Nepal - First and Second Water Supply and Sewerage Projects

Docuent of The World Bank FOR OFFICIAL USE ONLY Report No. 6506 PROJECT PERFORMANCE AUDIT REPORT NEPAL FIRST AND SECOND WATER SUPPLY AND SEWERAGE PROJECTS (CREDITS 470-NEP AND 704-NEP) November 19, 1986 Operations Evaluation Department 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 Currency Unit - Nepalese Rupee NR Credit 470 Credit 704 Appraisal Year Average (1974) = NRs 10.56 US$1.00 Appraisa.. Year Average (1977) = = US 1.00 = NRs 12.50 Average over Project Period = NRs 12.67 = US$1.00 = NRs 14.14 Completion Year Average (1983) = NRs 14.75 Completion Year Average (1983) = US$1.00 = NRs 18.05 Exchange Rates - US$1.00 - NRs in: 1974 1975 1976 1977 1978 1979 1980 19F2 1983 1984 1985 10.56 12.50 12.50 12.50 12.00 12.00 12.00 14.30 15.20 18.00 18.10 HMG Fiscal Year: 11.53 12.50 12.50 12,25 12.00 12.00 12.60 13.75 14.75 16.60 18.05 MEASURES AND EQUIVALENTS 1 = Liter (1 liter = 0.26 gallons) led = Liter per capita per day m3 = Cubic meter (1 m3 = 1,000 1) M1 Million liters (1 M1 = 1,000 m3) Mid = Million liters per day 1/see Liter per second mm Millimeter (1 mm = 0.03937 inch) m Meter (1 m = 3.28 feet) km = Kilometer (1 km = 0.62 mile) sq km = Square Kilometer (1 sq Km = 0.386 square mile) na Hectare (10,000 square meters = 2.47 acres) ABBREVIATIONS AND ACRONYMS DWSS - Department of Water Supply and Sewerage GTZ - Agency of Technical Cooperation - Federal Republic of Germany HMG - His Majesty's Government of Nepal MOF - Ministry of Finance MPLD - Ministry of Panchayat and Local Development ODM (ODA) - Overseas Development Ministry (Administration) - UK WSSB - Water Supply and Sewerage Board WSSC - Water Supply and Sewerage Corporation FISCAL YEAR July 16 to July 15 FOR OFFICIAL USB ONLY THE WORLD SANK Washington, D.C. 20433 U.S.A. Offie of Ovrector-Ceer Opwatoas tIvut% November 19, 1986 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on Nepal - First and Second Water Supply and Sewerage Projects (Credits 470-NEP and 704-NEP) Attached, for information, is a copy of a report entitled "Project Performance Audit Report on Nepal - First and Second Water Supply and Sewerage Projects (Credits 470-NEP and 704-NEP)" prepared by the Operations Evaluation Department. Yves Rovani by Ram K. Chopra Attachment 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 authoriation. FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT NEPAL FIRST AND SECOND WATER SUPPLY AND SEWERAGE PROJECTS (CREDITS 470-NEP AND 704-NEP) TABLE OF CONTENTS Page No. Preface ................................. .................... i Basic Data Sheet .... ....................................... iii Evaluation Summary .............i.................. ............ . vii PROJECT PERFORMANCE AUDIT MEMORANDUM I. PROJECT DESCRIPTION ..... .......... ....................... 1 Background 1...... .............................. 1 Objectives ............................... ............. 2 Pre-Project Discussions ................................... 3 Project Description/Loan Description ...................... 3 Project Revisions ........... ....................... 00.... 4 II. IMPLEMENTATION EXPERIENCE AND ISSUES ...................... 5 Government Priorities ..........................5......... 5 Sector Development ...................................... 6 Implementation .......................................... 7 Procurement ..9. ................................... 9 Project Costs ............................................ 9 Performance of Consultants, Contractors, and the Construction Industry ................................ 9 Institutional Performance ....,........................ 10 Accounting ............................................... 11 Manpower and Training Development ........................ 11 Operational Performance .................................. 12 Financial Performance .................................. 14 Performance of the Bank ................................. 14 Sociocultural Issues/Community Support ........... .. 15 III. CONCLUSIONS AND FOLLOW UP ................................ 16 Sustainability of Benefits ............................... 16 Economic and Financial Evaluation ...........,............ 17 Conclusions and Recommendations .......................... 17 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. Table of Contents (Cont'd) Page No, PROJECT COMPLETION REPORT I. Introduction ......................................... 20 II. Project Preparation and Appraisal ..................... 26 III. Project Implementation and Costs ...................... 39 IV. Financial Performance .......... .. ............... 52 V. Institutional Performance ......................... 59 VI. Bank Performance ...................,................. 65 VII. Project Justification ................................ 65 VIII. Conclusions and Lessons Learned ....................... 68 ANNEXES (Credit 407) 1. Estimated and Actual Project Costs (Nepalese Rs. - m1n.) ..................... 72 2. Estimated and Aczual Project Costs (US$ - mln.) ....... 73 3. Estimated and Actual Annual Expenditures *........... 74 4. Estimated and Actual Annual Operational Data .......... 75 5. Major Project Elements - Appraisal and Actual Comparison ................................. .. 76 6. Appraisal and Actual Income Statements (Nepalese Rs.- mln.) ................................ 77 7. Appraisal and Actual Cash Flow ........................ 78 8. Appraisal and Actual Balance Sheet .................... 79 9. Estimated and Actual Cumulative Expenditures by Year (Nepalese Rs. -m1n.)....................... 80 (Credit 704) 10. Estimated and Actual Project Costs (Nepal6se Ra. - m1n.) ................ 81 11. Estimated and Actual Project Costs (US$ - aln.) ....... 82 12. Estimated and Actual Annual Expenditures (Nepalese Rs.- mln.) ................................ 83 13. Estimated and Actual Annual Operations (Credit 704).... 84 14. Major Project Elements - Appraisal and Actual Comparison ... ........... ......... 85 15. Appraisal and Actual Income Statements ................ 