipal Reforms Program undertook municipal reforms in the remaining 164 ULBs.

9 Measures such as implementation of property taxes with 75% coverage, application of a fund-based accounting

system, and the introduction of volumetric (water) and sewerage tariffs.

22 Appendix 3

CONTRACT PACKAGES

No. Contract Package

No. Scope of Work

Implementing Agency

Contract Amount

(in $ million)

ADB Portion

Date of Commence-

ment

Status

Planned Completion

Date

Actual Completion

Date/ Remarks

1 01RCR02a

Improvements to sewerage system: laying 171 km sewer network and construction of 20 MLD FAL-type STP in Raichur

CMC, Raichur 0.70 04.10.2010 03.04.2012

to be retendered

under tranche 4

2 01HPT02A a

Improvements to sewerage system: supply and laying 176 km sewer network, construction of 1.17 km storm water drain in Hospet

CMC, Hospet 0.65 29.09.2010 29.03.2012

extended up to

31.12.2013; physical works

currently ongoing under tranche 4, to be completed

in 2016

3 01HPT02B a

Construction of 27 MLD ASP-type STP in Hospet

CMC, Hospet 0.93 29.09.2010 29.03.2012

4 01HVR02 a

Supplying and laying 63 km sewer system, constructing 4.71 MLD FAL-type STP, and constructing 1.15 km secondary drainage in Haveri

Haveri CMC 2.26 19.12.2009 18.06.2011 to be retendered under tranche 4

5 01UIB01 Construction of corporate office for KUIDFC: urban infrastructure Bhavan in Bangalore

KUIDFC 1.08 31.03.2010 30.03.2011 31.12.2013

6 01 RCR 01

Improvements to water supply system: laying 9 km raising main, construction of 1 no. GLSR, 2 OHTs, laying 101 km distribution system in Raichur

CMC, Raichur 1.71 01.04.2010 30.09.2011 30.11.2013

7 01HPT01

Improvements to water supply system: laying of 150.9 km feeder main/distribution network, construction of 3 ELSR and 1 GLSR in Hospet

CMC, Hospet 1.85 01.03.2010 30.09.2011 15.04.2013

8 01HVR01

Improvements to water supply system: supplying and laying of 14 km DI pumping main from Karjagi to Heggere, construction of intake works, laying 21.68 km distribution system and providing and fixing bulk flow meters in Haveri

Haveri CMC 1.14 19.12.2009 18.06.2011 31.12.2013

ADB = Asian Development Bank; ASP = activated sludge process; CMC = city municipal corporation; DI = ductile iron; ELSR = elevated storage reservoir; FAL = facultative aerated lagoon; GLSR = ground level storage reservoir; km = kilometer; KUIDFC = Karnataka Urban Infrastructure Development and Finance Corporation; MLD = million liters per day; OHT = overhead tank; STP = sewage treatment plant. a The sewerage subprojects in all three towns could not be completed within the project completion date. This is primarily due to the poor performance of the contractors. The contractors’ demonstrated lack of technical capacity and resources to implement sewerage works in urban setting. In addition, the program consultants provided inadequate design and contract management support in implementing sewerage subprojects. These led to slow physical progress of all sewerage works and their consequent transfer and completion under tranche 4 at the request of the government.

Appendix 4 23

STATUS OF OUTPUTS AND OUTCOMES

Contract Package No.

Name of Contract Package

Households Additionally Served with Sewerage

Length of New Sewers Built

(km)

Length of Sewers

Replaced /

Rehabili-tated (km)

Wastewater Treatment Capacity

Added (MLD)

Households Additionally Served

with New Piped Connection

Length of New Pipe Network

Built (km)

Length of Existing Pipe

Network Rehabilitated

(km)

Water Production Capacity Added (MLD)

T A T A T A T A T A T A T A T A

1 01HVR01

Improvements to water supply system: supplying and laying DI pumping main from Karjagi to Heggere, constructing intake works, strengthening distribution systems, and providing and fixing bulk flow meters in Haveri CMC

2400 203a 26.86 26.68 9.14 9.14 - -

2 01HVR02

Supplying and laying new gravity sewer system, constructing FAL-type STP and secondary drainage link in Haveri CMC

5,000b

0 63.72 51.26 - - 4.71 - - - - - - - - -

3 01HPT01 Improving water supply in Hospet CMC

10,000 824 a 139 127.65

c 18 0 9.08 9.08

4 01RCR01 Improving water supply in Raichur CMC

10,000 437 a 100 101.60 5 0

24 Appendix 4

A = achievement; CMC = city municipal corporation; DI = ductile iron; DMF = design and monitoring framework; FAL = facultative aerated lagoon; km = kilometer; MLD = million of liters per day; PFR = periodic financing request; STP = sewage treatment plant; T = target.

a Not financed under the loan. Paid for by beneficiaries.

b However, the PFR included the provision of 7,000, 12,500, and 10,000 household connections in Haveri, Hospet, and Raichur, which is less than the numbers in

the DMF. These could not be taken up under the tranche scope due to the funding crunch. They will now be undertaken by the respective ULBs after the completion of sewerage work in the project towns. c The balance network in Hospet was constructed by the Karnataka Urban Water Supply and Drainage Board (KUWSDB) through its own funds, leading to a savings

of Rs5.9 million.

Contract Package No.

Name of Contract Package

Households Additionally Served with Sewerage

Length of New Sewers Built

(km)

Length of Sewers

Replaced /

Rehabili-tated (km)

Wastewater Treatment Capacity

Added (MLD)

Households Additionally Served

with New Piped Connection

Length of New Pipe Network

Built (km)

Length of Existing Pipe

Network Rehabilitated

(km)

Water Production Capacity Added (MLD)

T A T A T A T A T A T A T A T A

5 01HPT02A Improving sewerage system in Hospet CMC

20000b

0 176 72.35 0

6 01HPT02B Improving sewerage system in Hospet CMC

27

7 01RCR02 Improving sewerage system in Raichur CMC

20000b

0 177 23 20

Total 45000 0 416.72 146.6 0 0 51.71 0 22,400 1,464 a

(0) 265.9 255.93 32.14 9.14 9.08 9.08

Appendix 5 25

LOAN REALLOCATIONS

No. Category Name

Formerly Approved Allocations Partial Cancellation

a

Terms

Original Allocation

($)

Allocation after

Reallocation (4 Oct 2011)

($)

Allocation after Partial Cancellation

(19 Aug 2013) and

Reallocation (29 Aug 2013)

($)

Re-allocation Based on

Actual Contracted Expenditure (1 April 2014)

($)

Actual ADB Loan

Disbursement Amount after

Cancellation of Undisbursed Loan Amount (23 July 2014)

($)

Percentage and Basis

for Withdrawal

from the Loan

Account

Works 1A Sanitation

infrastructure 11,600,000 18,137,178 4,545,414 4,545,382 4,545,382 70% of total

expenditureb

1B Water supply infrastructure

3,800,000 6,106,659 5,423,354 4,909,072 4,697,732 70% of total expenditure

b

1C Non-municipal infrastructure

2,400,000 0 0 0 0

1D KUIDFC building

1,500,000 1,477,747 1,295,648 1,246,082 1,193,625 70% of total expenditure

b

Equipment 2A Water supply

infrastructure 500,000 0 0 0 0

2B Non-municipal infrastructure

3,200,000 1,906,643 1,901,708 1,901,708 1,901,708 70% of total expenditure

c

2C Institutional development

1,100,000 0 0 0 0

2D KUIDFC building

100,000 0 90,915 0 0

3 Consulting services

5,700,000 3,226,533 5,014,128 5,892,904 5,872,345 100% of total expenditure

c

4 Incremental recurrent cost

2,100,000 2,043,955 5,426,269 5,202,588 5,210,057 100% of total expenditure

c

5 Unallocated 1,000,000 101,285 300 0 0 TOTAL 33,000,000 33,000,000 23,697,736 23,697,736 23,420,849

ADB = Asian Development Bank; KUIDFC = Karnataka Urban Infrastructure Development and Finance Corporation. a Partial cancellation of undisbursed loan amount.

b Inclusive of taxes and duties.

c Exclusive of taxes and duties.

26 Appendix 6

11.20

23.42

1.432.99

8.19

13.5815.72

21.71

23.42

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2008 2009 2010 2011 2012 2013 2014

$ m

illi

on

Cumulative Contract Awards

Cumulative Disbursements

DISBURSEMENTS PERFORMANCE

48%

100%

6% 13%

35%

58%

67%

93%

100%

0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014

Pe

rce

nta

ge

Ach

iev

em

ern

ts

Cumulative Contract Awards

Cumulative Disbursements

Appendix 6 27

28 Appendix 7

1 01HVR01

Improvements to Water Supply System,

Laying DI Pumping Main and Construction

of Intake in Haveri CMC

201RCR01

Improvements to Water Supply System in

Raichur CMC

301HPT01

Improvements to Water Supply System in

Hospet CMC

4

01HVR02*

Supplying and Laying of Sewer System,

Constructing FAL type STP and Drainage

Link in Haveri CMC

501RCR02*

Improvements to Sewerage System in

Raichur CMC

601HPT02A*

Improvements to Sewerage System in

Hospet CMC

701HPT02B*

Improvements to Sewerage System in

Hospet CMC

8 01UIB01 Construction of KUIDFC Building

LegendContract Period

Extended (Proposed / Actual)

*Sewerage sub-projects have been shifted to Tranche 4

IMPLEMENTATION SCHEDULE

46%

65%

18%

67%

Q1 Q2 Q3 Q4 Q1 Q2

2011 2012Q3 Q4 Q4

2009Q1 Q2 Q3 Q4 Q2

2010Q1 Q2 Q3 Q4No.

DescriptionQ3 Q4 Q1 Q2 Q3Q1

2013 2014

100%

100%

Contract

Package No.

100%

100%

IMPLEMENTATION SCHEDULE

Appendix 8 29

IMPLEMENTATION ARRANGEMENTS

1. The executing agency for the investment program is the Government of Karnataka, acting through the Karnataka Urban infrastructure Development and Finance Corporation (KUIDFC). The KUIDFC is a fully state-owned company that was incorporated in 1993 under the Companies Act (1956). As a nodal agency for urban infrastructure projects financed by the government, the KUIDFC has already successfully implemented two Asian Development Bank (ADB)–assisted projects, the Karnataka Urban Investment Development Program 1 and Karnataka Urban Development and Coastal Environmental Management Project.2 In addition to 1 ADB. 1995. Report and Recommendation of the President to the Board of Directors: India: Karnataka Urban

Infrastructure Development Project. Manila. 2 ADB. 1999. Report and Recommendation of the President to the Board of Directors: India: Karnataka Urban

Development and Coastal Environmental Management Project. Manila.

30 Appendix 8

being the project manager, the KUIDFC acts as a conduit of funds between the government, which is disbursing the ADB loan funds to the urban local bodies (ULBs) via the KUIDFC, and the ULBs, which will repay agreed portions of the ADB loan funds to the government via the KUIDFC. 2. The implementing agencies under tranche 1 were the respective urban local bodies (ULBs) of Haveri, Hospet, and Raichur, which were in charge of implementing the water supply and sanitation infrastructure subprojects3 with the assistance of the project management unit (PMU) and its divisional office, reporting to the respective divisional program director (DPD). The Karnataka State Fire and Emergency Services (KSFES) was initially the implementing agency for the non-municipal infrastructure component. As KSFES is a service provider only, this was later changed4 to the Karnataka State Police Housing Corporation (KSPHC). However, the on-lending was to KSFES, which procured equipment, while the actual implementation was carried out by KSPHC on behalf of KSFES, both reporting to the project director. Institutional development5 activities were carried out by Directorate of Municipal Administration (DMA) and KUIDFC, reporting to the project director. The KUIDFC, also reporting to the project director, looked after the investment program assistance facility. 3. The program’s consulting services were provided in four packages, corresponding to the four divisional offices. The program consultancy for Haveri came under the scope of the program consultant for the Dharwad district, and for Hospet and Raichur under the program consultant for Ballari district. Three consultant firms6 were mobilized over these four program consultant packages. The program consultants worked under the overall direction and guidance of the PMU and were responsible to its executive director, the divisional offices, and the ULB commissioners. 4. A state-level empowered committee has been formed to oversee the investment program. The committee meets every quarter to review the performance of the investment program and decide on major issues, such as counterpart funding, implementation bottlenecks, land disputes, and special procurement. Committee members of the state-level empowered committee include the additional chief secretary (the committee chair), the principal secretary of the Urban Development Department (UDD), the principal secretary of the Planning Department, the secretary for Municipalities and Urban Development Authorities of the UDD, the secretary for Expenditure of the Finance Department, the director of the DMA, and the managing director of the KUIDFC (the committee secretary). The empowered committee approved the subprojects that were appraised by the ULBs in the city-level infrastructure plans (CLIPs), based on the provisions in the framework financing agreement (FFA). 5. Under tranche 1, two district-level program steering committees were appointed for the districts of Ballari and Hubballi,7 which reported to the executive program director (EPD). These committees were instituted to monitor the implementation of subprojects and institutional reforms in the investment program ULBs, as well as to coordinate approvals and clearances 3 As there were no bulk water supply schemes (disassociated from the distribution system) included in the project,

the involvement of the Karnataka Urban Water Supply and Drainage Board as the implementing agency for such subprojects was not required.

4 At the request of a government vide letter dated 14 Feb. 2008. As a result, the loan agreement schedule 5, para 4,

item (ii) had to be amended. 5 As the tourism subprojects were not taken up under the tranche, therefore Department of Information, Tourism,

and Youth Services (DITYS) was not involved as an implementing agency. 6 A single firm was allowed to submit bids for a maximum of any two of the four program consultant packages and

could be awarded a maximum of two packages based on the evaluation of its bids. 7 Haveri is in Hubballi district and Hospet and Raichur are in Ballari district.

Appendix 8 31

among various agencies. The committees were composed of the district deputy commissioner (who serves as chair), the DPD from the concerned divisional office, municipal commissioners or chief officers of the investment program ULBs, and presidents or chairs of the investment program ULBs. 6. In addition, five tender evaluation committees (TECs) were set up to evaluate tenders and provide recommendations on issues related to all works, which are subsequently forwarded for approval to the ULB commissioners. Each TEC consisted of a ULB engineer, a representative of the KUIDFC, and a member of the program consultant team with relevant expertise. 7. To look after resettlement and awards, a grievance redressal committee (GRC) was established at the district level, headed by the deputy commissioner for the investment program, who consults with those affected before finalizing awards. An assistant commissioner is responsible for distributing and finalizing the awards in his/her capacity as the land acquisition officer.8 All resettlement awards for tranche 1 have been successfully settled, with no delays and no outstanding claims. 8. Overall, the clear division of roles and responsibilities at the various levels ensured smooth project implementation. The implementing agencies lacked adequate technical and contract management capacity because of which there were a few implementation challenges. Furthermore, clearer arrangements of working with line agencies to secure necessary approvals would have helped to expedite matters.

8 A GRC committee is usually delegated to the assistant commissioner.

32 Appendix 9

COMPLIANCE WITH LOAN COVENANTS

LOAN COVENANTS - Loan 2312 Project Specific Covenants Status/Issues Sector 1. The State shall ensure that the necessary resolutions have been

passed by the relevant urban local bodies (ULBs) prior to allowing the Karnataka Urban Water Supply and Drainage Board (KUWSDB) to undertake implementation of the bulk water supply part of Component B on behalf of the ULB, as referred in clause (a) of this paragraph. [LA, Schedule 5, para. 4(b)]

Not applicable. Under tranche 1, there are no components of the bulk water supply delegated to KUWSDB.

2. The State shall ensure (a) that all subprojects meet and are implemented, to the satisfaction of the Asian Development Bank (ADB), in accordance with the provisions set forth in Schedule 4 to the framework financing agreement (FFA); and (b) that necessary council resolutions to implement the resolution for NNP reforms are passed in each ULB before subprojects for that ULB are implemented. [LA, Schedule 5, para. 9 (a)&(b)]

Complied with. Subprojects selected according to the agreed selection criteria for tranche 1. Nirmala Nagara Program (NNP) reforms became mandatory for all ULBs through a Government Order. The ULBs passed the relevant resolutions.

