India - Tamil Nadu Water Supply and Sanitation Project

Document of The World Bank FOR OFFICIAL USE ONLY F ILE COPFY~ Report No. P-3741-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 35.3 MILLION AND A PROPOSED IDA SPECIAL FUND CREDIT OF SDR 35.3 MILLION TO INDIA FOR THE TAMIL NADU WATER SUPPLY AND SANITATION PROJECT March 2, 1984 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (As of January 30, 1984) US$1.00 = Rs 10.775249 Rs 1.00 = US$0.09280528 Rs 1 million = US$92,805 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were made at US$1.00 = Rs 9.75, which represents the average exchange rate projected over the disbursement period. FISCAL YEAR April 1 - March 31 Abbreviations and Acronyms GTN - Government of Tamil Nadu GOI - Government of India ICB - International Competitive Bidding IDWSSD - International Drinking Water Supply and Sanitation Decade MMWSSB - Madras Metropolitan Water Supply and Sewerage Board PWD - Public Works Department TWAD - Tamil Nadu Water Supply and Drainage Board lcd - liters per capita per day  FOR OFFICIAL USE ONLY INDIA TAMIL NADU WATER SUPPLY AND SANITATION PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiaries: The Tamil Nadu Water Supply and Drainage Board (TWAD) and participating local bodies. Amount: SDR 70.6 million (US$73 million equivalent), of which SDR 35.3 million (US$36.5 million equivalent) will be an allocation from the IDA Special Fund. Terms: Standard. Relending Terms: India to Tamil Nadu: As part of Central assistance for State development projects on terms and conditions applicable at the time. Tamil Nadu to TWAD and TWAD to the par- ticipating local bodies: 25 years, including five years of grace at 8 1/2% interest per annum. The foreign exchange risk will be borne by the Government of India. Proiect Description: The project consists of (i) the construction of intake, treatment, transmission and dis- tribution facilities to augment the supply of piped water by about 300 million liters per day to (a) the city of Coimbatore, 20 satel- lite towns, and rural areas in the Coimbatore planning district; (b) the city of Salem, 11 satellite towns and peripheral rural communities; and (c) the city of Madurai; (ii) the provision of safe drinking water to about 44 small towns with no protected reliable source; and (iii) the installation of low-cost sanitation in 14 middle-sized towns. By 1988/89, about 3.3 million people in the project cities and towns, and about 500,000 people in the project villages will be served with safe drinking water and a This document has a restricted distribution and may be used by recipients only in the performance of I their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -ii- further 200,000 people will benefit through better sanitary facilities. Funds will be provided to (i) TWAD for a sectorwide train- ing program, improved leak detection and meter repair services and implementation of improved accounting and material management systems; and to (ii) the Government of Tamil Nadu for consultancy services for a Statewide water resources management study; a municipal resource mobilization study, and implementa- tion of sector accounting systems for par- ticipating local bodies. The project is complex and its timely execu- tion will require careful planning and good management. TWAD is a well-established organization with experience in executing similar projects. Nevertheless, several anticipatory measures will be taken under the project including the strengthening of the organization, management and staffing of TWAD, and the use of consultants for the implementation of improved financial and management information systems. An Action Plan has also been designed to closely monitor project implementation. Consequently, completion of the project within the planned implementation period would seem feasible.  -iii- (US$ Millions) Estimated Costs Local Foreign Total Urban Water Supply 60.8 16.7 77.5 Urban Low-Cost Sanitation 3.2 0.7 3.9 Rural Water Supply 6.8 1.9 8.7 Loan Fund for House Connections 1.0 - 1.0 Training 0.5 0.1 0.6 Consultancy Services 1.5 1.2 2.7 Miscellaneous Equipment & Works 0.3 - 0.3 Land Acquisition 2.1 2.1 Taxes and Duties 6.9 - 6.9 Sub-total 83.1 20.6 103.7 Physical Contingencies 5.4 1.4 6.8 Price Contingencies 15.4 3.4 18.8 Design, Supervision and Management 24.0 _ 24.0 TOTAL PROJECT COST 127.9 25.4 153.3 Project Costs Net of Taxes and Duties 121.0 25.4 146.4 Financing Plan: (US$ Millions) Local Foreign Total IDA 24.1 12.4 36.5 IDA Special Fund 23.5 13.0 36.5 GTN Loans/Grants 1/ 80.3 - 80.3 TOTAL 127.9 25.4 153.3 Estimated Disbursements of IDA and IDA Special Fund Credits: (US$ Millions) IDA FY FY85 FY86 FY87 FY88 FY89 FY90 Annual 4.0 14.5 16.5 18.3 16.7 3.0 Cumulative 4.0 18.5 35.0 53.3 70.0 73.0 Rate of Return: About 9%, for the urban water supply component. Appraisal Report: No. 4707-IN, dated March 1, 1984. 1/ Includes US$6.9 million of taxes and duties.  I I  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT AND IDA SPECIAL FUND CREDIT TO INDIA FOR THE TAMIL NADU WATER SUPPLY AND SANITATION PROJECT 1. I submit the following report and recommendation on a proposed develop- ment credit to India in an amount equivalent to SDR 35.3 million (US$36.5 million equivalent) and a proposed Special Fund Credit in an amount equivalent to SDR 35.3 million (US$36.5 million) on standard IDA terms to help finance a water supply and sanitation project in the State of Tamil Nadu. The proceeds of both credits would be channelled to the Government of Tamil Nadu (GTN) in accordance with the Government of India's standard terms and arrange- ments for the financing of State development projects. GTN will relend the credit to the Tamil Nadu Water Supply and Drainage Board (TWAD) for 25 years, including five years of grace, at 8 1/2% interest per annum. TWAD would in turn make these funds available to the participating local bodies on the same terms and conditions. The foreign exchange risk will be borne by the Government of India. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation of India and Resource Mobilization Issues" (4395-IN, dated April 11, 1983), was distributed to the Executive Directors on April 19, 1983. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 700 mil- lion (in mid-1982) and an annual per capita income of US$250. The economy is dominated by agriculture which employs more than two-thirds of the labor force. However, the land base is not sufficient to provide an adequate livelihood to everyone engaged in agricultural activities, especially those with little or no land. Growth of value-added in agriculture -- 2.2% since 1950/51 -- has been slower than growth of industrial value-added (5.0% per annum). As a result, there has been a gradual decline in the share of agriculture in GDP (at factor cost) from 60% to just under 40%, while the share of industry rose from 15% to around 25%. But industrialization has not been rapid enough to absorb the growing labor force, or to bring about a rapid economic transformation, with significantly higher productivity and income levels. As a result economic growth has been slow over the past three decades, averaging about 3.6% per annum since 1950/51. 4. Nevertheless, there has been steady progress with per capita income rising by about 1.4% per year in the period 1950 to 1980. Despite the large population base and its relatively rapid growth, India has been able to eliminate persistent dependence on foodgrain imports through significant improvements in agricultural production. Savings and investment have increased 1/ Parts I and II of the report are substantially the same as Parts I and II of the President's Report for the Dudhichua Coal Project (No. P-3735-IN), dated February 27, 1984.  -2- markedly since 1950/51: gross national savings more than doubled from 10.8% of GDP (at factor cost) to 22.8% in 1982/83, while gross domestic investment rose from 12.5% of GDP to 24.9% in 1982/83. Foreign savings (balance of payments deficit on current account) have never financed a major portion of domestic investment: a peak of about 20% was reached during the early 1960s. Surpluses arose for a few years in the late 1970s, and at the present time, foreign savings are about 8% of investment. External assistance has been low both as a percentage of GDP and in per capita terms, never rising above 3% of GDP and averaging below 1% for the past five years. Net foreign savings have never risen above 3% of GDP, and presently stands at 2.1%. 5. Before the 1970s, India placed relatively less emphasis on export promotion and more on import substitution. The volume growth of exports between 1950/51 and 1969/70 averaged only 2.2% per annum, while the volume growth of imports over the same period was 4.3%. In the early to mid-1970s, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. As a result, the volume of India's exports grew on average about 7.3% per annum for the 1970s as a whole, a performance which demonstrates that sustained rapid growth is possible. While expanding world markets, particularly in the nearby Middle East, con- tributed to this growth, liberalized access to imported inputs and more effec- tive export incentives played a major role. 6. Moving into the second half of the 1970s, the Indian economy was buoyed by higher levels of investment and an expanding level of foodgrain output. As a result, growth in real GDP and in agricultural and industrial value-added, substantially exceeded the historical 30-year trends (paragraph 3) averaging 4.9%, 3.9% and 5.6%, respectively. In 1979/80, however, this momentum was broken when the worst drought in recent years, combined with a doubling of international oil prices and domestic supply shortages, led to a sharp fall in foodgrain production, a decline in GDP, and the opening up of a large trade deficit. Severe inflationary pressures also emerged after several years of virtual price stability. These setbacks in 1979/80 coincided with the prepara- tion of the Sixth Five-Year Plan which laid down a program of adjustment that aimed at improving the trade deficit, removing infrastructural bottlenecks and ensuring price stability with an overall growth of the economy of 5.2%, 1.6 per- centage points above the trend growth of 3.6%. Recent Trends 7. In 1980/81 and 1981/82, the economy substantially recovered with real GDP growing by 7.9% and 5.2%, respectively. While industrial output expanded by 4% in 1980/81 and 8.6% in 1981/82, recovery was particularly robust in agriculture where normal weather helped output to rise by more than 15% and 5.5%, respectively. The availability of power, coal, and rail transport, already improved in 1980/81, was even better in 1981/82, recording growth rates of about 10%, 9.6% and 12.9%, respectively. The easing of constraints on the supply of infrastructure and basic commodities was a determining factor in the improved performance of the industrial sector. This overall improvement in the Indian economy, combined with a more restrictive monetary policy contributed to a sharp decline in the rate of inflation. Wholesale prices rose by about 9% on an average annual basis in 1981/82 and by only 2.5% in 1982/83, reflecting a strong deceleration from a peak increase of 18% in 1980/81.  -3- 8. After two years of fairly solid performance, the Indian economy faced a difficult year in 1982/83 due to the drought in mid-1982 which brought down the GDP growth rate to around 2% and put further strains on the already dif- ficult balance of payments and domestic resource situation. Besides a sig- nificant decline in the range of 4.5%-6.5% in agricultural production, GDP growth was also constrained by a slowdown in industrial growth from 8.6% in 1981/82 to about 4% in 1982/83. This resulted from a combination of several factors, notably the decline in agriculture income, persistent (though lessened) power shortages, a textile strike in Bombay, as well as depressed export markets and increased competition from imports. The Government was able, however, to protect the level of savings to a large extent and keep the momentum of the investment program through largely successful public sector resource mobilization efforts. Foreign savings played a crucial role in sup- port of this effort. Similarly, the timely implementation of various economic policies mitigated the otherwise very distressing effects of a poor monsoon. Continued improvements of the infrastructure sectors, although at a slower pace than in the previous two years, also reduced the negative effects of the drought. 9. Agricultural production in 1982/83 received a serious setback from the drought. Foodgrain production, which had reached a record 133 million tons in 1981/82, declined to 124-127 million tons. Production of most other major crops also declined in 1982/83. Corrected for weather variations, this still represents a creditable performance. In 1979/80, with a broadly comparable monsoon, foodgrain production reached only 109 million tons. The Government was able to mitigate the effects of the 1982 drought through efficient manage- ment of foodgrain procurement and distribution, careful timing of foodgrain imports, and appropriate allocation of power to irrigation pumps. These policies helped to avoid disruptions in basic food supplies and contributed to price stability during the year. While the management of the foodgrain economy after the drought was a significant achievement, the effect of the drought on production re-emphasized the continued importance of the monsoon in Indias agriculture. The performance of the recent past and probable future trends suggest that on average foodgrain supplies will meet demand. The balance remains delicate, and the need for foodgrain imports to maintain con- sumer supplies or adequate buffer stocks could arise from time to time. Thus, programs to expand irrigation, strengthen extension and encourage the efficient use of other agricultural inputs continue to receive high priority. 10. Basic infrastructure services performed generally well in 1982/83, although growth of coal, power and rail transport failed to maintain the momen- tum of the marked recovery of 1981/82. Despite lower hydro generation due to the failure of the monsoon, overall power generation recorded an increase of about 7%. This was due largely to an increase in capacity utilization in thermal plants resulting from improved overall management, stabilization of most of the new large units and better availability of coal due to the combina- tion of increased coal production and improved railway performance. Nevertheless, power shortages remain the major bottleneck in the economy. Railway traffic grew by only 3.7% in 1982/83 reflecting a slowdown from 1981/82. The lower growth was due not to a decline in the operational efficiency of the railways but rather to slack demand from core sectors like steel, iron ore, coal washeries and fertilizers. Coal production growth (4% in 1982/83), after 10% growth in the two preceding years was creditable. There were no major shortages and there were improvements in the quality of coal. Recent easing of shortages and bottlenecks in infrastructure has come primarily from better utilization of existing capacity, but in the future most improve- ment must result from added capacity. It is therefore critically important  -4- that India maintain the pace of investment in these key sectors and mobilize sufficient resources to do so. 11. The Indian economy has reverted from a situation of resource surplus, which had been a temporary phenomenon of the late 1970s, to one of resource scarcity. Investment has again grown quicker than national savings, and the scope for further increases in the latter appears limited. India's gross national savings rate, which averaged 22.4% of GDP in the last three years, is high by any standard, particularly considering India's low income and the large proportion of its population living below the poverty line. Future increases in savings will depend heavily upon the enhanced profitability of public sector enterprises which would require better utilization of capacity, more efficient operations and adequate pricing policies. In 1981/82 there was a significant increase in public savings due to improved profitability of various public sector enterprises. This trend which was maintained in 1982/83 needs to be accelerated. The gap between gross investment and national savings which rose from 0.4% of GDP in 1979/80 to 1.8%, 2.3% and 2.1%, respectively in the first three years of the 1980s, has been financed by foreign savings. 12. India's ability to generate resources to meet its development objec-- tives has become increasingly linked to the balance of payments. The current account balance which recorded surpluses between 1976/77 and 1978/79, sharply deteriorated to deficits of nearly US$2.9 billion in 1980/81 and US$3.8 billion in 1981/82 (1.8% and 2.3% of GDP, respectively). This was partly due to a sharp rise in the oil import bill as a result of both the disruption of oil production in northeast India in 1980 and significant oil price increases, and to a more liberal import policy aimed at providing producers with access to inputs for higher capacity utilization, greater efficiency, improved technology and capacity expansion. The current account deficit in 1982/83 declined to US$3.3 billion or 2.1% of GDP. The improvement would have been greater had not the drought resulted in the need to rebuild food stocks through imports and at the same time led to a lower level of GDP growth. This improvement in the balance of payments is to a significant degree the result of India's develop- ment and adjustment efforts over the past three years. It also reflects a reduction in the trade deficit as compared to the levels reached in 1980/81 and 1981/82. The trade deficit declined from US$7.6 billion in 1980/81 to US$6.0 billion in 1982/83 due to continued export volume growth (following the sub- stantial resumption in 1981/82) despite poor world market conditions, coupled with the containment in import growth due to import substitution of petroleum products, metals and fertilizers while allowing substantial growth in "other" imports through more liberal import policies. Nevertheless, it is expected that the balance of payments will be under strain for the next several years, for India's adjustment program will continue to require high levels of imports. 13. The high investment rate, about 25% of GDP, envisaged in the Sixth Plan coupled with the limited possibilities of raising domestic savings beyond the present high levels, necessarily implies a need for external resources. Faced with a reduction in the availability of bilateral and multilateral concessional assistance, India has begun to borrow significant amounts on commercial terms from the Euro-dollar market in addition to much greater utilization of suppliers' and export credits. India's favorable debt service profile has enabled India to tap commercial capital markets at favorable spreads (over relatively high underlying rates). In the period 1980-82 India contracted commercial loans totalling over US$2,000 million and suppliers' credits of about US$520 million. The bulk of the loans are linked to specific development  -5-- projects in the public sector while the credits are linked, by and large, to development projects in the private sector. India also reached an agreement with the International Monetary Fund for the use of the Extended Fund Facility for SDR 5 billion, of which SDR 2.5 billion have already been drawn. The transfer of funds under the EFF has stemmed the use of foreign exchange reser- ves which had fallen to less than four months of import coverage in 1981/82. In 1982/83, in addition to continued use of the EFF, financing requirements were met by increased nonr-concessional borrowing (about US$2,000 million in new committments) and a 10% increase in net aid disbursement. Development Prospects 14. The experience of recent years illustrates that India has the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure -- irrigation, railways, telecommunications, power, roads and ports -- is extensive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institutional infrastructure for development. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and reasonable access to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 15. The medium-term framework for advancing India-s development objectives is the Sixth Five-Year Plan (1980/81-1984/85), which is now in its fourth year. The Plan assigns priority to agriculture, energy development, the growth of exports and domestic import substitutes where appropriate, and the removal of infrastructural bottlenecks. Overall performance has so far been encouraging, although bottlenecks in key sectors such as power and transport are likely to persist. Moreover, fulfillment of the Plan targets will require additional resource mobilization. The efforts of the Central Government to raise resour- ces have so far been impressive and are likely to be broadly sufficient to meet the financing requirements of the Central Government s share in plan investment, even if some increase in inflation is experienced above current low levels. However, a shortfall in public savings is likely to occur in some States unless further measures are introduced. There will be a need also for continuous efforts to maintain the current level of private savings. Recent increases in interest rates and tax concessions on time deposits and the con- tinued dampening of inflationary expectations should stimulate such savings. 16. The higher capital formation rates of the past few years augur well for future income growth. However, returns to investment have so far been relatively low. Much of this phenomenon relates to India's stage of development, in which a large and growing proportion of investment has been needed to build up basic infrastructure. These services, such as power, tran- sport and irrigation, have inherently high capital-output ratios. However, there is scope to improve the sectoral capital-output ratios through greater efficiency and better management. Bottlenecks in basic infrastructural sectors clearly can prejudice growth in other sectors where large investments have been made. As demonstrated in the last three years, performance in the basic serv- ice sectors can be improved through better planning and management, thus lead-  -6- ing to higher productivity and capacity utilization throughout the economy. At the same time, programs to expand domestic capacity are vital. In the case of tradeable commodities like coal, steel and cement, this is justified on the grounds of comparative advantage. For sectors such as irrigation, power and transportation, expansion of planned capacity in accordance with the require- ments of the rest of the economy will be vital to overall medium- and long-term development prospects. In the short term, however, achieving an adequate balance between supply and demand in these sectors will remain a difficult objective. 