86 16. Appraisal and Actual Cash Flow (Nepalese Rs.- mln.) .............................. 87 17. Appraisal and Actual Balance Sheet (Nepalese Rs.- m1n.) ................................ 88 18. Estimated and Actual Cumulative Expenditures by Year (Nepalese Rs. - mln.) ....................... 89 Table of Contents (Cont'd) Page No. 19. Organization Chart of the Water Supply and Sewerage Board ..................................... 90 20. Nepal Cr. 470-NEP (1st Water Supply) and Nepal Cr. 704-NEP (2nd Water Sapply) ...................... 91 21. Tariff History and Proposals .......................... 92 22. Appraisal and Actual Financing Plans (Nepalese Rs.- mln.) ........ .................... 93 PROJECT PERFORMANCE AUDIT REPORT NEPAL FIRST AND SECOND WATER SUPPLY AND SEWERAGE PROJECTS (CREDITS 470-NEP AND 704-NEP) PREFACE This report presents the results of a performance audit of Nepal's First and Second Water Supply and Sewerage Projects for which IDA Credits 470-NEP and 704-NEP, respectively, were made to His Majesty's Government of Nepal, with on-lending to the Water Supply and Sewerage Board (WSSB). Credit 470-NEP of US$7.8 million was signed May 8, 1974 for the First Project, and became effective June 26, 1974. For the Second Project, a Credit 704-NEP of US$8.0 million was signed May 27, 1977 and became effective November 17, 1977. Supplementary financing assistance of US$4.0 million was provided by IDA under CR470-NEP REV which was signed May 27, 1977, and became effec- tive November 17, 1977. Furth. r supplementary assistance of US$3.0 million was later provided by an IDA-administered EEC Special Action Credit (26-NEP), signed August 9, 1979. This agreement also modified some of the covenants in CR470-NEP, CR470-NEP REV, and CR704-NEP. The original closing date of the First Project of June 30,. 1978, was extended four times through various agreements until June 30, 1983. US$1.11 million of the credit was cancelled and the final disbursement was in August 1984. The original closing date of the Second Project was June 30, 1982, but was extended twice to June 30, 1985. The final disbursement was in January 1986 after cancellation of US$0.70 of surplus funds. The follow-up project, Third Water Supply and Sewerage Project (CR1059-NEP), is being implemented. ODA provided advisors through bilateral assistance to WSSB during the period 1973-1981 as part of an institutional development effort which was to be coordinated with the First and Second Projects. The Project Performance Audit Report (PPAR) is made up of an Evalu- ation Summary and a Project Performance Audit Memorandum (PPAM), both pre- pared by the Operations Evaluation Department (OED), and a Project Completion Report (PCR) prepared by the Urban and Water Supply Division, South Asia Projects Department. The PCR was compiled on the basis of a review of the relevant reports, files, works in the field, and on the basis of discussions with WSSC1/ staff and consultants. OED has reviewed the PCR, the Bank files, the Loan and Project Agreements, the Appraisal and President's Reports, and the transcripts of the meetings of the Executive Directors when the loans were approved. The audit also reviewed other pertinent Bank Group reports on Nepal, and interviews were held with Bank staff familiar with the project. The PPAM generally agrees with some of the findings of the PCR, and disagrees with others. The PPAM summarizes and supplements material found in the PCR, and comments on aspects of the projects that the PCR did not cover fully. Following standard OED procedures, copies of the draft PPAR were sent to the Government and the executing agency for comments. No comments were received. I/ WSSB became a Corporation (WSSC), July 15, 1984. PROJECT PERFORMANCE AUDIT BASIC DATA SHEET NEPAL FIRST WATER SUPPLY AND SEWERAGE PROJECTS (CREDIT 470-NEP) KEY PROJECT DATA Item Apraisal Actual Total Project Cost (US$m) 10.37 15.38 Overrun (%) - 48.3 Credit Amount (US$m) /a 7.8 /a 11.8 /a Disbursed - 10.7 Cancelled - 1.1 Internal Financial Rate of Return n.a. n.a. Date of Physical Completion 12/77 06/83 Time Overrun (%) 150 Financial Performance Good Not Satisfactory Institutional Performance Good Not Satisfactory Physical Performance Good Satisfactory CUMULATIVE DISBURSEMENTS (US$ '000) IDA Appraisal Estimated Actual Fiscal Year Estimates Supplement Total 1975 850 780 1976 3,250 1,262 1977 6,200 2,696 1978 7,800 4,900 4,150 1979 - 10,800 7,800 1980 - 11,800 8,470 1981 - 9,600 1982 - 9,884 1983 - 10,350 1984 - 10,700 - iv - OTHER PROJECT DATA Appraisal REV Estimates Revisions Actual Actual First Mentioned in Timetable - - 1969 n.a. Negotiations - - 01/74 03/09-17/77 /e Board Approval - - 04/30/74 04/25/77 7 Loan Agreement Date - - 05/08/74 05/27/77 g Effective Date - - 06/26/74 11/17/77 /h Closing Date 06/30/78 06/30/79 /b 06/30/81 /c 06/30/82 /d 06/30/83 Borrower: His Majesty's Government of Nepal (HMG) Executing Agency: Water Supply and Sewerage Board (WSSR) Fiszal Year of Borrower: July 15 to July 14 AD (1 Shrawan-30 Ashad BS) Follow-on Project: Second Water Supply and Sewerage Project Credit No.: 704-NEP Amount: US$8.0 million Credit Agreement Date: May 27, 1977 Ia IDA Credit 470-NEP of 05/08/74 for US$7.8 m. plus 470-NEP REV of 05/27/77 for US$4.0 m. /b Extended in Agreeme.t for 470-NEP REV. 7T Extended to coincide (closely) with closing date for EEC 26-SAC. /d This extension was granted coincident with an extension to EEC 26-SAC to July 1982. /e These dates parallel those for the Second Project Credit 704-NEP. /f (Same as /e above). T& (Same as 7 above). lh Effectiveness conditions: Appropriate revisions to Subsidiary Loan Agreement under 470-NEP. Note: Further supplementary financing was provided under an IDA administered EEC Special Action Credit (EEC 26-NEP) of US$3.0 m, which funds flowed to the Executing Agency WSSB as equity. This Credit was fully disbursed. This Credit had two conditions for effectiveness: (i) HMG confirmation that Credit proceeds would be available to WSSB on a grant basis. (ii) Transfer