India - Rajasthan Water Supply and Sewerage Project

Document of The World Bank j PAV FOR OFFICIAL USE ONLY Report No. 2865b-IN INDIA RAJASTHAN WATER SUPPLY AND SEWERAGE PROJECT STAFF APPRAISAL REPORT May 19, 1980 Regional Projects Department South Asia Projects 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 September 1, 1979) Currency Unit - Rupee (Rs) US$1.00 - Rs 8.4 Rs 1.00 - US$0.119 MEASURES AND EQUIVALENTS L millimeter (mm) = 0.04 inches (in) 1 meter (m) = 3.28 feet (ft) 1 kilometer (kim) 2 = 0.62 miles (mi) 1 square meter (m ) = 10.8 square feet (sq ft) 1 hectare (ha) 2 = 10,000 square meters or 2.47 acres (ac) 1 square kilometer (km ) = 0.386 square miles (sq mi) 1 liter (1) = 0.26 US gallons (gal) 1 liter per capita per day (1/cd) = 0.26 US gallons per capita per day (gcd) I cubic meter (m ) 35.3 cubic feet (cu ft) ABBREVIATIONS AND ACRONYMS Four Cities - Jaipur, Jodhpur, Kota and Bikaner Three Cities - Jaipur, Jodhpur and Bikaner CP - IBRD/WHO Cooperative Program DGS&D - Directorate General for Supply and Disposal GOI - Government of India GOR - Government of Rajasthan LIC - Life Insurance Corporation of India MD - Medical Department PHED - Public Health Engineering Department RWSSB - Rajasthan Water Supply and Sewerage Management Board FISCAL YEAR April 1 - March 31 The project was appraised in November/December 1979 and March/April 1980 by Lars Rasmusson, Senior Sanitary Engineer, R.C. Mitchell, Senior Finan- cial Analyst, and Tauno Skytta, Sanitary Engineer.  FOR OFFICIAL USE ONLY INDIA RAJASTHAN WATER SUPPLY AND SEWERAGE PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. THE RAJASTHAN WATER SUPPLY AND SEWERAGE SECTOR .... ....... 1 Country Background ...................................... 1 Water Resources ......................................... 1 Sector Organization and Development ..................... 2 Present Service Levels .................................. 3 Service Levels Goals .................................... 4 Sector Investment Program ............................... 4 II. POPULATION SECTOR SERVICES AND DEMAND IN THE PROJECT AREA ........................................ 6 Population Projections and Demand for Services .... ...... 6 Population Served and Standard of Services for Project Areas ..................................... 7 Design Parameters ........................................ 8 Project Locations ....................................... 8 Development Prospects ................................... 9 Existing Water Supply and Waste Disposal Systems ........ 9 III. THE PROJECT ............................................. 10 Genesis ................................................. 10 Project Objectives ...................................... 10 Technological Aspects ................................... 11 Description of Project Components ....................... 13 Cost Estimates .......................................... 14 Project Financing ....................................... 16 Project Implementation .................................. 16 Procurement ............................................. 18 Disbursements ........................................... 19 IV. FINANCIAL ANALYSIS ...................................... 19 Past Financial Performance .19 Present Finance Position .20 Revenues and Tariffs .21 Future Financial Performance .23 Financing Plan .25 Commercial Accounting System .26 Billing and Collection .26 Audit .27 Insurance .27 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.  -2- Table of Contents (cont'd) Page No. V. THE IMPLEMENTATION AND OPERATION AGENCY .... ............. 27 Operating Arrangements .................................. 27 Organization .......... .................................. 27 Management and Personnel ................................ 29 Training ............ .................................... 30 VI. ECONOMIC ANALYSIS ....................................... 30 Marginal Cost Analysis .................................. 30 Pricing Considerations .................................. 31 Incremental Financial Rate of Return .... ................ 32 Project Benefits and Impact on Poverty Groups .... ....... 32 Project Merits and Risks ................................ 33 VII. AGREEMENTS REACHED AND RECOMMENDATIONS .... .............. 34 ANNEXES Annex 1 Table 1 Summary of Service Levels in Rural and Urban Areas, Water Supply and Sewerage ........... ....................... 35 Table 2 Past and Projected Water Supply and Sewerage Sector Investments (Rural and Urban Areas) ..... .............. 36 Table 3 Service Levels and Implementation Schedule (Rural Areas) ..... ............... 37 Table 4 Salient Data and Service Levels (Four Cities Water Supply) ..... ........... 