17. Under the Sixth Plan, India has an ambitious oil production program backed by substantial financial commitment. While the gap between domestic consumption of petroleum and production remains large, the prospects for progressive substitution of domestic petroleum for imports are quite bright. In 1981, and again in early 1983, resources for exploration and development were raised by successive price increases for domestic crude and products. India's dependence on oil imports dropped from 63% in 1979/80 to about 45% now and a scheduled expansion in production is expected to decrease oil imports (in crude equivalent terms) to about 33% of consumption by 1984/85. The rapidly expanding level of exploration activity, combined with the possibilities for accelerated offtake from known fields, offers much encouragement for India's longer-term energy prospects. 18. Despite an expected continued decline in its current account deficits from the current 2.1% to about 1.7% of GDP by the late 1980s, India will require growing access to world financial markets to complement concessional assistance. These commercial sources of funds will be important in the future since India's current account deficits, though not large relative to the size of the economy, will nevertheless be large in absolute terms and will neces- sitate external borrowing beyond levels expected to be available from normal concessional sources. Given the favorable structure of India's external debt, which reflects the past reliance on concessional sources, India should remain creditworthy for a substantial growth in external borrowing. 19. India-s development prospects over the next few years will hinge on the extent to which the economy can be brought into both internal and external balance, while at the same time achieving more rapid growth than in the past. In the longer term, income growth represents the best strategy for achieving these needed adjustments, both by generating higher savings for further investment, and by fostering the development of export and import-substituting industry to improve the balance of payments. In the short term, a relatively large external borrowing, including an increased emphasis on commercial borrowing, will be necessary to cope with the balance of payments consequences of such a growth strategy. However, an important element in providing India with the capacity to adjust flexibly will be adequate flows of concessional assistance. Although India is currently in a position to increase borrowing on commercial terms from the very low levels of the past, there are, of course, limits beyond which India will choose to sacrifice growth objectives rather than accept debt on unfavorable or unmanageable terms. The Government's effort to maintain an adequate rate of growth while adjusting the structure of the Indian economy to a more open and efficient environment requires foreign resources in addition to the level of commercial borrowing available to India. India is still a very poor country with a large rural sector and enormous investment requirements for human development and basic infrastructure. The fact that India has been able over the past seven years to maintain a rate of  -7- growth above the long term trend, despite the poor monsoons of 1979/80 and 1982/83, lends substance to the hope that a more open trade policy and con- certed efforts to remove constraints on the growth of productive capacity, supported by adequate mobilization of savings both foreign and domestic, can sustain a rate of growth closer to 5.0% per annum than the long-run trend of 3.6% per annum. Combined with a reduction in the rate of population increase to below 2.0% per annum, a 5.0% growth rate would mean a doubling of the trend rate of growth of per capita income of less than 1.4% per annum. Success in these efforts would make a significant difference to the prospects of easing poverty in India. 20. A large and growing population and severe poverty underline the need to accelerate India's development efforts. The 1981 Census placed India's popula- tion at 683.8 million, or about 12 million higher than official projections. The fact that there was no decline in inter-census rates of population growth, equivalent to about 2.2% per annum, is a cause for concern. While further analysis of the Census may suggest this rate of growth to be slightly overestimated, the expectation of a measurable decline in the population growth rate has not materialized. Until the results of the Census are fully analyzed, firm judgements about the reasons for this outcome are not possible. However, the results re-emphasize the need for continuing efforts to strengthen the health and family planning program in a broad range of activities and services. These efforts are given high priority in the Sixth Plan, which aims at a rise in the proportion of protected couples in the reproductive age group from its estimated 1979/80 level of about 23% to over 35% by 1984/85. 21. Reduction of poverty remains the central goal of Indian economic growth. I-lore than one-third of the world's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. About 51% of the rural population and 40% of the urban popula- tion subsist below the poverty line. Improvements in the living standards of the poor will depend to a large extent on the overall growth of the economy, particularly on increases in agricultural production and employment, and in non-farm rural employment. These developments will have to stem in large part from market forces which can be encouraged and reinforced by appropriate Government policies and the strengthening of basic services and infrastructure. The declining trend in real foodgrain prices between 1970 and 1981, resulting from India's sustained effort to raise agricultural production, reflects such developments. There is also a role for direct Government action in faster implementation of land reform (though the scope for significant reduction in poverty through land redistribution is quite limited in India), in increasing the supply of credit available to small farmers and rural artisans, and finally in broadening the provision of those services which enhance the human capital of the poor and improve living standards. Many of the latter are elements of the Minimum Needs Program, which has been an integral part of Indian planning for the past decade. Progress has been slow but steady in the expansion of primary education, the extension of rural health facilities and the provision of secure village water supplies. Operations such as the community health volunteer program and the national adult literacy campaign provide encouraging evidence that well-targetted, relatively low-cost programs can lead to enhanced prospects for India-s poor.  -8- PART II - BANK GROUP OPERATIONS IN INDIA 22. Since 1949, the Bank Group has made 76 loans and 160 development credits to India totalling US$5,183 million and US$11,851 million (both net of cancellation), respectively. Of these amounts, US$1,387 million has been repaid, and US$6,224 million was still undisbursed as of September 30, 1983. Bank Group disbursements to India in the current fiscal year through September 30, 1983 totalled US$286 million, representing a decrease of about 2 percent over the same period last year. Annex II contains a summary state- ment of disbursements as of September 30, 1983. 23. Since 1959, IFC has made 9 commitments in India totalling US$224 million, of which US$30 million has been repaid, US$56 million sold and US$18 million cancelled. Of the balance of US$120 million, US$113 million represents loans and US$8 million equity. A summary statement of IFC disbursements as of September 30, 1983, is also included in Annex II (page 5). 24. The thrust of Bank Group assistance to India has been consistent with the country's development objectives in its support of agriculture, energy and infrastructure. Of particular importance have been investments in irrigation, extension and on-farm development designed to increase agricultural productivity, and efforts to improve the availability of basic agricultural inputs to farmers through credit, fertilizer, marketing, storage, and seed projects. Major elements of the lending program have also been directed at helping to meet the energy needs of the economy while curbing the growth of oil imports, and to ease the infrastructure bottlenecks which have hampered economic growth in India, particularly through power generation and distribution, and railways and telecommunications projects. The Bank Group has also provided financing for a broad range of medium- and small-scale industrial enterprises, primarily in the private sector, through its support of develop- ment finance institutions. Recognizing the importance of improving the ability to satisfy the essential needs of urban and rural populations, the Bank Group has supported nutrition and family planning programs, a rural roads project, as well as water supply and sewerage and other urban infrastructure projects. 25. This pattern of assistance remains highly relevant, and consonant with Government priorities, as reflected in the Sixth Plan. The continued active involvement of the Bank Group in agriculture, energy and infrastructure development will appropriately contribute to India's adjustment and growth prospects. Irrigation will need continuing support, with emphasis on improved efficiency in water conveyance systems to ensure reliable delivery to farmers' fields. In addition, major investments to develop the large Narmada River basin will be vital to India's efforts to increase agricultural production. Important complements to these efforts, such as fertilizer production and distribution, agricultural credit and extension, will continue to receive support. A continued program of investments aimed at rapidly increasing the domestic supply of energy will clearly be necessary if India is to curb the cost of oil imports and alleviate the critical power shortages which constrain output in both the agricultural and industrial sectors. Exploitation of oil and gas resources is a central element of this program, which should be supple- mented by investments in hydro and thermal power generation, and in the expan- sion of the transmission and distribution networks. Industrial projects to increase the domestic production of basic commodities, which have been in short supply and which India has a comparative advantage in producing, should also receive high priority. Finally, raising the efficiency and levels of transpor-  -9- tation infrastructure would mitigate a key constraint to achieving higher levels of economic growth so that further support of the railways and for ports development will be particularly appropriate. 26. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid-1970s. However, there is now a need for increased foreign assistance to India, not only to help the economy adjust to the more recent oil price increases and the overall deterioration in the world trade environment but also to maintain the rela- tively higher growth rates achieved during the first two years of the Sixth Plan. As in the past, Bank Group assistance for projects in India should aim to include the financing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sectors as agriculture, irrigation, and water supply. 27. India's poverty and needs are such that whenever possible, external capital requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India-s needs for external support. This requirement for additional assistance can be met, in part, through Bank lending. Given its development prospects and policies, India is judged credit-worthy for Bank lending to supplement IDA assistance. A con- tinuation of efforts already underway to achieve growth in productive capacity, trade expansion, higher levels of savings, foodgrains self-sufficiency and a reduction in the rate of population growth should result in continued economic growth and improvement in the balance of payments. Despite recent setbacks, India's external payments position is still manageable. The ratio of India's debt service to the level of exports was about 11% in 1982/83 and is projected to remain below 20% through 1995/96. As of September 30, 1983, outstanding loans to India held by the Bank totalled US$3,932 million, of which US$2,100 million remain to be disbursed, leaving a net amount outstanding of US$1,832 million. 28. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with 50%, 43% and 53%, respectively, in 1981/82. On March 31, 1982, India's outstanding and disbursed external public debt was about US$17.9 billion, of which the Bank Group's share was US$7.1 billion or 38% (IDA's US$5.9 billion and IBRD's US$1.2 billion). In 1981/82, about 16.0% of India's total debt service payments were to the Bank Group.  -10- PART III - THE WATER SUPPLY AND SEWERAGE SECTOR 29. While the Central Government exercises some influence in the water supply and sewerage sector in India through the provision of financial support, State Governments have primary responsibility for the development of this sector. They execute their responsibilities through various Government departments and agencies which, in turn, may delegate part or all of their duties to local authorities. In a number of cases, municipal authorities or other agencies have the entire responsibility for planning, design, construction, operation and maintenance of water supply and sewerage services within their jurisdictions. 30. Since the early 1950's, State Governments have endeavored to meet the increasing demands on the Sector caused by rapidly expanding popula- tion and unprecedented rates of urban growth. However, competing demands for resources by other sectors, lack of management and planning skills, shortages of key materials and equipment, as well as foreign exchange constraints, have resulted in only 1 to 2% of public expenditures being invested in the sector. This has led to inadequate levels of water supply and sewerage services. In 1975, it was estimated 1/ that in India only 193 million people, or 31% of the total population of 620 million, had access to reasonably safe drinking water and that only 125 million (20%) had acceptable means of disposing sewage. These levels were lower than the average levels for all developing countries, in which water and waste disposal services reached 38% and 33% of the population, respectively. 31. The State of Tamil Nadu, located in southern India, covers an area of 130,000 sq km, (about 4% of the national territory). With a population of about 50 million, Tamil Nadu is one of India's more densely populated States with 372 persons per sq km, compared with a national average of 208. The agricultural area of Tamil Nadu covers approximately 56% of the State's cultivable land surface, of which approximately 35% is irrigated. The per capita income (1977/78) in Tamil Nadu was estimated at Rs 1,030 (US$121) 2/ which corresponds approximately to the all-India average for the same period. 32. The primary sources of surface water in the State are the Palar, Pennar, Cauvery, Vaigai and the Tambiraparani rivers. Most rivers flowing through the State rise in the adjoining States of Karnataka and Kerala and abstractions from them are under interstate agreements. Only the Cauvery and Tambiraparani are perennial rivers, while there is extensive impound- ing on the lesser, non-perennial rivers to permit greater exploitation for irrigation needs. The average annual discharge of the rivers in Tamil Nadu is less than 1% of the total national potential, as compared with the State's population which currently represents about 7.3% of the national total. Most (about 95%) of the available surface water resources are reserved for irrigation and the drinking water supply needs of Tamil 1/ World Health Organization, Community Supply and Wastewater Disposal, Mid-Decade Progress Report, May 1976. 2/ 1977/78 rate of exchange Rs 8.50=US$1.00.  -11- Nadu's increasing population have to be met either by an increased depend- ence on groundwater, or by bringing scarce supplies of surface water over long distances at great expense. 33. The overall service levels in Tamil Nadu are far from satisfactory. However, the supply of safe piped water to the rural areas has improved over the past decade and currently about 47% of the rural population is served. The Tamil Nadu Government's (GTN) goal is to serve all problem villages 1/ with safe drinking water by 1985, but progress to date indicates that this goal would most likely have to be revised. In urban areas, of 740 towns, 222 have organized water supply systems, while schemes for a further 70 towns are currently under execution. Approximately 65% of the population in the towns presently served is supplied with piped water. The 448 remaining towns which lack these facilities represent approximately 28% of the urban population. The supply of water to these towns, as well as improvement to existing systems in 72 towns are proposed as part of the International Drinking Water Supply and Sanitation Decade (IDWSSD) program. In all urban areas however, only intermittent service is available and a large proportion of the urban population is served through standposts. 34. Sewerage systems in Tamil Nadu are even less developed than water supply. Only thirteen towns have water-borne sewerage facilities at present. Execution of sewerage schemes is in progress in six more towns, and the provision of sewerage facilities for a further five towns is currently under investigation. Within the scope of India's IDWSSD program, new sewerage systems are proposed for Tamil Nadu's nine Class I towns; 2/ in the remaining towns sanitation facilities will be based on low-cost sanitation techniques (para. 54). Rural sanitation has so far received little attention. In accordance with IDWSSD goals, 3/ 25% of the rural population is targetted to be provided with low-cost sanitation by 1990. However, due to financial constraints this goal is not likely to be met. Sector Organization 35. With the exception of the city of Madras, the statewide respon- sibility for the planning, design, and construction of water supply and sewerage systems rests with the Tamil Nadu Water Supply and Drainage Board (TWAD), which was founded in 1971. TWAD executes, finances, and co missions projects and in most cases hands them over to urban local bodies for operation and maintenance. TWAD engineers are seconded to 1/ Villages without an assured safe water source within a distance of 1 km from the village. 2/ Towns with a population of 100,000 or more. 3/ The goals are: Urban and Rural Water Supply - 100% coverage. Urban Wastes disposal - 80% coverage. Rural Sanitation - 25% coverage.  -12- municipalities to ensure effective maintenance and repair of systems after commissioning. TWAD is also entrusted with the responsibility for the operation and maintenance of all rural water supply systems in the State. Until recently, the Madras Corporation was responsible for the construc- tion and maintenance of water supply and drainage schemes within the city limits. In 1978, however, the Madras Metropolitan Water Supply and Sewerage Board (MMWSSB) was set up as an autonomous body with respon- sibility for all water supply and sewerage schemes formerly held by the Corporation. Sector Investment 36. The proposed project is a part of GTN's and TWAD's sector invest- ment program under the State's current Sixth Plan (1980-85) and the forthcoming Seventh Plan (1986-1991). Under the Sixth Plan, GTN has allocated about 8.5% (about US$277 million) of total State Plan outlays for water supply and sanitation as compared with the All-India average of about 4% reflecting both the priority the State Government attaches to the sector and the high cost of providing water in Tamil Nadu. Annual investments in the sector currently average about Rs 75 crores (US$77 million). Early indications are that the Seventh Plan would provide a significant increase over current levels of investment. 37. Water is a very scarce resource in the State and alternative options for supply are limited (para. 32). It is therefore costly for GTN to develop new sources of drinking water while consumers generally cannot afford water charges which enable full cost recovery. Consequently, GTN is required to subsidize local authorities with significant capital and operating grants. In the proposed project, about half the total project cost would be provided by GTN to sector agencies on a grant basis. Beneficiary charges will in most cases be sufficient to cover operation and maintenance costs, as well as debt service on the loan portion. This financing pattern would allow GTN to sustain its ambitious sector invest- ment program over the longer term, but it requires that future sources of water be exploited at affordable cost levels. Bank Group Operations in the Water Supply and Sewerage Sector 38. The Bank Group's involvement in the water supply and sewerage sector in India began in 1974 with a US$55 million credit for the Bombay Water Supply and Sewerage Project (Credit 390-IN of JaLnuary 1974). Since then, the Bank has made seven credits totalling US$529 million for water supply and sewerage projects and provided a further US$190 million for water supply and sewerage as part of a broader program of infrastructure development in urban areas. Credit 390-IN which financed water transmission, distribution and treatment facilities in the Greater Bombay area and the Uttar Pradesh Water Supply and Sewerage Project (Credit 585-IN of September 1975), which supported the construction of water supply and sewerage facilities for five large towns and provided safe piped water to a number of smaller towns and villages in three regional water authorities, have been completed. The Project Completion Report of Credit 585-IN is under preparation. Ongoing projects include the Second Bombay Water Supply and Sewerage Project (Credit 842-IN of  -13- November 1978); Punjab Water Supply and Sewerage Project (Credit 848-IN of October 1978); Maharashtra Water Supply and Sewerage Project (Credit 899-IN of June 1979); Rajasthan Water Supply and Sewerage Project (Credit 1046-IN of June 1980) and the Gujarat Water Supply and Sewerage Project (Credit 1280-IN of November 1982). 