to WSSB of the assets of the Birganj water system. This Credit was signed 08/09/79. -v - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET NEPAL SECOND WATER SUPPLY AND SEWERAGE PROJECTS (CREDIT 704-NEP) KEY PROJECT DATA Item Appraisal Actual Total Project Cost (US$m) 11.30 9.35 Overrun (%) - (17.3) Credit Amount (US$m) /a 8.0 8.0 Disbursed - 6.3 Cancelled 0.7 Internal Financial Rate of Retur-a n.a. n.a. Date of Physical Completion 06/81 06/85 Time Overrun (%) 94 Financial Performance Good Not Satisfactory Institutional Performance Good Not Satisfactory Physical Performance Good Satisfactory CUMULATIVE DISBURSEMENTS (US$ '000) IDA Appraisal Fiscal Year Estimates Actual 1978 500 75 1979 3,000 440 1980 6,000 1,281 1981 7,600 2,790 1982 8,000 4,602 1983 - 5,350 1984 - 5,670 1985 - 7,250 1986 - 7,280 OTHER PROJECT DATA Appraisal Estimates Revisions Actual First Mentioned -in Timetable - - 1973 Negotiations - - 03/09-17/77 Board Approval - - 04/26/77 Loan Agreement Date - - 05/27/77 Effective Date - - 02/28/78 Closing Date 06/30/82 06/30/84 06/30/85 Borrower: His Majesty's Government of Nepal (HMG) Executing Agency: Water Supply and Sewerage Board (WSS8) Fiscal Year of Borrower: July 15 to July 14 AD (1 Shrawan-30 Ashad BS) Follow-on Proect: Third Water Supply and Sewerage Project Credit No.: 1059-NEP Amount: US$27.0 million Credit Agreement Date: September 29, 1980 /a A further $0.3 million approximately is expected to be disbursed within this quarter (January-March 1986), after which the remaining disbursed balance of about $0.7 million will be cancelled. - vi - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET NEPAL FIRST AND SECOND WATER SUPPLY AND SEWERAGE PROJECTS (CREDITS 470-NEP AND 704-NEP) MISSION DATA Month/ No. of No. of Date of Purpose Year Days Persons Weeks Report Identification Credit 4?0 Il 12/71 4 2 1.1 1/10/72+2/18/72 Preappraisal PA1 04/72 8 3 3.4 05/15/72 Preappraisal PA2 07/72 2 3 0.9 08/01/72 Preappraisal PA3 11/72 7 2 2.0 12/29"72 Appraisal (Credit 470) Al 5-6/73 22 2 6.3 06/20/73 Appraisal Update (Cr. 470) A2 11/73 3 1 0.4 12/04/73 APPRAISAL REPORT 270-NEP N/A 04/10/74 (Credit 470) Supervision S1 11/74 12 2 3.4 12/31/74 Supervision S2 06/75 16 2 4.6 07/21/75 Supervision S3 04/76 19 1 2.7 05/18/76 Appraisal (704)/ A3/ Supervision (470) S4 10/76 20 2 5.7 11/10/76 APPRAISAL REPORT 1420-NEP (Credit 704) 04/11/77 Supervision S5 5-6/77 14 1 2.0 07/1-5/77 Disbursement Division D1 2-3/78 1 N/A 04/07/78 Supervision S6 02/78 8 2 2.3 04/05/78 Supervision S7 5-6/78 11 1 1.6 06/29/78 Supervision S8 11-12/78 10 2 2.9 01/26/79 Supervision 89 5-6/79 8 2 2.3 06/29/79 Supervision S10 09/79 8 1 1.1 10/25/79 Appraisal (Credit 1059) A4 01/80 2 N/A APPRAISAL REPORT 2925b-NEP (Credit 1059) 05/29/80 Supervision S11 11/80 8 2 2.3 01/07/81 Supervision S12 08/81 14 3 6.0 11/11/81 Supervision S13 5-6/82 10 2 2.9 07/16/82 Supervision S14 03/83 7(2) 2(1) 2.6 05/05/83 Supervision S15 9-10/83 14 2 4.0 11/17/83 Supervision S16 04/85 13(6) 2(1) 5.4 06/04/84 Supervision S17 09/84 9 1 1.3 10/25/84 Supervision S18 02/85 9 2 2.6 04/10/85 156 69.8 =Nmw - vil - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET NEPAL FIRST AND SECOND WATER SUPPLY AND SEWERAGE PROJECTS (CREDITS 470-NEP AND 704-NEP) STAFF INPUT - Credit 470-NEP (Man-Weeks) Bank FY 1972 1973 1974 1975 1976 1977 1978 1979 Preappraisal 11.8 20.1 Appraisal 16.9 43.5 Negotiations 29.6 Supervision 1.3 34.6 25.8 25.5 11.8 9.5 Other .8 .3 .1 Total 12.6 37.3 74.5 34.6 25.8 25.5 11.8 9.5 1980 1981 1982 1983 1984 1985 1986 TOTAL Preappraisal 31.9 Appraisal 60.4 Negotiation 29.6 Supervision 2.7 2,9 4.7 3.0 1.5 .6 1.3 125.2 Other .1 1.3 Total 2.7 2.9 4.8 3.0 1.5 .6 1.3 248.4 STAFF-INPUT - Credit 704-NEP (man-weeks) 1973 1974 1975 1976 1977 1978 1979 1980 Preappraisal .1 .7 .1 1.9 Appraisal .3 35.2 Negotiation 13.6 Supervision 2.8 11.1 18.0 4.5 Other Total .1 1.0 .1 53.5 11.1 18.0 4.5 1981 1982 1983 1984 1985 1986 TOTAL Preappraisal 2.8 Appraisal 35.4 Negotiation 13.4 Supervision 5.1 6.6 3.4 6.4 3.2 5.5 67.2 Other .1 .1 Total 5.1 6.6 3.5 6.9 3.2 5.5 119.1 - viii - PROJECT PERFORMANCE AUDIT REPORT NEPAL FIRST AND SECOND WATER SUPPLY AND SEWERAGE PROJECTS (CREDITS 470-NEP AND 704-NEP) EVALUATION SUMMARY Introduction i. The First and Second Water Supply and Sewerage Projects, approved in 1974 and 1977, respectively, were designed to respond to needs in the growing urban areas in the Kathmandu Valley, the Pokhara Valley, and (in the Second Project) the Terai. Objectives ii. The basic justification for the First Project cited the social and health benefits expected from the provision of water supply and sewerage, including (a) the provision of a continuous supply of safe water to 327,000 people, representing 95 percent of the population of the project area in the Kathmandu and Pokhara Valleys, (b) improvement of the sanitary conditions in Kathmandu and Lalitpur through the provision of water borne sewerage for certain core areas, and (c) reduction of pollution in the Bagmati River in the Kathmandu Valley. Another expected benefit was the strengthening of the Water Supply and Sanitation Board (WSSB), newly formed in 1973, as an insti- tution capable of improving and extending water supply and sewerage services (also outside the project area), with the ultimate goal of serving the entire country. iii. For the Second Project, the main purpose was to continue improve- ments to the water supply and sewerage works began as part of the First Project, but with the addition of water supply in the two Terai towns of Biratnagar and Birganj. iv. Neither the First nor the Second IDA Projects were viable and separate in and of themselves, but required continuing support and funding from follow-on projects in order to achieve their original objectives. Implementation Experience v. As summarized in the PCR (paras. 