3. The State shall ensure that by 31 December 2007 surveys are conducted under the bridging technical assistance (TA), to determine the real volumetric tariff by measuring the actual amounts of water supplied to three (3) ULBs to be selected by the Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC). [LA, Schedule 5, para. 15(a)]

Surveys conducted. Information may need periodic updating. Government Order no. NAE o7 UWS 2011 issued, which sets volumetric tariff rates.

4. The State shall ensure that for each of the ULBs receiving funds under the loan the (nominal) base volumetric water tariff shall be increased to the real current volumetric tariff per m3 and the tariff schedule shall be changed zone by zone or for the related town, as feasible upon completion of the related water supply subproject, from the current (un-metered) monthly flat rate to the volumetric metered tariff with the lifeline block set at 8 m3 for which the rate shall not be less than the current flat rate. Upon completion of the studies currently being carried out by consultants under the World Bank–supported Karnataka Urban Water Sector Improvement Project (KUWASIP), and by bridging TA consultants, the water tariffs of the project towns shall be reviewed and revised based on recommendations of these studies. Related recommendations to the ULBs shall be firmed up by the midterm review of the investment program. [LA, Schedule 5, para. 15(b)]

Based on studies, the Government of Karnataka issued Government Order No. NAE o7 UWS 2011, specifying volumetric tariff rates in order to reconfirm the state’s policy to introduce a volumetric tariff. Project ULBs under the investment program passed a resolution to introduce a volumetric water tariff, and have increased the monthly fixed water tariff rate (non-metered household connections) to Rs120/ month. A real volumetric tariff not yet put into effect due to the absence of meters, house connections, and/or water in the systems. Tranche 4 will selectively provide these.

5. The State shall ensure that for subprojects consisting of sewerage, sewerage tariffs shall be introduced by the State. The appropriate levels of sewerage tariffs shall be agreed with the State and ADB upon completion of ongoing studies under the World Bank–supported KUWASIP, and subsequently upon completion of studies by the bridging TA consultants to recommend the appropriate sewerage tariffs for the ULBs. Such sewerage tariffs will take effect upon the related subproject’s completion. [LA, Schedule 5, para. 15(c)]

Circulars have been issued on the sewerage tariff to the ULBs. The Government of Karnataka has also issued a government order to this effect. The ULBs have passed a general resolution to levy user charges on completion of projects and this would also apply to sewerage subprojects. The ULBs shall introduce the tariffs upon the completion of sewerage works under tranche 4. Tariff rates are yet to be decided.

6. The State shall ensure that the ULBs shall by no later than 31 Partly complied with. (i) Measures to

Appendix 9 33

LOAN COVENANTS - Loan 2312

Project Specific Covenants Status/Issues

December 2013 (i) take measures to significantly improve bill collection efficiency, including the enforcement of existing provisions for service cut-off due to nonpayment, and (ii) introduce a self-assessment system/capital value system for property tax. [LA, Schedule 5, para. 16(b)]

improve bill collection efficiency have been slower than initially envisaged and the political will for service cut-off due to non-payment is less. (ii) A self-assessment system/capital value system for property tax was introduced and performance can be further improved/strengthened in the ULBs. Property tax collection efficiency for FY2013–14 for Haveri, Hospet, and Raichur was 71%, 60.4%, and 82.2%, respectively

7. The State shall ensure that measures are taken to improve bill collection efficiency for water and sewerage infrastructure services, including the enforcement of existing provisions for service cut-off due to non-payment. The appropriate levels of bill collection efficiency improvement targets for the ULBs shall be agreed between the State and ADB upon completion of the ongoing studies under the KUWASIP, and the studies of the bridging TA consultants. [LA, Schedule 5, para. 16(a)]

Monitoring undertaken, showing low collection efficiency of water tariffs. Water charges collection efficiency for the FY2013–14 for Haveri, Hospet, and Raichur was 32.3%, 26.5%, and 21.5%, respectively.

Environmental 8. The State shall undertake the project in accordance with the

applicable environmental laws and regulations of the Borrower and ADB’s Environment Policy (2002) and the Environmental Assessment Review Process (EARP). In this regard, the State shall ensure the following: (a) that the design, construction, operation, and implementation of all subprojects are carried out in accordance with the EARP, and related initial environmental examinations (IEEs) or environmental impact assessment (EIA) reports, including any environment management plan (EMP). Any adverse environmental impacts arising from the construction, operation, and implementation of the subproject facilities shall be minimized by implementing the EMP measures and other recommendations specified in the IEE or EIA reports, as applicable. The State shall ensure that all environmental requirements are incorporated in bidding documents and civil contracts under the project. (b) That if any of the components/subprojects requires compliance with the 120-day advance disclosure under ADB’s Environment Policy (2002), the summary EIA or IEE for such components/subprojects shall be circulated to the ADB Board and made available to the general public 120 days before the ADB Board considers the same for inclusion in the project. [LA, Schedule 5, para. 10(a)&(b)]

(a) Partly complied with. All IEEs prepared in accordance with EARP. EMPs are included in bidding and contract documents. Contractors failed to adhere fully to the EMPs and site management plans were not prepared. Environmental monitoring of the balance of civil works is ongoing under tranche 4. Monitoring reports were submitted in a timely manner. (b) Not applicable for subprojects under tranche 1.

Social 9. The State shall undertake the project in accordance with the

Borrower’s laws and regulations, including its policy on Resettlement and Rehabilitation, ADB’s Involuntary Resettlement Policy (1995), and the Resettlement Framework (RF). The State shall ensure the following: (a) that all land and rights-of-way required for any of the subprojects are made available in a timely manner, compensations at replacement values are provided prior to the signing of relevant civil works contracts, and involuntary resettlement, including relocation, is carried out in accordance with the RF and related resettlement plans (RPs) agreed upon between the State and ADB. (b) that a RP will be prepared for each subproject involving land acquisition or resettlement, including relocation, and submitted to ADB for review and approval prior to award of any related civil works contracts.

(a) Complied with. Resettlement impacts only in Hospet. RP approved by ADB and disclosed. All land and rights-of-way were made available in a timely manner, and compensations at replacement values determined. Issues and corrective actions being identified during implementation. (b) Complied with. RPs prepared based on detailed design and approved by ADB prior to award of civil works contracts.

34 Appendix 9

LOAN COVENANTS - Loan 2312

Project Specific Covenants Status/Issues

Similarly, revised RPs based on detailed designs for all subprojects shall also be provided for ADB approval prior to award of related civil works contracts. [LA, Schedule 5, para. 11(a)&(b)]

10. The State shall ensure as minimal an impact as possible on indigenous peoples in the project area. In the event of involvement of indigenous peoples in any of the subprojects, the State will ensure that the subprojects are carried out in accordance with the Indigenous Peoples Development Framework (IPDF) and ADB’s Policy on Indigenous Peoples (1998). (LA, Schedule 5, para. 12)

Not applicable.

11. The State shall ensure that the projects shall be carried out in accordance with the Gender Action Plan (GAP) attached as Appendix 12 to the report and recommendation to the President (RRP), and ADB’s Policy on Gender and Development (1998). (LA, Schedule 5, para. 13)

Complied with. A total of 85% (11 of the 13) of the GAP activities have been performed successfully.

Financial 12. The State shall ensure sufficient counterpart funds from its budget for

each fiscal year, in a timely manner, for the efficient implementation of the project toward (i) its contribution, and (ii) of the implementing agencies (IAs), for the subprojects under the relevant components. [LA, Schedule 5, para. 8(a)]

Complied with. Adequate budgetary provision has been made to date. The Government of Karnataka is making allocations in every yearly budget. IAs are also making contributions and these are monitored regularly.

13. The State shall ensure sufficient funds in a timely manner for the payments to the contractors under the private sector participation contracts by the ULBs during the implementation of the project. [LA, Schedule 5, para. 8(c)]

Not applicable to tranche 1.

14. The State shall ensure adequate funds toward operations and maintenance (O&M) of project facilities, through budgetary allocations or other means, to be provided to appropriate IAs, during and after subprojects’ completion. [LA, Schedule 5, para. 8(b)]

The ULBs have been provided with sufficient grants by the state to cover O&M expenditures. These funds are currently bridging the gap due to the low water tariff collection efficiencies in the ULBs.

15. The State shall relend the loan proceeds through KUIDFC to the IAs under appropriate re-lending arrangements as acceptable to ADB. [LA, Schedule 5, para. 8(d)]

Delayed compliance. On-lending agreements between KUIDFC and ULBs signed/effectuated in June 2009.

Economic 16. The project performance management system (PPMS) shall track the

investment program and project implementation activities, corresponding target dates, expected outcomes, and assigned responsibilities under a monitoring mechanism that can be used to track progress on specific activities. The PPMS shall aim to detect any deficiency or discrepancy between the plan and the execution of the investment program and project in using the resources efficiently in order to ensure that timely corrections can be made to adjust the design of the investment program and project. [LA, Schedule 5, para. 17(a)]

Within 3 months of the effective date, the State, through the PMU, shall establish the PPMS in a form and substance acceptable to ADB. [LA, Schedule 5, para. 17(a)]

Delayed compliance. The PPMS was established with 4 months’ delay. Indicators reported adequately in quarterly progress reports QPRs. Improved submission of QPRs. PPMS submitted and tracked in parallel for tripartite portfolio review meeting (TPRM) purposes. PPMS indicators have been finalized and submitted to ADB. Baseline values have been collected. Targets are finalized.

Others 17. The State, through the KUIDFC, shall be the executing agency (EA)

and shall be responsible for overall implementation of the project, including detailed appraisal of subprojects under the project. (LA, Schedule 5, para. 1)

Complied with. Not required so far.

Appendix 9 35

LOAN COVENANTS - Loan 2312

Project Specific Covenants Status/Issues

The Government of Karnataka, will, in so far as it relates to the related projects, promptly notify ADB of any proposal to amend, cancel, or repeal any of the provisions of the KUIDFC’s memorandum of association or articles of incorporation and will give ADB an adequate opportunity to comment on such proposals before taking any action. [PA Section 2.15]

18. Established, staffed, and operating PMU/project implementation unit (PIU). The head office of KUIDFC, in coordination with the regional office (based in Dharwad), shall constitute the PMU within 3 months of the approval of the facility by ADB. The PMU shall be headed by the managing director of KUIDFC as program director (PD) at head office and by the executive program director (EPD) at the regional office. The PD will be responsible for overall management and implementation of the investment program and the project, while the EPD, assisted by experts and officials with proper qualifications and experience, shall be responsible for day-to-day implementation activities of the project.

Within no later than 6 months of the approval of the facility by ADB, the State shall establish four divisional offices under the PMU, in the cities of Dharwad, Belgaum, Gulbarga, and Ballari, to supervise the ULBs. Each divisional office shall be headed by the DPD reporting to the EPD. The divisional offices shall be responsible for coordination of project planning, preparation of subprojects and cost estimates, technical guidance and supervision, financial control, training, and overall subproject monitoring, assisted by the program consultants; as also to assist the ULBs in this regard for respective components. (LA, Schedule 5, paras. 2&3)

Complied with. The PMU and PIU are adequately staffed. Divisional offices established with divisional project directors (DPDs). The designation of EPDs to the divisional office was delayed by 4 months.

19. Fielding of Consultants Complied with. Four program consultant teams mobilized in Dec. 2007. These remain in place supporting latter tranches.

20. The IAs under the project shall be as follows: (i) water and sewerage infrastructure (components A and B in loan agreement terminology)—the respective ULBs of Haveri, Hospet, and Raichur reporting to the respective DPD. For a part (i.e., bulk water supply schemes) of Component B, KUWSDB, on behalf of the respective ULBs, reports to the respective DPD; (ii) non-municipal infrastructure (Component C) —Karnataka State Fire and Emergency Services (KSFES), and the Department of Information, Tourism, and Youth Services (DITYS), both reporting to the EPD; (iii) institutional development (Component D)—DMA/KUIDFC, reporting to the PD; and (iv) investment program assistance facility (Component E)—KUIDFC reporting to the PD. (LA, Schedule 5, para. 4)

Established accordingly. There are no bulk water supply schemes dissociated from the distribution system. For Component C the implementing agency changed from the KSFES to the Karnataka State Police Housing Corporation (KSPHC). However, the on-lending was to KSFES, which procured equipment, and the actual implementation was carried out by KSPHC on behalf of KSFES. Component D was carried out by KUIDFC with assistance from the Department of Town Planning.

21. The State shall form a tender evaluation committee (TEC) for each contract package under the subprojects before the related tender is called to evaluate the tenders, and provide recommendations on issues related to all works, which shall subsequently be forwarded for approval to the ULB commissioner. The TEC will consist of an engineer of the ULB, a representative of KUIDFC, and a concerned expert of the program consultant. (LA, Schedule 5, para. 5)

Complied with. Five TECs established in accordance with the covenant.

22. The empowered committee shall meet every quarter to review the investment program’s performance, and the project, decide on major

Complied with. Empowered committee met regularly (35 times)

36 Appendix 9

LOAN COVENANTS - Loan 2312

Project Specific Covenants Status/Issues

issues, such as counterpart funding, implementation bottlenecks, land disputes, special procurement, etc. (LA, Schedule 5, para. 6)

23. The district-level program steering committee (DPSC), reporting to the EPD, shall be responsible for monitoring implementation of subprojects and institutional reforms in the ULBs, as well as coordinating between various agencies regarding approvals and clearances. (LA, Schedule 5, para. 7)

Complied with. DPSC established and functioning.

24. Information disclosure: The State shall disclose information on the investment program on the KUIDFC website and the respective ULB websites as appropriate, including procurement-related information, financial statements, and physical progress. With regard to procurement, the websites shall disclose a list of participating bidders, name of winning bidder, basic details of bidding procedures adopted, contract value, and the list of goods/services procured. [LA, Schedule 5, para. 14(d)]

Complied with. Information on the project, including procurement-related information, physical and financial progress, is disclosed on the KUIDFC’s website. http://www.kuidfc.com/WEBSITE/WebPage.nsf/lookupAllCat/Projects-NKUSIP

25. The State shall ensure that the contractual documents under the performance-based payment structure (PBDPS) and/or performance-based management contracts (PBMC) are provided for prior review and approval in order to be used under the project. The State shall ensure that necessary provisions are made for each PBDPS and/or PBMC contractor to meet the State/ULB contractual obligations. In this regard, the State shall operate the private sector participation (PSP) fund, to ensure timely payments under private sector participation contracts, in particular the PBDPS and PBMC contracts under the project. All PSP contracts shall be subject to technical auditing by independent auditors. For each contract involving PSP, a list of three (3) program consultants not directly involved in the geographical area concerned shall be proposed by KUIDFC as candidates for the independent auditor and the PSP contractor shall be allowed to select a preferred candidate from the list, to be employed by KUIDFC. [LA, Schedule 5, para. 14(a),(b)&(c)]

Not applicable to tranche 1.The model contracts and request forproposals (RfP) for PBDBS and PBMC were drafted under CTA-4814.

26. Without limiting the generality of Section 2.08 of the project agreement, the State through KUIDFC shall prepare and provide ADB with quarterly progress reports on implementation of the project and the investment program, that shall include reports on progress made during the period of review, changes if any in the implementation schedule, problems or difficulties encountered and remedial actions taken, work to be undertaken and subprojects/components to be proposed for financing in the coming quarter. The reports shall also include a summary financial account for each IA, expenditures to date, and benefit monitoring undertaken pursuant to the previous paragraph of this schedule. (LA, Schedule 5, para. 18)

Complied with. Summary quarterly reports submitted to ADB. Submission delivery time has improved.

27. In addition to regular reviews, including a midterm review for the project in January 2010, a detailed midterm review of the investment program shall be undertaken, in June 2011 by ADB, the Borrower and the State. The midterm review shall include a detailed evaluation of the respective project and investment program scope, implementation arrangement; any outstanding issues; environment, resettlement, and other safeguard issues; achievement of scheduled targets; progress on PBDPS contracts; and other issues, as appropriate. [LA, Schedule 5, para. 19(b)]

A midterm review was fielded from 21 to 25 May 2012.

28. Based on a review of quarterly progress reports submitted in accordance with the preceding paragraph, ADB and the State as required, will meet to discuss progress of the investment program and

Complied with. Met semiannually or more frequently.