39. All on-going projects with the exception of the First and Second Bombay Water Supply Projects, have been formulated on a statewide basis with responsibility for construction of facilities entrusted to a state- level agency. The Second Bombay Water Supply Project like its predecessor (Credit 390-IN), addresses the specific water supply and sewerage needs of a single city viz. the Bombay Metropolitan area. A third approach has been the provision of water supply and sewerage facilities as part of a composite program of urban infrastructure development as under the First, Second and Third Calcutta Urban Development Projects (Credit 427-IN, 756-IN and 1369-IN, respectively) and the Madras Urban Development Project (Credft 687-IN). Credits 427-IN and 687-IN have been fully disbursed. Sectoral Objectives and Performance 40. Through its involvement in the water supply sector in India the Bank Group is assisting in developing viable sector policies and programs in support of GOI's overall objective of progressing towards IDWSSD goals (para. 34). Particular attention is being given to (a) institutional development, (b) financial viability and pricing issues, and (c) the choice of technology an'd promotion of less costly designs. 41. The physical and technological objectives of Bank Group supported water supply and sewerage projects in India have been met in most cases. Implementation of construction works has been satisfactory. There has also been some progress in lowering per capita costs, partly through efforts to encourage a search for alternative technical solutions as a part of project preparation, and partly as a result of efforts through a Bank-executed UNDP-financed program to develop, test and disseminate low cost sanitation technologies (UNDP GLO/78/006) which are now becoming widely accepted in India. Of major concern on the physical side however, is the relatively poor standard of operation and maintenance of completed facilities, which is directly linked to institutional and financial issues (see para. 42). 42. Achievement of project institutional and financial goals, includ- ing cost recovery, however has not been up to expectation. GOI shares IDA's concern in this regard and is collaborating with IDA through the Central Ministry of Works and Housing and concerned State Governments in a detailed review of the institutional and financial performance of all completed and on-going water supply projects. The objective of this review, which was initiated in mid-1983, is to identify the underlying causes and the corrective actions needed to improve institutional and financial performance in the sector. The data collection phase of the review has been completed and findings are presently under review. When completed by June 1984, the review should provide the basis for further dialogue with GOI and State Governments on the issues identified and  -14- provide options and guidelines for future project formulation which are practical and adaptable under local circumstances. 43. Initial findings of the review indicate that poor cost recovery is symptomatic of several underlying institutional and operational problems. While there is a lack of political will on the part of some State Governments to increase tariffs, resolution of the underlying institu- tional and operational problems may result in a beneficial effect on tariff and cost recovery issues. The review has tentatively identified three problem areas related to unsatisfactory institutional and opera- tional performance: (i) the appropriate roles and objectives of new sector agencies remain insufficiently defined, incentives for effective sector management are somewhat ambiguous, and the relation- ship between the internal processes of these agencies and the political decision-making processes at state and local government levels need to be more fully considered; (ii) traditional roles of local governments in the sector require more attention in project design and execution, particularly in regard to the retailing of water, operation and maintenance, billing and collection, and public education; and (iii) specific programs and actions to improve sector management and operational efficiency have not been adequately iden- tified and vigorously pursued during project implementation by the agencies and local governments concerned, partly because of the lack of an appropriate incentive structure, as noted above. 44. In considering the above causes for poor institutional and finan- cial performance, it should be noted that the delivery of water has been traditionally perceived in India as a local government function financed through general tax revenues, particularly property tax revenues. Furthermore, the concept of water supply as a separate utility operation has not yet been fully accepted in India by policy makers and the public alike. Strong public opposition to tariff increases and the metering of consumption has arisen due to the prevalence of the traditional notion that water is a "free public good". However, there is now a growing awareness particularly among policy makers, that in order to extend serv- ice coverage the sector must be strengthened and be made to generate a larger proportion of its own funding through direct user charges. There is added support for this view due to the demands on limited property tax revenues for the provision of a wide range of other local services (e.g. road maintenance, waste collection and disposal etc.) for which the opportunities for direct user charges are more limited. 45. The initial findings also suggest that there is scope for improved sector performance over the medium to long-term. Intensified supervision of ongoing projects and emphasis on well defined sectoral policies in upcoming projects will be required to achieve this objective. The sec-  -15- toral adjustments contemplated are far reaching and will take time. Follow-up projects will be required to maintain continuity and consistency in the sector policy dialogue envisaged and to pursue in greater detail the issues now being identified. 46. Although the sectoral review and evaluation is still under way, and no definitive conclusions can therefore be drawn, the preliminary findings discussed above suggest that no drastic departure from current sector assistance strategy and basic sector objectives (para. 40) is required. Instead, increased attention to the sector issues discussed above, including an appreciation of the time and effort required to effect change through a series of projects, is suggested. Accordingly, the proposed project does not reflect a significantly different sector approach but is, in its content and design, consistent with the findings referred to above. Firstly, the principal project implementing agency is well established and has a proven track record with a well accepted sector role. It will be further strengthened through a carefully designed sup- port program of simple yet practical improvements in staffing, administra- tive and financial systems and procedures, and monitoring practices. Secondly, steps are being taken through the project to support and strengthen the traditional sector role of local governments in the dis- tribution and retailing of water through better training and staffing, and through improved procedures for billing, collection and operation and maintenance. Measures are also being taken to improve not only the revenues from water supply operations, but also the general resource base of the local governments through a Resource Mobilization Study (para. 66). Thirdly, a detailed Program of Action to improve sector management and operational efficiency of all participating agencies has been developed which outlines specific timebound steps to achieve agreed objectives and to provide a better basis for project supervision and monitoring. Finally, in order to move the GTN towards taking a broader view of the sector and identifying cost-effective alternatives for its longer-term sector development, a state-wide Water Resources Management Study will be undertaken (para. 53). PART IV - THE PROJECT 47. The proposed project was prepared by TWAD with assistance from Bank staff and consultants and was appraised in February 1983. The Staff Appraisal Report No. 4707-IN dated March 1, 1984 is being distributed separately. A Supplementary Project Data Sheet appears in Annex III. Negotiations were held in Washington in February, 1984 with Mr. S.P. Bajpai, of the Department of Economic Affairs, Ministry of Finance, as coordinator of the Indian Delegation. Project Description and Objectives 48. The proposed project will be implemented over five years (1984/89) during the State's Sixth (1980/85) and Seventh (1986/91) Five Year Plan periods. It represents a significant portion (37%) of GTN's current water supply sector investment program. The project aims at providing an improved supply of water to selected urban communities and a safe supply of new piped water to a number of smaller towns and rural areas.  -16- Low-income groups would be provided with assistance to connect to the water supply system, or alternatively be served with standpost water. Public health standards would be improved in 14 towns through the provi- sion of low-cost sanitation. Finally, the project would aim at strengthening TWAD's institutional, managerial and financial capabilities through the provision of training and technical assistance. The project would consist of the following: (a) the design and construction of intake, treatment, transmission and distribution facilities to provide an additional 300 mil- lion liters per day of piped water to (i) the city of Coimbatore, 20 urban communities, and surrounding rural areas in the Coimbatore area; (ii) the city of Salem, 11 satellite towns and peripheral rural communities and (iii) the city of Madurai; (b) the provision of new piped water to about 44 small towns currently lacking a protected reliable source; and (c) a low-cost sanitation component for 14 middle-sized towns identified under the UNDP Global Low-Cost Sanitation Project. 49. The project will also provide funds for a sectorwide staff train- ing program, and the installation of leak detection and meter repair services for TWAD. TWAD will also be provided with consultant services for the implementation of accounting and materials management systems. Consultant assistance for a Statewide Water Resources Management Study, for the installation of appropriate water supply sector accounting systems and for a Resource Mobilization Study for participating local bodies are also included in the project. To monitor the implementation of a number of interrelated project activities aimed at improving the operational efficiency and financial viability of the project entities, an Action Plan was discussed with GTN and TWAD during appraisal and agreed to during negotiations (para. 46). The Action Plan will be reviewed annually and updated by TWAD in consultation with the Association (Section 2.07(b)(iii) of the Project Agreement). Project Implementation 50. TWAD will implement the project except for the Water Resources Management Study (para. 53) and the Resource Mobilization Study (para. 66), which will be implemented by GTNo TWAD's chairman, nominated by the Government, heads its Board of Directors. He is assisted by a full time Managing Director drawn from the Indian Administrative Service (IAS). TWAD employs around 1,200 engineers, 400 technical staff and about 500 non-technical staff. 