India - Vocational Training Project

Document of The World Bank FOR OFFICIAL USE ONLY 1-Al 3 cjr/MA Repowt No. P-4948-IN MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$30 MILLION AND A PROPOSED CREDIT OF SDR 189.2 MILLION ($250.0 MILLION EQUIVALENT) TO INDIA FOR THE VOCATIONAL TRAINING PROJECT APRIL 3, 1989 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.  CURR FC E0UIVALENTS Currency Unit - Rupees (Rs) Rs. 1.00 - US$0.07 Rs. 14.60 - US$1.00 Rs. 1 lakh - US$6,849 Rs. 1 crore - US$684,932 FISCAIM April 1 - March 31 ACADEIC YEAR July 1 - April 30  FOR OFFICIAL USE ONLY INDIA VOCATIONAL TRAINING PROJECT LOAN/CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President Beneficiaries: Directorate General of Employment and Training (DGET), participating States, and Union Territories. Amount: IBRD: US$30.0 million equivalent IDA: SDR 189.2 million (US$250.0 million equivalent) Terms=: IBRD: 20 years, including 5 years of grace, at standard variable interest rate IDA: Standard, with 35 years maturity on-Lending Terms: The re-equipping of the Industrial Training Institutes (ITIs) component of the project will be financed through a matching funds arrangement between the Union Government and the States. Union funds will be lent to the States as part of central assistance for development projects on terms and conditions applicable at the time. Financing Plan: Local Foreign Total --------------US$Nillion------------ IBRD/IDA 195.0 85.0 280.0 GOI 149.8 - 149.8 TOTA1 344.8 85.0 429.8 Economic Rate of Return: Not applicable Staff Ap-raisal Report: Report No. 7530-IN This document has a restrictd distribution and may be used by recipients only in the performnance of their official duties. Its contents may not otherwise be disclod without World Bank authoriztion.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNA-IONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A IOAN AND CREDIT TO INDIA FOR THE VOCATIONAL TRAINING PROJECT 1. The following memorandum and recommendation on a proposed loan and credit to India is submitted for approval. The loan would be for US$30.0 million equivalent and would have a term of 20 years, including 5 years of grace with a standard variable interest rate. The credit, for SDR 189.2 million (US$250.0 million equivalent), would be on standard IDA terms. The loan and credit would help finance a Vocational Training Project. 2. Background. Since 1985, substantial policy reforms undertaken by the Government of India (GOI) have resulted in significantly higher growth rates in manufacturing, and above-average performance in the industrial sector. While GDP growth in 1987/88 is expected to be about 3.6%, mainly due to a severe drought, industrial growth is expected to reach 6.5%. Growth of manufacturing has averaged nearly 9% in the last three years, and manufactured exports have surged in the last two years. This is a significant departure from the 1960s and 1970s, when the performance of manufacturing did not generate the growth, employment, and foreign exchange that the economy required. The recent high growth rates in manufacturing need to be maintained if India is to achieve the minimum 5% growth rate which is needed in order to improve living standards, provide productive employment for the growing labor force, and reduce poverty. 3. It has also become increasingly evident that the overall quality and relevance of India's manpower development programs have not kept pace with recent technological innovations and changing occupational requirements. Average productivity levels are significantly below those which can be attained with the newly installed technology, and there are emerging shortfalls in specialized skill areas such as electronics and computers, especially for semi- skilled and technician levels. 4. Higher quality and more relevant training for skilled and semi-skilled industrial workers is needed to sustain economic growth, and to increase their prospective lifetime earnings and employability in the organized sector. The National Vocational Training System (NVTS) provides technical and vocational training for workers at different levels, which helps to increase their employment and earnings prospects, while at the same time addressing the issues of the lew level of industrial productivity and poor quality of manufacturing output. The proposed project will constitute an important step in assisting India in its efforts to modernize vocational training, and, ultimately, improve the productivity of skilled and semi-skilled industrial workers. 