3.01-3.05), the First Project was completed with considerable difficulty and delay, and with costs considerably greater than those estimated at appraisal. The Second Project was completed with somewhat less difficulty, but ended nonetheless two years behind sched- ule. The reason for this performance relates not only to the logistical difficulties of carrying out the projects themselves, but also to other ques- tions such as the effectiveness of the implementating agency, its staff and management. - ix - vi. A number of miscalculations in design of the First and Second Project became evident, listed as follows: (a) population projections were too low (PPAM, para. 38); (b) the near-term reduction in unuccounted for water was overestimated (PPAM, para, 38); (c) expected yields of proposed wells were significantly overestimated (PPAM, paras. 38, 16); (d) the vehicle needs for WSSB had not been assessed properly (PPAM, paras. 38, 22); (e) water rights to Pharping Springs, the largest new source under the First Project, did not become available until 1982 because of existing commitments for power generation (PPAM, paras. 38, 60); (f) the sewerage system was designed as a separate system on the basis of economic analysis, although traditional practice had been the use of a combined system, and community acceptance was not sought as part of the design process (PPAM, paras. 38, 79, 80). vii. In addition to problems listed above regarding the design of the projects, there were also difficulties with implementation. Some of these difficulties can be listed as follows: (a) the construction industry in Nepal was poorly developed, undercapitalized and inexperienced (PPAM, paras. 38, 48); (b) the v-rks proposed in the First Project were insufficient to provide 24-hour service without major emphasis on redVetion of leakage and wastage, the implementation of which was delayed; (c) ten additional towns were added to the Kathmandu/Lalitpur system as part of the Second Project, but a transmission main serving five of the towns was closed when supplies proved to be inadequate (PPAM, para. 38); (d) cost recovery was generally insufficient, due to delays in tariff increases, and inefficiency in billing and collection efforts; (e) the institutional arrangements were generally inadequate (PPAM, paras. 32, 39, 43); (f) management was weak throughout the period (PPAM, paras. 39, 50, 52); (g) design changes were necessary in the project when the yield of new water sources proved to be less than expected; and - x - (h) inflation was rapid during the implementation period due to world- wide inflationary pressures (PIAM, para. 39); vii.' It seems evideni that in the early stages of project formulation, communications between the Bank Group, the borrower, consultants, and the communities affected were insufficient to design a workable project. None- theless, the First Project was funded essentially as had been drawn up by the technical experts during the early stages. Institutional arrangements -- new and untried -- proved to be inadequate because of the perceived temporary nature of the implementing agency, the management practices in effect, and the frequent staff shifts from DWSS to WSSB and back. Training during this period w-.s problematic, if not of little effect, because of frequent staff changes .nd low morale. Yet over 10 years was spent in this environment before institutional changes were made. ix. By 1983, an Operational Action Plan was drawn up to spur the recov- ery of the WSSB. The plan concentrated on consumer and bulk metering, reve- nue collection, and revision of tariffs for financial recovery. Operational performance can be expected to improve slowly. Results x. Limited progress has been made in achieving the objectives of the First and Second Projects. Although 24-hour water supply service has not yet been possible in Kathmandu and Lalitpur, service hours have been increased from an average of about 4-6 hours per day in 1973 to about 12-14 hours per day in 1986. In addition, population served by WSSB/WSSC has increased from about 324,000 in 1974/1975 to 810,000 in 1983/1984 (the last year for which data are available). Water service delivered has been less than expected at appraisal because of the several factors, listed above (paras. vi and vii). Sustainability xi. It is still too early to say whether the new institutional arrange- ments (formation of WSSC in 1984) will be ultimately successful. There remain certain conflicts and duplication of effort between DWSS and WSSC in some areas. The Operational Action Plan has drawn attention to the need for better financial performance in WSSC if financial recovery is to take place, and the availability of future funding is to be ensured. For sewerage, a more broad based taxing system is required, rather than the approved water surcharge system (25 percent of each water bill). xii. Since the formation of the Corporation, and thus the advent of an environment in which staff can feel more secure, little effort has been made to provide training. The audit believes that there is still a considerable need for training, particularly among the lower level staff involved in operation, maintenance, leak detection, and repair. - xi - xiii. Domestic metering has curtailed wastage at individual connections, but wastage at standposts and leakage throughout the distribution system are still major concerns. A major new effort is needed to obtain the involvement of the community in solving the current problems. In the past, many of the design assumptions have been inappropriate to local needs. On-site sanita- tion has considerable merit for the future, and needs to be studied further. xiv. As more and more schemes are completed, the primary emphasis of the Corporation will need to be shifted to operation and maintenance, and concom- itant increases in those capabilities need to be developed across a broad front. Current strategies call for financial recovery through improvements in several areas, including billing and collection, the store/materials man- agement system, fixed assets accounting system, as well as improvement in organization and management. On the operational side, performance is still hampered by leakage in the water distribution system. Findings and