Nepal - Second Water Supply and Sewerage Project

Report No. 1420b-NEP Nepal: Appraisal of the Second FILE OgPY Wate:r Supply and Sewerage Project April 11, 1977 South Asia Projects Department Energy and Water Supply Division FOR OFFICIAL USE ONLY Docurniet of the World Bank Thts document has a restrtcted distnbution and may be used by reciptents only in the pertormance of their offt cal duties Its contents may not otherwise be dtsclosed without World Bank authorizatiorn  CURRENCY EQUIVALENTS (As of March 1, 1977) Currency Unit = Nepalese Rupee (NRe) NRe 1.00 = 100 Paisa US$ 1.00 = NRs 12.50 ,US$ 1 million N NRs 12.5 million NRe 1.00 = US$0.08 NRs I million = US$80,000 MEASURES AND EQUIVALENTS 1 = Liter (1 liter = 0.26 US gallons) 1Tcd = Liter per capita per day m3 = Cubic meter or 1,000 liters (1,000 liters = 264 US gallons) m /day Cubic meter per day 1/sec = Liter per second (0.035 cubic feet per second) mm Millimeter (0.03937 inch) m Meter (3.28 feet) km Kilometer (0.62 mile) ha = Hectare (10,000 square meters or 2.47 acres) ABBREVIATIONS AND ACRONYMS HMG = His Majesty's Government of Nepal MWP = Ministry of Water and Power, Nepal ODM = United Kingdom Ministry of Overseas Development UNDP = United Nations Development Programme UNICEF = United Nations International Children's Emergency Fund WHO World Health Organization WSSB = Water Supply and Sewerage Board, Nepal WSSD = Water Supply and Sewerage Department of the Ministry of Water and Power, Nepal FISCAL YEAR July 16 to July 15  FOR OFFICIAL USE ONLY NEPAL APPRAISAL OF THE SECOND WATER SUPPLY AND SEWERAGE PROJECT TABLE OF CONTENTS Page No. SUMAARY AND CONCLUSIONS . . . . . ..... . . . . . . . . . .. . - i-iii -. INTRODUCTION . ....... C ............................ 1 Ii. THE SECTOR ,.. ................................ 2 A. Present Situation ... ..*.................. .....* 2 B. Sector Development .. .............................. 3 C. Sector Organization ..................... 4 III. THE PROJECT ........ .... ... .............. 6 A. Description of the Project . ....................... 6 B. Cost Estimates .................................... 8 C. Project Finance ........... ....................... . 10 D. Procurement ...... ................................. 10 E. Disbursements ..................................... 11 F. Design, Construction and Supervision of Construction .................................... 11 G. Land Acquisition and Temporary Access .............. 12 H. Impact of the Project on the Urban Poor ....... .... 12 I. Environmental Impact ..... ......................... 12 IV. JUSTIFICATION ....... ................................... 12 V. THE BORROWER AND BENEFICIARY ........................... 15 A. The Borrower ...................................... 15 B. The Beneficiary ................................... 15 C. Organization and Management .... ................... 16 D. Management and Accounting Systems .............. ... 16 E. Staff ............................................. 16 F. Training .......................................... 17 G. Audit ... 17 H. Project Risks ....... .................... 17 This report was prepared by Messrs. L.V. Smith (Financial Analyst) and T. Skytta (Sanitary Engineer). document has a restrictod distribution and may be usd by recipients only in the performance [fteir official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -2- Table of Contents (Continued) Page No. VI. FINANCE ................................................ 18 A. General .................................. . .. . 18 B. Past Performance and Present Financial Position (FY1975 and FY1976) .... . ....................... 18 C. Financing Plan ..........................I... 19 D. Present Water Charges .. ..................O. ... 22 E. Tariff Study ............................ .... 22 F. Future Water and Sewerage Charges ....... ......... 23 G. Future Finances .............................. ...... 24 H. Performance Monitoring ... 26 I. Insurance .............. 696 VII. AGREEMENTS REACHED AND RECOMMENDATIONS . ................ 26 ANNEXES 1. Description of the Project 2. Project Cost Estimates 3. Estimated Schedule of Disbursements 4. Construction Schedule 5. Existing Water Supply and Sewerage Facilities 6. Population, Water Demand and Production Projections 7. Organization Chart of the Water Supply and Sewerage Board 8. Income Statements 9. Flow of Funds Statements 10. Balance Sheets 11 Assumptions for Financial Projections 12. Schedule of Present Water Charges MAPS IBRD - 12629 NEPAL: Existing and Planned Water Supplies IBRD - 12672 KATHMANDU VALLEY: Existing and Planned Water Supplies IBRD - 12677 KATHMANDU AND LALITPUR: Existlng and Planned Distribution System. IBRD - 12678 KATHMANDU AND LALITPUR: Existing and Planned Sewerage System IBRD - 12679 POKHARA AND BODE/THIMI: Existing and Planned Water Supplies IBRD - 12680 BIRATNAGAR AND BIRGANJ: Existing and Planned Water Supplies  NEPAL APPRAISAL OF THE SECOND WATER SUPPLY AND SEWERAGE PROJECT SUMMARY AND CONCLUSIONS i. This report covers the appraisal of a second project for improving and exlending water supply and sewerage facilities in Nepal. The first Proj- ect 1/ provides for expansion and improvements to water supply systems for urban and fringe rural areas in the Kathmandu Valley (including Kathmandu the capital) and Pokhara, a major regional