5. Previous Bank Group Experience. Bank iroup experience in the education sector has been limited to a Credit (Cr. 342-IN) of US$12 million in FY73 for support of university-level agricultural education in Delhi, Bihar, and Assam. The project was implemented over 10 years, compared with 7 years planned at appraisal, due to: late appointment of staff, shortage of construction materials, and price disputes with contractors. The Project Performance Audit Report (No. 5668, dated May 23, 1985), recommended better institutional assessm *t, more explicit statement of project objectives, and increased  realism in setting conditionality. Apart from the work done on the project noted above, the Bank Group and the Government have had limited discussions concerning education and training over the last decade. However, since mid- 1988 a dialogue has been reopened on the education and training sector. In addition to collaborating on the proposed project, discussions are underway concerning possible Bank Group assistance for technical education and primary education. 6. Rationale for IDA Involvement. Bank Group involvement in this project will promote industrial development by supporting improvements in the quality, efficiency, and relevance of vocational training for men and women and increasing access to modern sector skill training for women. High private and social rates of return to apprenticeship and craftsmen training support further investments in vocational training. From a distributional and employment- generation point of view, these investments are also well-justified, as trainees at these levels tend to come from the lower income groups. The project should also assist the Government in implementing its program for improving vocational training and in accelerating and strengthening State capacity for implementing vocational training investments. Moreover, it will enhance the focus of concerned authorities on the issues of the long-term financing of vocational training, recurrent finance for equipment maintenance, and incentive systems for retaining high quality instructors. The project will also have a positive impact on the quality of private Industrial Training Institutes (ITIs) by providing equipment on a grant basis to selected private ITIs which meet overall minimum performance criteria. The project fits in well with the Bank Group's country strategy for India which aims to promote industrial growth and enhance the level of development of India's human resources. 7. Prolect Objectives. The proposed project will be the first in vocational training in India to be assisted by the Bank Group. Its long-term objective is to improve the efficiency of industry by providing workers who are trained in a high quality manner in relevant skill areas. It will seek to achieve this objective in three ways. First, it will improve the quality and efficiency of training for craftsmen and apprentices. Second, it will expand the scope and relevance of advanced skill training programs. Third, it will strengthen the planning and management of vocational craining at central and State levels. Toward these aims, it will support the re-equipping and refurbishing of training institutes, the introduction at training centers of new trades, the creation of some new training centers in key fields, and the improved training of teachers for the vocational training system. A special feature of the project is that it will pay particular attention to promoting training for women in modern sector and high-tech trades. It will support the expansion and upgrading of training for women at the craftsmen and advanced levels, and related teacher training. It will aim over the life of the project to increase the share of women in these training programs from 5% to 10% and to have a major impact on enhancing the job prospects for women in emerging growth fields.  8. Project Descrigtion. The project is national in scope and will be implemented under the overall direction of the Directorate General of Employment and Training (DGET). The DGET will be solely responsible for implementing the central training schemes covering the advanced skill training areas and Central Staff Training and Research Institute management and instructor training programs. These represent about 40% of the total cost of project investments. The participating States and Union Territories will be responsible for implementing the ITI modernization scheme under the guidance of the DGET, which accounts for about 60% of proposed investments. About 80% of the ITIs assisted under the project will be located in 15 large states. All major procurement will be conducted in a centrally guided manner by the DGET on behalf of, and with appropriate representation from, the States and Union Territories. 9. 