Lessons xv. The audit believes that WSSB/WSSC extended water service too rap- idly to additional areas in the Kathmandu Valley without the necessary increase in supply availability, and without sufficient attention to early repair of distribution system leaks, both of which would have been required if 24-hour service objectives were to be achieved. WSSB/WSSC policies thus ensured that more people would receive limited access to water supply from the central system, but that individual consumers in the original service area would notice little overall improvement in service during the period 1974-1986. It could be said in defense of WSSB/WSSC that political pressures may have made the above policy the only viable choice. xvi. On the sewerage side, the decision to provide separately for storm water and sewage (with only sanitary sewers to be constructed initially), was probably not a wise decision from the sociocultural point of view. For one thing, the beneficiaries did not understand the difference between storm sewers and sanitary sewers. Operational difficulties have developed in the sewered core areas because residents reportedly have dumped street sweepings and other refuse in the manholes. Community resistance has been seen in some areas to laying of new sewers because residents view the small pipes (designed only to carry sanitary sewage) to be too small to handle their needs for both storm drainage and sanitary sewage. At the minimum, the project should have included a companent for educating the community about the purposes of the sewer system, and to enlist their support and help in using the system properly. A better solution, however, might have been to select a combined sewer system. xvii. In both the First and Second Project there seems to have been little attention paid to the interaction between the proposed interventions and the users themselves. It should be noted that no consultant sociologists were engaged to determine the acceptability of the project proposals to the beneficiaries. There was a need for more dialogue with the beneficiaries, mobilization of local support, and establishment of local users committees to assist in these efforts. - xii - xviii. If the above-cited miscalculations had not occurred at the design stage, neither the First nor the Second IDA Projects would have appeared to be viable and separate projects in and of themselves. Each have required, in fact, continuing support and funding from follow-on projects in order to continue efforts to achieve their original objectives. xix. Although clear difficulties remain to be overcome in the urban water supply and sanitation area, the risks are not without potential rewards. If continuous service can be achieved in urban water supply with cost recovery (and adequate results achieved in urban sanitation), experience in this sector can serve as an example to other sectors in need of encourage- ment in Nepal. Diligent staff efforts and enlightened management will con- tinue to be required from the implementating agency (as part of the Third IDA Project) in order to achieve these goals. - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM NEPAL FIRST AND SECOND WATER SUPPLY AND SEWERAGE PROJECTS (CREDITS 470-NEP AND 704-NEP) I. PROJECT DESCRIPTION Backgr'und 1. The First and Second Water Supply and Sewerage Projects were designed to respond to needs in the growing urban areas in the Kathmandu Valley, the Pokhara Valley, and (in the Second Project) the Terai. In the Kathmandu Valley, the existing urban areas date their beginnings to ancient times. Predominant urban areas of the Valley are Kathmandu, Lalitpur (Patan), and Bhaktapur; much of the unique character of the Valley that attracts foreign tourists can be attributed to the ancient architecture and congested bazaars of the old towns. 2. Water supplies for the towns have traditionally come from springs, both from the high water table of the Valley floor, and (more recently) from srings in the surrounding hills, which were piped to the town areas. The transmission network is a radial pattern in plan, collecting water through numerous gravity-fed pipes from source springs (and surface drainage) at the elevated edges of the Valley, and conveying it to the numerous towns and villages on the Valley floor. Until completion of interconnecting links between Kathmandu and Lalitpur as part of the IDA projects, individual towns had been supplied from separate sources. 3. Significant growth in the Pokhara Valley and in the Terai at Birganjand Biratnagar have taken place primarily in the last two decades - since Nepal's development efforts began in the early 1960's. Pokhara has grown particularly as a seat for government in the Western Region of the country, and as a center for tourism and trade. 4. The original water supply distribution network in Kathmandu and Lalitpur was constructed in 1896. During appraisal of the First Project (1973) it was estimated that the existing systems provided intermittent ser- vice available for a minimum of 4-6 hours per day to some 233,000 people. A few areas had 24-hour service, particularly those villages near the source springs and situated along the major transmission pipelines. These fortunate villages receive water enroute from the hillside sources. Out of the 11,000 residential connections, 2000 were metered. In addition there were 296 standposts and about 1000 metered non-domestic connections. Wastage, leak- age, and general system disrepair were greatly in evidence during appraisal of the First Project. - 2 - 5. In theory, the Kathmandu system provided treatment to water enter- ing from spring sources and surface collection, although at ttimes theory did not always hold true. In any case, the fact that most distribution mains were pressurized only intermittently throughout the day allowed the infiltra- tion of polluted water from the ground. As a result, water quality standards could not be assured in most areas of the Kathmandu Valley. 