Appendix 9 37

LOAN COVENANTS - Loan 2312

Project Specific Covenants Status/Issues

the project, any changes to implementation arrangements or remedial measures required to be undertaken toward achieving overall objectives of the project and the overall investment program [LA, Schedule 5, para 19(a)]

29. Promptly after physical completion of the project, but in any event not later than three (3) months thereafter or such later date as ADB may agree for this purpose, the State through KUIDFC shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the project, including its cost, the performance by the State and KUIDFC, of its obligations under this project agreement and the accomplishment of the purposes of the loan. [PA, Sec. 2.08(c)]

Complied with late.

30. The State and KUIDFC each shall (i) maintain separate accounts for the project and for its overall operations; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualification, experience, and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than nine (9) months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the loan proceeds and compliance with the covenants of the loan agreement as well as on the use of the procedures for imprest account, second generation imprest account (SGIA), and statement of expenditures), all in the English language. The State and KUIDFC shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. [PA, Sec. 2.09(a)]

Complied with. (i) Separate books of account maintained. (ii) The audit for FY07/08 was submitted on 24 February 2009 (late by 1.8 months). (iii) The audit for FY08/09 and FY09/10 were submitted on time. (iv) The audit for FY10/11 was submitted on 6 February 2012 (late by 1.2 months). (v) Audits for FY11/12, FY12/13, and FY13/14 were submitted on time.

31. The State and KUIDFC as appropriate, shall each take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for insurance of project facilities, to such extent and against such risks and in such amounts as shall be consistent with sound practice. Without limiting the generality of the foregoing, the State and KUIDFC as appropriate, each undertake to insure, or cause to be insured, the goods to be imported for the project and to be financed out of the proceeds of the loan against hazards incident to the acquisition, transportation, and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods. [PA, Sec. 2.05(a)&(b)].

Not applicable.

38 Appendix 10

PROBLEMS, DELAYS, AND VARIATIONS

1. The issues encountered during contract implementation are listed below: A. Haveri 2. Water supply: Design changes had to be incorporated during the construction stage in the water supply project 01HVR01

(i) Intake structure (chamber) for housing the pumps at Heggere Lake had to be included. This item was originally not included in the scope of works.

(ii) Underground cables had to be laid for the National Highway crossing, instead of providing overhead cables.

(iii) For the Karjagi pump house one additional vertical turbine has been installed as a standby pump at the request of the city municipal council (CMC), Haveri.

(iv) The contractor took a long time to complete the project. 3. Sewerage works: The contract for the Haveri underground drainage (UGD) project 01HVR02 was terminated in January 2015 due to a fundamental breach of contract by the contractor for non-renewal of the performance bank guarantee. The balance works have yet to be retendered under tranche 4. B. Hospet 4. Water supply:

(i) Failure to undertake hydraulic testing of the laid high-density polyethylene (HDPE) pipes for a length of 50 km. The firm had to replace the pipeline and conduct the hydraulic test.

(ii) Delay in commissioning of bulk flow meters along with trial run. (iii) In channel alignment had to be done in the water treatment plant. (iv) Poor performance of the contractor.

5. Sewerage works:

(i) Poor performance of the contractor—the contract had to be extended several times.

(ii) Necessary tests were not conducted by the contractor, resulting in delays. (iii) The resource mobilization by the contractor was inadequate. (iv) The drawings provided by the consultants for the sewage treatment plant (STP)

had to be revised based on the site conditions. (v) Since the work could not be completed under the project, the balance of works

have been shifted to tranche 4 of the North Karnataka Urban Sector Investment Program (NKUSIP).

C. Raichur 6. Water supply:

(i) Delay in site clearances for laying 500 millimeter (mm) diameter and 350 mm diameter ductile iron (DI) pipelines by the Public Works Department (PWD).

(ii) Delay in obtaining forest department permission for the construction of a 500,000 liter ground level storage reservoir (GLSR).

(iii) Delays encountered due to non-availability of electrical power supply to the intermediate pumping station.

Appendix 10 39

(iv) Commissioning of bulk flow meters was pending due to delays on the part of the contractor.

(v) Hydro testing by the contractor of 12 km of HDPE pipeline was pending. (vi) The performance of the contractor was poor in terms of resource mobilization

and planning.

7. Sewerage works: The reasons for delay in execution of sewerage works are mainly due to poor performance of the contractor. The contractor did not perform in terms of resource mobilization and due to poor planning. Hence the contract was terminated in November 2012. The balance of works are to be tendered under tranche 4. D. Urban Infrastructure Bhavan, Bengaluru: 8. There were a few changes in subproject scope:

(i) Due to noise pollution and traffic disturbance the structural glazing specifications had to be changed and these were not executed by the contractor. Hence, this had to be removed from the contract’s scope under tranche 1.

(ii) The heating, ventilation, and air conditioning (HVAC) works required a specialized agency for execution. Hence, these works were also removed from the contract’s scope and shifted to tranche 3 and have been awarded as a separate contract.

9. A few additional works had to be added based on site conditions and less working space available at site:

(i) For a better architectural aesthetic the front compound wall was changed from brick to concrete.

(ii) Structural changes had to be adopted due to changes in the design of the ramp. (iii) The steel quantity increased due to changes in structural design necessitated

due to loose strata. (iv) Variations were incurred in electrical items as per the requirements of the

Bangalore Electricity Supply Company Ltd. (BESCOM). (v) Extra items of work were added as per site conditions such as soiling below the

foundation, waterproofing sunken slabs, aluminum louvres, polyvinyl chloride (PVC) grating, and other electrical and fire safety items. These had to be added to the bill of quantities.

40 Appendix 10

Project wise Variation and Delays Package

No. Subproject Name Contract

Duration (Month)

Actual Duration (Month)

Delay (Month)

Estimated Cost (Rs

million)

Awarded Cost (Rs

million)

Completion Cost

(Rs million)

Variation in Cost w.r.t. Estimated Cost (%)

Variation in Cost w.r.t Awarded Cost (%)

01HVR01

Improvements to water supply system: supplying and laying DI pumping main from Karjagi to Heggere, constructing intake works, strengthening distribution systems, and providing and fixing bulk flow meters in Haveri CMC

18 48 30 97.849 99.073 97.7 (-) 0.2 (-) 1.38

01HVR02

Supplying and laying a new gravity sewer system, and constructing a FAL-type STP and a secondary drainage link in Haveri CMC

18 48 30 253.915 325.153

178.312 Contract terminated. The balance of works of this contract has been taken under tranche 4

- -

01UIB01 Constructing corporate office “Urban Infrastructure Bhavan” of KUIDFC

12 45 33 94.30 94.633 89.00 (-)5.95 (-)6.2

01HPT01 Improvements to water supply system in Hospet CMC.

18 45 27 153.80 156.50 173.8 13 11.05

01HPT02A

Providing and laying 176 km sewer network and constructing manholes and secondary drains linking the length of 1.75 km system

18 54 36 229.60 325.40 123.10 - Shifted to tranche 4

01HPT02A

Constructing 27 MLD ASP-type STP, constructing 2 wet wells, pumping machineries, etc.

18 54 36 168.60 210.50 147.20 - - Shifted to tranche 4

01RCR01 Improvements to water 18 45 27 130.40 142.00 159.3 22.2 12.18

Appendix 10 41

Package No.

Subproject Name Contract Duration (Month)

Actual Duration (Month)

Delay (Month)

Estimated Cost (Rs

million)

Awarded Cost (Rs

million)

Completion Cost

(Rs million)

Variation in Cost w.r.t. Estimated Cost (%)

Variation in Cost w.r.t Awarded Cost (%)

Supply system in Raichur CMC.

01RCR02 Improvements to sewerage system in Raichur CMC

18 - - 309.80 398.10 51.80 -

Contract terminated and balance of works taken up under tranche 4

ASP = activated sludge process; CMC = city municipal council; DI = ductile iron; FAL = facultative aerated lagoon; km = kilometer; KUIDFC = Karnataka Urban Infrastructure Development and Finance Corporation; MLD = million liters per day; STP = sewage treatment plant; w.r.t. = with respect to.

42 Appendix 11

FINANCIAL AND ECONOMIC ANALYSIS

FINANCIAL ANALYSIS A. Analysis at Appraisal

1. A financial analysis was prepared in accordance with the Financial Management and Analysis of Projects (2005) and the Framework for the Economic and Financial Appraisal of Urban Development Sector Projects of the Asian Development Bank (ADB). The financial viability of revenue-generating subprojects in three urban local bodies (ULBs), Haveri, Hospet, and Raichur, was also examined as part of the subprojects’ appraisal. 2. Financial projections were made for incremental revenues and expenditures over 20 years of operation for such revenue-earning subprojects as water supply, sewerage, and solid-waste management. The financial projection tariff revision assumed for water supply was an increase of 30% every 5 years. The original rate was Rs45 per month per household in FY2006–07. Financial internal rate of return (FIRR) was assessed as negative for all three ULBs’ water supply projects. 3. The financial sustainability of the three investment program ULBs was assessed with the implementation of the three reforms: (i) property tax reform with 75% coverage; (ii) introduction of fund-based accounts and computerization as part of the Nirmala Nagara Program; and (iii) implementation of a revised water tariff and improvement in service. Due to the difficulty in increasing tariffs without any improvement in services, subprojects will not use project revenues and will be dependent on surpluses available in the municipal funds for overall sustainability. B. Analysis at Completion 4. The financial analysis of the water supply subprojects was reassessed at project completion. The reassessment updated the earlier analysis through appropriate changes in project cost, project coverage, revenues, etc. that occurred during implementation. This reassessment was conducted to facilitate the comparison of analysis results between appraisal and completion stages. The project analysis period, including the ‘base year’1 followed during the appraisal stage, is retained for the present analysis. 5. The financial costs included base costs, consultancy, project implementation, project monitoring, financing charges, taxes and duties, and excluded a price contingency. The physical contingency is not considered under the project cost as it is part of the actual cost. Using the wholesale price index (WPI) for subproject-related commodities groups, the yearly actual disbursement was discounted to the base year. The actual cost and discounted cost details are in Table 1. In addition, the proportionate implementation cost, excluding financing charges, was considered for the purpose of analysis. 6. Revenue from water was considered as per the actual increase due to the tariff revision in 2011. In all three ULBs the tariff was revised to Rs120 per month per household for domestic connections as compared to the original tariff of Rs45 per month per household. Periodic tariff revisions of 30% every five years was also assumed, as was done at appraisal. The tariff was applied on the number of connections as per the ULBs’ records for assessing the incremental

1 For capital cost – 2003–04, as specified in Table 1 of Economic Analysis; for O&M and revenues 2013–14 – first

year of operations post completion.

Appendix 11 43

revenue. The weighted average cost of capital (WACC) was assessed at 1.69% considering the cost of the Government of Karnataka’s loan to ULBs, i.e., 40% of the loan amount lent at an interest rate of 8.5%, a government grant of 50% at the long-term government bonds yield rate of 8%, and a ULB contribution of 10% at 9%. The amount of inflation considered for WACC determination is 6.5%.

C. Revaluation at Completion

7. The FIRR at project completion was found to be negative for all three ULBs’ water supply projects, with negative net present values (NPVs) assessed at the WACC rate of 1.69%. However, the incremental revenues2 cover the incremental operation and maintenance (O&M) costs for Hospet and Raichur. In the case of Haveri, the incremental revenues are not enough to meet the O&M cost. The tariff increased in 2011 and the subsequent periodical revision of 30% once in five years, when converted to real terms, is not adequate to generate a positive FIRR equivalent or more than the WACC. 8. Hence, as at appraisal, the FIRR at completion is also negative for water supply for all three ULBs. Two of the three ULBs generating incremental revenues to cover the incremental O&M costs. D. Sustainability 9. An analysis of financial statements, prepared on the accrual basis of accounting, was conducted for the last 5 financial years, from FY2009–10 to FY2013–14, for all three ULBs. Overall:

(i) The proportion of their own revenues to total revenues averaged 22% in Haveri, and 28% in Hospet and Raichur, with the balance coming from government grants.

(ii) The operating ratio was less than unity for all three ULBs for the analysis period except for FY2013–14 in Raichur, indicating that the ULBs are meeting their operational expenses through their own revenue and government grants.

(iii) All three ULBs’ current ratio was good throughout the analysis period, indicating good liquidity. The debt-equity ratio was also favorable, indicating good capital structures.

(iv) The rate of return for all three ULBs was positive throughout the analysis period except in the case of Hospet and Raichur for FY2013–14, when it became negative.

10. The water supply and sewerage fund analysis revealed that:

(i) User charges and/or fees have grown at a compounded annual growth rate (CAGR) of 11% in Haveri, 25% in Hospet, and 27% in Raichur over the last 5 years, from FY2009–10 to FY2013–14. This was mainly due to the increase in the tariff in 2011. Improved collection efficiency will have a significant positive impact on the cash flow position of the three ULBs.

(ii) All three ULBs had an operating surplus for the last three financial years, albeit with the help of grants in this fund account. Without this grant, all three ULBs would not be in a position to meet their O&M expenses.

2 Considering only water tariff collection for the FIRR.

44 Appendix 11

11. Overall, the revenue base of the three ULBs has gone up significantly in nominal terms since FY 2002–03, with an annual compounded growth rate of 17%. However, the cash flow projections for revenue from water charges at appraisal could not be realized in FY 2013–14, as the actual collection efficiency was low as compared to the projections for all three ULBs. 12. The property tax collection efficiency in FY2013–14 ranged from 60% to 82%3 and can improve still further. There is substantial scope for the improvement of collection efficiency in water tariffs, which are at present in the range of 21% to 32%4 for FY2013–14. In line with the State Finance Commission recommendations, 10% of the government’s revenue receipts are shared with the ULBs. The devolution of government funds ensures that the ULBs are able to meet their regular O&M expenses. 13. An analysis of annual financial statements for the three ULBs for the last 5 financial years from FY2009–10 to FY2013–14 was conducted and the observations are:

(i) All three ULBs depend on the devolution of government funds and the percentage of their own revenue contribution is relatively low;

(ii) Of the three ULBs, two had an operating ratio of unity, with Raichur having greater than unity in FY2013–14;

(iii) All three ULBs showed a positive current asset ratio on average, thus indicating positive liquidity; and

(iv) All three ULBs showed a positive debt-equity on average, indicating positive capital structures.

E. Conclusion

14. Overall, the project is rated financially sustainable. All the project towns reported a favorable current assets ratio and debt-equity ratio. However, the operating ratio needs to be improved by improving the share of own revenue. Due to low tariffs, the FIRR of water supply subprojects produced negative results. The ULBs are able to meet the regular expenses, even when the revenues are not sufficient to cover O&M expenses with government grants. The implementation of reforms, which is an ongoing process, will significantly improve municipal revenues and thus strengthen their capacity to sustain O&M of assets created under the project and other assets of the ULBs.

3 The property tax collection efficiency for FY2013–14 for Haveri, Hospet, and Raichur was 71%, 60.4%, and 82.2%,

respectively. At appraisal, the collection efficiency for Haveri, Hospet, and Raichur was 68%, 89%, and 70%, respectively.

4 The water charges collection efficiency for FY2013–14 for Haveri, Hospet, and Raichur was 32.3%, 26.5%, and

21.5%, respectively. At appraisal, the collection efficiency for Haveri, Hospet, and Raichur was 51%, 78%, and 68%, respectively.

Appendix 11 45

ECONOMIC ANALYSIS

A. Introduction

1. Under tranche 1 investments were made in the following sectors: water supply, sewerage, firefighting, and building infrastructure. For economic analysis water and sewer subprojects only were considered in project towns during the loan processing stage, as the other two components were amenable for economic analysis. At this project completion report (PCR) stage, all the water supply subprojects have been completed. However, sewer subprojects in all three project towns could not be completed as explained in earlier sections (paras. 7, 13, 36). This background economic analysis for the present PCR was conducted only for water supply subprojects in three tranche 1 project towns in accordance with ADB’s guidelines, including Guidelines for the Economic Analysis of the Projects (1997) and Guidelines for the Economic Analysis of Water Supply Projects (1998). B. Approach

2. The main focus of this economic analysis is to update the analysis made during the loan processing stage (2005) through appropriate changes in project cost, project coverage, and beneficiaries that occurred during implementation. This update should facilitate the comparison of analysis of results between these stages. The project analysis period followed during the processing stage is retained for the present analysis with a base year of 2003–04. 3. The present analysis has kept the analysis period of the earlier analysis (2005) with modifications in the construction period as observed from actual performance. This has resulted in the reduction of the subprojects’ operation period to 20 years from completion of the project component due to delays in project completion. 4. The economic analysis was based on the updated information from the (i) updated engineering, environmental, social, financial, and other details collected on project completion; and (ii) the updated economic evaluation parameters relevant to the project towns gathered from secondary sources and informal discussions with project nongovernment organizations (NGOs). Data was collected in the following areas:

(i) Actual capital costs of improvements; (ii) Annual O&M costs of the improved infrastructure; (iii) Updated forecasts of demand for/usage of infrastructure services; and (iv) Updated supply characteristics of infrastructure networks and services

delivery at completion.