'T'he project will have three major components: (a) modernizing craftsman and apprenticeship training through re-equipping about 400 selected ITIs and developing related training systems, extending trade coverage of the National Apprenticeship Training Scheme at about 24 Bac'c Training Centers and 44 Related Instruction Centers, and increasing women's access to modern sector training by constructing about 100 new ITIs for women and adding about 19 new trades in about 72 existing women's ITI wings; (b) expanding the Advanced Training Programs by establishing about 32 new Advanced Vocational Training System Centers and extending existing Centers, and developing one new High- Technology Training Center for electronics, computers and robotics; and (c) improving NVTS management and planning at the DGET and corresponding State Directorates of Training through the development of a monitoring and evaluation system, improving testing and certification processes, reorienting management and supervisory training, and strengthening research on vocational training. The estimated project cost is US$429.8 million, including contingencies, resulting in a proposed IDA credit of US$250.0 million equivalent and a Bank loan of US$30.0 million equivalent. Retroactive financing of US$10.0 m.^llion equivalent (or about 4% of the total Credit amount) will be allowed for costs incurred in purchasing ITI equipment for the start-up period of the project. The estimated project costs and the financing plan are given in Schedule A. The procurement method and disbursement schedule are provided in Schedule B. A timetable of key project processing events and the status of Bank operations in India are given in Schedule C and D, respectively. The Staff Appraisal Report No. 7530-IN is being distributed separately. 10. Part of the proposed project vill be carried out in the State of Jammu and Kashmir, which includes areas over which India and Pakistan have been in dispute since 1947. In making the proposed loan/credit to India, the Bank does not intend to prejudice the final determination of the claims of the parties involved. 11. Agreed Actions. During negotiations, the Government provided assurances that: (a) it will maintain a Central Project Implementation Unit during the life of the project which will carry out project coordination, monitoring, supervision, and evaluation; (b) the equipment maintenance system will be adequately funded and maintained throughout the life of the project;  - 4 - (c) it will continue under the project its ptlicy of strengthening links between training institutions and industry through the establishment of local level advisory boards and the appointment of industry liaison officers for each Industrial Training Institute assisted under the project; (d) it will review annually with the Bank Group the project implementation plan for the next year, including staffing and training plans, evidence of land acquisition and plans for further acquisitior, and financial, procurement, and construction plans; (e) it will furnish the Bank Group with studies, performed in accordance with terms of reference acceptable to the Bank Group of the self-employment schem% and a sample study of ITI instruction by December 31, 1994; of the application of accreditation standards by July 31, 1995; and of a tracer study of the employment of ITI certificate holders by September 30, 1995; and (f) it will carry out a mid-term review of the project under terms of reference acceptable to the Bank Group and it will furnish the outcomes of such a review to the Bank Group for discussion no later than December 31, 1994. 12. Each State and Union Territory participating in the project must have submitted a letter of undertaking to GOI covering the implementation, procurement and coordination arrangements which the States and Union Territories will be expected to follow. Such letter will also deal with maintenance of equipment and facilities and provision of progress reports and will ensure that overall project arrangements are properly executed. Letters of undertaking must be satisfactory to the Bank Group and their submission to the Bank Group will be a condition for disbursement in any State and Union Territory. Twelve States, in which about 50% of the proposed ITI investments would be made, have already submitted letters of undertaking to the Government of India and the Bank Group. 13. Benefits. The main benefit of the proposed project will be the provision to the industrial sector of more relevant and better trained skilled and semi-skilled manpower. The NVTS will also be rejuvenated and more closely linked to industry and better able to respond to current and projected needs. The proposed project will also increase modern sector training opportunities for women. In addition, it will result in a strengthened planning and management capacity for vocational training, particularly at the State level. 