6. Prior to the First Project, sewerage facilities In Kathmandu com- prised a combined system of very limited extent serving the core area of the city, constructed between 1896 and 1905. About 7000 connections discharged sewage to this system, which then flowed together with surface runoff at times of rain for use on irrigated vegetable plots, or to the Bagmati River. No sewage treatment was provided. This system was reportedly clogged in several points due to lack of maintenance prior to the First Project. 7. Some of those not connected to the old core system utilized septic tanks for waste disposal -- particularly well-to-do households -- but the majority of people simply defecated on river banks, in streets and lanes, and in vacant urban lands. Thus prior to the First Project a highly traditional populace was still prevalent in the urbanized areas cf the Kathmandu Valley, a populace whose attitudes and beliefs towards water supply and sanitation would be important to the outcome of the IDA-financed projects. 8. The PCR provides further details regarding the background situation prior to the IDA-financed projects (PCR, para. 1.02-1.33). Objectives 9. The basic justification for the First Project sited the social and health benefits expected from the provision of water supply and sewerage, including (a) the provision of a continuous supply of safe water to 327,000 people, representing 95 percent of the population of the project area in the Kathmandu and Pokhara Valleys, (b) improvement of the sanitary conditions in Kathmandu and Lalit?ur through the provision of water borne sewerage for certain core areas, and (c) reduction of pollution in the Bagmati River in the Kathmandu Valley. Another expected benefit was the strengthening of the Water Supply and Sanitation Board (WSSB), newly formed in 1973, as an insti- tution capable of improving and extending water supply and sewerage services (also outside the project area), with the ultimate goal of serving the entire country. 10. For the Second Project, the main purpose was to continue improve- ments to the water supply and sewerage works began as part of the First Project, but with the addition of water supply in the two Terai towns of Biratnagar and BIrganj. 11. It will be shown in this report that neither the First nor the Second IDA Projects were viable and separate in and of themselves, but required continuing support and funding from follow on projects in order to continue efforts to achieve their original objectives. - 3 - 12. Also see the PCR (para. 2.34-2.35) for further details of the pro- ject objectives. Pre-Project Discussions 13. The First and Second Projects were essentially developed on the basis of a previous Master Planl/ for water supply sewerage for the greater Kathmandu and Bhaktapur area, completed in 1974, This study -- funded by UNDP and executed by WHO and their consultants -- was very comprehensive in nature, and the results were published in several substantial volumes. In general, the Master Plan proposed comprehensive (although costly) solutions to the existing problems of water supply and sewerage, including the provi- sion of 24-hour water supply where intermittent service had been the norm, and the provision of sewerage in Kathmandu and Lalitpur through separate sys- tems for storm and waste water (although the existing system in Kathmandu was a combined system, where storm water and sewage were channeled together). The Master Plan detailed a staged program of works to meet needs until the year 2000, as well as an "intermediate works" program for early implemen- tation. 14. The First Project was mentioned in Bank Group timetables beginning in 1969, with identification and pre-appraisal discussions taking place during the period 1971 to 1972. The IDA appraisal mission visited the field in May-June 1973. One of the preconditions required by the Bank Group for funding was the formation of an implementing agency, and the Water Supply and Sanitation Board (WSSB) was formed in 1973. Negotiation for the First Project took place in January 1974, with Board approval in April 1974. 15. The Second Project was first mentioned in Bank Group timetables in 1973. The IDA appraisal mission visited the field in October 1976. Negotia- tions took place in March 1977, with Board approval in April 1977. Addi- tional details on project preparation and appraisal stages of the First and Second Projects can be found in the PCR (para. 2.01-2.27). Project Description/Loan Description 16. The water supply component of the First Project was quite modest, including in the Kathmandu Valley: (a) the conversion of a hydropower plant at Pharping (156 1/sec) to a water supply source, with transmission of water from this and proposed well sources nearby (93 1/sec) to supply Kathmandu and Lalitpur, (b) equipping of two previously drilled exploration wells and related transmission works at Balaju (26 1/sec) and Bansbari (26 1/sec), (c) drilling of a new well at Bode to supply Thimi, (d) provision of distribution piping extensions and improvements, including 100 fire hydrants, 700 new con- nections and new connections and meters, and the replacement of 5000 existing meters and 5400 existing connections, (e) rehabilitation efforts at existing 1/ "Master Plan for Water Supply and Sewerage for Greater Kathmandu and Bhaktapur," 1974. headworks and treatment plants, (f) the provision of a workshop and labora- tory, and (g) the provision of bulk water meters to permit the development of source yield records. 17. In Pokhara, the First Project included development of three new spring sources (52 1/sec), the drilling of one exploratory well, water distribution system improvements, 100 fire hydrants, 400 new service con- nection and consumer meters, and the replacement of 600 existing meters. 