5. The economic analysis is based on the parameters and projections used in the earlier economic analysis during the loan processing stage with suitable updates observed during project implementation. The analysis is based only on the measurable benefits that would arise from the project towns and does not attempt to include the numerous other positive but unquantifiable effects that would be generated by the project interventions. C. Economic Cost

6. The economic costs of capital for works and annual O&M were calculated from the observed actual financial cost on the following basis:

(i) Price contingencies are excluded but physical contingencies are included because they represent real consumption of resources;

46 Appendix 11

(ii) Import duties and taxes are excluded because they represent transfer payments. For this the shadow exchange rate factor (SERF) of (1.03)1 was used;

(iii) The existence of unemployment and under-employment for unskilled workers within the Indian economy means that the opportunity cost of unskilled labor can be considered to be lower than its wage rate—a conversion factor of 0.822 of the market wage rate for unskilled labor in Karnataka State was used to estimate the shadow wage rate;

(iv) The market wage rate for skilled labor and the acquisition cost of land are considered to represent opportunity costs, as both factors are in demand;

(v) All costs are valued using the domestic price numeraire, to enable an easier comparison with the information used to measure benefits (e.g., a significant component of benefit is the savings in resources, which would be used in the without project scenario).

7. As all the water supply subproject components planned during the processing stage were completed during implementation, the project coverage was adopted from the earlier analysis. However, project beneficiaries were estimated based on the details of water supply connections and the tariff structure3 on the project completion stage collected from the ULBs. 8. Though the project’s implementation was planned to be completed in 2011, the actual project completion for two of the subprojects was 2013–14 and for the other 2014–15. Actual subproject expenditures during implementation collected from PMU were used to update the project’s cost and phasing. Using the wholesale price index (WPI) for selected commodities groups,4 the yearly actual disbursement was discounted to the base year (2003–04). Table 1 shows the updated financial cost of the water supply subprojects along with their discounted cost using the WPI. Table 2 gives the arrived economic cost used for the analysis.

1 Shadow Exchange Rate Factor (SERF) Rs in Billions

Details 2013–14

2012–13

2011–12

2010–11

2009–10

2008–09

2007–08

2006–07

2005–06

Exports – Govt. of India 18,942 16,353 14,660 11,429 8,455 8,408 6,559 5,718 4,564 Imports – Govt. of India 27,142 26,732 23,455 16,835 13,637 13,744 10,123 8,405 6,604

Customs Duties – Govt. of India 1,231 1,155 1,056 976 602 692 720 628 466

Standard Conversion Factor (SCF) 0.974 0.974 0.973 0.967 0.973 0.970 0.959 0.957 0.960

Standard Exchange Rate Factor (SERF)

1.03 1.03 1.03 1.03 1.03 1.03 1.04 1.04 1.04

Calculation based on ERD Technical Note Series No. 11, February 2004, “Shadow Exchange Rate for Project Economic Analysis,” ADB. Source: Reserve Bank of India, Handbook of Statistics on Indian Economy, 2013–14.

2 Shadow Wage-rate Factor (Y) Unskilled labor cost (Rs per day)* ( L) 238.35 Minimum Wages in India w.e.f. 1 October 2014 (Rs per day)** (M) 290.00 Shadow Wage-rate Factor (Y); Y = L/M 0.82

* Normal wage rates practiced for construction laborers in project towns in Karnataka (Source: Apex NGO, NKUISP). ** http://www.paycheck.in/main/salary/minimumwages/central-sphere (wage rate suggested for construction workers). Note: Calculated using the Guidelines for the Economic Analysis of Projects, 1997, ADB.

3 New tariff structure vides Govt. Order No. NAE o7 UWS 2011, Bangalore, dated 20.07.2011, implemented from August 2011.

4 Cement, steel, pipes, diesel, construction machinery, and automobiles are selected commodity groups in the WPI

used for discounting the actual cost to the base year (2004–05).

Appendix 11 47

Table 1: Details of Subproject Costs at Different Stages (Rs Million) Year Water Supply Hospet1 Water Supply Raichur Water Supply Haveri

Estimated Cost during Processing

Actual Cost

Phasing Estimated Cost during Processing

Actual Cost Phasing Estimated Cost during Processing

Actual Cost Phasing

2007–08 0.00 0.00 0.0% 0.00 0.00 0.0% 0.00 0.00 0.0%

2008–09 0.00 0.00 0.0% 0.00 0.00 0.0% 0.00 0.00 0.0%

2009–10 0.00 0.00 0.0% 0.00 0.00 0.0% 0.00 9.90 11.1%

2010–11 38.45 49.60 30.7% 32.60 14.20 9.7% 24.50 31.70 33.8%

2011–12 76.90 51.10 29.8% 65.20 69.20 44.6% 48.90 36.20 36.4%

2012–13 38.45 25.30 14.0% 32.60 47.10 28.7% 24.50 15.70 14.9%

2013–14 0.00 47.80 25.5% 0.00 24.70 14.5% 0.00 4.20 3.9%

2014–15 0.00 0.00 0.0% 0.00 4.10 2.4% 0.00 0.00 0.0%

TOTAL 153.80 173.80 100.0% 130.40 159.30 100.0% 97.85 97.70 100.0%

Notes: 1. The additional amount spent on Hospet’s water supply subproject by the Karnataka Water Supply Board (Rs5.9 million) is included in FY2014. 2. Periodical subproject costs were discounted to the base year (2004) using the Wholesale Price Index of relevant commodity groups.

Table 2: Details of Subproject Costs at Different Stages ($ Million) Year Water Supply Hospet Water Supply Raichur Water Supply Haveri

Estimated Cost during

Proposal

Actual Cost

Phasing Estimated Cost during

Proposal

Actual Cost Phasing Estimated Cost during Processing

Actual Cost Phasing

2007–08 0.00 0.00 0.0% 0.00 0.00 0.0% 0.00 0.00 0.0%

2008–09 0.00 0.00 0.0% 0.00 0.00 0.0% 0.00 0.00 0.0%

2009–10 0.00 0.00 0.0% 0.00 0.00 0.0% 0.00 0.20 11.1%

2010–11 0.79 1.02 30.7% 0.67 0.29 9.7% 0.51 0.65 33.8%

2011–12 1.71 1.14 29.8% 1.45 1.54 44.6% 1.09 0.80 36.4%

2012–13 0.79 0.52 14.0% 0.67 0.97 28.7% 0.50 0.32 14.9%

2013–14 0.00 0.91 25.5% 0.00 0.47 14.5% 0.00 0.08 3.9%

2014–15 0.00 0.00 0.0% 0.00 0.07 2.4% 0.00 0.00 0.0%

TOTAL 3.30 3.59 100.0% 2.79 3.34 100.0% 2.10 2.07 100.0%

48 Appendix 11

Table 3: Details of Water Supply Projects Cost Overrun Water Supply

Project Estimated Cost

during Agreement (2011–12) Rs Million

Actual Cost Rs Million

Cost Overrun

Rs Million % Hospet* 153.80 173.80 20.00 13.0% Raichur 130.40 159.30 28.90 22.2% Haveri 97.85 97.70 -0.15 -0.2% Total 382.05 430.80 48.75 12.8%

Notes: 1. *The additional amount spent on Hospet’s water supply subproject by the Karnataka Water Supply Board

(Rs5.9 million) is included in FY2014. 2. Periodical subproject costs were discounted to the base year (2004) using the Wholesale Price Index of

relevant commodity groups.

Table 4: Details of Water Supply Projects Cost Overrun

Water Supply Project

Estimated Cost during Agreement

(2011–12) $ Million

Actual Cost $ Million

Cost Overrun

$ Million % Hospet* 3.30 3.59 0.30 9.0% Raichur 2.79 3.34 0.55 19.7% Haveri 2.10 2.07 -0.03 -1.4% Total 8.19 9.00 0.82 10.0%

Notes: 1. * The additional amount spent on Hospet’s water supply subproject by the Karnataka Water Supply Board

(Rs5.9 million) is included in FY2014. 2. Periodical subproject costs were discounted to the base year (2004) using the Wholesale Price Index of

relevant commodity groups.

Appendix 11 49

Table 5: Calculation of Economic Cost for Water Supply Component

Details Construction Cost Rs Million

Financial Cost Economic

Cost Shadow Price

Factor Haveri - Unskilled labor 8.93 7.34 0.82 - Skilled labor and others 65.50 65.50 1.00 - Taxes and duties 8.19 - 0.00 Total 82.62 72.85 Hospet - Unskilled labor 15.30 12.57 0.82 - Skilled labor and others 112.18 112.18 1.00 - Taxes and duties 14.02 0.00 0.00 Total 141.50 124.76 Raichur - Unskilled labor 13.91 11.44 0.82 - Skilled labor and others 102.04 102.04 1.00 - Taxes and duties 12.76 0.00 0.00 Total 128.71 113.48 Total 352.84 311.08

Notes:

1. Construction cost includes (i) base cost; (ii) allowances: design and quality assurance (2.8%), benefit monitoring (0.075%), and Incremental administration (2.8%); and (iii) taxes and duties.

2. The entire project cost (100%) is considered as the local cost.

D. Project Beneficiaries

9. Updated project beneficiaries in project towns shown in Table 6 indicate that coverage has improved considerably (but less than the assumption at the loan processing stage analysis)1 and will continue to improve. The findings of the project’s apex NGO (2014–15) were used to arrive at the composition of project beneficiaries.

1 The planned project beneficiaries for Haveri and Raichur were determined to be 70% and for Hospet 85% (for

water supply coverage) during the loan processing stage as given in the tranche 1 design and monitoring framework (DMF).

50 Appendix 11

Table 6: Water Supply Component Project Beneficiaries in Project Towns

Details

Socioeconomic Category Core Poor

Intermediate Poor

LIG MIG/HIG

Total

A. Haveri (i) During project preparation (CLIP) stage – 2004

a

Total beneficiary population 2,458 5,997 22,258 2,949 33,662

% of population covered 4.2% 10.2% 37.7% 5.0% 57.0% (ii) During completion stage – 2015

b c

Total beneficiary population 4,243 11,906 27,619 14,639 58,407

% of population covered 6.3% 17.6% 40.9% 21.7% 86.6%

B. Hospet (i) During project preparation (CLIP) stage – 2004

a

Total beneficiary population 11,205 5,563 4,662 21,191 42,620

% of population covered 6.5% 3.2% 2.7% 12.3% 24.8% (ii) During completion stage – 2015 b c

Total beneficiary population 31,068 25,148 30,349 32,189 1,18,754

% of population covered 14.0% 11.4% 13.7% 14.5% 53.7%

C. Raichur (i) During project preparation (CLIP) stage– 2004

a

Total beneficiary population 5,468 25,389 36,481 14,002 81,340

% of population covered 2.4% 11.2% 16.1% 6.2% 35.8% (ii) During completion stage – 2015 b c

Total beneficiary population 9,396 14,765 30,012 87,721 1,41,895

% of population covered 4.3% 6.7% 13.6% 39.7% 64.2% HIG =higher income group; LIG = low income group; MIG = middle income group; a Base year beneficiaries as assessed during the project preparation (CLIPs) stage in 2004.

b Number of beneficiaries in 2015 is based on the apex NGO’s household survey (2015)

c Number of domestic connections from the NGO survey (2014–2015) and the data available with ULB are

considerably different, which may be the result of illegal connections. However, for the analysis, only the NGO household survey result was considered.

E. Valuing Economic Benefits

10. The water supply component comprises three types of improvements: (i) rehabilitation of existing water treatment plants and transmission mains; (ii) leak detection, strengthening the existing distribution network, and laying additional distribution network for uncovered areas; and (iii) construction of additional pumping capacity and storage barrage. The objectives for the completed improvements would make the water supply system more efficient and effective in terms of the quantity of piped water delivered. The economic cost-benefit analysis therefore considers all types of improvements together. 11. The quantifiable benefits of the water supply component considered in the earlier analysis were considered for the present analysis. also without change and they include:

Appendix 11 51

(i) Resource Cost Savings. The savings in supplying the existing volume of piped water more efficiently are measured in terms of the average cost of supply with and without the project. This has two major components for the purpose of benefit quantification: (a) Non-incremental water supply. This component includes the increase in

water sold from the public scheme due to the project but resulting in no effect on total consumption for the following reasons: (a) the non-incremental water supply replaces water consumed from private vendors, shallow wells, and tanks and/or rivers; and (b) the non-incremental water supply is due to the reduction in non-technical losses. This component of benefit is evaluated by using the supply cost of replaced water sources.

(b) Incremental water supply. This component has a positive effect on total consumption due to the proposed project. This component of benefit is evaluated by using the demand price, or willingness to pay (WTP) for additional consumption. Based on the WTP survey analysis results, the demand price is generally assumed to be equal to the supply price, to be decided by the ULB from time to time, for the purposes of analysis. However, due to the WTP survey’s adaptability to the statistical test requirements, the ‘incremental water supply’ benefit is not considered in the present analysis. Also, the proposed subprojects are designed to supply the minimum required water supply and so the additional water supply from the project will be considered under the ‘non-incremental’ category only.

(ii) Other Benefits. (a) Times savings. Time savings result from water collection, which is more

acute in the dry season and is quantified using the opportunity cost of unskilled casual laborers.

(b) Opportunity cost. The opportunity cost for the additional water supply drawn into the project is a negative benefit, as it measures the quantum of loss to the economy in terms of agricultural production due to the diversion of water for drinking purposes. It is assumed that one crop paddy cultivation will be converted into one crop rain-fed crop in the impact area. Accordingly, the loss in production is estimated as follows and used in the analysis.

12. Exclusions. In addition to the direct economic benefits quantified in the estimate of the economic internal rate of return (EIRR), the project also generated many unquantifiable and indirect benefits. The following benefits of the water supply project have not been quantified for want of adequate data and quantification techniques. In addition to these qualitative benefits, along with the quantifiable benefits discussed above, the proposed water supply system will tend to provide better living conditions in the project towns.

(i) The public cost of treating waterborne diseases due to poor environmental sanitation;

(ii) The effects on businesses and industries, such as aquaculture and fisheries, agriculture and washing; and

(iii) The effects on tourism and tourist-related businesses.

F. Economic Cost-Benefit Analysis

13. This section summarizes the results of both the main economic evaluation and the sensitivity analysis. Each subproject component completed was compared to the ‘without

52 Appendix 11

project’ scenario, using the discounted cash-flow technique and economic opportunity costs of capital (EOCC) of 12%. Though the earlier analysis period from 2003–04 to 2031–32 allowed for 20 years of operation from the first full year of benefits, the present analysis kept the same analysis period with an actual project completion period of 2013–14 (for two subprojects) and 2014–15 (for one subproject). The analysis was conducted at domestic prices and the discount year was taken as 2003–04. All values in the following tables are expressed in 2003–04 prices. This is mainly to facilitate the comparison of the PCR’s economic results with the earlier analysis. 1. Economic Feasibility Criteria 14. The cost-benefit analysis was carried out using the discounted cash flow (DCF) technique to obtain the EIRR and economic net present value for the completed investments and the likely quantified benefits linked with the project during the defined project analysis period. 2. Economic Opportunity Cost of Capital 15. Given the complexity of estimating a country-specific economic opportunity cost of capital (EOCC), a discount rate of 12% in constant economic prices is generally used as a proxy for EOCC in the economic analysis. The EIRR must be compared with the economic opportunity cost of capital, for interpretation purposes of project feasibility.

3. Cost-Benefit Analysis 16. Main Evaluation: Table 8 presents the results of the main economic evaluation for the water supply component in the subprojects.

