Document of

The World Bank

Report No: 20390-IN

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$62.0 MILLION

TO

INDIA

FOR A

TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

May 11, 2000

Finance and Private Sector UnitSouth Asia Regional Office

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CURRENCY EQUIVALENTS

(Exchange Rate Effective May 2000)

Currency Unit = Indian Rupees (Rp)Rp 1.0 = US$ .023

US$ 1.0 = Rp 44.0

FISCAL YEARApril 1 March 31

ABBREVIATIONS AND ACRONYMS

ADB - Asian Development BankATM - Asynchronous transfer modeCAA&A - Controller of Aid Accounts and AuditC&AG - Comptroller and Auditor General of IndiaDoT - Department of TelecommunicationsDoTS - Department of Telecommunications ServicesFDI - Foreign direct investmentGDR - Global Depository ReceiptIFC - International Finance CorporationIT - Information technologyITU - International Telecommunication UnionMIGA - Multilateral Investment Guarantee AgencyMoC - Ministry of CommunicationsMOF - Ministry of FinanceMTNL - Mahangar Telephone Nigam Ltd.NTP - National Telecommunications Policy (1994)NTP - National Telecommunications Policy (1999)PCS - Personal Communication ServiceSOE - Statement of expenditureTRAI - Telecom Regulatory Authority of IndiaTDSAT - Telecom Disputes Settlement and Appellate TribunalTC - Telecommunications CommissionTEC - Telecommunication Engineering CenterVSAT - Very small aperture terminalVSNL - Vides Sanchar Nigam Ltd.WPC - Wireless Planning and Coordination WingWTO - World Trade Organization

Vice President: Mieko NishimizuCountry Director: Edwin R. Lim

Sector Director: Marilou Jane D. UyTask Team Leader: Rajesh B. Pradhan

INDIATELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

CONTENTS

A. Project Development Objective Page

1. Project development objective 22. Key performance indicators 2

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 22. Main sector issues and Government strategy 23. Sector issues to be addressed by the project and strategic choices 9

C. Project Description Summary

1. Project components 102. Key policy and institutional reforms supported by the project 103. Benefits and target population 114. Institutional and implementation arrangements 11

D. Project Rationale

1. Project alternatives considered and reasons for rejection 132. Major related projects financed by the Bank and other development agencies 143. Lessons learned and reflected in proposed project design 154. Indications of borrower commitment and ownership 165. Value added of Bank support in this project 16

E. Summary Project Analysis

1. Economic 172. Financial 173. Technical 184. Institutional 185. Social 186. Enviromnent 187. Participatory Approach 18

F. Sustainability and Risks

1. Sustainability 192. Critical risks 203. Possible controversial aspects 21

G. Main Loan Conditions

1. Effectiveness Condition 212. Other 21

H. Readiness for Implementation 22

I. Compliance with Bank Policies 22

Annexes

Annex 1: Project Design Summary 23Annex 2: Project Description 27Annex 3: Estimated Project Costs 33Annex 4: Economic Analysis Summary 34Annex 5: Financial Summary 35Annex 6: Procurement and Disbursement Arrangements 36Annex 7: Project Processing Schedule 45Annex 8: Documents in the Project File 46Annex 9: Statement of Loans and Credits 47Annex 10: Country at a Glance 51

MAP(S)Map not included.

INDIA

TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

Project Appraisal Document

South Asia Regional OfficeSASFP

Date: May 11, 2000 Team Leader: Rajesh B. PradhanCountry Manager/Director: Edwin Lim Sector Manager/Director: Marilou Jane D. UyProject ID: P055456 Sector(s): CC - Telecommunications & InformaticsLending Instrument: Technical Assistance Loan (TAL) Theme(s): Telecom & Informatics

Poverty Targeted Intervention: N

Project Financing DataM Loan LI] Credit Li Grant li Guarantee C Other (Specify)For LoanslCredits/Others:Amount (US$m): US$62.0

Proposed Terms: Variable Spread & Rate Single Currency Loan (VSCL)Grace period (years): 5 Years to maturity: 20Commitment fee: 0.75%Front end fee on Bank loan: 1.00%Finacin Pln. Sourc ForFiflancing ~~~~~~~~~~~~~ Local Foein TotalGOVERNMENT 10.00 0.00 10.00IBRD 0.00 62.00 62.00

Total: 10.00 62.00 72.00

Borrower: GOIResponsible agency: DOTProject Coordination Unit at DoT, Project Management Units at TRAI and TDSAT, and Project Implementation Units atWPC and TECAddress: Departnent of Telecommunications, Sanchar Bhawan, Room 201, 20 Ashoka Road,New Delhi 110 001Contact Person: Mr. Dhanendra Kumar, Additional SecretaryTel: 91 11 3717300 Fax: 91 11 335-0495 Email: ast@dell.vsnl.net.in

Other Agency(ies):PMU - TRAI

Address: TRAI, 16th Floor, Jawahar Vyapar Bhawan 1, Tolstoy Marg,New Delhi 110 001Contact Person: Mr. Narinder Sharna, Secretary Tel. 91 11 3357814, Fax 91 11 3738708, Email trai@del2.vsnl.net.inEstimated disbursements ( Bank FYIUS$M):

FY 2.01 2a0 5 0 _ 00

Annual 10.0 30.0 17.0 5.0Cumulative 10.0 40.0 57.0 62.0

Project implementation period: 4 yearsExpected effectiveness date: 10/01/2000 Expected closing date: 12/31/2004

OCS PAD F. Rev M.a, 2000

A. Project Development Objective

1. Project development objective: (see Annex 1)

The objective of this project is to strengthen elements of the policy and regulatory environment topromote private investment and competition in the telecommunications sector in India. This will beachieved by assisting the Department of Telecommunications (DoT) in the Ministry of Communications(MoC) to strengthen its government functions, including modernization of radio frequency managementand licensing systems, and the Telecom Regulatory Authority of India (TRAI) and the Telecom DisputesSettlement and Appellate Tribunal (TDSAT) to strengthen their capacity to regulate the sector. Thus, theproject will improve the institutional capacity and capability of the Wireless Planning Coordination Wingof DoT (WPC) to efficiently manage the radio frequency spectrum, and the TelecommunicationsEngineering Center of DoT (TEC) to become aware of the emerging technologies and the need for settingstandards in the sector. Furthermore, the project will continue the dialogue between the Bank and all thestakeholders (DoT, TRAI, TDSAT, operator associations and key customers) on regulatory practice andissues.

2. Key performance indicators: (see Annex 1)

The key performance indicators to measure the impact of the project are provided in Annex 1 and are asfollows:

* Inter-circle domestic long distance service liberalization, latest by 2001.* Interconnection regime conducive to competition in place, latest by 2002.* Assign frequencies for earmarked bands within 15 days of application, latest by 2004.

B. Strategic Context1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: 17241-IN Date of latest CAS discussion: 01/15/98

Board discussion of the last full Country Assistance Strategy (CAS) for India (Rpt. No. 17241 -IN) was onJanuary 15, 1998; the latest Board discussion of the CAS Progress Report (Rpt. No. R99-12,IDA/R99-10) was on February 18, 1999. The proposed project is fully consistent with the CAS. A criticalelement of the CAS is to help the Central Government and the States to create and promote an enablingenvironment for private capital and management to enter various sectors of the economy, particularlyinfrastructure. In telecommunications, which has moved much further than other utility sectors in thereform process, the Bank will assist the Government in implementing elements of its newtelecommunications policy (NTP) announced on March 26, 1999.

2. Main sector issues and Government strategy:

The chronology of sector reform in India (Tablel) indicates important progress, despite implementationdifficulties, in moving towards more private investment and competition in the sector.

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F Table 1: Chronology of Sector Reform in India

1992 MTNL and VSNL partially privatized

1992 Provision of value-added services opened to the private sector.

1994 National Telecommunications Policy (NTP 94) issued; opened basic and cellular services to privateinvestors.

1994 Eight cellular licenses awarded in four metropolitan areas

1994-98 Licenses for private provision of paging, cellular, and basic services were awarded. Severallicensing initiatives were not successfully completed.

1997 Telecom Regulatory Authority of India established in March 1997

1997 Commitments made to the World Trade Organization in respect of the agreement on basictelecommunications service.

1998 Department of Telecommunications (DOT)/VSNL monopoly on Internet service ended. InternetService Providers (ISPs) will be authorized to establish their own international links for Internettraffic.

1999 Govemment announced a new national telecommunications policy (NTP 99) which further promotescompetition and private investment, and enhances the role of TRAI. DoT's government and serviceprovision functions have been separated with the establishment of the Department ofTelecommunications Services (DoTS) responsible for provision of telecom services and theremaining DoT responsible for government functions.

1999 New re-balanced tariff initiative began May 1, 1999.

2000 TRAI Act amended to separate the dispute settlement functions from its regulatory functions byestablishing Telecom Disputes Settement and Appellate Tribunal (TDSAT).

Sector Overview: An overview of the sector management/structure is shown in Table 2 overleaf andsummarized in the following paragraphs.

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Table 2: India Telecommunications Sector OverviewExistin2 Institutional Framework (April 2000)

Cate&eorv Description

Responsible Ministry Ministry of Communications (through the Telecommunications Commission andDepartment of Telecommunications)

Regulatory Agency TRAI/TDSAT/WPC for spectrum management

Licensing Authority Department of Telecommunications (DoT)

Legislation Indian Telegraphs Act (1885);Indian Wireless Act (1933);Telecom Regulatory Authority of India Act (1997);TRAI (Amendment) Act (2000).

Regional/Local Most areas, DoTS; and in two major metropolitan areas, Mahanagar Telephone Nigam Ltd. (MTNL)Basic Services which is majority owned by DoT. Competition to be provided through privately owned networks

in 21 "circles". Six licenses have been awarded/signed. Service has commenced in three of thesecircles.

National Long-distance DoTS (authorized private cellular/basic operators for intra-circle long-distance).

International service Videsh Sanchar Nigam Ltd. (VSNL - majority-owned by DoTS) / Internet Service Providers (ISP)

Cellular Services Total of 42 networks provided by 22 private companies. In most areas there aretwo service providers.

Internet/WWW New entry liberalized

Email; Paging Liberalized

The Telecommunications Commission (TC) is charged with formulating the Govemment's sector strategy.The TC is chaired by the Secretary of the DoT in the Ministry of Communications (MoC). The WPC isthe national agency responsible for regulating and managing radio spectrum. The TelecommunicationsEngineering Center (TEC) is responsible for setting technical standards for equipment and networkinterconnection, forecasting technology, and raising awareness in support of policy formulation in thetelecommunications sector.

TRAI was established in 1997 as a statutory body with quasi-judicial powers to regulatetelecommunications services. TRAI is responsible for recommending the need and timing for the entry ofnew service providers, recommending the terms and conditions of the licenses, ensuring technicalcompatibility and effective interconnection between service providers, ensuring compliance of licenseconditions including universal service obligations, establishing tariffs, monitoring carriers' quality ofservice, and inspecting equipment.

The TRAI Act 1997 was amended effective January 24, 2000 by the promulgation of the TRAI(Amendment) Act. Under the amended provisions, the Authority consists of a Chairperson, not more thantwo full-time members, and not more than two part-time members, to be appointed by the CentralGovernment. The disputes-settlement functions formerly vested in TRAI under the TRAI Act 1997 havenow been transferred to the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). The creationof TDSAT has clarified the appeals process which no longer involves the high courts. Furthermore, theTRAI (Amendment) Act specifies that the Chairperson and other members of TDSAT shall be appointed in

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consultation with the Chief Justice of India. This and other provisions emphasize the impartiality and highlevel of TDSAT. The Act has also made more explicit the Government's need to consult with TRAI onintroduction of new service providers and terms and conditions of their licenses. These changes have (a)clarified and simplified the appeal process, and (b) strengthened TRAI's role in determining terms andconditions for interconnection. The developments are consistent with India's WTO commitments ontelecommunications to adopt internationally practiced common regulatory principles with respect tocompetitive safeguards, interconnection, universal service, public availability of licensing criteria, etc.

Main Sector Issues: The main sector issues can be classified under two broad categories: (a) sectorperformance, and (b) private investment environment. The summary of these issues together withGovernment response and strategy are discussed below.

Sector Performance: The performance of the Indian telecommunications sector has fallen far short of itspotential in the following areas:

* High level of unmet demand. Although the telecommunications sector has attained a growth rateof around 20% per annum since 1992, it is nowhere near meeting the rising demand for newconnections. The overall level of fixed telephone density in India is very low at approximately 2.6lines per hundred persons compared to the world average of 10.5. It is lower than in China (4.5),Indonesia (3.2) and Thailand (7.0). Not only is telephone density low, but there is a high level ofunmet demand for basic telephone service. Furthermore, the expansion of the cellular market(currently with only about 1 million subscribers compared to about 28 million in China and 2million in Thailand) has been much slower than expected. This low level of teledensity for bothfixed and cellular reflects the need for initiatives to attract the very large scale private investmentneeded for the sector to meet the demand.

* Inadequate Availability of Telephone Service in Rural Areas. Approximately 74% of India'spopulation resides in rural areas where telephone density is estimated to be only about 0.3 lines perhundred persons. Out of about 600,000 villages in India, only about 360,000 have access totelephone facilities.