14. Risks. The major risk likely to face the project is the potential delays in implementing a national effort. Other concerns are: (a) the fact that the MOL has not previously worked with the Bank; (b) the general inadequacy of industry-training establishment linkages; (c) difficulties in implementing improved maintenance programs; and (d) constraints on establishing enhanced incentives for instructional staff. These risks are being addressed in a number of ways. First, the project builds upon an ongoing GOI sponsored scheme for the modernization of ITIs. In addition, 40% of the project is under a single entity. Second, a procurement plan has been prepared and generic bidding documents were approved during negotiations. Third, the DGET will have some flexibility to shift funds from one ITI/State to another based on implementation performance, which should considerably limit the implementation delays by any given State on the project as a whole. The additional risks mentioned above will be addressed through the implementation of well-prepared project components aimed directly at improving: monitoring and evaluation,  5- 5 maintenance, staff incentives, and the strengthening of ITI industrial advisory boards to improve industry-training establishment linkages. 15. Recommendation. I am satisfied that the proposed loan and credit will comply with the Articles of Agreement of the Bank and of the Association, and recommend that the Executive Directors approve the proposed loan and credit. Barber B. Conable Presidert Attachments Washington, D.C. April 3, 1989  -6- ScheduleA Page 1 VYTO_gNaL TRAINING PRQJECT Estimated Costs and Financing Plan Estimated Costs: For- *or- A ^/ Local eign Total Local eign Total Base -------Rs million----- --US$ million--- cost A. Modernizing the craftsman and apprenticeship training ptogram 3,079.8 646.2 3,726.0 210.9 44.3 225.2 76 B. Expandir.g advanced training programs 568.0 357.7 825.7 38.9 17.6 56.6 17 C. Improving NVTS planning manage- ment & supervision 280.8 75.0 335.8 19.2 5.1 24.4 7 Total Base $osts 3.928.6 978.2 4.907.5 269.1 67. 336.1 10 Contingencies Physical 436.9 105.7 542.6 29.9 7.2 37.2 11 Price 1,162.8 265.0 1,427.8 .5.7 10.7 56.5 17 Total / S.S28.3 1.349.6 6.877.9 344.7 85.0 429.8 128 _/ Refer to US$ figures. All figures are rounded. b/ Includes Rs 539 million (U$33.9 million equivalent) in taxes and duties.  -7- Page 2 Fincing Plan: Government Ag l of India 1BRD/IDA Total SIBRD/IDA ----- -US$ million------------.Financing Equipment: SL Standard 48.7 146.2 194.9 75 High Tech 13.9 16.8 30.7 55 Books 0.4 1.4 1.8 80 Furniture 0.7 1.0 1.7 60 Civil works and related professional services 16.2 24.3 40.5 60 Training: Domestic - 12.8 12.8 100 Overseas - 3.4 3.4 100 Specialist services: Local 1.2 1.2 100 Foreign - 2.2 2.2 100 Miscellaneous 1.7 1.8 3.5 ' 50 Incremental Salaries 27.7 30.1 57.8 52 Incremental Maintenance 16.5 - 16.5 0 Travel/Daily Allowances and Honoraria 4.5 4.6 9.1 50 Consumable Haterials 4.4 6.6 11.0 60 Total Ease Costs 134.7 A.L 387.1 gU Unallocated s/ 15.1 27.6 42.7 65 Total1498 2800 42982 l A/ The Goverrnment of India share includes about US$55 million which participating States will contribute to the project. k/ Totals represent total estimated costs per category including price contingencies. 5/ Including estimated import duties and taxes financed by GOI. v/ Unallocated funds are the physical contingencies plus price contingencies on physical contingencies.  * 8 Page 1 INDIA VOCATIONAL TRAINqING PROJZa Procurement Metho and Disbursements Procurement Table (in US$ million) Procurement method Total _ _ ____.___._________- -------- -------- cost Category of Expenditure ICB LCB Other NA A/ Equipment: Standard 66.5 105.1 42.8 - 214.5 (49.8) (78.8) (32.2) - (160.8) High Tech 16.8 13.5 3.4 - 33.7 (9.3) (7.4) (1.9) - (18.6) Books - - 1.9 - 1.9 = - *(1.5) - (1.5) Furniture - 1.7 0.2 - 1.9 = (1.0) (0.1) (1.1) Civil works and related - 48.6 - - 48.6 professional services - (29.2) - - (29.2) Training: Domestic - - - 14.1 14.1 _ - - (14.1) (14.1) Overseas - - - 3.8 3.8 - - - (3.8) (3.8) Specialist services: Local - - 1.3 1.3 - - - (1.3) (1.3) Foreign - - - 2.5 2.5 - - - 2.5 (2.5) miscellaneous - - - 3.8 3.8 * - - (1.9) (1.9) Incremental Salaries - - - 63.6 63.6 - - - (33.1) (33.1) Incremental Maintenance - - - 18.1 18.1 - (0.0) (0.0) Travel/Daily Allowances - - - 9.9 9.9 & Honoraria - - (4.9) (4.9) Consumable Materials - 10.9 1.2 - 12.1 (6.5) (0.7) - (7.2) Total 83.3 179.8 49.6 117.1 429.8 (59.1) (122.9) (36.4) (61.6) (280.0) Note: Figures in parentheses are the respective amounts financod by the Bank Group. g/ Totals represent total estimated costs per category including price and physical contingencies. NA - Not applicable.  -9 Schedule B Page 2 Disbursements Table Disbursement Disbursement Semesters Bank Group Cumulative Profile (%) from Fiscl year Semester Cumulative as 8 of Regional Approval and Semester ----(US$ million)---- total Ed. Projects Date 1989 2nd 0.0 0.0 0% 0% 1 1990 1st 5.6 5.6 2% 2% 2 2nd 5.6 11.2 4% 4% 3 1991 1st 11.2 22.4 8% 10% 4 2nd 19.6 42.0 15% 18% 5 1992 1st 28.0 70.0 25% 28% 6 2nd 28.0 98.0 35% 38% 7 1993 lst 19.6 117.6 h2% 46% 8 2nd 22.4 140.0 50% 54% 9 1994 1st 28.0 168.0 60% 64% 10 2nd 28.0 196.0 70% 73% 11 1995 1st 14.0 210.0 75% 80% 12 2nd 14.0 224.0 80% 88% 13 1996 1st 28.0 252.0 90% 94% 14 2nd 14.0 266.0 95% 100% 15 1997 1st 8.4 274.4 98% 16 2nd 5.6 280.0 100% 17 Closing Date: September 1996 Estimated Disbursements FM89 FY90 FY91 I=2 FY93 FY94 FY95