Table 8: Results of Economic Analysis for Water Supply Subprojects – Tranche 1 Item Present Value (Rs million)

a

Haveri Hospet Raichur A. Costs

Capital costsb 24.97 43.69 38.43

O&M costs 4.49 7.23 7.25 Total costs 29.45 50.92 45.67

B. Benefits

Resource cost savings i) Non-incremental water supply 22.37 35.71 24.09 iii) Reduction in non-technical loss 0 0.01 0.83 iv) Total resource cost savings 22.37 35.72 24.92 Collection time savings 23.36 108.50 111.23 Opportunity cost due to diversion of water from agricultural use

-2.81 0 0

Total benefits 42.92 144.22 136.15 Economic Return Measures Net benefit (Rs million) 13.47 93.30 90.47 EIRR (%) 17.63% 26.60% 26.43% Notes: a In 2003–04 prices. Discounted to 2003–04 at 12% real discount rate.

b Base capital cost estimates in undiscounted financial cost of Rs. 79.74 million and its economic costs of

Rs. 73.51 million.

Appendix 11 53

17. Table 8 shows that the overall EIRR of the water supply component for the project towns is found to range from 17.6% in Haveri to 26.6% in Hospet. These EIRR values exceed the economic opportunity cost of capital (12%) and are found economically viable. Details of analysis of water supply subprojects are given in Annex 1. 18. Sensitivity Analysis. A sensitivity analysis was undertaken to test the robustness of the economic results is summarized in Table 9. The results show that:

(i) All the subprojects remain economically viable in each individual sensitivity test; and

(ii) When the combination of changes is tested, the overall component for the sample towns remains economically viable.

Table 9: Results of Sensitivity Analysis for Water Supply Subprojects under Tranche 1

Details

Economic Internal Rate of Return (EIRR)

Haveri Hospet Raichur

Main Evaluation (Base Case)a

17.63% 26.60% 26.43%

Capital Cost Overrunb 16.11% 23.85% 23.88%

Switching Valuec 65.00% 213.00% 235.00%

O&M Cost Overrund 18.35% 26.39% 26.21%

Switching Valuec 363.00% 1290.00% 1250.00%

Lower Time Valuatione

16.74% 24.07% 23.69%

Switching Valuec 67.00% 86.00% 81.00%

Lower Resource Cost Benefitf

17.06% 25.65% 25.90%

Switching Valuec 72.00% 261.00% 362.00%

One Year Delay in Implementation 17.43% 26.44% 26.24%

All Five Tests Combined 12.21% 20.08% 20.27% a Base case scenario

b A 20% increase in capital costs.

c Calculated as the percentage change in a variable required to reduce the EIRR to 12%.

d A 20% increase in operation and maintenance (O&M) cost.

e Calculated for the reduction in time cost savings by 20%.

f Calculated for the reduction in resource cost savings by 20%.

G. Conclusion

19. The main evaluation has shown that all three completed water supply subprojects are economically viable, with the calculated EIRR values exceeding the economic opportunity cost of capital in all cases. The sensitivity analysis has demonstrated the robustness of these results, with all subprojects economically viable even when tested with a combination of changed assumptions. 20. In comparison to the economic analysis results during the loan processing stage (2005), the EIRRs have been considerably reduced at this PCR stage for all three water supply subprojects. This reduction in viability results can be assigned to the following reasons, as indicated in Table 10:

(i) The overall cost overrun for the water supply subprojects was Rs48.75 million ($0.82 million). However, the dollar exchange rate fluctuations have helped to cushion this. Factoring in the exchange fluctuations, the cost overruns were 9%

54 Appendix 11

in Hospet ($0.3 million), (-) 1.4% in Haveri [(-) $0.03 million]), and 19.7% in Raichur ($0.55 million);

(ii) There was a considerable reduction in project coverage in the reduction of project beneficiaries; and

(iii) There was a time overrun of 27–30 months.

Table 10: Comparison of Subproject Performance during Implementation Stage

Details Hospet Haveri Raichur

Base Cost (2011–12 prices) Rs Million

i. During processing stage 153.8 97.85 130.4

ii. During completion stage 173.8 97.7 159.3

Cost overrun Rs million 20 (-) 0.15 28.9

Cost Overrun % 13% - 0.2% 22.2%

Project Completion (Months)

i. Planned during project approval—months 18 18 18

ii. Actual completion—months 45 48 45

iii. Time overrun—months 27 30 27

Project Beneficiaries Coverage % i. Planned during project preparation (CLIP) stage for 2014 85% 70% 70%

ii. Actual completion—2015 87% 54% 64%

EIRR %

i. Planned during project preparation (CLIP) stage 35.75% 19.32% 46.28%

ii. During completion stage 26.60% 17.63% 26.43% Note: 1. Details of processing stage data were from CLIP reports, the tranche 1 DMF and supplementary appendix. Completion stage details are from the present PCR analysis. For PCR stage project beneficiary coverage, the household survey data from apex NGO (2015) are used.

H. Distribution of Project Effects and Poverty Reduction Impact

21. A distributional analysis, leading to a calculation of the poverty impact ratio (PIR), i.e., the proportion of project net benefits accruing to the poor for the three project towns together, is presented in the following sections. 22. The analysis shows that the PIR for the three subprojects in all three towns ranges from 33% (Haveri) to 43% (Hospet) which is closer to the poverty group composition in the respective towns.

Annex 1 55

Annex 1: Economic Cost-Benefit Analysis for Water Supply Projects - Hospet Base Case (Rs in Million)

Year Economic Cost Economic Benefits Net Benefits Capital

Cost O&M Cost

Total Non-Incre-mental Water

Incremen-

tal Water

Reduction in Non-

Techn-ical

Loss

Total Resource

Cost Benefit

Time Cost

Savings

Total

2003–04 - - - - - - - - - -

2004–05 - - - - - - - - - -

2005–06 - - - - - - - - - -

2006–07 - - - - - - - - - -

2007–08 - - - - - - - - - -

2008–09 - - - - - - - - - -

2009–10 - - - - - - - - - -

2010–11 38.51 - 38.51 - - - - - - (38.51)

2011–12 37.40 - 37.40 - - - - - - (37.40)

2012–13 17.52 - 17.52 - - - - - - (17.52)

2013–14 31.33 - 31.33 - - - - - - (31.33)

2014–15 - 3.47 3.47 15.24 (0.02) 15.22 23.74 38.96 35.49

2015–16 - 3.47 3.47 6.50 (0.01) 6.49 27.26 33.76 30.29

2016–17 - 3.47 3.47 10.01 (0.01) 9.99 31.05 41.04 37.57

2017–18 - 3.47 3.47 13.49 (0.01) 13.48 35.12 48.60 45.13

2018–19 - 3.47 3.47 17.17 (0.01) 17.16 39.50 56.66 53.19

2019–20 - 3.47 3.47 20.74 (0.01) 20.74 44.21 64.94 61.47

2020–21 - 3.47 3.47 22.80 (0.00) 22.80 49.27 72.06 68.59

2021–22 - 3.47 3.47 25.73 0.00 25.73 54.71 80.44 76.97

2022–23 - 3.47 3.47 28.42 0.01 28.43 60.56 88.99 85.52

2023–24 - 3.47 3.47 28.42 0.01 28.44 66.85 95.29 91.82

2024–25 - 3.47 3.47 30.01 0.02 30.03 73.62 103.65 100.18

2025–26 - 3.47 3.47 29.74 0.03 29.77 81.07 110.84 107.37

2026–27 - 3.47 3.47 26.49 0.04 26.53 89.07 115.59 112.12

2027–28 - 3.47 3.47 18.74 0.05 18.79 97.64 116.43 112.97

2028–29 - 3.47 3.47 15.82 0.06 15.88 106.85 122.72 119.25

2029–30 - 3.47 3.47 1.88 0.08 1.96 116.72 118.68 115.21

2030–31 - 3.47 3.47 - 0.10 0.10 127.32 127.42 123.95

2031–32 - 3.47 3.47 - 0.12 0.12 138.69 138.81 135.34

Total 124.76 62.45 187.21 311.21 - 0.44 311.65 1,263.26 1,574.9

0 1,387.70

NPV at

12% (Rs Million)

43.69 7.23 50.92 35.71 0.00 0.01 35.72 108.50 144.22 93.30

IRR (%) 26.60%

56 Annex 2

Annex 2: Economic Cost - Benefit Analysis for Water Supply Projects - Haveri Base Case (Rs in Million) Year Economic Cost Economic Benefits Net Be-

nefits Capital Cost

O&M Cost

Total Non-Incre-mental Water

Incre-mental Water

Reduction in Non-

Technical Loss

Total Resource

Cost Benefit

Time Cost

Saving

Opportu-nity Cost

Due to Diversion of Water

from Agri. Use

Total

2003–04 - - - - - - - - - - -

2004–05 - - - - - - - - - -

2005–06 - - - - - - - - - -

2006–07 - - - - - - - - - -

2007–08 - - - - - - - - - -

2008–09 - - - - - - - - - -

2009–10 - - - - - - - - - -

2010–11 22.48 - 22.48 - - - - - - (22.48)

2011–12 21.12 - 21.12 - - - - - - (21.12)

2012–13 9.89 - 9.89 - - - - - - (9.89)

2013–14 17.69 - 17.69 - - - - - - (17.69)

2014–15 - 2.15 2.15 1.41 - 1.41 9.82 (1.35) 9.89 7.74

2015–16 - 2.15 2.15 11.27 - 11.27 10.20 (1.35) 20.12 17.96

2016–17 - 2.15 2.15 11.41 - 11.41 10.40 (1.35) 20.46 18.31

2017–18 - 2.15 2.15 11.54 - 11.54 10.61 (1.35) 20.81 18.65

2018–19 - 2.15 2.15 11.68 - 11.68 10.82 (1.35) 21.16 19.01

2019–20 - 2.15 2.15 11.83 - 11.83 11.04 (1.35) 21.52 19.37

2020–21 - 2.15 2.15 11.97 - 11.97 11.26 (1.35) 21.88 19.73

2021–22 - 2.15 2.15 12.11 - 12.11 11.49 (1.35) 22.25 20.10

2022-23 - 2.15 2.15 12.26 - 12.26 11.72 (1.35) 22.63 20.48

2023–24 - 2.15 2.15 12.40 - 12.40 11.95 (1.35) 23.01 20.85

2024–25 - 2.15 2.15 12.55 - 12.55 12.19 (1.35) 23.40 21.24

2025–26 - 2.15 2.15 12.71 - 12.71 12.43 (1.35) 23.79 21.64

2026–27 - 2.15 2.15 12.85 - 12.85 12.68 (1.35) 24.18 22.03

2027–28 - 2.15 2.15 13.00 - 13.00 12.93 (1.35) 24.58 22.43

2028–29 - 2.15 2.15 13.15 - 13.15 13.19 (1.35) 25.00 22.85

2029–30 - 2.15 2.15 13.30 - 13.30 13.46 (1.35) 25.41 23.25

2030–31 - 2.15 2.15 13.44 - 13.44 13.73 (1.35) 25.82 23.67

2031–32 - 2.15 2.15 13.60 - 13.60 14.00 (1.35) 26.25 24.10

Total 71.18 38.74 109.92 212.49 - - 212.49 213.92 (24.25) 402.16 292.23

NPV@12% (Rs Million)

24.97 4.49 29.45 22.37 0.00 0.00 22.37 23.36 -2.81 42.92 13.47

IRR (%) 17.63%

Annex 3 57

Annex 3: Economic Cost-Benefit Analysis for Water Supply Projects - Raichur

(Rs (Rs in Million)

Year Economic Cost Economic Benefits Net Benefits Capital

Cost O&M Cost

Total Non-Incremen-tal Water

Incremen-

tal Water

Reduction in Non-

Technical Loss

Total Resource

Cost Benefit

Time Cost Savings

Total

2003–04 - - - - - - - - -

2004–05 - - - - - - - - -

2005–06 - - - - - - - - - 2006–07 - - - - - - - - -

2007–08 - - - - - - - - -

2008–09 - - - - - - - - -

2009–10 - - - - - - - - -

2010–11 33.87 - 33.87 - - - - - (33.87)

2011–12 32.90 - 32.90 - - - - - (32.90)

2012–13 15.41 - 15.41 - - - - - (15.41)

2013–14 27.55 - 27.55 - - - - - (27.55)

2014–15 - 3.48 3.48 - - - 23.59 23.59 20.12

2015–16 - 3.48 3.48 2.16 - 2.16 27.30 29.46 25.98

2016–17 - 3.48 3.48 4.66 - 4.66 31.29 35.95 32.47

2017–18 - 3.48 3.48 7.16 0.06 7.22 35.58 42.80 39.32

2018–19 - 3.48 3.48 9.86 0.13 9.99 40.19 50.18 46.70

2019–20 - 3.48 3.48 12.66 0.19 12.86 45.14 57.99 54.51

2020–21 - 3.48 3.48 14.95 0.30 15.25 50.46 65.71 62.23

2021–22 - 3.48 3.48 17.69 0.38 18.07 56.17 74.24 70.76

2022–23 - 3.48 3.48 20.43 0.45 20.88 62.31 83.19 79.71

2023–24 - 3.48 3.48 20.23 0.54 20.77 68.64 89.41 85.94

2024–25 - 3.48 3.48 20.21 0.58 20.79 75.11 95.91 92.43

2025–26 - 3.48 3.48 22.86 1.30 24.16 84.04 108.20 104.72

2026–27 - 3.48 3.48 31.05 1.04 32.09 93.17 125.26 121.78

2027–28 - 3.48 3.48 26.01 1.26 27.27 102.49 129.76 126.29

2028–29 - 3.48 3.48 24.94 1.33 26.27 112.02 138.29 134.81

2029–30 - 3.48 3.48 18.61 1.60 20.22 121.76 141.98 138.50

2030–31 - 3.48 3.48 10.62 1.94 12.56 131.71 144.27 140.79

2031–32 - 3.48 3.48 8.87 2.03 10.90 141.88 152.78 149.30

Total 109.73 62.59 172.32 272.97 - 13.14 286.11 1,302.86 1,588.97 1,416.65

NPV at

12% (Rs Million)

38.43 7.25 45.67 24.09 0.00 0.83 24.92 111.23 136.15 90.47

IRR (%) 26.43%

58 Appendix 12

ENVIRONMENTAL AND SOCIAL SAFEGUARDS A. Environmental Safeguards 1. The project (North Karnataka Urban Sector Investment Program [NKUSIP], tranche 1) was classified as environmental category ‘B’1 and processed under the project loan modality. During project processing three initial environmental examination (IEE) reports were prepared for the subprojects in the three towns (Raichur, Hospet, and Haveri), in accordance with the Asian Development Bank’s (ADB’s) Environment Policy (2002) and Environment Assessment Guidelines (2003). The IEEs concluded that no significant adverse impacts were anticipated as a result of the water supply, sewerage, and drainage infrastructure expansion and rehabilitation works proposed in the project towns. The identified works were not expected to pass through or be in the vicinity of environmentally, ecologically, or archaeologically sensitive areas or envisaged to have any irreversible, significant, or adverse environmental impacts. Environmental management plans (EMPs) were prepared to address the potential moderate environmental impacts of the proposed subprojects identified in the IEEs. All IEEs were approved by ADB 2 and EMPs were included in the bidding documents. Furthermore, the executive summaries of the IEEs for the project towns were disclosed and information provided in respective EMP reports. B. Institutional Arrangements for Implementation of Environmental Safeguards 2. The project was executed by the program management unit (PMU), set up within the Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) and assisted by the regional office at Hubballi and the four divisional offices (Kalburgi, Ballari, Hubballi, and Balagavi3). The KUIDFC environmental manager was responsible for the overall oversight of the environmental compliance and reporting procedures. Environmental specialists from KUIDFC’s divisional offices would visit all towns in each package once a month and observe compliances with the EMPs. In accordance with the requirements of the environmental monitoring reports, the construction supervision specialists of the respective program consultant, contractors, and assistant executive engineers (AEE) monitored the critical environmental safeguards as per the format prepared by the KUIDFC PMU4 and provided monthly reports. The AEEs were also responsible for preparing daily monitoring sheets for the contractors. In addition, the environmental specialists of the respective program consultants were to visit each town once a month to observe compliance with the EMPs. ADB missions put a heavy emphasis on safeguards, drew attention to the various issues on site, and made concrete recommendations for improvements and follow-up. KUIDFC submitted three semi-annual environmental monitoring reports, and also submitted the status of environmental safeguards to the ADB missions.