18. In the First Project, sewerage was to serve only the Kathmandu and Lalitpur core areas, with repair and replacement of the existing 12 km com- bined sewer system in Kathmandu, the provision of an additional 10 km of trunk sewers in Kathmandu and Lalitpur, 30 km of collection sewers, and about 4000 sewer connections. In addition, one pumping station and two separate treatment plants were proposed to convey and treat the sewage (with three- stage stabilization ponds) prior to discharge to the Bagmati River. Consult- ing services were also to be included for additional design and supervision work, preparation of a second-stage project, and a tariff study. 19. In the Second Project, further improvements to the water distribu- tion system in Kathmandu, Lalitpur, Thimi, aDd Pokhara were proposed, along with further extensions and improvements to the sewage collection system in Kathmandu and Lalitpur. New water systems were proposed for the towns of Birganj and Biratnagar, as well as procurement of miscellaneous vehicles, tools, water meters, and consulting services. The details of the project included 27,000 water meters, 9 km of branch sewer extensions, and provision of supply to 10 additional villages. 20. At appraisal of the First Project, total project costs were esti- mated to be US$10.4 million. An IDA credit was arranged for a total of US$7.8 million, or 75 percent of estimated total project costs. At appraisal of the Second Project, total project costs were estimated at US$11.3 million. An IDA credit was arranged for a total of US$8.0 million, or 71 percent of estimated total project costs. 21. Also see the PCR (paras. 2.36-2.49) for a description of the prin- cipal elements of the First and Second Projects. Project Revisions 22. The following deviations from the approved activities were made during implementation of the First Project: (a) very few old and leaky con- nections were replaced in either Kathmandu or Pokhara; (b) bulk water meters, to permit reliable gathering of supply data, were not obtained; (c) a large number of additional vehicles were obtained; (d) consulting services for preparation of the next stage project and the tarirf study were deleted (but were carried out under the Second Project); and (e) very little was done to carry out repair and provide new manholes in the existing core area system in Kathmandu (but this was taken up during the Second Project). 23. Revisions to the Second Project included the following: (a) con- sumer meters to be purchased were increased from 27,000 to 47,000, (b) the design concept of deep tube wells in Birganj was changed, and (c) more dis- tribution main in Kathmandu was required than had been originally proposed. II,. IMPLEMENTATION EXPERIENCE AND ISSUES Government Priorities 24. The First and Second Water Supply and Sewerage Projects were car- ried out over the period 1974 to 1985, a period which represents a signifi- cant portion of the 25-year development experience of Nepal. Since such projects cannot be carried out in isolation in one sector, it is well to look briefly at the macroeconomic environment in Nepal during the period of interest. 25. Nepal is still one of the least-developed countries of the world. Over the past 15 years, real GDP growth has barely kept pace with population growth. More importantly, per capita agricultural output has declined stead- ily, which among other things has led to dwindling agricultural export sur- pluses. The emergence during the past three years of unsustainable budget and balance of payments deficits is the cumulative result of many years of unsuccessful economic management2/. 26. Budgetary policies have been generally characterized by inadequate revenue efforts in the face of rapidly growing spending, much of which has had limited economic benefits. The most important factor in the surge of recent Ppending has been the rapid growth of civil service employment, cou- pled with substantial wage and salary increases. Subsidies to often ineffi- cient public enterprises have also grown quickly, while development spending has been spread too thinly over too many projects. 27. Cost recovery has been very poor, primarily because of low service charges which have remained unchanged over the years, and partly because of weak collection efforts. Spending for operations and maintenance has been below needs. For the next few years, short term concerns for budget and balance of payments support are likely to preoccupy policy makers. 28. The tax base is narrow, primarily because of the tax exempt status of major sectors of the economy. For all practical purposes, the agricul- tural sector goes untaxed, the transport sector is exempt from income taxes, while industry receives wide exemptions under existing legislation. In addition, personal income tax exemptions and deductions are very high. 29. Emphasis in the Seventh Plan period (1985/1986-1989u1990) is to be on completion of ongoing projects. Given the enormous backlog of foreign- financed projects and the burden of counterpart funding, it is expected that donor agencies, in cooperation with the Government, will need to reevaluate ongoing projects in light of returns to the economy in order to decide which to postpone, drop, rephase, or reduce in scope in light of counterpart budgetary restraints. 2/ IBRD Report No. 5867-NEP. "Nepal: Prospects for Economic Adjustment and Growth," December 12, 1985. 30. As a result of the austerity measures implemented by BMG during the last couple of years, the 1985 IDWSS Decade3/ Plan Revision saw reductions in both water supply and sanitation targets for urban and rural areas. For urban areas, water supply coverage targets were reduced from 100 percent to 62 percent by 1990, while coverage with sanitation facilities was reduced from 17 percent to 12.3 percent. Although overall urban sanitation targets were reduced, an even steeper drop was seen in the urban sewerage target (from 17 percent to 3.3 percent by 1990), while the urban on-site sanitation target was increased from zero percent to 8.8 percent by 1990, reflecting increased interest in lower cost alternatives. Sector Development 31. Water supply and sanitation sector development in Nepal, still in its relatively early phases, is nonetheless fragmented, with three major agencies and several sections/programs/projects active in the