* Low Efficiency. The main operator, DoTS (together with MTNL), has found it difficult to comeclose to world-class efficiency levels in an environment where it has faced limited competition, andneeded to follow inflexible civil service procedures for staffing and procurement. For example,with respect to staffing, DoTS has 28 lines per employee, compared to the international average of160. The productivity is low even for example compared to Indonesia which is 130 lines peremployee.

Government Response 1994-97. During the period of 1994-97, and starting with the NationalTelecommunications Policy issued in 1994, the Government adopted a series of important reforms torespond to the above poor sector performance by creating new channels for private investment in the sector,establishing for the first time in India competition in the provision of basic and cellular mobile services, andestablishing a regulatory authority. Thus, the reform measures included:

* Passage of the TRAI Act which established TRAI as a statutory body in 1997 with quasi-judicialpowers to regulate telecommunications services.

* Award of licenses in six out of the 21 circles to private operators to provide basic service incompetition with DoT and MTNL. These licenses include provision of intra-circle long distance

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service to their own subscribers.

* Award of 42 licenses to private operators to provide cellular services.

However, the results fell short of the Government's expectations. The inflow of private investment was lessthan what was needed to transform India's telecommunications sector.

Private Investment Environment: Many factors have contributed to the low take-up of licenses for basicservices and more generally for the low level of private investment in the sector. In general, theimplementation of the basic and cellular licensing policies failed to establish adequate incentives for highlevels of private investment to take place. Factors contributing to the poor private sector response include:

* Private Operators 'High License Fees: Until 1999, private cellular and basic services operatorswere committed to pay high license fees. These fees accounted for as much as 40% of theoperating costs for cellular as compared to about 6% in Singapore. One of the reasons for the highlicense fees was the over estimation of profitability by the private operators during the biddingprocess. Thus, the revenues realized by the private cellular operators were far short of theirprojections. This has damaged the viability of network investment projects and resulted indifficulty in arranging financing for these projects. (More recently GOI has decided to replacecertain fees by migrating to more investor-friendly revenue-sharing arrangements).

* Distorted Tariff Structure: The price structure does not reflect costs and does not adequatelyencourage local network investment. India's current tariff regime cross-subsidizes local calls by itsdomestic and international long distance revenues. This has led to an inefficient allocation ofresources and has inhibited private investment in basic and cellular services.

* Inadequate Interconnection Arrangement: Interconnection and revenue sharing arrangementsbetween DoT and new private licensees, together with other license terms such as the duration ofthe licenses, are insufficiently attractive.

* National Long Distance: Some important market segments, such as national long-distancetelephony, remained closed. (This issue is addressed in the NTP 1999 but implementation ofcompetition in the segment has not started).

* Ineffective Spectrum Management: Ineffective radio spectrum management has been identified as asignificant problem by several private investors in the sector. Problems have included excessivelyslow processing of license applications, inadequate or inefficient bandwidth allocations,interference caused by unauthorized radio transmissions, and delays in resolving interferenceproblems. As in many other countries, radio-based telecommunications technology is vitallyimportant for new entry, rural connectivity, cellular telephony, Internet service, and provision ofother new services.

* Technical Standards Setting: The proliferation of networks and operators in India has made thelink between technical standards and authorizations to erect telecommunications infrastructureincreasingly important. India needs a well developed telecommunications standard andharmonization process that is consistent with international guidelines. TEC's activities arecurrently heavily oriented towards supporting DoT's operations rather than on technical standardsetting and monitoring compliance, and advising DoT on policy implications ontelecommunications technology developments. In order to effectively address the future needs of

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the rapidly emerging multi-vendor environment, TEC needs to be strengthened.

* Separation ofDoT's Government and service provision functions: Given the leadership role ofDoT in the license award process for both basic and cellular services, one of the underlyingproblems has been the conflict of interest within DoT as both the licensing authority and the mainoperator. To ensure transparent and accountable development of policies in the sector, thegovernment and service provision functions of DoT were separated by establishing the Departmentof Telecommunications Services (DoTS) in late 1999 as a precursor to corporatization of theservice provision function. DoT has requested proposals from consultants to assist in thecorporatization.

* TRAI: Although TRAI has quickly established an excellent reputation for transparency andconsultative processes, it is a young organization and faced significant problems in its first years ofoperation. For example, TRAI was not consulted on the introduction of new service providers.Moreover, court challenges led to rulings that TRAI could not influence or determine theinterconnection regime. These problems, as well as controversy over TRAI's 1999 tariff rulinghave now been successfully addressed, in part by the TRAI (Amendment) Act 2000. Nevertheless,at the time they contributed to uncertainty and inadequate incentive for private investment in thesector.

Government Strategy. Drawing on lessons of the first phase of the reforms (1994-97) and aware that acompetitive and well regulated telecommunications sector is essential for India's remarkably fast growingIT sector, the Government launched a second phase of reforms.

v In April 1998, the National Task Force on Information Technology and Software Developmentwas appointed to address critical national needs in the areas of telecommunications, informationinfrastructure, Internet access, software development, electronic commerce, and others. In July1998, the recommendations of the Task Force were adopted by resolution of the PlanningCommission. These recommendations significantly broaden and deepen India's economic reformprocess by encouraging competition, entrepreneurship and innovation in the area of IT. TheGovernment's seriousness in implementing reforrn policies for the telecommunications and ITsector are further confirmed by the announcement of the Prime Minister in November of 1998, of aliberal Intemet access policy. Foreign companies will be allowed stakes of up to 49% in InternetService Providers (ISPs), there will be no limit on the number of licensees and minimal licensefees, ISPs will be allowed their own international gateway access, and will be free to install "lastmile access" data communication lines for customers.

* In December 1998, the Prime Minister established a high level Task Force (Group onTelecommunications (GoT)) mandated to establish a new telecommunications policy for India thatwould recognize the indispensable need to expand and modernize telecommunicationsinfrastructure and establish a competitive and well-regulated telecommunications environment. InFebruary 1999, the GoT posted on the world-wide web its draft discussion paper for the NewTelecom Policy 1999 for suggestions and comments. The solicitation for suggestions revealed theGovernment's commitment to broad participation and transparency. Besides the suggestions fromthe Bank, there were around 17,000 responses from public, institutions, financiers, operators andusers.

* TRAI announced a new telephone tariffs decision on March 9, 1999 to come into effect on May 1,1999. The new tariffs will substantially re-structure telephone service prices over a three year

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period. These price changes will significantly improve incentives for local network investment.TRAI has also programmed an agenda of regulatory activity to address several other importantregulatory matters, such as: review of domestic long distance competition, inter-connectionarrangements, numbering plan, quality of service, rules of business, customer satisfaction, carrierperformance monitoring, regulatory aspects of information infrastructure, and others.

* The Government announced the new telecommunications policy (i.e. NTP 1999) on March 26,1999. The new policy recognizes that provision of world class telecommunications andinformation infrastructure is a key to rapid economic development for India, is critical for theInformation Technology industry, and has widespread ramifications for the entire economy. It is aprogressive policy and addresses several key outstanding issues that have inhibited the flow ofsubstantial private sector investment in the sector which is required to improve sector performance.Key features of the proposed policy and actions already taken are as follows:

Long distance service to be opened to competition. Existing backbone networks of publicand private power transmission companies, railways etc. can be utilized for national longdistance voice communication. TRAI has already submitted to the Government itsrecommendation for national long distance service competition.

Multiple basic operators to replace duopoly in basic service and four cellular operatorswill be allowed per area. DoT or MTNL will be the third cellular operator in each area.

DoTs govermnent and service provision functions to be separated as a precursor tocorporatization. Most recently the Department of Telecommunications Services has beenestablished with a separate secretary within the MoC to separate the service provisionversus government functions of DoT.

One time entry fees and revenue sharing to replace the current license fees scheme for newlicenses have been recommended by TRAI. TRAI has started the consultative process forformulating its recommendation on revenue sharing arrangements for existing cellular andbasic operators. This would also include recommendations on entry of more operators,license fee structure and other terms and conditions for cellular and basic serviceoperators.

Commitment to a strong regulator independent from the operators and with comprehensivepowers and clear authority to effectively perform its functions. The promulgation of theTRAI (Amendment) Ordinance, 2000 on January 24, 2000 (see above) will greatlystrengthen TRAI's authority.

Spectrum to be utilized efficiently, economically, and optimally. The Government willinstitute a transparent process of allocation of frequency spectrum. WPC has publishedthe National Frequency Allocation Plan 2000 (NFAP).

Effective January 2000 the TRAI (Amendment) Act clarifies the appeals process withrespect to TRAI decisions, strengthens TRAI's role in determining terms and conditions forinterconnection, and establishes the new impartial, high-level TDSAT.

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3. Sector issues to be addressed by the project and strategic choices:

Issues to be addressed by the project. The project will strengthen the institutional base necessary to builda modem telecommunications sector and includes the following:

* Strengthening Spectrum Management: WPC will be strengthened to effectively discharge allfunctions of radio spectrum management and radio regulatory process to match internationalspectrum management practices. Complete state-of-the-art computerization with networking andmodernized spectrum monitoring facilities for effective control and regulation will be provided.WPC will be in a position to assign frequencies based on electromagnetic compatibility (EMC)evaluation and with minimal need for coordination. Furthermore, WPC organization will bestudied by consultants to recommend suitable organizational structure. These components willstrengthen WPC's role as a competent and professional body. This will make private investment inthe deployment of wireless technologies more attractive and cost effective and improve the qualityof service. In addition, it will facilitate access to service in the rural areas which rely onavailability of spectrum in order to use wireless technologies.

* Strengthening TRAI: TRAI will be strengthened by Bank support through technical assistance,and by access to the Bank's extensive international experience on telecommunications regulation.Consultancy support will lead to the promulgation of public consultation papers on several issuesincluding: network interconnection, Internet telephony, third generation mobile telephony, equalaccess for national long distance competition, universal service, and cable TV local telephony.

- Strengthening Technical Standard Setting: TEC is not fully equipped to handle its mandate to settechnical standards for equipment and network interconnection, raise awareness in support ofpolicy formulation in the multi-operator environment, and respond to the rapid advances intechnology. While the Government is taking action to strengthen TEC's capacity to meet itsmandate, the project will support raising awareness in TEC to the need for setting standards inregard to emerging technologies.

Strategic Choices. In selecting the above areas, the project supports the Government's efforts to strengthenthe environment to promote private investment and competition and responds to the requests of theGovernment. The project intentionally does not address:

* Licensing of circles for basic service where bids have been awarded The completion of theselicense award processes is a complex and contentious area which, in several cases, involve legaldisputes. The Government has decided to adopt the revenue sharing regime to address the issuesfaced by the existing telecom private operator licenses. Furthermore, Government officials havenot requested Bank involvement in this aspect. Nevertheless the project is addressing keyconstraints to new entry, such as spectrum management and long distance competition.

* Separation of DoT's government versus service provision functions. The Government hasannounced through the new telecom policy, the separation of DoT's government and serviceprovision functions. The policy and licensing functions of DoT have been separated from theservice functions by setting up a separate Department of Telecom Services as a precursor tocorporatization. DoT has initiated actions to hire consultants to assist with this task and henceGOI has not requested assistance for corporatization of service provision of DoT.

* Institutional Development of DoTService Provision Function. This area is regarded as beyondthe scope of the project which focuses on the development and strengthening of the policy and

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regulatory environment to promote private investment and competition in the telecommunicationssector.

C. Project Description Summary

1. Project components (see Annex 2 for a detailed description and Amnex 3 for a detailed costbreakdown):

A detailed description of the project components for DoT, including WPC and TEC, and TRAI/TDSATand estimates of detailed cost breakdown are provided in Annex 2 and 3, respectively. The summary ofproject components, estimated cost and proposed Bank financing are provided in the Table below. Thetotal project cost is estimated at US$ 72 million excluding customs duties and local taxes, with a foreigncost component of US$ 62 million.

_ l = .~~~~~~~~~~~~a f fall ITA for DoT Component (DoT, WPC Telecommunicati 2.70 3.7 2.15 3.5and TEC) ons &

InformaticsSpectrum Management & Monitoring 62.67 87.0 54.23 87.5Equipment

Support of PCU/PIU 0.50 0.7 0.00 0.0

TA for TRAI 4.95 6.9 4.50 7.3

TA for TDSAT 0.56 0.8 0.50 0.8

Total Project Costs 71.38 99.1 61.38 99.0Front-end fee 0.62 0.9 0.62 1.0

Total Financing Required 72.00 100.0 62.00 100.0

2. Key policy and institutional reforms supported by the project:

The project will strengthen the institutional framework and capacity of the government agencies responsiblefor telecommunications sector, regulating service providers, and managing the radio spectrum.Specifically, the project will:

(a) Strengthen TRAI's and TDSAT's capacity and capability to manage regulatory issues. Forexample, this work will include supporting TRAI's assessment of the introduction of nationallong-distance and interconnection arrangements and charges in the multi-operator environment;

(b) Strengthen WPC's capacity to (i) achieve the NTP 1999 policy objective to have a transparentprocess of allocation of frequency spectrum which is effective and efficient, (ii) review the spectrumallocations in a planned manner so that frequency bands are available to the service providers, (iii)improve the quality of all publications and documentation sent to the public, (iv) gradually introducemore detail into the NFAP, thus reducing time taken to introduce new services or existing services toexpand to meet customer demand, and (v) initiate studies to establish a more market-oriented approach

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to spectrum allocation.