51. As the oldest water board in the country, TWAD has well developed policies and procedures which it is currently reviewing to ensure their continued appropriateness. As part of project preparation, consultants were appointed to review TWAD's activities. Their recommendations include specific improvements in TWAD's organizational plan, staffing pattern, delegation of powers, material management systems, aLccounting systems,  -17-- project planning and control systems, as well as job responsibilities. Of specific importance is the need to appoint an Engineering Director, a Finance Director, a Chief Accountant and a Chief Audit Officer. TWAD would ensure that the above positions are staffed on a full-time basis by September 30, 1984 (Section 2.02(b) of the Project Agreement). In addition, TWAD will engage consultants to implement the recommended improvements in material management, project accounting, and centralized financial management systems which would be fully implemented by April 1, 1986 according to the Action Plan. 52. In view of the magnitude of the works involved, careful planning and good management would be required to complete the project by the first quarter of 1989. The design section of the project team has already been established and is fully operational and by September 30, 1984, TWAD will complete the staffing of the project team by the inclusion of supervisory personnel in accordance with an organizational structure satisfactory to the Association (Section 2.02(a) of the Project Agreement). Separate water supply and sanitation accounting systems will be established within the Municipalities of Coimbatore, Salem and Madurai by April 1, 1985 (Section 2.09 of the Tamil Nadu Agreement). Consultants have also designed accrual accounting, and management information systems for the water supply and sanitation operations in these cities. In the small towns under the project, water supply and sanitation are relatively modest operations and will therefore continue to function as an integral part of municipal undertakings based on a simpler modified cash accounting system. The systems designed for the three cities and small towns will be fully implemented by TWAD with consultant assistance by April 1, 1986 in accord- ance with the Action Plan (para. 49). Water Resources Management Study 53. The problem of providing drinking water in sufficient quantities at an affordable cost is becoming increasingly acute in Tamil Nadu. Most of the readily available water resources have been reserved for irrigation purposes and drinking water needs have to be met from diminishing expen- sive alternative sources (para. 32). There could be substantial benefits from a Statewide Water Resources Management Study in helping to develop appropriate water management strategies and options. Such a study would be particularly important for Madras, the State capital which regularly suffers from water crises. Under the proposed project, a team of local experts will collaborate with the United Nations, Department of Technical Cooperation for Development (UN/DTCD) in undertaking a study covering a selected number of priority areas in the State based on agreed terms of reference. The Study will commence by January 1, 1985 and will be com- pleted in about two years thereafter (Section 2.05 of the Tamil Nadu Agreement). GTN also proposes to take into consideration the findings of the proposed Study in regard to the exploitation of groundwater resources and thereafter endeavor to introduce suitable measures to monitor and control its use by commercial and industrial users (Section 2.08 of the Tamil Nadu Agreement).  -18- Low Cost Sanitation 54. Under the proposed project, fourteen medium-sized towns for which feasibility studies have been completed under the UNDP Global Low-Cost Sanitation Project executed by the World Bank would also be provided with pour-flush waterseal type latrines. Construction of these units would be regulated, confining their use to areas where pollution of groundwater sources would not present a problem. Each participating local authority would be required to pass bylaws for this purpose by December 31, 1984 (Section 2.10 of the Tamil Nadu Agreement). The financing plan and cost recovery measures for this component would be based on affordability criteria established under the UNDP Project which is acceptable to the Association. Training 55. The systematic provision of in-service training is not currently provided by TWAD. Under the project, TWAD will develop a comprehensive scheme of education and training and establish, or secure commensurate training facilities. Apart from meeting project-related training needs, the training system will also provide a continuing capability to identify and meet Statewide sector manpower development requirements beyond the project period. With respect to sanitation, the training program will have a practical emphasis and will take account of evaluation studies to be made on the operation and use of facilities as they are installed. The total staff of all categories employed within the urban water sector of Tamil Nadu excluding MMWSSB, is estimated at 10,800. The manpower required for the planning, construction, operation and maintenance by the project is likely to increase by a further one-third over the project period. The project training component, although substantial, clearly would be unable to address the needs of such a large, diverse and widely dispersed work-force. It will therefore be designed as the first phase oE a long term training strategy for the whole sector. The component will include a Stage I Training Study to formulate training policy, determine training strategy, and identify and design priority training programs which will be completed by June 30, 1985. Assistance in setting up the embryo training organization and implementing priority training programs will represent Stage II. The timing of implementation of Stage II will be agreed with TWAD later in accordance with the Action Plan. The sector training plan will be developed and executed in coordination with the comprehensive training system currently being operated by the MMWSSB. Proiect Costs and Financing 56. The estimated cost of the proposed project is about US$153.3 million equivalent, including about US$6.9 million in taxes and duties. Physical contingencies amount to approximately US$6.8 million, while price contingencies of US$18.8 million are based on annual price increases for both foreign and local costs of 7% from 1983/84, through 1985/86 and 6% for 1986/87 and thereafter. Details of project costs are included in the Credit and Project summary. Approximately 130 man-months of foreign and 470 man-months of local consultancy services are needed for the project. These services are required to carry out the Water Resources  -19- Management Study, Resource Mobilization Study and a Training Study. The man-month cost including salary, fees and subsistence for both foreign and local consultants would average about US$10,000 and US$2,500 respectively. 57. The proposed IDA Credit of US$36.5 million equivalent and IDA Special Fund Credit of US$36.5 million equivalent will finance about 50% of project costs, net of duties and taxes. The Credits will finance all direct and indirect foreign costs (approximately US$25.4 million) and US$47.6 million of local costs. The balance of funding required for the project of approximately US$80.3 million, will be provided by GTN as a loan/grant mix. Capital grants will be made to local authorities where internal revenues from tariffs and water taxes based on affordability criteria will not be adequate to recover the full investment cost. For the project as a whole, total capital assistance will be passed on in approximately equal loan/grant portions. GTN loans to the participating local authorities made through TWAD will be at 8 1/2% interest per annum over a period of 25 years, including five years of grace. The proposed relending rate is comparable with the current interest charged by finan- cial institutions in India on loans for similar purposes and is expected to be positive in real terms, since the average annual rate of inflation over the project period is not expected to exceed 8%. On execution of the subproject.s by TWAD, the ownership of the assets will be vested in the respective local bodies who will be responsible for servicing the associated debts to TWAD. TWAD, in turn, would repay GTN. Procurement and Disbursement 58. Contracts for equipment and materials, estimated at about US$12.5 million including contingencies, would be awarded on the basis of international competitive bidding (ICB) in accordance with IDA's guidelines for procurement. However, proceeds provided under the IDA Special Fund credit for this component may only be used to finance expen- ditures for goods produced in, or services supplied from, eligible Special Fund countries. A preference margin of 15% of the c.i.f. value or current import duty, whichever is lower, would be granted to local manufacturers in bid evaluation. Other contracts for equipment and materials would involve either small items (below US$150,000) which cannot readily be grouped into larger bulk contracts or items unsuitable for ICB because of high transportation costs and/or high risk of damage in transit (e.g. concrete, asbestos cement and stoneware pipes). These contracts, with a total value estimated at about US$49.7 million would be awarded on the basis of local competitive bidding (LCB) in accordance with local bidding procedures satisfactory to IDA. 59. The total value of civil works under the project is estimated at US$53.5 million, including contingencies. Most civil works (approximately US$47.0 million) would consist of a large number of relatively small contracts, which are widely dispersed throughout the project area, do not require any special equipment or techniques, are labor-intensive, and are traditionally carried out by registered contractors established in Tamil Nadu or other Indian States. These works, which include labor-intensive pipe laying and the construction of pumping stations, would not attract foreign bidders since it is clear that overseas firms could not success-  -20- fully compete with local bidders for works of this type and size. Major water treatment plants (estimated value US$6.5 million) to be constructed would be combined into a single package and submitted to ICB. Although some local contractors are well qualified to bid for its construction, it may also attract foreign bidders. A preferential margin of 7 1/2% would be allowed to local contractors in evaluating bids for civil works under ICB. Most of the contracts for equipment, materials and civil works are likely to be won by local contractors. 