38 Table 5 Salient Data and Service Levels (Three Cities Sewerage) .39 Table 6 to 10 Cost Estimates for Rural and Urban Areas, Water Supply and Sewerage .40-44 Table 11 Material and Equipment Requirements .45 Table 12 Estimated Schedule of Disbursements .46 Table 13 Urban Areas - Income Statement .47 Table 14 Urban Areas - Funds Flow Statement .48 Table 15 Urban Areas - Balance Sheet .49 Table 16 Rural Water Supply - Income Statement .50 Table 17 Rural Water Supply - Funds Flow Statement 51 Table 18 Rural Water Supply - Balance Sheet .52 Table 19 Current Tariff Structure .53-53 Table 20 Project Location - Income Statement .55  -3- Table of Contents (cont'd) Page No. Annex 2 Summary of Assumptions for Financial Projections ........ 56-58 Annex 3 Additional Information Available in Project File ....... 59 Annex 4 Performance Indicators ................................. 60 CHART 21142 Construction Implementation Schedule .... ............... 61 21143 RWSSB Organization ..................................... 62 MAP IBRD 14817 - The State of Rajasthan with Project Districts and Project Cities Indicated   INDIA STAFF APPRAISAL REPORT RAJASTHAN WATER SUPPLY AND SEWERAGE PROJECT I. THE RAJASTHAN WATER SUPPLY AND SEWERAGE SECTOR Country Background 1.01 The State of Rajasthan is located in the northwestern part of India bordering Pakistan (M2p IBRD 14817). It is the second largest State, covering an area of 342,000 km or 10% of India's total area. The Aravalli mountain ranges divide the State north to south into almost two equal halves. The western part is the Thar desert, while the eastern part is hilly semi-desert. Extreme climatic conditions are typical for Rajasthan with temperatures ranging between -4OC to 50 0C and annual rainfall varying from 50 mm to 2,000 mm. 1.02 The population of Rajasthan was 25.8 million at the 1971 census and is estimated to have increased by 1979 to about 32 million. About 80% (26 million) live in rural areas (33,305 villages) and the remaining 20% (6 million) in urban areas 2(175 cities and towns). The population density averages about 90 persons per um which is much lower than the overall average for India (about 200 persons/km ). The population increase for the period 1961/71 was 27.8%, or 38.5% for urban areas and 25.8% for rural areas. 1.03 The economy of the State is primarily based on agriculture, from which about 56% of its total income is derived. Of the total area, about 50% is under cultivation, of which about 20% is irrigated. The per capita income by 1977/78 was Rs 925 or about 20% below the national average (Rs 1,163). The State development plan outlay during FY1979 was Rs 95 per capita or only about 45% of the national average (Rs 212). 1.04 The public health level in Rajasthan appears to be below the Indian average. Infant mortality is more than 10% higher than the all-India figure and high incidences of dysentery and infectious hepatitis have been reported. Skeletal fluorosis is comparatively widespread because of the use of ground- water with high fluoride content. The prevalence of guineaworm also adds to the number of water-borne diseases. A significant number of villages use water rated as hazardous to health. Water Resources 1.05 There are no perennial rivers in the arid region (Western part) where the main surface water source is the Rajasthan irrigation canal system. The eastern districts are covered by river systems with highly variable dry-wet season flows and include some minor lakes.  - 2 - 1.06 The Rajasthan Groundwater Department has comprehensively surveyed the State's geological formations with regard to groundwater. In general, groundwater availability is scarce and the quality ranges from satisfactory to poor. In the desert areas the groundwater is frequently brackish and available only at considerable depth (below 200 m). 1.07 In brief, the water supply situation is difficult and frequently remote water sources have to be developed to satisfy basic needs. Sector Organization and Development 1.08 Most functions at the State Government level related to the water supply and sewerage sector have since 1965 been concentrated in the Public Health Engineering Department (PHED) which has been responsible for project planning and construction, as well as operation and maintenance of rural and urban water supply systems. The operation of sewerage systems remained a local function. 1.09 In order to better cope with the needs of the sector, the Government of Rajasthan (GOR) decided to establish a semi-autonomous State Government Organization and effective May 1, 1980 established the Rajasthan Water Supply and Sewerage Management Board (RWSSB) 1/ (see para 5.02). 1.10 The RWSSB/PHED is responsible for all sector activities including operation and maintenance for both water supply and waste disposal works (para 3.25). The GOR would retain the powers (i) to borrow funds for capital investments in water supply and sewerage schemes, for which the priorities would be based on recommendations to be made by RWSSB; and (ii) to sanction water supply and sewerage tariffs based also on recommendation made by RWSSB. 1.11 The formation of RWSSB does not exclude the ultimate development of a two-tier system with local responsibility for operation and maintenance; a gradual transfer of this function to local bodies might take place in the future (para 5.04 and 5.05). However, initially all properties would be owned by GOR and operated by RWSSB. Assurances that all water supply assets have been transferred from the municipalities to GOR was provided for all proper- ties currently operated by RWSSB. 