The separation of DoT's government versus service provision functions together with a predictable andtransparent regulatory framework regime, including spectrum management, are needed to improve investorconfidence and facilitate increased private investment. In addition, during this period of market, structuraland regulatory transformation of the Indian telecommunications sector, in which options are beingconsidered that are new for India, the project will support institutional reform by providing access toofficials on the lessons of international experience of telecommunications reform and regulation.

3. Benefits and target population:

The achievement of the project development objective to promote private investment and competition in theIndian telecommunications sector through strengthening elements of the policy and regulatory environment,will, in conjunction with the Government's overall reform initiatives for the sector, contribute to (a)substantially increased private investment in the sector, (b) increased competition, and (c) more effectivepolicy and regulatory interventions in the public interest. Furthermore, the radio spectrum managementcomponent will greatly enhance the value and productivity benefits to be obtained from the efficientutilization of radio spectrum in India. These results will accelerate the expansion of telephone networks tomeet unmet demand including in previously unserved areas, enhance market incentives for significantlyimproved efficiency in the provision of telecommunications services, and enhance both market andregulatory incentives for improved quality of service. The ultimate beneficiaries of the overall reformprogram therefore will be small, medium and large businesses, individual subscribers, and customers ofpay phone service. Among businesses, the importance of excellent telecommunications for India'scomputer software business sector has already been noted.

4. Institutional and implementation arrangements:

Implementation Period: The project will be implemented over four years, July 1, 2000 through June 30,2004.

Project Implementation and Coordination. A Project Coordination Unit (PCU) in DoT will beresponsible for the overall project coordination. The PCU will have a dedicated Senior Finance Officer tomanage and report on financial aspects. The responsibility for project implementation of the DoTcomponent for WPC and TEC will rest with the Project Implementation Units (PIU) for each of thesub-components. The responsibility for project implementation at TRAI will rest with its ProjectManagement Unit (PMU), which has already been established. At TDSAT the PMU will be set up later.The PIUs and the PMU will have the responsibility for book-keeping, record keeping, preparation ofperiodic Project Management Reports (PMRs) and annual audits of PMRs. The project will start ontraditional disbursements and will produce the full set of PMRs from the beginning and there will be adetermination for moving to PMR-based disbursements with 12 months of effectiveness, based on mutualagreement.

Accounting, Financial Reporting andAuditArrangements. An assessment of the financial managementsystems in the implementing agencies of the project, i.e., DoT (including TEC and WPC), and TRAI, hasbeen carried out to ensure that the arrangements are adequate to meet the Bank's requirements specified inOP/BP 10.02 and the guidelines under the Loan Administration Change Initiative (LACI). When TDSATis established, the Bank will review its financial management arrangements to ensure that they aresatisfactory to the Bank. The project provides technical assistance to TRAI, TDSAT and DoT, and willfinance one large contract for procurement of spectrum management system by WPC (approximately USD54 million). In view of this relatively limited procurement work-load, complex project accounting and

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management systems are not envisaged under this project.

The financial management systems and procedures followed by DoT (including WPC and TEC) essentiallyfollow a cash-based government accounting system. DoT will open separate account heads to capture theproject expenditures of TEC and WPC. TRAI follows accrual system of accounting. Financialmanagement function in DoT is manned by a separate cadre of Telecom Accounts & Finance Service.WPC currently has no separate accounting staff. Both WPC and TEC will assign, separately, a dedicatedFinance and Accounts Officer to manage project accounting. In addition, DoT will assign a senior financeprofessional to be part of the PCU. The Officer will be responsible for review of PMRs submitted by thePIUs and PMU, consolidation of PMRs, coordination with the Controller of Aid Accounts and Audit(CAA&A) and early completion of audit. TRAI officers have wide experience in the Finance & Accountsfunctions in govemment and public sector undertakings, in procurement (including World Bankprocurement), revenue, budget & control, accounting, payroll, and audit functions. TRAI will assign adedicated Finance and Accounts Officer to manage project accounting.

DoT and TRAI follow the government budgeting system procedures in formulation of annual budgets. Theprocess of utilization of resources by DoT is through the budget mechanism. In the current set up, fundsrequired by TRAI are released through DoT. For this project, the PCU will be responsible for ensuringrelease of adequate funds on a timely manner to TRAI, WPC, and TEC. For this purpose TRAI, WPC andTEC will submit quarterly funding requirements to the PCU which will be responsible for ensuring timelyrelease of fuinds. Under the project, a Special Account will be established in the Reserve Bank of India tobe operated by the CAA&A.

Disbursements: Disbursements from IBRD loan would initially be made in the traditional system(reimbursement with full documentation and against statement of expenditure), with quarterly PMRssubmitted from the start of the project. PMR-based disbursements are expected to start twelve monthsafter loan effectiveness based on mutual agreement.

Retroactive Financing: Retroactive financing up to an amount of US$4.0 million equivalent would covereligible expenditure for implementation of activities since August 15, 1999 based on a Statement ofExpenditure.

Project Reporting Requirements, Monitoring and Evaluations Arrangements: The PCU, PMU andPIUs will be responsible for maintaining records and accounts of the activities under their respectiveproject components. PIUs in WPC and TEC, and the PMU in TRAI will submit quarterly PMRs to thePCU in DoT. The Finance and Accounts Officer in the PCU will review and compile the PMRs fortransmission to the Bank through the CAA&A. The Project reporting, monitoring and evaluationarrangements will include: (a) quarterly PMRs; (b) bi-annual Bank supervision missions; (c) jointDoT/Bank and TRAI/Bank annual progress reviews and a mid-term review (about two years after the dateof effectiveness of the loan); and (d) a completion report to be transmitted by the GOI to the Bank withinsix months of the closing of the Project. The annual and mid-term reviews will be conducted jointlybetween DoT and the Bank and TRAI and the Bank on the basis of a report prepared by the PCU in such amanner as to: (a) assess progress in the implementation of key actions and performance indicators (seeAnnex 1); (b) verify the continued validity of the design assumptions in light of implementation experienceand the evolving environment; and (c) identify remedial actions that might prove necessary to achieve theProject's objectives.

Audit: There will be audit reports for three entities (i.e. DoT, TRAI, TDSAT) and these will be submittedto the Bank through DoT. Project Financial Statements would be audited annually in accordance with

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standards on auditing acceptable to the Bank by an independent auditor (viz. the Comptroller and AuditorGeneral of India (C&AG). The audit of project accounts would include an assessment of the adequacy ofaccounting and internal control systems, ability to maintain adequate documentation for transactions, andeligibility of expenditures for Bank financing. The audited Project Financial Statements together with theauditors opinion, separately for DoT, TRAI and TDSAT would be submitted to the Bank not later than sixmonths after the close of each fiscal year. The audit report on the Special Account maintained by theDepartment of Economic Affairs (DEA) would include a summary of SA transactions and the closingbalance held by the Reserve Bank of India (RBI). The audit report on SA would be submitted to the Banknot later than six months after the close of each fiscal year.

D. Project Rationale

1. Project alternatives considered and reasons for rejection:

Rationale. The proposed project is consistent with the Bank's strategy for the telecommunications sector,which calls for shifting the government's role from ownership and operations to policy making andregulation, promoting competition, efficiency, service quality, and increased private sector participation ininvestments and provision of services (OP 4.50). The project will make an important contribution to thedevelopment of policy and regulation in the Indian telecommunications sector and facilitate continueddialogue with the Bank on sector development. For example, the project is financing TRAI's veryimportant work to review (pursuant to India's WTO commitments) the introduction of nationallong-distance competition. As for spectrum management, the demand for spectrum for radio-based serviceswill continue to grow, thereby intensifying the spectrum problems now plaguing India unless the proposedASMS facilities and associated procedures are implemented. However, this increasingly serious problemcould be turned into real opportunities for economic growth by installing the ASMS, which will helpaccommodate various demand elements discussed earlier under "Private Investment Environment". As inmany other countries, radio-based telecommunications technology is vitally important for new entry, ruralconnectivity, cellular telephony, Internet service, and provision of other new services. In several countries,such as Sri Lanka, Thailand and Indonesia, wireless-based new entry has played a very important role.

Alternatives. Several alternatives have been considered:

Status quo. One alternative to the Bank's participation would be to do nothing in the hope that theprivate sector will increasingly invest in the sector. However, until now, failure to establishappropriate and essential incentives for private investment in the sector have held back potentiallyenormous private investment necessary to transform the performance of the sector. In this context,support to WPC and TRAI is critical to improve key elements of the regulatory environment whichare needed to ensure the successful implementation of the Government's new telecom policy.

Privatization / Corporatization of DoT. The corporatization and possible eventual fullgovernment disinvestment of DoT's enterprise operations was considered as a project component.The Government, however, has decided to handle this issue without Bank support at this stage.

Licensing. Assisting the Government in completing the licensing of basic service providers in thecircles where DoT received bids but had not awarded licenses was considered but not pursuedgiven the legal and commercial issues involved. The Government is not seeking Bank assistance inthis area.

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2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing and planned).

0 " : tX iX ~~~~~~~~~Latest S0 t0ervis ionV 05 -0

Implementation DevelopmentBank-financed Progress (IP) Objective (DO)

Telecommunications Telecom. IX (closed) S SInfrastructure ILFS-Infrastructure Finance U U

(on going)

Hazard Management (IT component) A.P. Emergency Cyclone (on U Ugoing)

Energy Second Powergrid DevelopmentProject (planned)

Economic Reform Technical Assistance forEconomic Reform (planned)

Other development agenciesAsian Development Bank Technical Assistance Project TA

261 1-IND Assisting TRAI indeveloping a new tariff andinterconnection regime.

Canadian International Development Training and study tours forAgency DoT, WPC, TEC and TRAI

staff.

International Finance Corporation (IFC) Investnents in paging andProject cellular operators.

Multilateral Investment Guarantee Guarantee to Motorola forAgency (M1GA) investment in a cellular

operator.

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

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3. Lessons learned and reflected in the project design:

International Experience. Experiences from other countries demonstrate that clear up-front policydecisions and the establishment of a transparent legal and regulatory framework lead to increased privateinvestments and improved operations. Furthennore, the momentum created by policy reform initiatives canlead to sustained sector growth provided implementation is undertaken promptly. The existence of anindependent regulator within a stable regulatory framework encourages higher levels of investment andmore rapid development of services which are being opened to competition (e.g., basic, cellular,value-added-services). Support of TRAI and TDSAT through this project is consistent with the lessonslearned. In countries where radio spectrum management has fallen into disarray, competitive new entry hasbeen severely constrained.

Bank Experience in TA Projects in South Asia. A 1995 review indicated that the World Bank'sexperience in technical assistance projects in South Asia has not been altogether positive. That review alsorecommended concrete measures to improve the performance of sector reform projects: (i) projects shouldbe designed as part of a broader strategy for institutional development; (ii) borrower commitment must beassessed carefully and tested through up-front action; and (iii) monitoring indicators should be introduced.These measures have been incorporated into the project design. In particular, suitable performancebenchmarks have been identified to monitor project progress and facilitate early corrective actions, ifnecessary.

Radio Spectrum Management Experience. The Bank has significant experience with radio spectrummanagement projects in several countries, such as Mexico, Pakistan, Romania, Sri Lanka, and Turkey. Ina frequency management project in Mexico, the software did not perform properly, and this causedproblems in the operation of the whole frequency management system which took time to resolve. Thelesson learned was that the main radio frequency management system should be procured in one package,including software, with initial assistance in operations, and guarantees by a reputable supplier to ensure itsproper functioning.

Experience on Borrower Commitment. The project design reflects the well-known lesson that reformprojects are likely to succeed when there is commitment at the highest level. Hence, this project focuses onthe areas where the Govemment of India is committed to take action. In addition, the Government sees theBank as a unique source of cross-country experience and has requested Bank involvement in the sector.

Procurement Experiencea Several Bank projects in India have experienced procurement problems. Thedesign of the procurement arrangements undertaken as part of project preparation address these problems.Advance procurement actions on priority consultancy assignments have already been initiated by TRAIusing retroactive financing. Likewise, WPC has also hired consultants to prepare bid documents forspectrum management and monitoring systems, and institutional diagnostics.

IFC Experience in the Indian Telecommunications Sector. IFC's experience with investments in pagingand cellular operators in India has been factored in the design of the project. In particular, the projectdesign reflects the need to improve the incentives for private investment through appropriate policy,licensing, and regulatory framework.

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4. Indications of borrower commitment and ownership:

Reforms Locked-in. Despite slow progress in implementing the National Telecommunications Policy(1994), the fact remains that the policy included very important reform elements, such as the introductionof private investment and competition in the provision of basic services. Subsequently, transformation ofthe sector through, licensing of multiple private cellular operators has occurred, and the Government haschosen to lock-in these elements in its 1997 commitment to the World Trade Organization. Furtherevidence of the Government's commitment to reform and development of the sector is the establishment ofthe independent sector regulator in February 1997. On March 26, 1999, the Government announced afar-reaching telecommunications policy which addresses key outstanding issues. This will help advanceIndia much further along the path on which it has already embarked, promoting competition, attractingprivate investment and confiming the importance of TRAI. Effective January 2000, the TRAI(Amendment) Act strengthens the role of TRAI on network interconnection and establishes the impartial,high-level TDSAT.