1 Subproject components were judged to have some adverse environmental impacts, but of lesser degree and/or

significance than those for Category A investment programs. An IEE is required to determine whether significant environmental impacts warranting an environmental impact assessment (EIA) are likely. If an EIA is not needed, the IEE is regarded as the final environmental assessment report.

2 ADB approved IEEs for all towns in 2009.

3 Raichur and Hospet fall under the scope of the Ballari divisional office. Haveri falls under the scope of the Hubballi

divisional office. 4

Staffing for tranche 1 monitoring has been adequate.

Appendix 12 59

C. Compliance with Statutory Environmental Regulations 3. As per guidelines from the governments of India and Karnataka, only the sewage treatment plants (STPs) required consent for establishment (CFE) from the Karnataka State Pollution Control Board (KSPCB).5 The CFEs for Hospet, Raichur, and Haveri were received on 10 December 2010, 20 January 2010, and 25 August 2009. These were valid for 3 years and extensions for all have been applied for and received. All CFE conditions have been complied with. The CFEs include the provision of green belts around the STP sites. All urban local bodies (ULBs) via AEEs of NKUSIP have issued a letter to the town planning divisional office, under the direction of KSPCB to earmark a buffer zone around the STPs. These need to be clearly marked in the ULB master plans. The forest department has been asked to plant green belts around the STPs after construction has been completed. This shall be maintained by them for a period of three years6 as a part of the program, until the time the consent for operation (CFO) is obtained. 4. Haveri’s wastewater is currently discharged into a nalla (small stream). As soon as the STP is in operation the treated wastewater will be discharged to this nalla to be reused as treated effluent for agricultural purposes, which is compliant with CFE requirements.7 5. Subprojects were carefully designed so as not to have any adverse effects on protected properties. In Haveri, care was taken to site the sewer lines outside of the 100 meter (m) and 300 m radii designated as a ‘prohibited area’ and the ‘regulated area’ near the Archeological Survey of India (ASI) protected property8—Siddeswara temple. Hence, clearances were not required from the ASI in accordance with the Ancient Monuments and Archeological Sites and Remains Rules, 1958 (footnote 8). 6. Daily environmental monitoring formats with critical attributes were filled for all projects. However, reporting from the Ballari district (which includes Hospet and Raichur) was a problem due to a staff shortage at the program consultant level. Difficulty in recruiting a specialist at this level has been attributed to the fact that the qualification being asked for is too high for the job. 7. Sludge management plans. Program consultants submitted concept reports in Q1 2015 to the chief engineer of NKUISP.9 Program consultants have recommended the use of sludge drying ponds instead of expensive drying beds as this is a simpler technology. DPR’s for Raichur and Haveri will be made in Q2 2015 to incorporate this method. Clearance will be obtained during the CFO period from KSPCB. Hospet has gone ahead with the use of sludge drying beds. 8. Air and noise monitoring. Dust levels were monitored visually and noise limits were found to be within the acceptable decibel limit of 45–50dB.

5 As per the Water (Prevention and Control of Pollution) Act, 1974.

6 In lieu of payment as per actuals.

7 This stream flows next to the Haveri STP site, which is presently draining wastewater emanating from the town.

This stream joins River Varada, approximately 16.02 km north of the proposed STP site. Farmers in the vicinity are using this water for irrigation. The STP subproject proposes the discharge of the treated effluent into this stream so that it can be reused for agricultural purposes.

8 According to the Ancient Monuments and Archeological Sites and Remains Act, 1958, construction, mining, and

excavation are not permitted in “prohibited areas” and these activities in “regulated areas” need prior permission from the Archaeological Survey of India.

9 This is required for the detailed project reports (DPRs).

60 Appendix 12

9. Compliance with health and safety provisions at site has been problematic due to the high rate of labor turnover and also because contractors did not have dedicated staff to address this issue. D. Implementation of Environmental Management Plans 10. As envisaged at appraisal, the project had no significant adverse environmental impacts. The environmental issues were not significant and were easily mitigated and managed by means of EMPs. The IEEs were thorough in screening the potential environmental impacts, proposing adequate mitigation measures,10 and identifying implementation responsibilities. The EMPs were incorporated into the bidding and contract documents for each subproject in Haveri, Hospet, and Raichur. 11. Although overall compliance with EMP provisions is noted (Table 1), there were specific areas where contractors’ performance needed attention, but is gradually improving in the latter tranches. These include (i) occupational health and safety measures on site (notably the use of protective and safety equipment); (ii) provision of basic sanitation facilities; (iii) preparation and implementation of onsite waste management plans; and (iv) barricading around trenches and works. The following activities were undertaken based on the review missions’ emphasis11 on the need to ensure the improvement of ongoing practices: (i) KUIDFC conducted special training for contractors working under the project, including one awareness training on HIV/AIDS and safety measures in each of the project sites conducted by the implementing nongovernment organizations (NGOs) under the community development plan activities; (ii) a special review was conducted on these topics by environmental specialists in KUIDFC for all subprojects; (iii) environmental monitoring checklist findings and recommendations, which already reflected the essential requirements, were more strictly enforced through separate follow-up meetings with contractors; and (iv) KUIDFC eventually issued contract variations and EMPs for all contracts. 12. In view of these recommendations made by ADB missions, the contractors were advised to prepare site management plans (SMPs) addressing issues like onsite health and safety measures, and to display an emergency response plan at the site. The contractors ultimately failed to prepare SMPs,12 although KUIDFC has now devised stronger monitoring processes to ensure proper housekeeping at project sites. KUIDFC initially prepared templates for the SMPs, which the contractors found too complicated. KUIDFC has used this experience to develop a simplified SMP template whose main focus is on adequate housekeeping measures.13 Another challenge that needs to be addressed in the preparation of IEEs and monitoring reports is providing adequate training to the program consultants and KUIDFC staff, who are responsible for environmental monitoring. Training in monitoring procedures and report writing would help to increase monitoring capacity. 13. The main challenges in the implementation of the EMPs were (i) inadequate environmental specialist staffing at program consultant level and KUIDFC; (ii) lack of an earmarked budget for the proper enforcement of environmental safeguards on site; (iii) lack of any stipulation for the implementation of environmental safeguards in bid documents; (iv) high

10

This includes the safe handling and disposal methods of sludge in STPs and the creation of green belts around STPs for odor mitigation purposes.

11 The review missions made recommendations for the preparation of plans to ensure the provision of sanitation facilities, appropriate securing of slopes/barricading, enhancement of health and safety equipment, and the initiation of monitoring of air and noise emissions.

12 They were not legally required to do so as per their contracts.

13 Developed Q1 2015.

Appendix 12 61

turnover of environmental specialists of the PCs as well as labor at site.14 It has been a particular challenge to recruit and retained qualified professionals to work in the interior regions of the state. Furthermore, as it is part-time work and the rates are not on par with market rates it is difficult to attract and retain suitably qualified specialists. Furthermore, at the time the project IEEs were conducted ADB was still using the older Environmental Assessment Guidelines (2003). This has since been superseded by the ADB Safeguard Policy Statement (2009), which includes the provision of an earmarked budget and institutional responsibilities to enforce environmental safeguards.15 14. In spite of these challenges, the presence of strong nodal officers at KUIDFC has helped to strengthen processes and monitoring and compliance procedures by refining processes based on lessons learned from challenges faced during implementation. E. Lessons and Recommendations 15. In almost all cases the contractors failed to adhere fully to the provisions in the EMPs. Compliance could have been strengthened by incorporating enforceable penal provisions in the contract as well as earmarking a budget in the loan for environmental monitoring. Also, contracts for the environmental specialists should be full-time engagements on par with market rates in order to recruit and retain talented staff. 16. Contractors should employ a nodal person for oversight of the EMP and SMP. This would greatly help to gather timely information on compliance on site. 17. The strong presence of the NGOs in the field (Appendixes 13, 14) can be used to provide complementarities to ensure better environmental compliance on site, for example, to provide training on giving the daily health and safety talk on site and also to increase EMP awareness among the people in the areas affected by construction, who can also play a role in strengthening the daily monitoring processes on site.

Table 1: Environmental Safeguards Compliance

Package No. ULB Sector Package Description Environmental Safeguards

Compliance Tranche 1 01HVR01 Haveri Water supply Improvements to water

supply system: supplying and laying DI pumping main from Karjagi to Heggere, constructing intake works, strengthening distribution systems, and providing and fixing bulk flow meters.

CFE not required. IEE approved by ADB and included in bidding and contract documents. Posted on ADB and KUIDFC websites. Forest clearance obtained. PMU submitted to ADB semi-annual environmental monitoring report on EMP compliance.

01HVR02 (04HVR02)

Haveri Sewerage Supply and laying new gravity system, constructing 4.71 MLD FAL-type STP and secondary drainage link

IEE approved by ADB and included in bidding and contract documents. Posted on ADB and KUIDFC websites. CFE has been renewed until 8 Sept 2019. EMP

14

Improved performance/ compliance have been observed where they were present on a continuous basis. 15

In the later tranches ADB had requested KUIDFC for continuous air and noise monitoring.

62 Appendix 12

Package No. ULB Sector Package Description Environmental Safeguards

Compliance implemented and monitored. PMU submitted to ADB semi-annual environmental monitoring report on EMP compliance. While there are no visible structures around the STP site, the design layout did not include green belts around STPs as per CFE requirements. A 100 m green belt is required around the STP. The ULB via AEE of NKUSIP has issued a letter to the town planning divisional office, under the direction of KSPCB to earmark a buffer zone around the STPs. The ULB has notified the planning department to provide the same. Forest department should plant these before the CFO is obtained. Treated wastewater discharge will be reused as treated effluent for agricultural purposes, in accordance with the CFE stipulations. Contract to be retendered.

01RCR01 Raichur Water supply Improvements to water supply system at Rampur and Krishna waterworks.

IEE approved by ADB and included in bidding and contract documents. Posted on ADB and KUIDFC websites. EMP implemented and monitored. PMU submitted to ADB semi-annual environmental monitoring report on EMP compliance.

01RCR02 (04RCR02)

Raichur Sewerage Improvements to sewerage system and construction of 20 MLD FAL-type STP and allied works for Eklaspur zone.

All CFEs renewed until March 2020. IEE approved by ADB and included in bidding and contract documents. Posted on ADB and KUIDFC websites. EMP was being implemented and monitored. PMU submitted to ADB semi-annual environmental monitoring report on EMP compliance. Currently, STP site can be approached by a narrow road and there is a possibility of spillover of construction activities into private lands, leading to crop loss. Contract to be retendered. Careful supervision of construction is required when the contract is retendered. No LA impacts or temporary impacts are envisaged while laying trunk main. Designated green belt to be provided around STP site as per CFE.

01HPT01 Hospet Water supply Improvements to water supply system

IEE approved by ADB and included in bidding and contract

Appendix 12 63

Package No. ULB Sector Package Description Environmental Safeguards

Compliance documents. Posted on ADB and KUIDFC websites. EMP implemented and monitored. PMU submitted to ADB semi-annual environmental monitoring reports on EMP compliance.

01HPT02A

Hospet Sewerage Providing and laying 176 km sewer network, including construction of manholes and 1.75 km of secondary drains.

CFE not required. IEE approved by ADB and included in bidding and contract documents. Posted on ADB and KUIDFC websites. EMP being implemented and monitored. PMU submitted to ADB semi-annual environmental monitoring report on EMP compliance.

01HPT02B (04HPT02B)

Hospet Sewerage Construction of 27 MLD ASP-type STP, including construction of two wet wells, pumping machineries, and pumping main.

Original CFE, valid until 10 Dec. 2014, has been renewed until December 2018. IEE approved by ADB and included in bidding and contract documents. Posted on ADB and KUIDFC websites. EMP being implemented and monitored. PMU submitted to ADB semi-annual environmental monitoring reports on EMP compliance. Designated green belt to be provided around STP site as per CFE.

ADB = ; Asian Development Bank; ASP = activated sludge process ; CFE = consent for establishment; CFO = consent for operation; DI = ductile iron; EMP = environmental management plan; FAL = facultative aerated lagoon; IEE = initial environmental examination; km = kilometer; KUIDFC = Karnataka Urban Infrastructure Development and Finance Corporation; LA = land acquisition; m = meter; MLD = million liters per day; PMU = program management unit; STP = sewage treatment plant; ULB = urban local body.

64 Appendix 12

Table 2: Social Safeguards Compliance

Package No. ULB Sector Package Description Social Safeguards

Compliance Actions Tranche 1 01HVR01 Haveri Water supply Improvements to water

supply system: supplying and laying DI pumping main from Karjagi to Heggere, constructing intake works, strengthening distribution systems, and providing and fixing bulk flow meters.

No LA and R&R impacts. A total alignment of 14.8 km pumping main was laid in a trench on the edge of the road within the existing RoW. There were no LA or R&R impacts. Government land, free of encumbrances (crops, structures, etc.), was available for construction of pumping station. Construction at intake works was carried out within existing premises and no additional land acquisition was required.

NA

01HVR02 Haveri Sewerage Supplying and laying new gravity system, constructing FAL-type STP and secondary drainage link.

No LA and R&R impacts. Sewerage network is laid/being laid on the edge of the road below the surface within the existing RoW and there are no temporary impacts while pipe laying. STP site is free of encumbrances. The site measures 19.29 acres at

NA

Appendix 12 65

Package No. ULB Sector Package Description Social Safeguards

Compliance Actions Siddadevapura village (survey nos. 32 and 39) and was purchased from the Health Department with ownership transferred to the Haveri ULB.

01RCR01 Raichur Water supply Improvements to water supply system at Rampur and Krishna waterworks.

No LA and R& R impacts. Pumping main was laid out on the edge of the road below the surface within the existing RoW with no temporary impacts. Construction of OHTs was undertaken in government parks/grounds and in the forest land/hillock free of encumbrances (crops, structures, trees, etc.) to avoid private land acquisition.

n/a

01RCR02 Raichur Sewerage Improvements to sewerage system and construction of 20 MLD FAL-type STPs and allied works for Eklaspur zone.

Sewerage network will be laid on the edge of the road below the surface within the existing RoW with no temporary impacts for pipe laying. STP site is free of encumbrances (crops, structures, trees, etc.) and measures 32.02 acres near Manchalapur

Close supervision of EMP during construction to avoid spillover onto private lands. At present works have been stopped due to termination of contract. Contract to be retendered again under tranche 4.

66 Appendix 12

Package No. ULB Sector Package Description Social Safeguards

Compliance Actions tank—Ekalspur, which is already in ULB possession. No additional land acquisition is anticipated. Currently, STP site can be approached by a narrow road and there is a possibility of spillover of construction activities onto private lands, leading to crop loss. Careful supervision of construction is required when contract is retendered. No LA impacts or temporary impacts are envisaged while laying trunk main.

01HPT01 Hospet Water supply Improvements to water supply system.

No LA and R&R impacts. Construction of OHTs/GLSR (3+1 nos.) was undertaken in government lands free of encumbrances (crops, structures, etc.); filter bed has been constructed within existing water treatment plant premises while pipelines are laid within available width of RoW.

n/a

01HPT02A Hospet Sewerage Providing and laying Sewerage network is n/a

Appendix 12 67

Package No. ULB Sector Package Description Social Safeguards

Compliance Actions 176 km sewer network including construction of manholes and 1.75km of secondary drains.

laid/being laid on the edge of the road below the surface within the existing RoW and there are no temporary impacts while pipe laying. A secondary drain is being constructed within the available width of the natural drain.

01HPT02B Hospet Sewerage Construction of 27 MLD ASP-type STPs, including construction of two wet wells, pumping machineries, and pumping main.

RP prepared and implemented in line with RF for acquisition of 15.28 acres of private agricultural land at Belagodu Village. All APs (11 landowners, 60 APs) received the land/crop compensation and subsistence allowance while provision of assistance for income restoration has been provided. Two wet wells were constructed on government lands free of encumbrances (crops, structures, trees, etc.).

Laying of trunk main at a few locations was stopped by the

A draft CAP was approved and the amount released to the ULB. The assistant commissioner for Hospet has disbursed the amount to APs. Based on the CAP,

11 landowners received crop compensation of Rs244,505 on 26 Nov. 2013.

KUIDFC head office approved IGA action plan for 10 APs in the amount of Rs300,000. Released to ULB.

10 APs received

IGA skills training*

(for one member per economically weaker family for income generation

68 Appendix 12

Package No. ULB Sector Package Description Social Safeguards

Compliance Actions adjacent landowners as construction activities damaged standing crops. A survey was carried out to estimate the losses and some of the landowners received compensation for the damage. A CAP has been prepared.

activities), completed in April 2015.