1/ A Government order giving notification of the effectiveness of the Rajasthan Water Supply and Sewerage Corporation Act was issued in January 1980 establishing the Rajasthan Water Supply and Sewerage Corporation. However, it was subsequently determined that transfer of staff to a new Corporation would be disruptive and administratively complex. Hence, GOR decided to continue to utilize the organization of PHED which would henceforth operate under a Board (RWSSB) established to oversee PHED's activities. Accordingly, GOR has withdrawn the notification of the establishment of the Corporation by government order and the Act would be subject to repeal as soon as necessary legislative action can be scheduled.  1.12 The establishment of RWSSB is a major step in the development of the sector. RWSSB and the Medical Department (MD) will administratively be under the same ministry which would assure continued close cooperation on health aspects and education in connection with water supply and sanitation. Proper coordination is also being maintained with other GOR organizations involved in water resource development and allocation and environmental matters (the Groundwater Department, the Irrigation Department, and the Water Pollution Control Board). Present Service Levels 1.13 Present (1979) and past (1971) service levels (water supply and sewerage) in rural and urban areas are summarized below: Water Supply 1971 1979 RURAL AREAS Population Served - Nos. (million) 3.0 6.3 - % of total 14% 24% URBAN AREAS Population Served by Connections - Nos. (million) 2.0 3.7 - % of total 43% 61% Population Served by Standposts - Nos. (million) 1.4 1.3 - % of total 31% 21% Sewerage URBAN AREAS Population Served by Connections - Nos. (million) 0.2 0.3 - % of total 5% 5% 1.14 Of a total of 33,305 villages (present population about 26 million), 24,037 (present population about 20 million) have been classified as problem villages based on criteria such as health hazard aspects and distance and accessibility to and quality of water sources. By 1979 about 3,800 villages (almost all of them problem villages) with a population of about 6.3 million had been provided with piped water supply, mainly through standposts but with a few private connections covering less than 15% of served population. Unserved population rely on shallow wells, remote surface water sources or water collected during the rainy season. About 0.8 million (3%) are served by water supplied through public handpumps. The service levels are similar to those in other rural areas throughout India. 1.15 Rajasthan is the only State of India, which has provided all its cities and towns (175) with piped water supply. In Jaipur, Jodhpur, Kota and Bikaner (the four major cities), accounting for about 32% of the total  - 4 - urban population, the service levels have remained about constant while in remaining urban areas they have improved during the period 1971 to 1979. Rajasthan and the all-India figure for served population in urban areas are comparable. The water supply is, however, generally intermittent, at low pressure and unevenly distributed. 1.16 Sewerage systems have been extended mainly to two urban areas (Jaipur and Jodhpur) covering about 20% of the population in these two cities or about 5% of total urban population, much below the all-India average. The bulk of the population rely on the conservancy system or have no sanitary facilities at all. Sanitary conditions, particularly in congested urban areas, are poor and steadily deteriorating. A program to convert dry latrines into water seal latrines has commenced but so far its impact cannot be measured. 1.17 In rural areas, there is a general lack of sanitary facilities and no program has, as yet, been evolved to improve the present situation. The problems are, however, less severe than in urban areas. Service Levels Goals 1.18 A long range sector objective is to provide satisfactory water supplies in all urban and rural areas, and sewerage systems in congested urban areas, but this would require capital investments that cannot be realized within the foreseeable future. Priorities have thus been established commen- surate with the immediate needs of the sector. The development or extension of water supplies is most urgently required in scarcity rural areas (problem villages) and in the growing major cities. Likewise, the extension of sewerage systems is most justified in congested areas of the major cities. 1.19 The objectives are, through FY1986, to increase the service levels (calculated on total population in rural and urban areas, respectively) as follows: (i) rural water supply from 24% to about 45%; (ii) urban water supply connections from 61% to about 72%; and (iii) urban sewerage from 5% to about 10%. This would imply about 60% coverage (based on population) of the problem villages and significant improvements (water supply and sewerage) in the four major cities (Jaipur, Jodhpur, Kota and Bikaner). Annex 1, Table 1 shows present and projected service levels in rural and urban areas. 