National Task Force on IT. The Government confirmed its commitment to development of India'sinformation infrastructure when Prime Minister Vajpayee declared in 1998 that promotion of infonnationtechnology would be one of his government's top five priorities. The subsequent Action Plan (as outlined inthe National Task Force on Information Technology and Software Development, April 1998) sets forth 108specific recommendations covering both bottlenecks and broad promotional measures intelecommunications and other areas crucial for boosting information technology in India. Theserecommendations were adopted by resolution of the Planning Commission in July 1998. By April 2000,DoT had authorized 17 Internet Services Providers to operate their own intemational gateways for Internettraffic.

Retroactive financing. Also reflecting its commitment to the project, the Government has agreed toinitially finance the project from its own funds and then seek retroactive funding from the Bank for up toUS$ 4,000,000 for expenditures made prior to effectiveness but after April 15, 1999. In addition, thegovernment desires to realize competitive prices through the Bank's international competitive procurementprocess and has sought Bank financing for the radio spectrum management system.

5. Value added of Bank support in this project:

International Experience on Telecommunications Sector Reform. The Bank is involved in dialogue onsector reform in around fifty countries, including Bangladesh, Indonesia, Nepal, and Thailand. The IndianGovernment has explicitly stressed the value added of Bank support in terms of its unique internationalexperience in addressing telecommunications sector reform issues and establishing regulatory frameworks.Thus, this experience, together with the Bank's neutrality, is attractive for the Government.

Experience in Radio Spectrum Modernization. In addition to the very extensive experience the Bank hasaccumulated in every continent on telecommunications sector reform, it has also developed significantexperience in supporting world best practice approach to spectrum management.

International Competitive Bidding: Bank experience in international competitive bidding in othercountries, with respect to procurement of telecommunications equipment under Bank procurementguidelines, indicates a significant cost savings of around 35%.

Access to High Level Officials. The Bank's access to key high level officials in countries which havesuccessfully undertaken reform programs will permit senior officials to discover for themselves lessonsfrom international experience.

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E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)

1. Economic (see Annex 4):

O Cost benefit NPV=US$ million; ERR = % (see Annex 4)O Cost effectiveness* Other (specify)

The project supports elements of the Government's overall telecommunications sector reform program. It isdifficult to provide a quantitative estimate of the response of the private investors to the regulatory andpolicy environment. Furthermore, the benefits of improved telecommunications services are not exclusivelyprivate. Network externalities and the use of information and communications technologies in education,health, and other social services may imply social benefits which need to be taken into account in assessingthe economic impact of telecommunications investment. Some of the benefits associated with the majorproject components would include, inter alia, the following:

(a) Upgrading WPC's radio frequency management through implementation of a modern spectrummanagement system and restructuring of WPC's organizational structure and procedures would bringvarious benefits. First, it would free up additional frequencies available to private operators. In somecases this will involve relocating existing assignments, including Government agencies in some cases.Second, it would minimize radio interference and thus improve the quality of service. Third, it wouldaccelerate the process of obtaining new frequency licenses. Fourth, it would reduce the investment riskof private operators--mainly in wireless services. Most importantly, it would enable WPC to lead theindustry towards more productive spectrum use and adoption of uniform technical standards whichwould benefit telecommunications customers.

(b) Strengthening TRAI's regulatory capacity will help establish a more credible, transparent legaland regulatory framework. The existence of an independent regulator within a stable regulatoryframework is likely to encourage higher levels of investment and more rapid development of servicesbeing opened to competition (e.g., basic, cellular, value-added services).

2. Financial (see Annex 5):NPV=US$ million; FRR = % (see Annex 4)

Fiscal Impact:

The project supports elements of the Government's overall telecommunications reform program, therefore itis difficult to identify the fiscal impact associated with the project. Although Government revenues fromtelecom license fees will now be lower than the sometimes infeasible amounts that were bid when thelicenses were first awarded, increased tax revenue resulting from a rapid expansion of private investment inthe sector may be large. Thus, the project is expected to have positive net fiscal impact.

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3. Technical:The project is technically sound. Its design takes into account: (a) lessons learned from similar

operations in other countries and other operations in India, (b) the ongoing dialogue of the Bank with theGovernment on the Country Framework Paper for private sector participation in the infrastructure sectorsincluding telecommunications; (c) work by the GoT and its Spectrum Management Group on a new policyfor telecommunications; (c) discussions with the stakeholders; (d) a number of assessments of thetelecommunications sector in India. The project will provide technical assistance to strengthen the keyregulatory agencies, WPC, TRAI and TDSAT.

4. Institutional:

a. Executing agencies:* Department of Telecommunications (including Wireless Planning and Coordination Wing, and

Telecommunications Engineering Center),* Telecom Regulatory Authority of India, and Telecom Disputes Settlement and Appellate

Tribunal.

b. Project management:A Project Coordination Unit (PCU) will be responsible for the coordination of the overall projectcomponents. The responsibility for project implementation of the DoT component for WPC and TEC willrest with the Project Implementation Units (PIU) for each of the sub-components. The responsibility forproject implementation at TRAI and TDSAT will rest with Project Management Units (PMU).

5. Social:

There are no resettlement and social issues in the implementation of this project.

6. Environmental assessment: Environment Category: C (Not Required)

There are no major environmental issues. This project would assist India in reforming thetelecommunications sector and would not involve any construction or other activity affecting theenvironment. Equipment will be housed in existing buildings and communications will use DoTS' existingnetwork, therefore no digging will be needed. Antennas will be installed, to the extent possible, on existingtowers and/or roof tops. The project will therefore have no adverse impact on the environment and shouldbe given an environmental "C" rating.

7. Participatory Approach (key stakeholders, how involved, and what they have influenced or mayinfluence; if participatory approach not used, describe why not applicable):

a. Primary beneficiaries and other affected groups:

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Participatory Approach Preparation Implementation

a) Government representatives: Line and relevant ministries CON/CON CON/COLand government agencies were fully involved at the outset andwill be closely consulted throughout the project to ensureeffective implementation and that the objectives of the projectare met.

IS/COL IS/CONb) Private sector: The private sector operators/investors andlocal experts in the sector were consulted during the projectdesign. The private sector's views will be further solicitedduring the implementation of the proposed activities.

c) Other donors: Donors in the telecommunications sectorhave been consulted and will continue to be consulted during IS/CON IS/CONthe preparation and supervision.

CON=ConsultationCOL=CollaborationIS=Information Sharing

b. Other key stakeholders:

F. Sustainability and Risks

1. Sustainability:

The concept of sustainability as applied to this project has different aspects. The largest project componentis to modernize the WPC management of the radio spectrum in India. This initiative will be sustainable inas much as the new systems will generate increased revenue due to allocation of frequencies for new serviceproviders and expansion of existing networks to meet customers' demand. Both training and other keyaspects such as maintenance of an accurate user database that links technical and administrative details foreach licensee, and periodic review of NFAP, are addressed in the project. With respect to TRAI, theproject strengthens the regulatory capacity of TRAI. TRAI has made important progress in a short periodof time to establish its credibility through the adoption of excellent consultative mechanisms, and the recentchanges to TRAI Act have strengthened its role. However, TRAIs effectiveness could be undermined dueto lack of financial independence. This risk is moderated by TRAI's ability to levy fees, on regulatedcompanies to cover its operational costs.

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2. Critical Risks (reflecting assumptions in the fourth column of Annex 1):

Riski Risk .t .RkLImiztioNi WiesreA i

From Outputs to ObjectiveGovernment will not maintain its M Despite the uneven progress in reform of thecommitment to sector reform as sector, the Government has shown a sustainedarticulated in NTP 99. commitment to introducing competition and

private investment to the sector, including: itsWTO commitments, supporting the TRAI in itsprice review recommendation in 1999, theissuance of the NTP 99, the separation of DoTand DoTS, in moving to resolve the license feeproblems, and authorization of multipleinternational gateways for ISPs.

Government's efforts to separate DoTs S The Department of Telecom Service has alreadygovernment and service provision been established to separate the servicefunctions and corporatization of DoTS provision functions of DoT. This is a precursorare not realized in a timely manner. to the planned corporatization of the service

provision functions of DoT by 2002. TheGovernment has requested proposals fromconsultants to assist in the corporatization ofDoTS.

Position of WPC is undermined by lack of M Institutional independence of WPC is reinforcedinstitutional independence by the separation of DoTs government and

service provision's already brought into effect bythe establishment of DoTS.

Effectiveness of WPC is undermined by M WPC has access to a large pool of well qualifiedinability to retain skilled staff telecom engineers. The project provides for

training.

TRAI's ability to carry out its mandate is M TRAI has the ability to levy fees on regulatedundermined by lack of resources companies to cover its operating costs.

Furthermore, priority tasks and training arebeing funded under the project. Essential role ofregulator is recognized in NTP 99.

From Components to OutputsProcurement of ASMS is not implemented M This risk is minimized by advance preparationin a timely and effective way. of bid documents with assistance of consultants.

TRAI management is not effective in N TRAI has a good track record in developing andcarrying out consultancies and using issuing consultation papers.consultation papers.

Overall Risk Rating M

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Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)

The most important risk for the project is that the GOI fails to support an effective regulatory framework.This risk is mitigated by the following three factors:

a) Despite the uneven progress in reform of the sector, the Government has shown a sustainedcommitment to introducing competition and private investment to the sector, including: its WTOcommitments, supporting the TRAI in its price review recommendation in 1999, the issuance of theNTP 99, the separation of DoT and DoTS, in moving to resolve the license fee problems (caused inlarge part by overbidding by the private sector), and authorization of multiple international gatewaysfor ISPs.

b) The regulatory framework has been clarified by recent legislation, which has given TRAI clearauthority over interconnection and introduced an appeals system to a specialized body, TDSAT, ratherthan through the High Courts.

3. Possible Controversial Aspects:

There are no controversial issues with respect to social, ecological and pollution aspects under the project.

G. Main Loan Conditions

1. Effectiveness Condition

1. Board Presentation:Expenditure Finance Committee (EFC) clearance. (This clearance has been confirmed via fax

dated May 8, 2000).

2. Effectiveness conditions:

None

2. Other [classify according to covenant types used in the Legal Agreements.]

e WPC to formulate by December 31, 2000 a time bound action plan, satisfactory to the Bank, forstrengthening radio spectrum management and monitoring and implement such plan.

* TRAI to issue by December 31, 2001 consultative papers on (i) model framework for interconnection;(ii) Customer Satisfaction and Performance Monitoring; and (iii) Information Infrastructure.

* TDSAT to submit not later than June 30, 2001 to the Bank a time bound action plan for implementinga program of technical assistance.

* WPC by June 30, 2003 to implement a state-of-the art computerized licensing system and installmodernized spectrum monitoring facilities for effective control and regulation.

* GOI to make available to TRAI, TDSAT, TEC and WPC through DoT the proceeds of the Loan toenable these agencies to carry out activities under the project, in accordance with a time schedule andterms of reference satisfactory to the Bank.

* DoT to maintain the Project Coordination Unit and ensure required staffing during the implementationof the project.

* TRAI to maintain the Project Management Unit and ensure required staffing during theimplementation of the project.

* WPC and TEC to maintain their Project Implementation Units and ensure required staffing during the

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implementation of the project.* DoT PCU will ensure that the quarterly PMRs are furnished to the Bank within forty five days of the

close of the quarter.* Commitment and disbursement will be made for Technical Assistance for TDSAT only after the Bank

is satisfied with the action plan and that adequate financial management arrangements are in place toutilize the funds efficiently.

* The audited Project Financial Statements including separate auditor's opinions for DoT and TRAI,would be submitted to the Bank not later than six months after the close of each fiscal year.

* The audit report on the Special Account (SA) maintained by the Department of Economic Affairs(DEA) would include a summary of SA transactions and the closing balance held by the Reserve Bankof India (RBI). The audit report on SA would be submitted to the Bank not later than six months afterthe close of each fiscal year.

H. Readiness for Implementation

B 1. a) The engineering design documents for the first year's activities are complete and ready for the startof project implementation.

1 1. b) Not applicable.

[ 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.

1 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.

B 4. The following items are lacking and are discussed under loan conditions (Section G):

i. Compliance with Bank Policies

1 1. This project complies with all applicable Bank policies.B 2. The following exceptions to Bank policies are recommnended for approval. The project complies with

all other applicable Bank policies.

Rajesh B. Pradhan Mafilou Jane D. Uy Edwin LimTeam Leader Sector Manager/Director Country Manager/Director

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Annex 1: Project Design SummaryINDIA: TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

Key P~fI fit Critie -"e"AMOy P OhhqtIhes- to" . . -vaIua*¶ CriaI A s

Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission)

Promote enabling Increase in FDI. Government statistics. Stable macroeconomicsenvironment for private environment andcapital and management to Increase in Private government continues itsenter various sectors of the Investment / Total economic reforn program.economy, particularly Investmentinfrastructure.

Project Development Outcome / Impact Project reports: (from Objective to Goal)Objective: Indicators:

Strengthen elements of Inter-circle domestic long DoT/TRAI Statistics Govemment will maintainpolicy and regulatory distance service opened to its commitment to sectorframework to promote competition, latest by 2001. Information provided by reform as articulated in itsprivate investment and Operators Associations National Telecom Policy ofcompetition in the Pro-competitve 1999, including furthertelecommunications sector interconnection regime in Other sources (e.g., liberalization of the sectorin India. place, latest by 2002. Economic Intelligence Unit, and timely corporatization

Consultants reports, of DoTS.industry publications, etc.)

Assign frequencies for Sufficient domestic andear-marked bands within 15 foreign private sectordays of applications, latest interest for investment in theby 2004. sector.