center. A sewerage system for Kathmandu and adjacent Lalitpur is also provided. An essential part of the first 'roject is the establishing of the Water Supply and Sewerage Board (WSSB), the start of its operations and the training of its staff under tech- nical assistance provided by the United Kingdom Ministry of Overseas Develop- ment (ODM). At the time of appraisal of the first Project the plans for two other provincial towns, Biratnagar and Birganj, were reviewed but, due to financial constraints, were excluded from the Project. Now, His Majesty's Government of Nepal (HMG) has requested a second credit to finance additional works to make fuller use of the facilities being constructed under the first Project and also those works excluded from the first Project. This second project includes construction of reservoirs and secondary distribution mains in Kat'amandu Valley and Pokhara; expansioni and improvement of water supply facilities in Biratnagar and Birganj; extensions to sewage collection systems in Kathmandu and Lalitpur; studies to prepare future schemes for six other towns in Nepal; a tariff study and traininig of staff. The estimated cost of the project is US$11.0 million equivalent (excluding duties and taxes of US$0.3 million equivalent) of which about 50% represents foreign exchange. An IDA CrEdit of US$8.0 million is proposed to cover about 73% of the project cost excluding duties and taxes. Additional financing of US$4.0 million is presently under consideration by the Executive Directors to assist in financ- ing an anticipated cost overrun of about US$6.0 million on the first Project. ii. The project is based on studies for Kathmandu Valley financed by the United Nations Development Program (UNDP) and for Pokhara, Biratnagar and Birganj financed by HMG all carried out by Binnie and Partners, London. These studies which were completed by 1973 have been reviewed and the cost estimates have been updated by WSSB for the purpose of project preparation. iii. The credit would be made to HMG and onlent to WSSB at 9% for a term of 25 years including five years grace on payment of principal and a waiver of inlerest during these five years. WSSB is a semi-autonomous government entity, set up to carry out the first Project. Although about twelve months behind schedule, the first Project is now well in progress. 1/ Credit 470-NEP signed on May 8, 1974  - ii - iv- The proposed project has a high priority because of inadequate ice to the growing population in the project area and the health hazard- volved in the present systems. The project will continue the rehabiliLa'-:- and extension of existing water supply and sewerage systems to provide ( F safe and uninterrupted piped water supply for the population in Kathmandu wa ley, Pokhara, Biratnagar and Birganj, and (2) waterborne sewerage systems for certain areas of Kathmandu and Lalitpur with modern sewage disposal facilities thereby reducing pollution of the Bagmati River. By 1981 on completion of the proposed second project the population served with water within the project area will be 590,000. This is an increase of about 200,000 over the pop- ulation that would be served with water on completion of the first Pzro_ecr 1978. Additionally over 85,000 people will be served by sewer connectiors by 1981. The project will also continue to develop WSSB as a viable entity capable of taking responsibility for water supply and sewerage through- out Nepal. v. The water supply component of the proposed project includes the development of tubewells (for Biratnagar and Birganj); a pumping station; transmission and distribution main extensions and replacements; service ressr- voirs; improvements and repairs to existing systems together with service connections and meters. These facilities will be adequate to meet requi-re. ments for water supply in the project area up to about 1985. The sewerage component of the project includes about nine km of sewer extensions for Kathmandu and Lalitpur. WSSB staff will continue to be trained in adminis tration, accounting, engineering, and operations and maintenance; adequate facilities, equipment and vehicles are included in the project for this >ur- pose, and ODM technical assistance would be continued. vi. Of the estimated total project cost of NRs 141.1 million (USSIIJ million equivalent), NRs 115.8 million (US$9.3 million equivalent) is f-s water supply, NRs 18.1 million (US$1.5 million equivalent) is for seweragei NRs 4.2 million (US$0.3 million equivalent) is for duties and taxes and NRs 3.0 million (US$0.2 million equivalent) is for tariff and feasibiliLty studies. The proposed credit will cover the US$5.6 million equivalent f g exchange component of the project cost and US$2.4 million equivalent repfesen- ing 42% of the local costs. The remaining US$3.3 million equivalent will be financed by HMG as an equity contribution to WSSB. vii. All contracts will be awarded on the basis of international compe' titive bidding in accordance with IDA guidelines, except for minor civil 1-.--s_ and equipment, totalling about US$500,000 equivalent which will be let ac ing to HMG procedures. viii. HMG has agreed to levy a sewerage charge equal to 50% of water charges in FY1978 when the sewerage service comes into use and to increase water charges in FY1979 in order to meet the required rate of return.