60. The proceeds of the credit would be disbursed against 100% of the cost of equipment and materials or 100% of the ex-factory cost of locally manufactured goods procured under ICB; 50% of the expenditures of locally procured equipment and materials; 50% of the cost of civil works contracts subject to LCB and 70% of the cost of civil works contracts submitted to ICB, 100% of the cost of contracts for consultant services and training, and loan fund expenditures. No disbursements would be made against administrative costs. Disbursements against small civil works contracts, for one or more progress payments not exceeding Rs 300,000 (about US$30,770), for equipment and materials for payments not exceeding Rs 150,000 (about US$15,380) and for loan fund expenditures on house connections would be on the basis of Statements of Expenditures. The supporting documentation for these expenditures would be subject to inde- pendent audit and would be retained for inspection by review missions. Disbursements against expenditures for all other items would be fully documented. The Financial Position of Proiect Entities 61. Local Bodies: All local bodies in Tamil Nadu have traditionally maintained their accounts on a simple cash basis. As a part of the feasibility study for this project, TWAD engaged consultants to prepare financial statements for the cities of Coimbatore, Madurai and Salem in accordance with commercial practice. Income statements for the year 1981/82 and 1982/83 indicate a varied performance ranging from a marginal surplus in Madurai and Salem to a major deficit in Coimbatore on account of its large interest obligation of about Rs 20 million (about US$2.0 million) per annum due to a major water supply augmentation scheme presently underway 1/. In the absence of financial reforms, the water supply and sanitation services will become a major burden on the overall resources of these cities. Little information is available on the finan- cial activities of the water supply operations in each of the small towns under the project. Due to their very limited scale, the costs of such operations have been met out of general tax revenues. 1/ Although Coimbatore will receive additional water under this augmen- tation scheme (the Siruvani Project) due to be completed by end 1984, the full benefits of it would be realized on completion of the proposed project in 1988/89. Coimbatore's debt service obligation on the Siruvani Project is guaranteed by GTN.  -21- 62. TWAD: TWAD's financial position is important in view of its sectoral role and responsibility for project implementation. TWAD does not levy tariffs and obtains its income through a charge of 19 1/2% of base construction costs for the work it undertakes on behalf of local bodies. TWAD has been able to generate enough revenues to cover its operating costs and produce a marginal surplus. However to execute projects for local bodies and other Government agencies, TWAD has obtained unsecured loans from GTN and the Life Insurance Corporation of India. TWAD's long term financial viability is critically dependent on the repay- ment of these monies. In 1982/83 the amounts outstanding were estimated to be about Rs 737 million (US$75.6 million). TWAD has no specific debt repayment program, nor is reliable information available on its debt maturity structure. To ensure TWAD's continued financial viability under the proposed project, TWAD will be required to furnish IDA by December 31, 1984 with (i) a debt maturity schedule for the period 1985/86 through 1995/96; (ii) an annual program for debt retirement beginning from fiscal year 1985/86; and (iii) an annual program to reduce outstanding receiv- ables from fiscal year 1985/86, so that such receivables will not be more than one and one-half times the value of the work in progress by fiscal year 1988/89 and thereafter. TWAD will implement the annual programs under (ii) and (iii) above beginning fiscal year 1985/86 (Section 4.02 of the Project Agreement). Tariffs 63. Although maxim'im affordable tariffs and taxes will be imposed upon the commissioning of works, full recovery of the proposed project invest- ments will not be possible (para. 37). Adequate revenues are however expected to be generated to cover operation and maintenance costs in the project cities and in a majority of the project towns. Based on the findings of socio-economic studies undertaken for the cities of Coimbatore, Madurai and Salem, the monthly household expenditure for water supply through earmarked water taxes 1/ and direct user charges is about 4% of total household income. In addition to the water taxes (currently about 80% of revenues), the average domestic metered tariff rate required to cover operation, maintenance and assigned debt service on the commis- sioning of schemes in the above project cities in 1988/89, has been estimated at Rs 1.35 (US$0.14) Rs 1.80 (US$0.18) and Rs 1.90 (US$0.19) per thousand liters respectively. These rates are expected to be affor- dable by consumers. GTN will cause Coimbatore, Madurai and Salem to make suitable adjustments to water supply tariffs and taxes as shall be required to produce sufficient revenues to cover their operation, main- tenance and debt service obligations each year starting from the fiscal year ending March 31, 1990 (Section 3.02(a)(i) of the Tamil Nadu Agreement). The extent to which debt service can be met varies with each local body, GTN will therefore pass on the capital costs to the project cities in varying mixes of grants and loans based on the capacity of each 1/ The earmarked water tax is a specific tax collected annually along with the general property tax. It appears as a separate billing item and represents a percentage of the annual assessed value of property.  -22- to meet its debt service obligation. In addition, GTN will impose a tariff increase effective April 1, 1985 (Section 3.03 of the Tamil Nadu Agreement). As a result of this measure, the domestic metered rates in Coimbatore, Madurai and Salem would rise to Rs 0.90 (US$0.09), Rs 0.75 (US$0.08) and Rs 0.75 (US$0.08) above prevailing tariff levels of Rs 0.35 (US$0.04), Rs 0.50 (US$0.05), and Rs 0.50 (US$0.05) per thousand liters, respectively 1/. The revenues generated through this measure would produce a marginal surplus though not adequate to recover all capital costs. The interim tariff increase will however help to reduce the impact of the tariff increases due at commissioning and improve the financial performance of the project cities. 64. In the 75 small towns, where there will be no metering, GTN will impose a flat monthly charge per connection upon the commissioning of works (about 1988/89) at a level that would enable each town to generate adequate revenues to cover its operation and maintenance costs and to the maximum extent possible, its debt service requirements. Due to the limited resource base of these towns, the water charges collected will not in all cases be adequate to fully cover operating costs and debt service. Consequently, GTN will provide such towns with funds to cover any short- fall in their operating costs and debt service obligations when they are unable to do so from their own revenues (Section 3.02(a)(ii) and (b) of the Tamil Nadu Agreement). 65. In order to help to monitor the achievement of the overall finan- cial objectives of the project, annual financial performance ratios have been established for each of the project cities. These ratios based on detailed financial analyses, reflect realistic achievement possibilities taking into consideration both financial and operational improvements. GTN would ensure that the project cities take all necessary action to enable these targets to be met in accordance with the agreed Action Plan. 66. To further improve local government finances, including sector finances, a Resource Mobilization Study has been proposed for the project cities. GTN will employ consultants by January 1, 1985 to undertake such a study for the cities of Coimbatore, Madurai and Salem in accordance with satisfactory terms of reference (Section 2.06 of the Tamil Nadu Agreement). Although the Study will focus on short-term measures to improve the revenue base of the project cities, it will also help to identify constraints in resource mobilization enabling GTN to address such issues as a long term program for improving local resource mobilization. 1/ Corresponding commercial and industrial metered water rates per thousand liters for Coimbatore, Madurai and Salem would be as follows. Commercial: Rs 1.80 (US$0.18), Rs 1.50 (US$0.15), Rs 1.50 (US$0.15) respectively. Industrial: Rs 2.70 (US$0.27), Rs 2.25 (US$0.23), Rs 2.25 (US$0.23) respectively.  -23- Benefits 67. The project would provide an improved water supply service to approximately 3.3 million people by 1988/89 in the three cities and 75 small towns to be served. Consumers in nearly all these cities and towns connected to the system will be provided a minimum supply of 90 liters per day (lcd) of safe piped water. Standpipe users will receive about 30 lcd in the cities and 25 lcd in the smaller towns. The rural areas covered by the project presently served with unsafe water drawn from wells and other occasional sources will receive about 40 lcd of safe piped water supplied through standposts. The population served in these vil- lages will be approximately 500,000 by 1988/89. The low-cost sanitation program will benefit about 200,000 people in the 14 middle sized towns. 68e Because of the absence of convenient water sources, the water supply components for all project towns are costly and capital intensive. All feasible alternatives have been examined and options costed to deter- mine the least cost solutions that would be pursued. The design of water distribution systems has been programmed to define the most economic network having regard to configuration and pipe size. A rate of return of about 9% has been calculated for Coimbatore, Madurai, Salem and the satel- lite towns using revenues as the surrogate for benefits. The project's rate of return is a conservative measure of the economic rate of return because it does not capture consumer surpluses and benefits which accrue to the community at large. 69. The project will also provide for the first time, a safe supply of piped water to 44 small towns benefitting nearly half a million people below the poverty threshold of about US$35 per household per month whose present water sources pose a health hazard. Due to the low levels of consumption, demand-based pricing is not feasible for these towns to the same extent as for the project cities and larger project towns. Consequently, attempts at the quantification of benefits for them will not be practical. 70. Among the non-quantifiable benefits of the project is the allevia- tion of the hardship and drudgery of the poor in urban areas, through the provision of new and increased supplies of standpost water. Also not reflected in the rates of return are the benefits from an improvement of environmental quality and health conditions and their impact on increased productivity and lower medical costs through the availability of safe water and better sanitation facilities provided under the project. Project Risks 71. The technical risks involved in the project are no greater than can normally be expected with operations of this type. The project is complex and its timely execution will require considerable management effort and input coordination by TWAD. Therefore, the possibilities of delays occurring cannot be excluded. Although TWAD is a well established organization with experience in executing similar projects on a smaller scale, several measures have been taken to minimize the risk of delays. Provision has been made for the strengthening of TWAD's organization,  -24- management and staffing, and for consultant assistance in providing improved financial and management and information systems. An Action Plan has also been designed to closely monitor the progress of project implementation. Consequently, completion of the project within the planned implementation period would seem feasible. PART V - LEGAL INSTRUMENTS AND AUTHORITY 72. The draft Development Credit Agreement between India and the Association, the draft Special Fund Credit Agreement between India and the Association acting as the Administrator of the Special Fund, the draft Tamil Nadu Agreement between the Association and the State of Tamil Nadu, the draft Project Agreement between the Association and the Tamil Nadu Water Supply and Drainage Board, and the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement are being distributed to the Executive Directors separately. 