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Output from each Output Indicators: Project reports: (from Outputs to Objective)component:

a) Strengthen Government Implementation of agreed Progress Management Government efforts tofunctions of DoT staff training program, including Reports and Supervision, increase early separation of(including WPC and TEC). study tours. DoT's policy and enterprise

Annual Review of training functions andand staffing during corporatization of DoTS areSupervision in November of successful.each year.

b) Build WPC's capacity Publish National Frequency Progress Management and Position of WPC is notand to manage radio Allocation Plan by 2001. WPC Annual Reports. undermined by the lack ofspectrum optimally institutional independence.

Implement a state-of-the-art WPC Annual Reports and Can recruit and retaincomputerized licensing Statistics on quality of sufficient number of skilledsystem and install service targets and periodic staff.modernized spectrum review of ASMSmonitoring facilities for implementation schedule.effective control andregulation by 2003.

c) Strengthen TRAI and Issuance by December 31, Progress Management Government will maintainTDSAT capacity to regulate 2001 consultative papers on: Reports. its commitment to sectorthe sector. reform and effective

a) Inter-connection in TRAI Annual Report. regulatory framework asmulti-operator environment. articulated in its National

Receipt of consultative Telecom Policy '99.b) Licensing/Spectrum papersManagement for third Availability of adequategeneration mobile. funding to carryout its

mandate.c) Regulatory issue onInternet Telephony andInformation Infrastructure.

d) Equal Ease Access in thecontext of National Longdistance opening.

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Hierarchy of Objectives Key Performance Indicators Monitoring & Evalation Critical Assumptions

Issuance by December 31,2002 consultative paperson:

a) Study of Universalservice fundingmethodology.

b) Regulatory issuesrelating to access by cableoperators.

c) Regulatory issuesrelating to introduction ofIntelligent Network servicesbased on IN platform.

d) Techno-economic issuesrelating to numberportability in amulti-operator environent.

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Project Components I Inputs: (budget for each Project reports: (from Components toSub-components: component) Outputs)DoT Components: Progress Monitoring

Reportsa) Training for DoT US$0.18 millionpolicy/regulatory staff.

b) Training TEC staff. US$0.58 million

c) Training and US$1.94 millionConsultancy for WPC.

d) Equipment - Automated US$62.67 million Procurement is implementedSpectrum Management and in a timely and effectiveMonitoring System. way.

e) Support for PCU/PIU US$0.50 million

TRAI and TDSAT Progress Monitoring TRAI management isComponents: Reports effective in carrying out

consultancies and usingconsultation papers.

a) Training and Consultancy US$4.95 millionTRAI

b) Training and Consultancy US$0.56 millionTDSAT

Front-end Fee US$0.62 million

TOTAL PROJECT COST US$72.00 million

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Annex 2: Project DescriptionINDIA: TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

The objective of this project is to strengthen elements of the policy and regulatory environment in thetelecommunications sector in India to enhance private investment, competition, rural connectivity andcustomer satisfaction. This will be achieved through two distinct but inter-related components, namely:(1) the DoT component and (2) the TRAI/TDSAT component.

By Component:

Project Component I - US$65.87 million

(1) DoT Component

This component includes the following three main sub-components : (A) support to the Department ofTelecommunications (DoT) to strengthen its policy making capacity; (B) strengthen and modernize theWireless Planning and Co-ordinations Wing's (WPC) radio frequency management including financing ofsoftware and hardware equipment and capacity building; and (C) strengthen the TelecommunicationsEngineering Center's (TEC) capacity to review implications of telecommunications developments ontelecommunications sector policy in India.

A. Assistance to DoT

This sub-component will help to strengthen DoT's govermment functions by financing provision ofequipment, consultants' services and training.

B. Assistance to WPC

This sub-component will fund technical assistance to WPC in the field of spectrum management to enableWPC to meet the increased demand for spectrum use in India. Financing will be provided for WPC toprocure state of the art equipment for efficient spectrum management and monitoring equipment to enhanceproductive use of the spectrum as well as enhancing revenues. This sub-component will initiate a long termprogram to establish and codify the process and methodology for regulatory policy development, technicaland allocation planning, and co-ordination and maintenance practices. Funds will be provided for technicaltraining of staff assigned to the operation and maintenance of the advanced tools to be funded by theproject, as well as for the training of new front line supervisors who will be key to the productive use ofthese tools. Also included, will be specialized training courses and seminars for WPC's senior managementfocusing on the importance of effecting a cultural change within WPC so that the leadership role, which theagency must play for the benefit of the entire radio communications industry, is fulfilled.

Specifically, the proposed project will provide the following:

1. Automated Spectrum Management System (ASMS) Overview: The Automated SpectrumManagement System (ASMS) will have a number of work-stations with suitable servers connected inLAN/WAN networks. Suitable networking will be effected to provide data exchange between WPC officesand Monitoring Organization Headquarters as well as with Regional Headquarters offices of MonitoringOrganization in Chennai, Calcutta, Delhi and Mumbai. The software will cater for both technical as wellas operational and administrative functions of WPC Wing.

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2. WPC Computer System and LAN/ WAN Configuration

The WPC Control Center LAN will include dual servers with a large disk capacity to hold the operationaldatabase, digitized topographic model (DTM) database, spectrum management and monitoring applicationprograms and office automation programs. The server configuration will include features to safeguard thedatabase from loss and convenient data backup facilities. Features will also include tools for the SystemManager and Database Administrator to effectively and efficiently manage and maintain the WPC ControlCenter and the associated network. The computer system will provide a Windows-based environment forthe spectrum management, spectrum monitoring and office automation applications programs. Forcustomization of the Spectrum Management and Spectrum Monitoring systems application software, therelational database management system (RDBMS) will include:-

* Administrative, technical and financial operational data for each license, permit or authorization.* Reference data such as the National frequency Allocation Table and list of approved radio equipment

and antenna system.* Geographic information system (GIS) data consisting of the digitized topographic model (DTM) data

available for India and the co-ordination zones in the neighboring countries.

The data communications circuits for the WAN data network will be arranged by the WPC. The Terms ofReference for the Project Management and Engineering consultant includes assistance to the WPC fordesign, procurement and implementation of the overall data communications network. The scope of thesupply for the Automated Spectrum Management System contract includes supply of equipment for thelinks from the fixed monitoring stations to the PSTN and provision of interfaces with the GSM cellularnetworks for the fixed, mobile and transportable system. It is desirable for the communication network toutilize local facilities and supply as much as possible for on going maintenance and support services.

3. Spectrum Management System

The spectrum management system will consist of an integrated suite of application software programs thatwill assist and, to a certain degree, automate the spectrum management process for the WPC. It isimportant to understand that the spectrum management system is a tool with many helpful, labor-savingfeatures to assist the WPC staff to utilize their experience to make decisions, but it is not a system thatfunctions automatically without people being involved. The spectrum management system will interactwith the data in the database and is heavily dependent on the data being complete and correct for thespectrum management application software to produce reliable results.

The spectrum management system requirements comprise computer hardware, software and networkingfacilities as follows:- Computer Hardware, Central (Server) facilities and peripherals- 50 Workstations in WPC, 60 Workstations in Monitoring Headquarters/Stations etc. (largelyindigenous)- Creation of Database and its management- Software for RF Spectrum Management process system application and data transfer software, etc.- Digital terrain map- LAN, WAN

4. Monitoring and Directions Finding System

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The Automated Spectrum Monitoring facility will consist of computer controlled fixed monitoring (10 kHzto 3 GHz) including direction finding , transportable/mobile units covering the frequency bands 20 MHz to3 GHz, microwave mobile monitoring units covering the frequency band of about 1 GHz to about 40 GHz,satellite monitoring facility for the monitoring of transmissions from Geo-stationery, LEOs, and MEOs inthe frequency bands applicable to space radio communication services, and also radio noise survey unitsfor specialized radio-noise related measurements. Mobile units will comprise of computer controlledequipment mounted in racks which will be installed in the specially designed vans. Computer-controlledmonitoring/measurements will help reduce human error, speed up the monitoring tasks in general and alsoenable quick data exchange with the specialized databases. Monitoring system requirements are listed inTable 1 below:

Table 1: Monitoring System Requirements

i. Fixed-cum-mobile monitoring units for monitoring stations, consisting of wide band signal receiver,direction finder for VHF/UHF band, vector analyzer, decoding system and related antennas formonitoring as well DF purposes. 25 units

ii. HF Interferometer (Direction finder and single site locator), consisting of HF Receiver, SpecializedAntenna System and related switching unit, real time programmable decoder, for internationalmonitoring stations. 2 Units

iii. Mobile microwave monitoring units up to 40 GHz consisting of spectrum analyzer, down-converter &LNAs digital signal processing unit, base band analyzer, digital receiver, code analyzer,modulation/vector analyzer, antenna controller, antenna switches and antenna system up to 40 GHz,printer/plotter, etc. 16 Units

iv. Satellite monitoring capability for LEO and GSO up to Ka band (It includes suitable antenna with feed,Low Noise Amplifiers, antenna controller, down converter, digital receiver, code analyzer, spectrumanalyzer, base band demodulator, signal generator, calibrating equipments, printer/plotter, etc.

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The functions of each type of radio spectrum monitoring facility are shown in Table 2 below:

Table 2: Functions of Radio Spectrum Monitoring Facilities

TYPE OF MONITORING FACILITY NATURE OF FUNCTIONS

1. Fixed-cum-Mobile Monitoring Measurements of (i) Frequency, (ii) Field Strengtlh,up to 3 GHz) (iii) Bandwidth, (iv) Modulation identification,

(v) Spectrum occupancy/vacancy,(vi) Location/Direction of transmitting source.

2. Direction Finding (i) Emission identification, (ii) Location/Direction of(HF bands) transmitting source.

3. Microwave Mobile Monitoring Measurement of (i) power flux density, (ii)up to 40 GHz) bandwidth, (iii) modulation identification, (iv)

Spectrum occupancy/vacancy. Another majorapplication being resolution of complex interferenceproblems.

4. Satellite Monitoring up to Ka-band) Checking presence of a space station to verify thecompliance with international commitments,measurement of (i) power flux density, (ii)bandwidth,(iii) modulation identification.

5. Training

The WPC staff will be provided with a comprehensive program of training to be able to efficiently andeffectively utilize the new tools for spectrum management and monitoring and also to operate and maintainthe new system. The program will consist of formal training courses in the factory and on-site includinghands-on experience on:

(a) what the new system wi1l do and how to make it do it (basically the same as learning how to use anew computer program;

(b) how to use the new system to do the tasks that they are responsible to perform for spectrummanagement and monitoring (learning to do the job a new way); and

(c) where to go or who to ask for help when the system doesn't do what they expect or want it to do.

There will also be a program for management staff and senior specialists including participation withthe Project Management and Engineering consultant to:

(a) participate in the Design Review Meeting:

(b) witness factory acceptance tests;

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(c) participate in the installation and checkout of the stations and the checkout of the stations and theintegrated system; and

(d) conduct site acceptance tests.

In addition, there will be a program of capacity building activities involving appropriate study visits,training modules and specialists/ experts.

6. Technical Assistance. Technical Assistance (TA) will be provided to WPC in the following areas:

* WPC will need project management consultancy assistance for the following reasons: firstly, this isa first project of its kind (integrating spectrum monitoring and management; and integrating supplywith installation and commissioning) that WPC would be handling. Second, the size of the projectis very large compared to what WPC has handled in the past. Third, the project is highly criticalfor India, and WPC cannot afford to take any risks that could lead to delays and/or sub-optimalproject implementation. Fourth, the two-stage procurement process to be adopted for realizing thecontracting is a complex process. Lastly, although WPC will set up a project unit, WPC'spersonnel would continue to perform their day to day activities and a dedicated team of industryexperts, working uniquely on the project, will ensure the success of the project. Therefore, theproject provides for a Project Management Consultant to assist in the procurement processincluding contract selection and implementation of ASMS. Terms of Reference for thisconsultancy were finalized during Appraisal, and work is underway.

* Assistance to WPC to strengthen its institutional capabilities by: (i) establishing the process,procedures and methodology for the formulation of technical and allocation policies and carryingout a review of the provisions for the formulation of technical and administrative regulations; and(ii) preparing and implementing programs to improve WPC's technical, managerial andcommercial skills and establishing industry consultative groups which will enable WPC to"educate" the industry participants regarding spectrum use and compliance requirements.

C. Technical Assistance to TEC

This sub-component, which will fund staff training under the project, would include: (i) a technicalcooperation arrangement, involving staff exchanges with relevant foreign regulatory agencies, informationsharing and formal and informal contacts, and advice; (ii) seminars and courses offered on a periodic basisby private firms, universities and associations, and dealing with specialized regulatory issues and generalregulatory methods; (iii) a tour of regulatory agencies in other countries and (iv) in-house training withclassroom facilities in India.

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Project Component 2 - US$5.51 million

(2) TRAI/TDSAT Component

TRAI. This element includes technical assistance to strengthen the Telecom Regulatory Authority ofIndia's (TRAI) ability to regulate the sector. It will include the consultative studies and training. Theconsultative studies will cover priority regulatory issues in regulatory infrastructure, sector liberalization,licensing and interconnection issues, development network and services, quality of service and customersatisfaction, and fostering fair competition. The following consultative studies are currently underway orplanned:

* Detailed Study of Arrangements and Charges for Interconnection links/Access and transport in aMulti-operator environment Best international practice from the techno-economic angle.