1.20 In order to achieve these objectives (i) sector investments will have to be increased significantly; (ii) more appropriate cost recovery sys- tems will have to be introduced; and (iii) RWSSB's project implementation and works operation capacity will have to be further developed and strengthened. Sector Investment Program 1.21 The development of the water supply and sewerage sector is given a comparatively high priority by GOR, as indicated by the proposed increase in sector investments. Of the total development plan budget, the proportion allocated to water supply and sewerage would increase from 7% (for the period 1974/78) to 10% (for the period 1979/83). 1.22 Past and projected sector investments (current values) through FY1985 are shown in Annex 1, Table 2, and summarized below:  - 5 - Past Investments Projected Investments FY1951 Through 1980 For FYs 1981/85 Rs Million US$ Million Rs Million US$ Million equivalent equivalent Rural Areas - Water Supply 900 107 1,660 197 Urban Areas - Water Supply 460 55 756 90 - Sewerage 32 4 148 18 1,392 166 2,564 305 1.23 Capital investments in the sector for FY1979 amounted to Rs 186 million and the budget allocation for FY1980 is Rs 263 million. Annual investment is projected to average about Rs 500 million during the period FYs1981/85. Likewise, the annual per capita investment in rural areas is projected to increase from Rs 8 (FY1980) to Rs 11 (average for FYs1981/85); corresponding figures for urban areas are Rs 11 and Rs 25, respectively. Past sector investments have been divided between rural water supply, urban water supply and sewerage on the ratio of 65:33:2; the corresponding ratio for projected investments (FYsl981/85) is 64:30:6. This also reflects sector priorities. 1.24 The Government of India (GOI) allocations to State Governments in general are for the overall development plan rather than for specific projects and comprise 30% grant and 70% loan. Each State Government estab- lishes its priorities for the distribution of such funds as well as its own funds between various sectors. Exceptions are, however, made for special programs such as the Minimum Needs Program and Accelerated Rural Development Program, with funds allocated as grants and specifically earmarked. In the past the subsequent GOR allocation of funds to the water supply and sewerage sector has been on a 100% grant basis but in the future, it is proposed that only rural area water supply will be covered by grants. For urban areas, GOR is expected to make funds available on terms and conditions which would be commensurate with the sector's capacity to service the debt. Some finance for the sector for urban areas has also been provided by loans from the Life Insurance Corporation of India (LIC) to the municipalities, while municipal contributions have been insignificant. 1.25 The revenues from the urban water supply sector have not been sufficient to cover operational costs but for FY1980 a breakeven is expected. The sewerage sector has depended entirely on the municipal budgets since no charges have been levied. In rural areas water charges are imposed only for private connections, and corresponding revenues have not covered total operat- ing costs, which are incurred primarily to provide standpost water to most of the population. The estimated recurrent cash deficit for rural areas for FY1979 amounted to Rs 21.3 million and is projected at Rs 38.2 million for FY1980. This deficit has been covered by GOR budget allocations.  - 6 - 1.26 The State Government objective is to make the sector financially viable from FY1981 through increased tariff levels in urban and rural areas and through the introduction of sewerage and standpost water charges. II. POPULATION, SECTOR SERVICES AND DEMAND IN THE PROJECT AREA Population Projections and Demand for Services 2.01 Population projections through 2001 for the state of Rajasthan have been made by the Directorate of Economics and Statistics (GOR) and, thereafter, through 2014, by PHED. The projections through 2001 are as follows: Total Year Population Urban Areas Rural Areas -----------------Million------------------- 1971 25.8 4.6 21.2 1978 30.8 5.6 25.2 1984 35.0 6.5 28.5 2001 49.6 9.7 39.9 The average annual population growth rate for the period 1971/78 is estimated at 2.6% for total population, the combination of 3.0% for urban and 2.5% for rural areas. Corresponding projected average annual growth rates for the period 1978/2001 are 2.1%, 2.4% and 2.0%, respectively. The Town Planning Department (GOR) has made population projections for the project cities individually in the light of master plans for urban development and taking into account such factors as growth potential and industrial development. These projections are summarized below and shown in Annex 1, Table 4. Population Average Annual 1980 2001 Growth Rate ----' 1000 -