73. Special conditions of the project are listed in Section III of Annex III. Execution of the Subsidiary Loan Agreements by TWAD with each of the project cities and towns, the passing of by-laws to ensure the metering of both new and existing connections in Madurai and the issue of a Government Notification allocating an additional 125 mld of water to Coimbatore will be conditions of disbursement for their respective com- ponents of the Project (Schedule I, para. 4(b), 4(c) and 4(d) of the Development Credit Agreement). 74. I am satisfied that the proposed credits would comply with the Articles of Agreement of the Association and Resolution No. IDA-82-6 adopted on October 26, 1982, of the Executive Directors of the Association. PART VI - RECOMMENDATION 75. I recommend that the Executive Directors approve the proposed credits. A.W. Clausen President by Ernest Stern March 2, 1984  ANNEX I Page 1 of 5 INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVERAGES) /a MOST (MOST RECENT ESTIMATE) /b /b 1971/b RECENT /b LOW INCOME MIDDLE INCOME 1960- 1970- ESTIMATE- ASIA & PACIFIC ASIA & PACIFIC AREA (THtNSAD SQ. K1) TOTAL 3287.6 3287.6 3287.6 AGRICULTURAL 1760.7 1780.5 1811.3 GNP PER CAPITA (US$) 70.0 100.0 260.0 276.7 1028.6 ENERGY CON5StmprION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 114.0 165.0 210.0 398.4 792.8 POPDLATION AND VITAL STATISTICS POPULATION,MID-YEAR (THOUSANDS) 434850.0 547569.0 690183.0 URBAN POPULATION (X OF TOTAL)- 18.0 19.8 23.7 21.5 32.9 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILL) 1001.3 STATIONARY POPULATION (MILL) 1838.3 YEAR STATIONARY POP. REACHED 2140 POPULATION DENSITY PER SQ. KM. 132.3 166.6 205.3 161.7 260.7 PER SQ. KM. AGRI. LAND 247.0 307.5 372.7 363.1 1696.5 POPULATION AGE STRUCTURE (X) 0-14 YRS 40.9 42.7 39.7 36.6 39.4 15-64 YRS 54.5 54.2 57.2 59.2 57.2 65 AND ABOVE 4.6 3.1 3.0 4.2 3.3 POPULATION GROWTH RATE (Z) TOTAL 1.8 2.1 2.1 1.9 2.3 URBAN 2.5 3.3 3.7 4.0 3.9 CRUDE BIRTH RATE (PER THOUS) 43.7 40.0 35.4 29.3 31.3 CRUDE DEATH RATE (PER THOUS) 21.8 16.7 13.3 10.9 9.6 GROSS REPRODUCTION RATE 2.9 2.7 2.4 2.0 2.0 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUS) 64.0 3 782.0 682 6.0 USERS (X OF MARRIED WOMEN) .. 12.0 23.0 48.1 46.6 FOO AND NUTRITION INDEX OF FOOD PROD. PER CAPITA (1969-71-100) 98.0 102.0 107.0 111.4 125.2 PER CAPITA SUPPLY OF CALORIES (X OF REQUIREMENTS) 96.0 90.0 87.0 98.1 114.2 PROTEINS (GRAMS PER DAY) 54.0 50.0 47,0 56.7 57.9 OF WHICH ANIMAL AND PULSE 17.0 15.0 13.0/c 13.9 14.1 CHILD (AGES 1-4) DEATH RATE 26.2 20.7 17.0 12.2 7.6 flMLTH LIFE EXPECT. AT BIRTH (YEARS) 43.2 48.1 52.2 59.6 60.2 INFANT MORT. RATE (PER THOUS) 165.0 139.0 121.2 96.6 68.1 ACCESS TO SAFE WATER (%POP) TOTAL .. 17.0 33.0/d 32.9 37.1 URBAN .. 60.0 83.07 70.8 54.8 RURAL . . 6.0 20.07? 22.2 26.4 ACCESS TO EXCRETA DISPOSAL (X OF POPULATION) TOTAL , 18.0 20.0/e 18.1 41.4 URBAN . . 85.0 87.0/e 72.7 47.5 * RURAL .. 1.0 2.07. 4.7 33.4 POPULATION PER PHYSICIAN 4850.0 4890.0 3640.0/f 3506.0 7771.9 POP. PER NURSING PERSON 10980.0/g 8300.0 5380.07? 4797.9 2462.6 POP. PER HOSPITAL BED TOTAL 2180.0 1650.0 1310.0/d 1100.6 104?.2 URBAN .. .. 370.07W 298.4 651.1 RURAL .. .. 10410.07d 5941.6 2591.9 ADMISSIONS PER HOSPITAL BED .. .. .. .. 27.0 HOUS ING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 5.6 5.2/e . URBAN 5.2 5.6 4.87. RURAL 5.2 5.6 5.37.. AVERAGE NO. OF PERSONS/ROOM TOTAL 2.6 2.8 '' URBAN 2.6 2.8 .. RURAL 2.6 2.8 ACCESS TO ELECT. (1 OF DWELLINGS) TOTAL .. .. URBAN .. .. RURAL .. ..  ANNEX I Page 2 of 5 INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVERAGES) /a MOST (MCST RECENT ESTIMATE) /b 1 b RECENT lb LOW INCOME MIDDLE INCCIE 1960- 1970- ESTIMATE- ASIA & PACIFIC ASIA & PACIFIC EDUCATION ADJUSTED ENROLLMENT R-ATIOS PRIMARY: TOTAL 61.0 73.0 76.0/f 96.1 101.2 MALE 80.0 90.0 90.07? 107.8 106.0 FEMALE 40.0 56.0 61.07o 82.9 97.5 SECONDARY: TOTAL 20.0 26.0 28.0/f 30.2 44.9 MALE 30.0 36.0 37.07d 37.3 50.0 FEMALE 10.0 15.0 18.07T 22.2 44.6 VOCATIONAL (% OF SECONDARY) 2.8 1.0 0.7/e 2.3 18.5 PUPIL-TEACHER RATIO PRIMARY 46.0 41.0 43.0/f 34.4 32.7 SECONDARY 16.0 21.0 .. 18,4 23.4 ADULT LITERACY RATE (X) 27.8 33.4 36.0 53.5 72.9 coNiSUPrioN PASSENGER CARS/THOUSAND POP 0.6 1.1 1.3/f 1.6 9.7 RADIO RECEIVERS/THOUSAND POP 4.9 21.5 44.4 96.8 113.7 TV RECEIVERS/THOUSAND POP 0.0 0.0 1.7 9.9 50.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 10.6 16.2 19.7 16.4 54.0 CINEMA ANNUAL ATTENDANCE/CAPITA 3.2 4.1 3.7/e 3.6 3.4 LABOR FORCE TOTAL LABOR FORCE (TROUS) 185951.0 219194.0 271179.0 FEMALE (PERCENT) 30.7 32.5 31.8 33.3 33.6 AGRICULTURE (PERCENT) 74.0 74.0 69.3 69.0 50.9 INDUSTRY (PERCENT) 11.0 11.0 13.2 15.8 19.2 PARTICIPATION RATE (PERCENT) TOTAL 42.8 40.0 39.3 42.5 18.6 MALE 57.0 52.4 51.9 54.4 50.7 FEMALE 27.3 26.9 25.9 29.8 26.6 ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.1 1.0 1.1 INCQ{E DISTRIBIJTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5E OF HOUSEHOLDS 26.7 26.3/h 22.2/e 16.5 22.2 HIGHEST 20% OF HOUSEHOLDS 51.7 48.97h 49.47e 43.5 48.0 LOWEST 20% OF HOUSEHOLDS 4.1 6.77h 7.07oT 6.9 6.4 LOWEST 40% OF HOUSEHOLDS 13.6 17.27h 16.27e 17.5 15.5 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INC'ME LEVEL (US$ PER CAPITA) URBAN .. .. 132.0 133.9 194.5 RURAL .. .. 114.0 111.6 155.0 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. .. 178.0 RURAL .. .. .. .. 164.8 ESTIMATED POP. BELOW ABSOLUTE POVERTY INCOME LEVEL (%) URBAN .. .. 40.3 43.8 24.4 RURAL .. .. 50.7 51.7 41.1 NOT AVAILABLE NOT APPLICABLE N O T E S /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, "Data for 1960" refer to any year between 1959 and 1961; "Data for 1970" between 1969 and 1971; and data for "Most Recent Estimate" between 1979 and 1981. /c 1977; /d 1976; /e 1975; /f 1978; /g 1962; /h 1964-65. May 1983  ANNE I Page 3 of 5 desrie rdra n egttode Idiec tred, nn .h...t... . eeee sje ditcee bscaaenccennetas -. sohjttnottrt(ecopt fe 'Sgt I-c-` O11iy etrs gcpeee "idle I-rs beech eit. -r ad Middis at is ch-ose hetans ef sceecse t .tIcca sf etes.I he cef--enc gre date etc Ftrgsaeppisiesihe eihei ee each Wriceice an chea -nly e-e sajery fcte c'etesi 1e97(thusad aqkI ...la le nr t siiaZ Pepsoltn dletd d~ by ceahec oo p _atiing fee:-Toa solce- e, optcn ladae-n nadetr;16,pyiin Iqoalitied c asdis ..h..ateni.r.. tee-d.. ftoe .. cro .s pe -re -are a-d kitchen garden or to lie fa11co; 0670. curIngarisre 1070 an Sf50 date. "ctlcc e Its ted - total, -ca, and ,ceI - P-e-iato-ttl ceac ndrea) icdd by bi -epctc nae of hspital cd GOP FP (0d tIll - Oh caP a aecsta tceetec e.ce a.te iei public and priat gerrledse ats ep t n ralcoleced lyss cne,enato la od hackota 1119-f haIa); rhhlttc etr optl t s hihet eu ri tfa (900,1)77 aOSMInd 1901 17 ~ .. data.to odtha t1 lnl trlde re tpd (geaca hsitas sdea 1b,dt. .I..r ..sp.tal. ..a.r... eaiasan eicladsent rnes rhrLolo Oho tnl. eelhld Ip'altdhnpcl t i nclde c f- de tonal.1 data 190,fr9cadt. hopialgdcied- te1eser-ttes 9 ~~~~~~~diftdai efndloa a oby sec sheafe- osacbtofyofdaadOOIb e --gou t'ie; l96(, 1970,ccd 1901 date. de-caeStl-cof Nos-hoid(orosehoaeoll" coaI ceaadraca Pco(tinItyer1z007- (Cr.-n p-uoinpceiosaeheie 90ad Iiheiesintaele. 0boerdor eric ayo ayctheicoddi tea ooaic yeencnc n hl ot (icy cd tntiityttebltaehcd ic acaItca crat.d-'' pldto osieItoca le-e, end ic-lt (teeci tnceailenen0, daelte eny -hcly. lAeelicga ea-d cnptern sraete n yean.Th yaC oefr fd-ecilcyCea l tcetheelee-.acIopadpctb aes -i ecin in. h fercilatyecco-dof athInoe- lCt--acd pea Iatl ccd-clet lolteipac ofdellitsl-ncaY,chacandtes aiccrchr bien note. it eq-aI-cedatcr, end also the ageTtO ONlo Th - - iccre-hle-ed onlyette-eyetityra-- Odjuated ne-11sn- et-s yoyoiantnntlc.o- ea -Ise-d on he bat it f the ....eeid chaactr-yel -nycnol-ade .p.opult L __hslj lyin -ld hcid leSed h-Il tatlcat. th p1opole-t- Ic, the -re 210, end thertao de-lint oe per onajetdfrdceeet eyt o ety aesf e eoyiatnnlroi ..l I..eceeohhed,".- hecorde -shol-tcolsalanffeai- Oh.eftl ashco;scndt pcoato eity dcaioncqiea esocnyasc aPpr"addptsr ye 7i k,-nd-yeo ycolntc. per aqtac kilo--te (107 heotoc-e of yrcid-c cetera. nctice, --eaher temn ctrc enfc "Ialero iftOhS 1h7(, -O (000data p.Ioynce -110 of (1 c 17yer ot age, corea--de-c ---ss c only; I'll,l970 -d hh98to hooicl`-lnct ecn of -tcod-y)-Occttra nstrtin .Pcelho behrcte prcn_ ChlOrec- (0-1e year), c-kice-ade (If- tnclode ehncl .,h-nel, roce pegas hrcoeat ed 64 ra, nd-tcehh .a...ccro -er-ennaeoofntd-y--eYoc enloadryrane tcod-y-alicea cotl ;1960, 710, and IntFdco noptI--hc rto- - rturn an ecdane l std-err enrolle it Ptnolalcnleochset(t--ntcn(-oa-hca potreoEtalid- yptsenyend ...od-cylrteln dclidedtbyn-orhcfech f cIh. .t1erc-- year "PIp,"ecl fcc lOh(-hO, 1960-70, en 100fl cepni (oe yopttfottcnotoonheacelye.-cenai-t~bnto- on( gcoat..t. of. a edIntearoeIncil- cetedca altnsddcc)s Pocyp,at len for (950-60, 1960-00, acd1970-Si, a ....ente0 of toco "d pI olt onetd it yeses and ce_r -noa foi- of (nec Ibttadl --cena Ifte bctha ye- cho....no of aId- yea ptoatc'960, 1970, n 1901 date. CONStotF`Tlh Crude euh tote S 2-th-otad) _ eno dcatha ye itooc-d of sid-y-ed. -aaeae Oar torn --t.and OOlcin --Fse-g car nc...athon; i9hO, 1970. a-d 19h1 da-. cane a.tn .. e ha eih.sc; c odcabol-cca .ease sod heI ceicyo"Ldac _ yateditsh caetceapeenog-ap Ific 11 tedi tec .n.. (pc, ntoadycoain ....l1 tyre of --ci-tr ter radio fetlt nrt i~Iy fle-cYoac h-ea,e endin,g in (960, 1970, and brood_cacte no_gnera Icbllc yen ..h.oIordf pplte; ee n 1001. 1!ieee, ccoenoconrted ..in react Io ttn ecIsI Ioe Oasileylanntn-eoceytc...e-- -dnolcoaca -Ooolt-ehcof aeepec seea _nff def aoeneantyea-r ncch -yhl.gc of bieth-c-c-o Oroi-e odecapotc natieca. fasily PI---"c, --oci-ie btoIa.he, Ileele nosen of chf(-hecctny etc li-I, franc Icht act h:nr-toct-nt - -ecae IaI cctn end1,,y If encU oe f.ntno ton aoenao insea ofeor hcheee l end c-c-iroe-nt (r-Iccet od danico~ the yea, in-l,dingaoin st octet-cc cine. she.. -ett- end tee oretolo.). egregoe pcodotlc_ of eah --ntylie _bileonine heackon naIonl eeecyc e nir- cegc;1961-65, 1970, end 1661 p-no-ytro -atclntcaonri .-ecn oft eeonnna-ocp-d fneon- ToaW-oeocltoaonoal-tFco...tn-lyocieesn,nld.gre da. -ocalloi -,ci-r o-,rite donnt podortleIi,icor ta eepylt ol all ga alilc ncnc econe,ad rthtg- Intc. .. ttaoy1 plIet_cclode, an-eci fed, nad, ope..ehbl; 1960, 197n -d (Ott dana. qt-nnihee cd In tend pecoecaing, and Inee in dgtrhotnn, F-sale cep--t -rnl ao oc as- pnaagef iota i.ib- force tehcrchnni areeatlece by coo hIe en phystoleIcalt n-ede fenoenol h otc nenn)-Lbcn lanc in f.tansne fcnsr-- hotn .ad acIce end helt III iern enioona catntr, dy ee5t,