* Regulatory Issues relating to introduction of Internet telephony.* Licensing/Spectrum management issues relating to third generation mobile telephone services such

as UMTS/IMT-2000.* Issues relating to Equal Ease of Access (EEA) in the context of NLD opening: Technical

considerations relating to allotment of Carrier Access Codes and Pre-selection.* Study of universal service funding methodology: Best International Practice for modeling of costs

of universal service, and its levy from various operators.* Regulatory issues relating to access service provision by Cable TV Operators as per NTP-99.* Regulatory issues relating to introduction of Intelligent Network services based on IN platform.* Detailed study of techno-economic issues relating to number portability in a multi-operator

environment.* Studies on other regulatory issues to be identified during project implementation.

TDSAT. This element will support implementing a program of technical assistance for strengthening theinstitutional capabilities of TDSAT in the areas of adjudication and dispute resolution.

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Annex 3: Estimated Project Costs

INDIA: TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

Local L ForignwPr ,Iect ost By Compoeent . 8 . ......................... xU m US $milion .. US $rniflion

DoT Component 8.40 51.84 60.24TRAI Component 0.46 4.61 5.07

Total Baseline Cost 8.86 56.45 65.31Physical Contingencies 0.38 2.93 3.31Price Contingencies 0.76 2.00 2.76

Total Project Costs 10.00 61.38 71.38Front-end fee 0.62 0.62

Total Financing Required 10.00 62.00 72.00

Local Forign Total:Project CostBy Category US $milion US $mUikni US $rnilrion

Goods 8.44 54.23 62.67Works 0.00 0.00 0.00Services 1.23 4.65 5.88Training 0.33 2.50 2.83

Total Project Costs 10.00 61.38 71.38Front-end fee 0.62 0.62

Total Financing Required 10.00 62.00 72.00

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Annex 4INDIA: TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

Economic Analysis Summary

The main activity of the project is to strengthen the institutional capacity of the government agenciesresponsible for formulating policies in the telecommunications sector and for regulatingtelecommunications operations. This will be done by supporting these agencies in improving theirinstitutional capacity, systems and procedures, developing staff skills, assisting in the development ofconsultation papers, and implementing modem radio frequency spectrum management and monitoring andinformation systems. Experiences from other countries have shown that an effective, transparent, andaccountable governance of the sector is critical in attracting investment in telecommunicationsinfrastructure. India's experience from the first round of bidding and private operations has demonstratedthat ambiguous licensing terms, changing "rules of the game," and an unclear division of responsibilities insector regulation have critically impeded private investment in the sector.

The project supports elements of the Government's overall telecommunications sector reform program. It isdifficult to provide a quantitative estimate of the response of the private investors to the regulatory andpolicy environment. Furthermore, the benefits of improved telecommunications services are not exclusivelyprivate. Network externalities and the use of information and communications technologies in education,health, and other social services may imply social benefits which need to be taken into account in assessingthe economic impact of telecommunications investment. Some of the benefits associated with the majorproject components would include, inter alia, the following:

(a) Upgrading WPC's radio frequency management through implementation of a modern spectrummanagement and monitoring system and restructuring of WPC's organizational structure andprocedures would bring various benefits. First, it would free up additional frequencies available toprivate operators. Second, it would minimize radio interference and thus improve the quality ofservice. Third, it would accelerate the process of obtaining new frequency licenses. Fourth, this wouldreduce the investment risk of private operators--mainly in wireless services. Most importantly, itwould enable WPC to lead the industry towards more productive spectrum use and adoption of uniformtechnical standards and benefit telecommunications customers.

(b) Strengthening TEC's institutional capacity. By upgrading staff skills, and restructuring itsorganizational structure and procedures, TEC would be in a better position to support the govermmentto design policies and set standards which ensure effective implementation of new technology and thatnew services are introduced in a timely and consumer-friendly manner.

(c) Strengthening TRAI's regulatory capacity will help establish a more credible and transparentregulatory framework. The existence of an independent regulator within a stable regulatory frameworkis likely to encourage higher levels of investment and more rapid development of services which arebeing opened to competition (e.g., basic, cellular, value-added services).

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Annex 5: Financial Summary

INDIA: TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

(US$ Million)

IMPLEMENTATION PERIOD2001 2002 2003 2004 TOTAL

Total Financing RequiredProject Costs

- Investment Costs 7.9 24.6 24.9 14.6 72.0

Total Project Costs 7.9 24.6 24.9 14.6 .72.0

Total Financing Required 7.9 24.6 24.9 14,6 72.0

Financing

- IBRD Loan 6.9 21.2 21.4 12.5 62.0- Government 1.0 3.4 3.5 2.1 10.0

Total Project Financing 7.9 24.6 24.9 14.6 72.0

Assumptions:

Physical contingencies: 5% for equipment and 5% for consultancy services and professional development components.

Price contingencies are based on estimates provided in January 5, 2000 memo.

The project supports elements of the Government's overall sector reform program and it is difficult to identify thefiscal impact resulting from the project.

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Annex 6: Procurement and Disbursement Arrangements

INDIA: TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

Procurement

1 The procurement methods applicable to the various expenditure categories are summarized inTable A.

Procurement methods (Table A)

2. Procurement capacity of the Project Coordinating Unit (PCU) and Project Management Unit (PMU)

The procurement capacity of the PCU and PMU has been assessed and it is agreed that consultants will behired to assist them in drafting bidding documents and evaluating bids as stated in para 3.1 below.

3. Procurement Planning

Prior to issuance of any invitations to pre-qualify for bidding or bid for contracts, the proposedprocurement plan for the project shall be furnished to the Bank for its review and approval, in accordance with theprovisions of paragraph 1 of Appendix I to the Guidelines. Procurement of all goods shall be undertaken inaccordance with procurement plan as shall have been approved by the Bank and with the provisions of saidparagraph 1. A procurement plan compiled by the Borrower was reviewed and agreed at appraisal.

3.1 Advanced Procurement

In order to accelerate project implementation and to minimize payments of commitment charges,advanced procurement under Paragraph 1.9 of the Guidelines will be adopted for hiring of consultants, followingfixed budget selection, (a) for the preparation of bidding documents for the automated spectrum managementsystem, (ASMS) that need to be completed by May 31, 2000 and (b) for undertaking priority studies to meetTRAI's commitment. Retroactive financing up to a maximum of 10% of the loan will be allowed for the above twoitems.

3.2 Goods and Equipment ($ 62.6M)

3.2.1 The project supports the procurement of the automated spectrum management equipment under the WPCcomponent.

3.2.2. International Competitive Bidding (ICB): ($ 62.OM)

Contracts for the purchases of Goods and Equipment valued at $200,000 or more would be procuredthrough International Competitive Bidding (ICB) procedures in accordance with Bank Procurement Guidelines,January 1995, revised January and August 1996, September 1997 and January 1999. Automated SpectrumManagement System ($62.OM) would be procured through ICB. Domestic preference in accordance withAppendix 2 of Bank's Procurement Guidelines will be applicable to goods manufactured in India.

3.2.3 National Competitive Bidding Provisions

With reference to the procedures for undertaking procurement on the basis of National CompetitiveBidding (NCB) referred to in Part C-I of Section I, Schedule 1, of the Project Agreement, all NCBcontracts shall be awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelinesfor Procurement under IBRD Loans and IDA Credits published by the Bank in January 1995 and revised inJanuary and August 1996, September 1997 and January 1999 (the Guidelines). In this regard, all NCB

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contracts to be financed from the proceeds of the Credit/Loan shall follow the following procedures:

* Only the model bidding documents for NCB agreed with the Government of India Task Force(and as amended from time) shall be used for bidding;

* Invitations to bid shall be advertised in at least one widely circulated national daily newspaper,at least 30 days prior to the deadline for the submission of bids;

* No special preference would be accorded to any bidder when competing with foreign bidders,state-owned enterprises, small-scale enterprises or enterprises from any given state.

* Except with the prior concurrence of the Bank/Association, there shall be no negotiation ofprice with the bidders, even with the lowest evaluated bidder;

* Except in cases of force majeure and/or situations beyond control of the Borrower, extensionof bid validity shall not be allowed without the prior concurrence of the Bank/Association (a)for the first request for extension if it is longer than eight weeks; and (b) for all subsequentrequests for extension irrespective of the period.

* Re-bidding shall not be carried out without the prior concurrence of the Bank/Association.The system of rejecting bids outside a pre-determined margin or " bracket " of prices shall notbe used.

* Rate contracts entered into by DGS&D would not be acceptable as a substitute for NCBprocedures. Such contracts would be acceptable for any procurement under National Shoppingprocedures.

3.2.4 Direct Contracting: ($0.6M)

CD ROMs, propriety software, books, audio and video cassettes aggregating to US$0.6M may be procuredon direct contracting procedures in accordance with Paragraph 3.7 of the Guidelines.

3.3 Bidding Documents: Standard Bidding Documents as compiled by the Government of India Task Forceand agreed with the Bank will be used for all ICB contracts. Contracts for supply goods and equipment will be theresponsibility of the Project Coordination Unit (PCU) duly assisted by the consultant employed by WPC.

4. Technical Assistance. Studies and Training ($8.7M)

4.1.1. Technical Assistance and Consultancy Services ($5.9M) would be contracted following the QCBS, CQand fixed budget procedures (Table B) in accordance with Bank Guidelines for Selection and Employment ofConsultants by World Bank Borrowers, January 1997, revised September 1997 and January 1999. The estimatednumber of contracts would be 21, ranging from US$100,000 to US$1,000,000, and 5 contracts between US$50,000to US$100,000.

4.1.2 Training for DoT. WPC and TEC ($1 .5M): Training of staff at these implementing agencies will be atselected institutions and universities. The method of procurement shall be based on consultants qualification andprocured directly as it does not lend to competitive bidding. This training program will be subject to clearancewith the Bank on course content, number and details of personnel to be deputed and course fee. The Bank willreview annually, beginning in November 2000, the training program containing names of candidates, costsestimates, courses, period of training and institutions. Domestic study tours would be arranged by the concernedimplementing agencies.

4.1.3 Training for TRAI and TDSAT ($1.3M): Training of staff at TRAI and TDSAT will be at selectedinstitutions and universities. The method of procurement shall be based on consultants qualifications/sole sourcecontracting on basis of training plan and cost estimates satisfactory to the Bank. Domestic study tours would bearranged by TRAI and TDSAT.

5. Prior review thresholds are given in Table B.

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5.1 Prior Review

5.1.1 Goods and Eguipment

All ICB packages irrespective of value would be subject to prior review by the Bank.

5.1.2 Technical Assistance. Studies and Trainine

The following would be subject to prior review by the Bank:

* Terms of Reference for all consultancies;* Contracts for the employment of consulting firms estimated to cost more than $100,000;* Contracts for the employment of individuals estimated to cost more than $50,000;* All single source selection of consulting finms/organizations;* Amendments to contracts for the employment of consulting firms raising the contract value to $100,000 or

above;* Assignments of a critical nature, as reasonably determined by the Bank; and* Amendments to contracts for the employment of individual consultants raising the contract value to

$50,000 or above.

5.2 Post Review

5.2.1 Goods and Eauigments

The contracts below the prior review threshold for Goods and equipment shall be subject to post review asper procedure set forth in paragraph 4 of Appendix I of the Bank Guidelines.

5.2.2 Technical Assistance. Studies and Trainin2

Contracts for the employment of consulting firms estimated to cost less than $100,000 and contracts forthe employment of individuals estimated to cost less than $50,000 shall be subject to post review provided that theTORs have been cleared with the Bank.

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Table A: Project Costs by Procurement Arrangements(US$ million equivalent)

Procurement MethodExpenditure Category tCB NCB er N.B.F. Total Cost

1. Works 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

2. Goods 62.05 0.00 0.60 0.00 62.65(53.73) (0.00) (0.50) (0.00) (54.23)

3. Services 0.00 0.00 5.39 0.50 5.89(0.00) (0.00) (4.65) (0.00) (4.65)

4. Training 0.00 0.00 2.84 0.00 2.84(0.00) (0.00) (2.50) (0.00) (2.50)

5. Front-end fee 0.00 0.00 0.62 0.00 0.62

______________ (0.00) (0.00) (0.62) (0.00) (0.62)

Total 62.05 0.00 9.45 0.50 72.00(53.73) (0.00) (8.27) (0.00) (62.00)

' Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies

2' Includes goods to be procured through national shopping, consulting services, services of contracted staffof the project management office, training, and technical assistance services.

Miscellaneous items includes training and visits.

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Prior review thresholds (Table B)(See next page.)

6. Procurement Information

Procurement Information will be collected and recorded as follows:

* Prompt reporting of contract award information by Project Coordination Unit (PCU) of DoT.

* Comprehensive semi-annual reports by PCU:

* revised cost estimates for individual contracts and total cost;* revised timings of procurement actions including advertising, bidding, contract award and completion

time for individual contracts; and* compliance with aggregate limits on the specified methods of procurement.

Completion report by the borrower within three months of the credit closing date.

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Table B: Thresholds for Procurement Methods and Prior Review'

Contiabt VOlWe -Cont-Ect. Subject toj .Threshold -- :urement Prior RevewExpenditure Category _ _ _

1. Works NA NA NA

2. Goods $200,000 and above ICB Prior review (62.0)

Below $200,000 Direct Contracting Post review (0.6)3. Services Consulting Firms: QCBS + short list Prior review (4.4) as per

$200,000 and above paragraphs 1, 2 [other thanthe third subparagraph ofparagraph 2(a)] and 5 of

Appendix 1 to theConsultants Guidelines.Issue advertisement in

UNDP to get expressions ofinterest; technical

evaluation receives Bank'sno-objection before opening

financial proposals.