IGA assets distribution for 10 APs is in progress.

AP= affected persons; CAP = corrective action plan; FAL = facultative aerated lagoon; GLSR = ground level storage reservoir; IGA= income generating activities; MLD = million liters per day; OHT =overhead tank; R&R = resettlement and rehabilitation; RF = resettlement framework; RoW = right of way; RP = resettlement plan; STP = sewage treatment plan; ULB = urban local body * Examples of training provided are dairy farming, computers, and tailoring.

Appendix 12 69

Grievance Redressal Mechanism 1. A Grievance Redressal Committee (GRC) was established after the introduction of ADB’s Safeguard Policy Statement (2009) to redress grievances at the local level in a consultative manner and with the participation of the affected households or their representatives and other members. Under the facility, grievances are first screened by the implementing NGO and district officer. Only major grievances are brought before the GRC. The GRC determines the merit of each grievance and attempts to resolve the same within a month of the date the complaint is lodged, failing which the grievance shall be addressed to the deputy commissioner.16 All costs incurred in resolving the complaints are borne by the ULBs. The GRC has the following functions:

(i) To support affected persons (particularly non-titled and vulnerable affected persons) with problems related to their eligibility for entitlements and assistance;

(ii) To record grievances from affected persons and to categorize, prioritize, and solve them within an appropriate time;

(iii) To inform the deputy commissioner of serious and unresolved cases within an appropriate time frame; and

(iv) To inform the aggrieved parties regarding the progress of their grievances and related decisions.

2. Two GRC meetings were held in Hospet under tranche 1, the details of which are as follows:

GRC meeting conducted on 22.10.2011.

Submitted the short-term resettlement plan in the meeting.

Fixed the subsistence allowances for 60 affected persons.

No issues were raised.

GRC meeting conducted on 06.07.2013.

Issues regarding crop compensation were raised.

Compliance: crop compensation was paid according to ADB’s policies.

3. No GRC meetings were conducted in Raichur as no issues were raised. In Haveri, there were no resettlement issues as the land for construction of STP was purchased from the Government of Karnataka’s Health Department. As a result, there was no need to conduct any GRC meetings in Haveri. Currently, there are no outstanding issues and/or claims under tranche 1 .

16

The GRC forwards grievances of a serious nature immediately to the deputy commissioner. The deputy commissioner shall hear appeals against the decisions of GRC. The decision of the deputy commissioner is final and cannot be contested in any other forum except in the Courts of Law.

70 Appendix 13

ASSESSMENT OF GENDER INCLUSIVE RESULTS1 1. The North Karnataka Urban Sector Investment Program (NKUSIP) was conceived and designed to address the regional imbalances in basic urban infrastructure and services in 25 urban local bodies (ULBs) in North Karnataka. The overall impact of the multitranche financing facility (MFF) was to improve the quality of life by improving urban infrastructure and services, resulting in a relative increase in economic opportunities. Tranche 1 of the MFF was designed to primarily support water supply and sanitation infrastructure improvements in the three ULBs of Raichur, Haveri, and Hospet. The project was categorized as effective gender mainstreaming (EGM) and included a gender action plan (GAP). The present assessment is to evaluate the adequacy of GAP design, efficacy of implementation, sustainability of initiatives, and extent of impact. A. Methodology

2. The design of the assessment included five criteria of investigation: relevance, effectiveness, efficiency, sustainability, and impact. The methodology was designed with the assessment objectives in mind and scheduled in a phased manner to suit the project completion report (PCR) timeline. Quantitative and qualitative tools were used to arrive at an objective assessment of gender inclusive results. Table 1 provides a snapshot of the framework used to guide the assessment.

Table 1: Framework for Assessing Gender Inclusive Results Towns: Haveri, Hospet, and Raichur

ASSESSMENT CRITERION

ASSESSMENT OBJECTIVE METHODOLOGY DATA SOURCE

RELEVANCE (i) The relevance of gender issues to project objectives; this will also assess whether the GAP prepared at project outset was relevant in terms of design adequacy and sector/project vision.

(ii) The extent to which gender was mainstreamed in project design

Literature review Desk review of relevant

project documents: DMF, CLIPs, government and ADB’s commitment to gender mainstreaming, etc.

Questionnaire for project staff and apex NGO

RRP, SPRSS , DMF-T1, GAP, GAP reports, CLIP, respondent information, government documents, ADB gender-related documents, etc.

EFFECTIVENESS (i) Effectiveness of GAP and gender-related outcomes, outputs and targets in the DMF

(ii) The extent to which gender was mainstreamed in project design

(iii) Quality of implementation,a

monitoring, and frequency of reporting GAP

Desk review of relevant project documents

Questionnaire for project staff, apex and implementing NGO

GAP reports, quarterly reports, CLIP reports, respondent information

EFFICIENCY (i) HR and financial allocation for GAP implementation and monitoring

• Questionnaire for project staff and apex NGO

Respondent information

SUSTAINABILITY (i) Assessment of wider Questionnaires/ Respondent

1 A note of gratitude to all community members who took the time to interact with the PCR mission team members.

Appendix 13 71

Towns: Haveri, Hospet, and Raichur ASSESSMENT

CRITERION ASSESSMENT OBJECTIVE METHODOLOGY DATA SOURCE

institutional effects of gender mainstreaming activities (e.g., staff trained) and their commitment to provide needed support for gender mainstreaming/ policy reforms to sustain the benefits from program activities.

(ii) Have activities empowered women beneficiaries in the long run and improved their quality of life/given them voice?

interviews with officials, NGOs and beneficiaries

information

PROJECT RESULTS /IMPACT

(i) To assess the impact of the project across the following parameters: human capacity development; economic empowerment; voice and decision making, and gender capacity building.

FGDs, IDIs for narratives and open ended interview with apex and implementing NGO staff, project staff

GAP reports, NGO reports, respondent information

ADB = Asian Development Bank; CLIP = city-level infrastructure plan; DMF = design and monitoring framework; FGD = focus group discussion; GAP = gender action plan; HR = Human Resources; IDI = in-depth interview; NGO = nongovernment organization; RRP = report and recommendation to the President; SPRSS = summary poverty reduction and social strategy; T1 = tranche 1. Note: The material in this table was contextualized from the framework suggested in Tip Sheet No. 5, Gender-Inclusive Results in Project Completion Reports, ADB.

a Project achievements reported against the GAP targets and activities are assessed as successful if 70% are

implemented and completed. Seventy-five percent of gender-related targets in the GAP were reached.

B. Summary of Findings

3. The findings are summarized across the five criteria, as included in Table 1. The same are substantiated with examples where required and corroborated with quantitative and qualitative data collated in the course of literature review, respondent data presented in questionnaires, and notes from field visits to project sites. 4. Relevance: The project design adequately addresses gender mainstreaming objectives relevant to the sector. The project documents include a brief analysis of social and gender issues relevant to the sector and the importance of community involvement in the project’s design, planning, implementation, and monitoring. The Poverty Reduction and Social Development section of the report and recommendation to the President (RRP) mentions ‘community development’ as a key objective of slum improvement outputs.2 It also mentions the need for strengthening self-help groups (SHGs) for women as a medium to bring about positive benefits to poor women in the project towns. It also envisages achieving practical gender benefits by way of reducing women’s time poverty, improving their health, and increasing their employment opportunities. The RRP includes a detailed GAP and a separate annex on gender

2 Slum improvement outputs are included in the latter tranches.

72 Appendix 13

strategy and participation strategy. The GAP comprises thirteen core activities, spread across three focus areas 3 and eleven objectives. The gender strategy emphasizes the need for participation of community women in decision making with respect to the investment program’s design, implementation, and monitoring. Sex-disaggregated data are used in baseline surveys. The summary poverty reduction and social strategy (SPRSS) used primary and secondary data to analyze the situation and status of women in the investment program ULBs. It includes data on female-headed households (FHH), female work participation rates, education levels and the like for both slum and non-slum populations. There are several issues with the GAP design, however. These include (i) too many activities; (ii) a lack of clarity with respect to what is expected from these activities; (iii) the use of indicators and terminology that are vague; and (iv) the absence of baseline data and targets. The latter is the most notable drawback. Furthermore, the GAP activities are not aligned to the tranche’s design and monitoring framework (DMF). 5. Effectiveness: As discussed under section 2.1, gender is adequately mainstreamed within the project design. Most GAP activities, however, are subsumed under the community development plan (CDP). These activities were conducted under the CDP component and financed under tranche 2. An institutional structure was created, with an apex nongovernment organization (NGO) at the center and 25 implementing NGOs (INGOs) (one for each town). The assessment reveals that the quality of implementation, monitoring, and frequency of reporting GAP progress is more than satisfactory. Table 2 provides quantitative achievements for all GAP activities along with comments on implementation. The cumulative rating indicates that a total of eleven activities (85%) were successfully performed. Activity wise data was systematically maintained and periodically reported. It is not possible, however, to calculate the percentage success rate with respect to ‘targets achieved’ as the GAP has not identified any such targets. With respect to channels and frequency of GAP reporting, the INGOs in each town maintained data on community development activities and GAP implementation. These data were reported to the apex NGO on a monthly basis. The apex NGO in turn compiled and analyzed the data. All beneficiary data are sex-disaggregated. INGOs also simultaneously maintained data on the impact of GAP activities, especially those related to the credit and thrift activities of SHGs and household-level personal investments in sanitation. These data are also regularly tracked, reported, and analyzed. Ten quarterly GAP reports4 have been submitted since 2012.

3 The three areas are project design, project implementation and monitoring, and institutional development.

4 July 12 to August 12; Oct. 12 to Dec. 12; Jan. 13 to March 13; April 13 to June 13; July 13 to Sept. 13; Oct. 13 to

Dec. 13; Jan. 14 to March 14; April 14 to June 14; July 14 to Sept. 14; Oct. 14 to Dec- 14. The project closed in December 2013; however, CDP- and GAP-related activities continued for tranche 1 towns in tranche 2 in order to complete them. Therefore, there are four additional GAP reports for the four quarters in 2014. The time overruns were due to delays in recruiting the apex and implementing NGOs.

Appendix 13 73

Table 2: GAP Achievements and Rating

ACTIVITIES ACHIEVEMENTS

(Haveri, Hospet, and Raichur) COMMENTS ON

IMPLEMENTATION

PROJECT DESIGN

Objective (a) To integrate a gender perspective in project design and to empower women by giving them opportunities to participate in the project from the very beginning.

1. Proactively seek women from disadvantaged families as target beneficiaries, ensuring one-third representation in NHGs.

A total of 575 SHGs, comprising 6,606 members, were constituted in the three program towns.

Town No. of SHGs

Members

Haveri 75 948 Hospet 225 2,601 Raichur 275 3,057

Instead of NHGs women from disadvantaged families were chosen as target beneficiaries to form SHGs. All SHGs comprised of 100% female members. Implementation status: Completed

2. Formation of NHGs, WLCs, and city-level CDSs with women members

NHGs, WLCs, and CDSs were not formed. The decision was taken to form SHGs instead. The ULB counselors interfaced with the community members to ensure participatory planning and oversight of works.

Implementation status: Not initiated

3. Participatory planning at project sites Local counselors (elected representatives) discussed priorities with SHG members and other community members. The counselors act as an interface to share and push for these priorities at the ULB level.

Implementation Status: Completed

Objective (b) To integrate gender within ULB’s/KSCB’s areas of work, with specific focus on project design 4. Provide gender sensitization training

for all regional level KSCB employees and ULB staff

Three gender sensitization trainings conducted: one each in Haveri, Hospet, and Raichur. A total of 135 KSCB and ULB staff trained with 12% female representation.

Town Total Trained

Haveri 28 (4 Female)

Hospet 57 (4 Female)

Raichur 50 (8 Female)

Implementation Status: Completed

Objective (c) Empowerment of women from poor families in project towns 5. Initiation of thrift and credit activities A total of 6,606 SHG members

representing 575 SHGs trained to build their capacities and credit rating/credit worthiness. Of these, 215 SHGs accessed loans from financial institutions. Between November 2012 and February 2015 almost 2,292 members had accessed loans to the tune of Rs13 million. Of this, 56% of the loan value has been repaid.

The outreach activities and trainings with respect to strengthening SHGs’ creditworthiness and linking them to financial institutions is a remarkable achievement under the project. Implementation Status: Completed

Objective (d) To ensure that needs of female-headed households, widows, elderly, and single women are addressed in resettlement plans

74 Appendix 13

ACTIVITIES ACHIEVEMENTS

(Haveri, Hospet, and Raichur) COMMENTS ON

IMPLEMENTATION

6. Collection of sex-disaggregated data during socioeconomic surveys for resettlement plan preparation.

Sex-disaggregated data were collected and analyzed in the course of socioeconomic surveys for resettlement plan preparation.

Implementation Status: Completed

PROJECT IMPLEMENTATION AND MONITORING Objective (a) To mainstream gender perspective in project implementation

7. Conduct gender awareness workshops with all project consultants, PMU staff and ULB staff.

1 divisional and 3 town level gender awareness workshops conducted. A total of 102 project staff, PMU staff and ULB staff were trained. Of these 57% were female participants.

Town Total Trained

Haveri 70 (41 Female)

Hospet and Raichur

32 (17 Female)

Implementation Status: Completed

Objective (b) To ensure women’s full awareness and involvement in project implementation and benefits

8. Conduct project awareness, hygiene education and water and waste management campaigns with specific targeting of women.

A total of 152 project awareness campaigns, including hygiene education and waste management, were organized in the three towns. A total of 11,875 community members participated in these events, of whom 66.3% were females.

Town No. of Programs

Total Participants

Haveri 54 4,746 (2,494 F)

Hospet 48 2,799 (2,091 F)

Raichur 50 4,330 (3,297 F)

Implementation Status: Completed

Objective (c) To ensure women gain benefits from construction process 9. Contractors required to engage

sizeable female labor force and ensure equal wages for men and women for equal work.

Trainings were conducted to motivate the contractors to engage a sizeable number of female laborers at the work site in Hospet. One awareness training on HIV/AIDS and safety measures was also organized.

The data for M/F labor force participation is available only for Hospet STP works.

Town Labor Force Participation

Hospet STP works

Total: 80 M: 45 F: 35

Due to non-availability of data to corroborate the achievement under this activity, it is rated as unsuccessful. Implementation Status: Not Completed

Objective (d) To ensure that project benefits positively impact women and that benefits are equitable 10. Establish a system of monitoring and

evaluation that can track/report impact of the project on women

The INGOs in each town have developed an efficient system of data collation and analysis. The same is fed

Implementation Status:

Appendix 13 75

ACTIVITIES ACHIEVEMENTS

(Haveri, Hospet, and Raichur) COMMENTS ON

IMPLEMENTATION

periodically to the central apex NGO and shared with the PMU.

Completed

Objective (e) To ensure that resettlement implementation addresses women’s concerns 11. Monitoring resettlement

implementation R&R consultants monitor resettlement implementation on a regular basis.

Implementation Status: Completed

INSTITUTIONAL DEVELOPMENT Objective (a)To promote gender awareness in institutional development program

12. Incorporate gender perspective in all aspects of institutional development program

Gender awareness trainings were combined with the NKUSIP program; updating trainings organized for ULB staff conducted in all 3 towns. A total of 237 KSCB and ULB staff trained with 37% female representation.

Implementation Status: Completed

Objective (b) Monitor usefulness of Gender Action Plan 13. Tracking use of GAP The impact of the GAP activities is

regularly tracked, especially with regard to the components related to credit and thrift activities of SHGs and household-level personal investments in sanitation. Data on the same are maintained and regularly updated. GAP activities are reported monthly by INGOs. Ten quarterly GAP reports have been submitted since 2012.

Implementation Status: Completed

OVERALL RATING FOR 13 GAP ACTIVITIES

11 activities successfully implemented 2 activities not initiated % success = 85%

CDS = community development society; F = female; GAP = gender action plan; KSCB = Karnataka slum clearance board; INGO = implementing nongovernment organization; M = male; NGO = nongovernment organization; NHG = neighborhood group; NKUSIP = North Karnataka Urban Sector Investment Program; PMU = project management unit; R&R = Resettlement and rehabilitation; SHG = self-help group; STP = sewage treatment plant; ULB urban local body; WLC = ward-level committee.