Between $100,000 and QCBS + short list Prior review (1.0) as per$200,000 paragraphs 1, 2 [other than

the second subparagraph ofparagraph 2(a)] and 5 ofAppendix 1 to Consultant

Guidelines. Technicalevaluation to be reviewedby Bank before opening

financial proposals.

Individual Consultants Based on consultants Prior review (0.5) TheBetween $50,000 and qualifications qualifications, experience,

$100,000 TOR and terms ofemployment of theconsultants shall be

reviewed.

4. Training & Study Training/Study tours Consultants qualifications Prior Review (2.8)Tours ____0_62_

5. Front-end Fee (0.62)

Total value of contracts subject to prior review: 95%

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Overall Procurement Risk Assessment

Average

Frequency of procurement supervision missions proposed: One every six months (includes specialprocurement supervision for post-review/audits)

Thresholds generally differ by country and project. Consult OD 11.04 "Review of ProcurementDocumentation" and contact the Regional Procurement Adviser for guidance.

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Disbursement

Allocation of loan proceeds (Table C)

Disbursements will be made for goods and services that are eligible for IBRD financing.

Table C: Allocation of Loan Proceeds

Expenditure Categy Amount in US$million Financing PerntageGoods 50.00 100% of foreign of expenditures, 100%

of local expenditures (ex-factory cost)

and 80% of local expenditures for otheritems procured locally

Consultants' services 4.50 100%Training and Study Tours 2.50 100%

Unallocated 4.38

Total Project Costs 61.38 _

Front-end fee 0.62 Amount due under Section 2.04 of theAgreement

Total 62.00

Use of statements of expenditures (SOEs):

When the existing disbursement procedures are used, disbursements would be made againstWithdrawal Applications for: (a) direct payments; (b) reimbursement of expenditures with fulldocumentation; and (c) reimbursement of expenditures against Statements of Expenditure (SOEs).IDA would disburse against SOEs for the following expenditures: (a) Contracts of less thanUS$200,000 equivalent for goods; (b) Contracts of less than US$100,000 equivalent for consultingfirms. (c) Contracts of less than US$50,000 equivalent for individual consultants and all training andstudy tours.

- 43 -

Special account:A Special Account would be maintained in the Reserve Bank of India; and would be operated by theDepartment of Economic Affairs (DEA) of Government of India (GOI). The Special Account would beoperated in accordance with the Bank's operational policies:

(a) When existing disbursement procedures are used, the authorized allocation of the SpecialAccount would be US$3.0 million. The Special Account would be replenished monthly or when 20percent of the advance to the Special Account has been utilized, whichever occurs first.

(b) When disbursements are based on PMRs, the authorized allocation of the Special Accountwould be US$6.0 million. This represents 6 months of peak expenditure. The Special Accountwould be replenished quarterly and be based on the next 6 months funds forecast.

The disbursement would initially be made according to the traditional method (reimbursement withfull documentation and against statements of expenditure. The project will produce the full set of PMRsfrom the beginning and there will be a determination from moving to PMR-based disbursement within 12months of effectiveness.

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Annex 7: Project Processing Schedule

INDIA: TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

Prolect $anneule -I d AcWal

Time taken to prepare the project (months) 9 24First Bank mission (identification) 04/20/98 04/20/98Appraisal mission departure 09/15/98 03/15/99Negotiations 11/01/98 04/24/2000Planned Date of Effectiveness 03/08/98

Prepared by:

Department of Telecommunications and Telecom Regulatory Authority of India

Preparation assistance:

Retroactive Financing

Bank staff who worked on the project included:

Name SpeqialityRajesh Pradhan Task Team Leader and Senior Financial AnalystPeter Smith Principal Telecommunications Policy SpecialistA. Shanmugarajah Principal Telecommunications EngineerBjom Wellenius Telecommunications AdvisorMohammad Mustafa Principal Financial AnalystClive Harris Senior EconomistSanjay Vani Senior Financial Management SpecialistNatarajan Raman Principal Procurement SpecialistKashmira Daruwalla Procurement AnalystCatherine Doody Program Assistant

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Annex 8: Documents in the Project File*

INDIA: TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

A. Project Implementation Plan

The Borrower is updating the Project Implementation Plan.

B. Bank Staff Assessments

* Identification Mission Back-to-Office Report, Aide Memoire and TORs, December 19, 1997* Preparation Mission Back-to-Office Report, TORs and Aide Memoire, May 12, 1998* India 1998 Macro Economic Update: Reformingfor Growth and Poverty Reduction, June 30, 1998* Pre-appraisal mission Back-to-Office Report, Aide Memoire, October 28, 1998* Suggestions on GoT's Draft Discussion Paper for New Telecom Policy 1999, electronic mail Feb. 5,

1999* Appraisal mission Back-to-Office Report, Aide Memoire, April 8, 1999

C. Other

3 TRAI, Telecom Pricing Consultation Paper on Concepts, Principles, and Methodologies, November4, 1997.

* TRAI, The Telecommunications Tariff Order 1999, March 9, 1999.* The Industrial Credit and Investnent Corporation of India, Draft Report to the DoT on State Cellular

Projects -Assessment of Viability, April 1998* Phillips Tarifica, The Impact of Changing International Telecommunications Environment for India,

Draft Final Report, March 1998* GOI, National Task Force on Information Technology and Software Development, Information

Technology Action Plan,July 4, 19983 TRAI, Consultation Paper on Regulations for Meeting the Funding Requirements of the Telecom

Regulatory Authority of India, June 15, 1998* COAI, Towards a Resolution of Cellular Telecom Issues, November 6, 19983 Group on Telecommunications, Draft Discussion Paper for New Telecom Policy 1999, February

1999.3 New Telecom Policy 1999, March 26, 1999.* TRAI (Amendment) Act, 2000.*Including electronic files

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Annex 9: Statement of Loans and CreditsINDIA: TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

Difference between expectedand actual

Original Amount in US$ Millions disbursements

Project ID FY Borrower Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd

P045051 1999 India 2ND NATL HIV/AIDS CO 0.00 191.00 000 184.47 5 05 0.00

P049301 1997 India A P. EMERG. CYCLONE 50.00 100.00 000 96.51 7271 000

P010407 1993 India ADP-RAJASTHAN 0.00 106.00 000 1440 1735 000P010503 1995 India AGRICHUMANRESDEVT 0.00 5950 0.00 22.43 2212 000

P010489 1995 India AP 1ST REF. HEALTH S 0.00 133.00 000 47.72 14.90 000

P049385 1998 India AP ECON RESTRUCTURIN 301.30 241.90 0 00 409.04 40.41 0.00

P010449 1994 India AP FORESTRY 0.00 7740 0.00 9.02 8.25 0.00

P035158 1997 India AP IRRIGATION III 175.00 150.00 0 00 239.84 91.40 0.00P049537 1999 India AP POWERAPLI 210.00 0.00 000 154.90 21.90 0.00

P010522 1995 India ASSAM RURAL INFRA 0.00 126 00 0 00 89.55 49.99 00P010408 1993 India BIHAR PLATEAU 0.00 117.00 000 30.28 3688 0.00

P010455 1994 India BLINDNESS CONTROL 0.00 117.80 0.00 7152 44.47 0.00P010480 1996 India BOMBAY SEW DISPOSAL 167.00 25.00 0.00 104.58 99.00 0.00

P043310 1999 India COAL ENV & SOCIAL MITIGATION 0.00 93.00 000 40.19 2418 0.00

P009979 1998 India COAL SECTOR REHAB 530.00 2.00 15.00 309.34 83.92 8392

P009870 1994 India CONTAINERTRANSPORT 94.00 000 0.00 92.07 6207 3786

P010464 1995 India DISTRICT PRIMARY ED 0.00 260.30 0 00 103 00 53.06 0 00

P035821 1999 India DPEP 11 0 00 425.20 0 00 226 83 -2.80 0.00

P038021 1998 India DPEP III (BIHAR) 0.00 152.00 0.00 129.52 47 49 0 00P036062 1997 India ECODEVELOPMENT O.O 2800 0 00 2004 8 03 0.00

P043728 1997 India ENV CAPACITY BLDG TA 0.00 5000 0 00 41.13 19.99 0 00P010563 1995 India FINANCIAL SECTOR DEV PROJ. (FSDP) 700.00 0.00 301 30 97.03 0.00 0.00

P010448 1994 India FORESTRY RESEARCH ED 0.00 47.00 0.00 16.82 35.24 11.27P035160 1998 India HARYANA POWER APL-I 60.00 0.00 000 28.09 16.06 0.00P010485 1996 India HYDROLOGY PROJECT 0.00 142.00 000 79.58 65.59 0.00

P009977 1993 India ICDS II (BIHAR & MP) 000 194.00 0.00 99.50 100.83 96.84P039935 1996 India ILFS-INFRAS FINANCE 200.00 5.00 0.00 178.79 150.70 0.00

P010463 1995 India INDUS POLLUTION PREV 143.00 25.00 1.64 141.63 11780 1.96

P010418 1993 India KARNATAKAWS & ENV/S 0.00 92.00 0.00 1.57 217 0.00

P049477 1998 India KERALA FORESTRY 0.00 39.00 0.00 30.24 -0 47 0.00P010461 1995 India MADRAS WAT SUP II 275.80 000 189.30 3671 20173 191

P050651 1999 India MAHARASH HEALTH SYS 0.00 13400 0.00 12849 130.89 000

P010511 1997 India MALARIACONTROL 0.00 164.80 000 13942 51.64 000P009946 1992 India NAT HIGHWAYS II 153.00 153.00 000 8738 9924 6.58

P009869 1989 India NATHPA JHAKRI HYDRO 485.00 0 00 0 00 83 89 83.89 -6.65

P010561 1998 India NATLAGRTECHNOLOGY 96.80 100.00 0.00 187.19 45.37 0.00

P009982 1990 India NORREGTRANSM 485.00 0.00 35.00 106.25 141.25 0.00P010496 1998 India ORISSA HEALTH SYS 0.00 7640 000 72.28 12.01 0.00

P035170 1996 India ORISSA POWER SECTOR 350.00 0.00 000 271.72 129.22 0.00P010529 1996 India ORISSAWRCP 0.00 290.90 0.00 131.41 2117 0.00

P010416 1993 India PGC POWER SYSTEM 350.00 0.00 75.00 37.46 111 07 0 00

P010457 1994 India POPULATION IX 0.00 8860 0.00 4282 25.41 0.00

P009963 1992 India POPULATION VIII 0 00 79.00 0 00 45.14 45.87 000P045050 1999 India RAJASTHAN DPEP 0.00 8570 000 81.27 4.69 000

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Difference betweenexpected

Original Amount in US$ Millions and actualdisbursements

Project ID FY Borrower Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd

P010410 1993 India RENEWABLE RESOURCES 75.00 115.00 0.00 64.67 94.26 0.00

P010531 1997 India REPRODUCTVE HEALTHI 0.00 248.30 000 192.18 74.52 29.31

P009959 1993 India RUBBER 0.00 92.00 3661 13.79 5070 -2.71

P044449 1997 India RURAL WOMEN'S DEVELOPMENT 0.00 1950 000 1651 10.24 0.00

P009921 1992 India SHRIMP & FISH CULTUR 0.00 85.00 50.02 15.05 62.95 14.34

P035825 1996 India STATE HEALTH SYS 11 0.00 350.00 0.00 204.33 127.96 0.00

P009995 1997 India STATE HIGHWAYS l(AP) 350.00 0.00 0.00 287.13 57.13 0.00

P045600 1997 India TA ST'S RD INFRA DEV 51.50 0.00 0.00 21.64 13.14 14.14

P010476 1995 India TAMIL NADU WRCP 0.00 282.90 0.00 153.65 99.47 0.00

P050637 1999 India TN URBAN DEVII 105.00 0.00 0.00 90.50 8.90 0.00

P010473 1997 India TUBERCULOSIS CONTROL 0.00 142.40 0.00 127.49 75,26 0.00

P050638 1998 India UP BASIC ED If 0.00 59.40 0.00 14.91 1.87 0.00

P009955 1993 India UP BASIC EDUCATION 0.00 165.00 0.00 9 83 -2.54 0.00

P035824 1998 India UP DIVAGRC SUPPORT 79.90 5000 0.00 119.07 36,09 0.00

P050667 2000 India UP DPEP III 0.00 182.40 000 178.31 0,00 0.00

P035169 1998 India UP FORESTRY 0.00 52.94 0 00 38.51 6.81 0.00

P010484 1996 India UP RURAL WATER 59.60 000 000 44.80 19.10 0.00

P050646 1999 India UP SODIC LANDS11 0.00 194.10 000 18304 19.60 0.00

P009961 1993 India UP SODIC LANDS RECLA 0.00 54.70 0 00 2 42 1.26 0.00

P009964 1994 India WATER RES CONSOLID H 0.00 258.00 0.00 113.96 80.62 0.00

P035827 1998 India WOMEN & CHILD DEVLPM 0.00 300.00 0 00 289.47 3.02 0.00

P041264 1999 India WTRSHD MGMT HILLS II 85.00 50.00 000 124.53 -0.07 0.00

Total: 5631.90 6843.14 703.87 6830.52 3182.90 288.17

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INDIASTATEMENT OF IFC's

Held and Disbursed Portfolio

In Millions US Dollars

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic1989 AEC 7.91 0.00 0.00 0.00 7.91 0.00 0.00 0.001992/93 Arvind Mills 0.00 10.55 0.00 0.00 0.00 10.55 0.00 0.001997 Asian Electronic 0.00 5.50 0.00 0.00 0.00 5.50 0.00 0.001984/91 Bihar Sponge 0.00 0.05 0.00 0.00 0.00 0.05 0.00 0.001997 CEAT 20.00 0.00 0.00 0.00 20.00 0.00 0.00 0.001990/92 CESC 22.50 0.00 0.00 50.25 22.50 0.00 0.00 50.251993/95/97 Centurion Bank 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.001994 Chowgule 12.63 4.58 0.00 19.38 12.63 4.58 0.00 19.381994 DLF Cement 7.70 4.94 0.00 9.38 7.70 4.94 0.00 9.381997 Duncan Hospital 7.00 0.00 0.00 0.00 7.00 0.00 0.00 0.001997 EEPL 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.001986 EXB-City Mills 0.48 0.00 0.00 0.00 0.48 0.00 0.00 0.001986 EXB-STG 0.31 0.00 0.00 0.00 0.31 0.00 0.00 0.001995 EXIMBANK 13.64 0.00 0.00 0.00 13.64 0.00 0.00 0.001995 GE Capital 7.50 5.00 0.00 0.00 7.50 4.39 0.00 0.001986/92/93/94 GESCO 0.00 1.86 0.00 0.00 0.00 1.86 0.00 0.001988/94 GKN Invel 0.00 0.33 0.00 0.00 0.00 0.33 0.00 0.001994/97 GVK 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001994/98 Global Trust 5.00 0.00 5.00 0.00 5.00 0.00 5.00 0.00

Gujarat Ambuja 0.00 7.78 0.00 0.00 0.00 7.78 0.00 0.001994 HDFC 0.00 1.19 0.00 0.00 0.00 1.19 0.00 0.001978/87/91/93 HOEL 0.00 0.28 0.00 0.00 0.00 0.28 0.00 0.001990 Hindustan 1.71 0.00 0.00 0.00 1.71 0.00 0.00 0.001987 LAF 0.00 6.50 0.00 0.00 0.00 0.62 0.00 0.001998 ICICI-IFGL 0.00 0.14 0.00 0.00 0.00 0.14 0.00 0.001990/94 ICICI-SPIC Fine 0.00 2.79 0.00 0.00 0.00 2.79 0.00 0.001990/95/00 IDFC 0.00 15.46 0.00 0.00 0.00 15.46 0.00 0.001998 IL & FS 0.00 3.12 0.00 0.00 0.00 3.12 0.00 0.001990/93/94/98 IL&FS Venture 0.00 0.60 0.00 0.00 0.00 0.60 0.00 0.001992/95 ITW Signode 0.00 0.46 0.00 0.00 0.00 0.46 0.00 0.001981/86/91/93/96 India Direct Fnd 0.00 7.47 0.00 0.00 0.00 5.97 0.00 0.001996 India Equipment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001986/93/94/95 India Lease 0.00 0.30 0.00 0.00 0.00 0.30 0.00 0.001984/90/94 Indo Ramna 0.00 2.14 0.00 0.00 0.00 2.14 0.00 0.001993/94/96 Indus II 0.00 5.00 0.00 0.00 0.00 4.00 0.00 0.001996 Indus Mauritius 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001996 Indus VC Mgt Co 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.001992 Info Tech Fund 0.00 0.64 0.00 0.00 0.00 0.64 0.00 0.001992 Ispat Industries 0.00 3.64 0.00 0.00 0.00 3.64 0.00 0.001992/94/97 JSB India 0.00 0.84 0.00 0.00 0.00 0.84 0.00 0.001989/95 M&M 0.00 0.62 0.00 0.00 0.00 0.62 0.00 0.001981/90/93 MUSCO 0.00 0.22 0.00 0.00 0.00 0.22 0.00 0.001964/75/79/90 Moser Baer 16.45 8.00 0.00 0.00 8.84 8.00 0.00 0.00

NICCO-UCO 5.00 0.00 0.00 0.00 2.00 0.00 0.00 0.001996/99

1992/96/97

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Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic

1997 Owens Corning 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.00

1981 Pennar Steel 0.0G 0.07 0.00 0.00 0.00 0.07 0.00 0.00

1995 Prism Cement 13.13 5.02 0.00 9.00 13.13 5.02 0.00 9.001995198 RCHL 0.00 2.95 0.00 0.00 0.00 2.95 0.00 0.00

1995 Rain Calcining 19.25 5.46 0.00 0.00 19.25 5.46 0.00 0.00

1997 SAPL 0.00 0.07 0.00 0.00 0.00 0.07 0.00 0.00

1992 SKF Bearings 0.94 0.00 0.00 0.00 0.94 0.00 0.00 0.00

1997 SREI 15.00 3.00 0.00 ().00 15.00 3.00 0.00 0.00

1995 Sara Fund 0.00 6.05 0.00 0.00 0.00 4.33 0.00 0.00

2000 Sundaram Finance 0.00 2.29 0.00 0.00 0.00 1.14 0.00 0.00

1998 TCW/ICICI 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00

1990 TDICI-VECAUS II 0.00 1.23 0.00 0.00 0.00 1.23 0.00 0.001981/86/89/92/94 TISCO 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1989/90/94 Tata Electric 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1988/90/92 Tata Telecom 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00

1994 Taurus Starshare 0.00 3.99 0.00 0.00 0.00 3.99 0.00 0.00

1987/88/90/93 Titan Industries 0.00 0.52 0.00 0.00 0.00 0.52 0.00 0.00

1989 UCAL 0.00 0.63 0.00 0.00 0.00 0.63 0.00 0.00

1996 United Riceland 10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1991/96 VARUN 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1997 WIV 0.00 5.00 0.00 0.00 0.00 1.63 0.00 0.00

1997 Walden-Mgt India 0.00 0.02 0.0() 0.00 (.00 0.02 0.00 0.00

Total Portfolio: 221.15 146.35 5.00 88.01 200.54 131.12 5.00 88.01

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic

2000 APCL 7100.00 0.00 1900.00 0.00

1999 Carraro 10000.00 0.00 0.00 0.00

2000 Chinai Chemicals 1000.00 0.00 0.00 0.001999 Sarshatali Coal 30000.00 0.00 5000.00 0.00

Total Pending Commitment: 48100.00 0.00 6900.00 0.00

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Annex 10: Country at a Glance

INDIA: TELECOMMUNICATIONS SECTOR REFORM TECHNICAL ASSISTANCE PROJECT

POVERTY and SOCIAL South Low.India Asia income Development diamond

1998Population. mid-year (millions) 979.7 1,305 3.536 Life expectancyGNP per capita (Atlas method, USS) 440 430 520GNP (Atlas method., US$ billions) 427.4 560 1,842

Averaqe annual growth, 1992-98

Population (%J 1.7 1.9 1.7Labor force t%) 2.0 2.3 1.9 GNP Grossper primaryMost recent estimate (latest year avaiable, 1992-98) capita enrollment

Povertv (% of poPulation below nationat DovertY line) 35Urban population (% of total population) 28 28 30Life expectancv at birth (years) 63 62 63Infant mortality (per 1,000 live births) 70 75 68Child molnutritito (% of children under 5) 53 5S 36 Access to safe waterAccess to safe water (51 of population) S1 77 73Illiteracy (% of Population aqe 15) 44 47 31Gross primarv enrollment (% of school-sae population) 100 100 107 India Low-income group

Male 109 t10 112Fvnmale 90 90 102

KrY ECONOMIC RATIOS and LONG-TERM TRENDS

1978 1g88 1997 1998 - -- Economic ratios-

GP' (US$ billions) 134.6 289.7 407,9 419.7Gross domestic nvestmentGDP 22.3 24 3 23,4 21.6Exportsofnoodsand serviceslGOP 6.2 6.3 11.1 11.3 TradeGrossdomesticsavings/GOP 21.1 21.4 19,9 19.1Gross national savinqsIGDP 21,9 21.2 21.9 20,7

Current account balance/GDP -0.1 -2,4 -1.4 -1.0 Doesticinterest pavmentslGDP 0.3 0.7 0,B 1 . 1 S InvestmentTotal debt/GDP 12.2 20.9 23,1 23.4 Savings Ie nTotal debt servicelexports 13,0 28.5 18.6 17.0Present value of debVGDP .. .. 18 7Present value of debWexports .. .. 130.3

Indebtedness1978-8S 1988-98 1997 1998 19§8-02

(averaoe annual growtl)GOP 50 5.5 4.6 6.3 6.2 India Low-incomegroupGNP per capita 2 6 3.7 2,9 4.3 4.4Exports of qoods and services 4.2 11.9 6.2 4,5 7 0

STRUCTURE of the ECONOMY1978 1988 1997 1998 Growth of investment and GDP (%)

(% of GDP)Agriculture 38.8 32.8 28.0 29.1 30Industry 24.2 26.8 27.1 25.7 20

Manufacturinq 16.5 16.4 16.6 15.6 1 tServices 37.0 40.4 44.9 45.2 n

Private consumption 69.3 66,4 68.8 69.9 -10 t 94 95 96 97 98General government consumption 9.6 12.3 11.3 11.0 - GDI ; GDPImports of qoods and services 7.4 9.3 14.5 14.0

1978-88 1988-98 1997 1998 Growth of exports and imports I%)(average annual growth)Aqriculture 2.8 3.1 -1.9 7.2 40Industrv 5.9 6.4 5.9 3.9 30 A

Manufacturing 6.1 6.9 4.0 3.6 I fServices 6.2 7.3 9.0 8.3 20

Private consumption 5.1 5.6 1.6 10.3 10General qovernment consumotion 7.7 4.6 10.6 6.5 oGross domestic investment 4.8 5.6 13.1 -0.1 93 94 95 96 97 9Simports of Goods and services 7.3 9.9 11.7 10.9 Exports t rmpostsGross national product 4.9 5.6 4.7 6.3

Note: 1998 data are preliminary estimates.

- The diamonds show four kev indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete.

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India

PRICES and GOVERNMENT FINANCE1978 1988 1997 1998 Inflation (%)

Domestic prices(% change) 1-Consumer prices .. 9.3 7.0 7.0 aImplicit GDP deflator 2.5 8.1 6.4 9.4

Government finance(% of GDP, includes current grants) oCurrent revenue .. 23.6 22.7 22.1 93 94 95 96 97 98

Current budget balance .. 1.0 -0.2 0.0 GDP deflator ! CPIOverall surplus/deficit .. -10.0 -8.0 -9.3

TRADE

(USS millions) 1978 1988 1997 1998 Export and import levels (US$ mill.)Total exports (fob) .. 13,970 35.013 34,298 50,0D

Tea .. 421 505 482Iron .. 465 476 359 40,000Manufactures .. 10,727 27,348 27,530 30,000

Total imports (cif) .. 19,497 41,484 47544 20!| |

Food .. 1,203 1,845 2,647 IFuel and energy .. 3,009 8,217 6,435 10.0Capital goods .. 4,803 9,796 9,497

92 93 94 95 50 97 5Export price index (1995=100) .. 111 100 96Import price index (1995=100) .. 88 94 90 e Exports U ImportsTerms of trade (1995=100) . 125 106 106

BALANCE of PAYMENTS

(US$Smillions) 1978 1988 1997 1998 Current account balance to GOP (%)

Exports of goods and services 8,380 18,213 45,109 47,484Imports of goods and services 9,900 26,843 59,297 58,565Resource balance -1,520 -8,630 -14,188 -11,081

Net income 223 -1,056 -3,166 -3,544Netcurrenttransfers 1,150 2,654 11,830 10,280 1

Current account balance -147 -7,032 -5,524 -4,345

Financing items (net) 147 5,600 9,120 8,721Changes in net reserves 0 1,432 -3,596 -4,376 2

Memo:Reserves including gold (US$ millions) 7,299 5,467 30,314 33,206Conversion rate (DEC, local/US$) 8.2 14.5 37.2 42.0

EXTERNAL DEBT and RESOURCE FLOWS1978 1988 1997 1998

(US$ millions) Composition of 1998 debt (US$ mill.)Total debt outstanding and disbursed 16,466 60,477 94,404 98,232

IBRD 646 5,590 8,138 7,993 G: 4,329 A: 7,993IDA 3,972 12,019 17,912 18,562

Totaldebtservice 1,309 5,945 10,832 10,001 |lBRD 126 777 1,411 1,627 / :18,562IDA 38 179 381 1,372

Composition of net resource flows F: 39,448 C 298Official grants 449 406 379 307Official creditors 603 2,645 -312 1,727 jD: 3,965Private creditors -10 5,741 2,840 -1,433Foreign direct investment 0 287 3,557 2,462 |Portfolio equity 0 0 1,828 -61 E 23,647

World Bank programCommitments 1,829 2,645 1,755 2,055 A -13RD E - BilateralDisbursements 507 2,472 1,372 1,421 B - IDA D - Other multilateral F - PrivatePrincipal repayments 84 383 1,071 2,193 C - MF G- Short-termNet flows 423 2,088 302 -772Interest payments 80 572 721 806Net transfers 342 1,516 420 -1,578

Development Economics 3128100

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