6. Efficiency: The assistant general manager (AGM), CDP, Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC), head office Bangalore, is the focal point for oversight and monitoring of GAP implementation. The INGOs were assigned responsibility for GAP implementation in the respective towns. The apex NGO provided overall guidance. The apex NGO also periodically monitored and reported on GAP implementation. A total of 42 staff members (33% female) were dedicated to GAP implementation at the apex NGO and INGO level (Table 3). There was a considerable delay in engaging the NGOs (both apex and implementing). Tranche 1 became effective on 25th April 2008. The apex NGO started work in August 2011 and the INGOs in June 2012.5 The NGOs and human resources (HR) for GAP implementation had approximately 28 months to complete all tranche 1-related GAP activities. 6 There is no specified budget component or committed outlay for GAP

5

NGOs were recruited under tranche 2. 6 The physical closing of tranche 1 was on 31 Dec. 2013 and the financial closing was on 23 July 2014.

76 Appendix 13

implementation in the project documents. A tentative estimate of expenditure7 on GAP activities indicates that approximately $15,5658 was spent on GAP implementation. This is almost .005% of the project cost9 at completion. A rough calculation of the unit cost of the GAP expenditure for 18,718 beneficiaries comes to around $0.84 per beneficiary. Considering the limited time frame for completion of GAP activities, the overall achievements indicate an extremely efficient implementation process. This can be attributed to dedicated and skilled HR, good planning and phasing of activities, and a well-organized data collection system.

Table 3: HR for GAP

Town No. of Staff Central-Apex NGO 10 (2 F) INGO Haveri 7 (1 F) INGO Hospet 12 (7 F) INGO Raichur 13 (4 F)

7. Sustainability: There were no activities implemented to impact policies or institutions, therefore sustainability cannot be measured from the perspective of institutional commitments or policy reforms to sustain gender mainstreaming objectives. Given this limitation, the sustainability of efforts exerted in the course of GAP implementation is measured against two activities. Qualitative methodologies, such as focus group discussions (FGDs) and in-depth interviews (IDIs), were planned with the beneficiaries in all three towns. The objective was to enable qualitative assessment of GAP activities and to evaluate sustainability as well as the impact of these interventions. The results of two interventions—trainings of SHGs and of elected women representatives (EWRs) of the ULB—were picked to evaluate sustainability. Four FGDs for SHG members were organized in the three towns. A total of 11 SHGs (98 females) participated in these discussions (Table 4). IDIs were

7 As provided by the project management unit (PMU).

8 Rs992,203 at an exchange rate of $1.00 = Rs63.75 as of 30 May 2015.

9 The actual expenditure at completion was $35.45 million, comprising a $23.42 million loan from ADB (66.1%) and

$12.03 million (33.9 %) spent by the Government of India. This includes the government’s share of commitment and financing fees.

Table 4: Focus Group Discussions with SHG members Town Slum Number

of SHGs

Number of participants

Haveri 1. Nagendramatti 1 14 Hospet 2. Varkeri 3 38

3. Amaravati 2 18 Raichur 4. Andran Khilla 3 28

I was married at a very young age and the only life I

have known is within the

four walls of my home. The

SHG activities help me

overcome that barrier.

Today I have the confidence

to run my own business and

I am respected for that. -Begum Rukhaya, Verkeri,

Appendix 13 77

planned with three elected women representatives. 10 The FGDs and IDI reveal the following: The FGD respondents were of the view that SHG formation and strengthening

initiatives were extremely helpful. They attributed their creditworthiness singularly

to the project interventions.11 As per quantitative data, 215 SHGs12 had accessed

loans from financial institutions. Between November 2012 and February 2015

almost 2,292 members had accessed loans worth Rs13 million ($0.204 million)

and earned profits to the tune of Rs0.16 million ($0.003 million).13 Of the total

loan accessed, almost 56% of the loan value has been repaid. The respondents

were confident of accessing loans independently and several said that the

groups were sustaining their ventures profitably.

The three counselors interviewed were part of the program’s capacity building

initiatives. The trainings and exposure visits helped them build their confidence to

take informed decisions regarding the project. They were actively involved in not

only monitoring the works but also assessing the quality of material used. The

members also noted that they regularly educate community members on the

judicious use of water and the importance of installing water meters.

8. Project Results and Impact: The quantitative project achievements across the four result parameters are reflected in Table 5.

Table 5: Quantitative Project Results

10 Mrs. Sumangalamma (ward member), Mrs. Rangamma (ex-ward member), and Mrs. Dhanalakshmi (ward member), all

members from Verkeri, Hospet. 11 The training for SHG members helps upgrade their credit rating to ‘A’, making them eligible to access loans from

commercial banks. 12 From 2012 to 2015. 13 Not all loans were for business ventures. Fifty-four percent of members accessed loans to finance their own businesses.

QUANTITATIVE PROJECT RESULTS

HUMAN CAPITAL

6606 SHG members representing 575

SHGs trained to build their capacities and credit rating/credit

worthiness.

ECONOMIC EMPOWERMENT

215 SHGs accessed loans from Financial

Institutions. As on date 2292

members had accessed loans in the tune of Rs 13

Million. Of this 56% loan value

has been repaid.

VOICE & RIGHTS

19 elected women representatives (EWRs)-

ward members- participated in exposure

visits and program updation events. Created

capacities to take informed decisions

regarding the project and monitoring progress of

works.

GENDER CAPACITY BUILDING

A total of 237 KCSB & ULB staff trained in gender with 37 %

female representation in

trainings.

78 Appendix 13

I took a loan to build a latrine. Now I feel a

sense of dignity for

myself and my two

daughters.

- - One of the respondents who is

the head of a FHH and accessed

a loan for constructing a HHL.

Project Impact:

9. Investing in household connections: A total of 152 project awareness campaigns, including for hygiene education and waste management, were organized in the three towns. The impact of these campaigns was tracked and the data indicate increased investments in household sanitation connections. Table 6 provides data on the number of families motivated to invest in better hygiene by way of household taps, underground drainage (UGD) connections, and household latrines (HHL).

10. Impact on Economic Empowerment: One of the project’s most remarkable impacts has been in enabling economic opportunities for women, especially the most disadvantaged. The SHG strengthening process helped to build the creditworthiness of members. The project also provided the interface for these SHGs to access loans from formal lending institutions. The data reflect encouraging trends with regard to the number of women who accessed loans post training (2,292 members or 35% of those trained14), the amount of loan accessed (Rs13 million), the rate of repayment (56% of the loan value has been repaid), and profits earned from business ventures (Rs.0.16 million). An analysis of the SHG members’ spending priorities indicates that 54% accessed loans to finance their own business ventures, such as selling fruits or vegetables, opening a grocery shop, or tailoring. This is closely followed by financing the educational requirements of children and house construction and repair. Other priorities include health-related expenditures, agriculture, etc. (Figure 1).

14 Above the critical mass of 30%.

C. Table 6: Impact of Hygiene Education

Town No. of families motivated to install HH tap connections

UGD connections

HHLs

D. Haveri 203 0 69

E. Hospet 824 35 480

F. Raichur 437 141 116

Appendix 13 79

11. Conclusions and Lessons Learned:

Overall, the GAP activities have enabled and sustained women’s economic opportunities. Also evident is the shift in spending priorities on hygiene-related

household-level expenditures. A total of 2,305 households (Tables 6, 9) invested

in household-level connections, indicating a change in perception regarding the

need to invest in the same. The baseline is ‘zero’ in each case. The project has contributed to long-term capacity development within the sector;

increased awareness about hygiene, water, and waste management; and

enhanced the capacity of women in the community and elected women

representatives (EWRs) to oversee the quality of implementation of physical

works.

Despite the fact that the facility design adequately addressed gender

mainstreaming objectives relevant to the sector, there were several problems

with the project design: (i) the GAP design was planned as an ‘add on,’ rather than being mainstreamed within the overall project design; (ii) in practice, GAP

implementation was subsumed under the community development component;

(iii) the GAP included too many activities and ambiguous indicators; (iv) the

indicators did not include any baseline data or targets; and (v) there was no

dedicated budget for implementation.

Important activities, such as formation of neighborhood groups (NGHs), ward-

level committees (WLCs), and city-level community development societies (CDS)

with women members and participatory planning at project sites, as envisaged,

were not implemented. The SHGs were given more focus and it was felt that the

Figure 1: Spending Priorities of SHGs

Vegetable

vending,

Grocery shop,

Fruit selling ,

Hotel business

& other petty

shops

43%

Education

11%

Health

3%

House

Construction/

repair

11%

Personal

purpose

9%

Auto Riksha

purchase/repa

ir

4%

Agricultural

1%

Animal

Husbandry

3% Tailoring

11%

Purchase of

property

1%

Other

3%

80 Appendix 13

ULB counselors will provide the much-needed interface with community

members to plan, implement, and monitor the works.

The GAP activities focused more on community involvement but ignored actions

that could influence institutional or policy reforms with strategic implications to

gender mainstreaming within the sector.

A dedicated implementation structure with an apex NGO at the center and 25

INGOs (one for each town) ensured systematic planning, implementation, and

monitoring of activities. Sex-disaggregated data were compiled and maintained

for all beneficiary-related indicators across all facilities. Planned and phased

implementation, sex-disaggregated data collation, and tracking of GAP impact

have been remarkable for the tranche.

Although the tranche was effective on 25 April 2008, there was a delay of almost

3 years in engaging the NGOs (both apex and implementing). The NGOs and HR

for GAP implementation had approximately 28 months to complete all tranche

1-related GAP activities.

Appendix 14 81

ACTIVITIES UNDER THE COMMUNITY DEVELOPMENT PLAN

North Karnataka Urban Sector Investment Program

Conducted Programs and Participants Details (Raichur)

S.N Particulars

Raichur

Program Grand Total

Participation Details

Male Grand Total Female Grand Total Grand Total

1 2 3 4 5 6

1 No. of SHG meetings 359 394 4,427 4,821

2 No. of SHG meetings held in slums 225 229 2,774 3,003

3 Ward-level awareness programs 25 443 1,574 2,017

4 IEC camps 0 0 0 0

5 Gender sensitization programs 10 349 617 966

6 Health and hygiene awareness program 0 0 0 0

7 SHG trainings (leadership, communication, accounting, and bookkeeping 0 0 0 0

8 Ward-level awareness of house connections, UGD connections, and water tariffs. 15 331 948 1,279

9 ULB updating and site visit for councilors 1 60 1 61

10 Safety measures for urban women 2 25 173 198

11 HIV/AIDS awareness and safety measures for NKUSIP labor 0 0 0 0

12 Work site visit by the media 0 0 0 0

13 Ward-level awareness of advantages of 24x7 water supply 10 259 775 1,034

14 Awareness program on NKUSIP and exposure visit to opinion makers 0 0 0 0

15 Awareness program on water and sanitation, importance of water conservation, and importance of having HHL for high school students 0 0 0 0

16 Program updating and gender sensitization to corporation/CMC/TMC staff 1 8 42 50

Grand Total 648 2,098 11,331 13,429

CMC = city municipal council; IEC = information, education, and communication; NKUSIP = North Karnataka Urban Sector Investment Program; SHG = self-help group; TMC = town municipal council; UGD = underground drainage; ULB = urban local body.

82 Appendix 14

North Karnataka Urban Sector Investment Program

Conducted Programs and Participants Details (Haveri)

Sl. No Particulars

Haveri

Program Grand Total

Participation Details

Male Grand Total Female Grand Total Grand Total

1 2 3 4 5 6

1 No. of SHG meetings 139 570 1,905 2,475

2 No. of SHG meetings held in slums 75 0 925 925

3 Ward-level awareness programs 26 774 1,110 1,884

4 IEC camps 3 192 117 309

5 Gender sensitization programs 3 0 214 214

6 Health and hygiene awareness program 1 92 64 156

7 SHG trainings (leadership, communication, accounting, and bookkeeping 3 0 126 126

8 Ward-level awareness of house connections, UGD connections, and water tariffs. 18 772 740 1,512

9 ULB updating and site visit for councilors 1 20 11 31

10 Safety measures for urban women 4 125 441 566

11 HIV/AIDS awareness and safety measures for NKUSIP labor 0 0 0 0

12 Work site visit for the media 0 0 0 0

13 Ward-level awareness of advantages 24x7 water supply 0 0 0 0

14 Awareness program on NKUSIP and exposure visit for opinion makers 1 48 5 53

15 Awareness program on water and sanitation, importance of water conservation, and importance of having HHL for high school students

7 514 527 1,041

16 Program updating and gender sensitization to corporation/CMC/TMC staff 1 24 4 28

Grand Total 282 3,131 6,189 9,320

CMC = city municipal council; IEC = information, education, and communication; NKUSIP = North Karnataka Urban Sector Investment Program; SHG = self-help group; TMC = town municipal council; UGD = underground drainage; ULB = urban local body.

Appendix 14 83

North Karnataka Urban Sector Investment Programme

Conducted Programs and Participants Details (Hospet)

S.N Particulars

Hospet

Program Grand Total

Participation Details

Male Grand Total Female Grand Total Grand Total

1 2 3 4 5 6

1 No. of SHG meetings 1,884 0 20,050 20,050

2 No. of SHG meetings held in slums 1,355 0 16,177 16,177

3 Ward-level awareness programs 38 352 1,451 1,803

4 IEC camps 0 0 0 0

5 Gender sensitization programs 19 104 931 1,035

6 Health and hygiene awareness program 1 63 5 68

7 SHG trainings (leadership, communication, accounting, and bookkeeping 58 0 650 650

8 Ward-level awareness on house connections, UGD connections, and water tariffs. 9 293 635 928

9 ULB updating and site visit for councilors 1 20 7 27

10 Safety measures for urban women 4 78 269 347

11 HIV/AIDS awareness and safety measures for NKUSIP labor 1 39 0 39

12 Work site visit for the media 0 0 0 0

13 Ward-level awareness of advantages 24x7 water supply 0 0 0 0

14 Awareness program on NKUSIP and exposure visit for opinion makers 0 0 0 0

15 Awareness program on water and sanitation, importance of water conservation, and importance of having HHL for high school students

0 0 0 0

16 Program updating and gender sensitization to corporation/CMC/TMC staff 1 53 4 57

Grand Total 3,371 1,002 40,179 41,181

CMC = city municipal council; IEC = information, education, and communication; NKUSIP = North Karnataka Urban Sector Investment Program; SHG = self-help group; TMC = town municipal council; UGD = underground drainage; ULB = urban local body.

84 Appendix 14

UPTAKE IN WATER SANITATION SERVICES DUE TO OUTREACH BY NGOs

Town No. of Families with HSCs

Total tap connections

as per survey

Tap connections achieved by INGO*

Total UGD connections

as per survey

UGD connections achieved by

INGO a

Total HHLs as per survey

Total HHLs achieved by

INGO a

Haveri 9,378 203 0 0 10,358 69

Hospet 14,052 824 14,920 35 22,024 480

Raichur 24,339 437 7,187 141 19,681 116

HHL= household latrines; HSC = house service connection; INGO = implementing nongovernment organization; UGD = underground drainage (sewerage connection).

a These figures are in addition to the figures in the columns on the left.

Appendix 14 85

APEX NGO-DEVELOPED VARIOUS TRAINING MANUALS, GUIDELINES, AND MODULES

1. Training manual for SHG activities (SHG formation, SHG leadership and communication, SHG goal setting and achievement, SHG grading, SHG managerial skills, SHG bookkeeping and accounting)

2. Training manual to bring about behavioral changes 3. Guidelines for ward-level awareness program 4. Guidelines for program updating to ULB councilors 5. Guidelines for IEC camps 6. Street play script 7. Approach paper for training programs 8. Manual on gender sensitization for SHGs 9. Manual on gender sensitization for NGOs 10. Manual on solid waste management 11. Manual on safety measures for urban women program 12. Manual on importance of HHL 13. Guidelines for site visit for media 14. Guidelines for health check-up camps 15. Plumber training module 16. Eco club strengthening booklet 17. Eco club competition booklet 18. Consolidation booklet of various government schemes 19. Community health workers training manual 20. Guidelines for 24/7 water supply advantages 21. Guidelines for tap and UGD tariff payment awareness program 22. Town specific booklets on training institutions 23. Town specific booklets on training resource persons 24. Town specific booklets on feasible income generating activities