sector. The major agencies currently involved are WSSC (Water Supply and Sewerage Corpo- ration, formerly the Water Supply and Sewerage Board, WSSB), serving major urban areas; DWSS (Department of Water Supply and Sanitation), serving medium sized towns above 1500 population; and MPLD (Ministry of Panchayat and Local Development), serving rural areas and communities smaller than 1500 popula- tion. 32. The consultants who prepared the First Project had recommended the creation of a corporation to operate as an independent and commercially viable entity for urban water supply and sewerage. However, the Government elected with IDA's concurrence to establish WSSB as part of the Ministry of Water Resources until sufficient experience had been gained. WSSB was established in November 1973 by Order under the Development Board Act, 1956, assumed in HMG-IDA project credit agreements as emerging to become a finan- cially viable water and sewerage utility. Unfortunately, WSSB was generally perceived in Nepal to be a temporary organization with only a project imple- mentation focus. 33. WSSC was formed on July 16, 1984 to overcome the perceived tempo- rary nature of the Board and to improve staff morale and commitment to the organization. It was also expected that WSSC would be more independent and more in charge of its own destiny. 34. The mandate for the Department of Water Supply and Sewerage. is nominally to serve communities having a population of more than 1500 people and not covered by WSSC. DWSS is also under the Ministry of Water Resources. Out of 225 piped water systems completed by DWSS, 13 have been turned over to WSSC and 20 to the local panchayats, thus DWSS operates and maintains the remaining 192 systems serving about 860,000 people. DWSS sys- tems face similar problems to those of WSSC, including water leakage; wastage is greater, however, because metering is less widespread. 3/ International Drinking Water Supply and Sanitation Decade, 1981-1990. - 7 - 35. The Local Development Department (LDD) of the Ministry of Panchayat and Local Development (MPLD) has a nominal mandate for water supply systems serving less than 1500 people, not being in a district headquarters, and requiring less than 10 km of pipe. It also has a modest rural sanitation program. LDD was created in 1971. 36. Also refer to PCR (paras. 1.10-1.15) for a discussion of sector development. Implementation 37. As summarized in the PCR (paras. 3.01-3.05), the First Project was completed with considerable difficulty and delay, and with costs considerably greater than those estimated at appraisal. The Second Project was completed with somewhat less difficulty, but ended nonetheless two years behind sched- ule. The reason for this performance relates not only to the logistical difficulties of carrying out the projects themselves, but also to other queations such as the effectiveness of the implementating agency, its staff and management. 38. A number of miscalculations in design of the First and Second Project became evident, listed as follows: (a) population projections were too low, because the same rate of growth as recorded between 1961 and 1971 was assumed to continue in the next ten years (this overlooked a significant increase in in- migration to the urban areas that might have been expected as development progressed); (b) the near-term reduction in unaccounted for water was overestimated (estimated to be reduced from 50 percent to 35 percent by 1981; current estimates place unaccounted for water at 45 percent); (c) expected yields of proposed wells were significantly overestimated, by a factor of two or more, necessitating eventual development of additioual sources (under the Third Project); (d) the vehicle needs for WSSB had not been assessed properly, neces- sitating purchasing of a considerable number of additional vehi- cles; (e) water rights to Pharping Springs, the largest new source under the First Project, did not become available until 1982 because of existing, commitments for power generation; (f) the sewerage system was designed as a separate system on the basis of economic analysis, although traditional practice had been the use of a combined system, and community acceptance was not sought as part of the design process. - 8 - 39. In addition to problems listed above regarding the design of the projects, there were also difficulties with implementation. Some of these difficulties can be listed as follows: (a) the construction industry in Nepal was poorly developed, under- capitalized and inexperienced, with the result that most contrac- tors were slow in start-up and inefficient in operations; (b) the works proposed in the First Project were insufficient to pro- vide 24-hour service (even if all source yields were proven as expected) without major emhasis on reduction of leakage and wastage, the implementation of which was delayed; (c) ten additional towns were added to the Kathmandu/Lalitpur system as part of the Second Project, but a transmission main serving five of the towns was closed when supplies proved to be inadequate; (d) cost recovery was generally insufficient, due to delays in tariff increases, and inefficiency in billing and collection efforts; (e) the institutional situation was generally unworkable due to the perceived temporary nature of the WSSB by its staff and by other agencies; (f) management was weak throughout the period, and was faced with a scale-up of operations on many fronts which the agency was gener- ally unable to handle; (g) design changes were necessary in the project when the yield of new water sources proved to be less than expected; and (h) inflation was rapid during the implementation period due to world- wide inflationary pressures, but inflation alone does not explain the cost overruns that took place during the First Project. 40. It seems evident that in the early stages of project formulation, communications between the Bank Group, the borrower, consultants, and the communities affected were insufficient to design a workable project. None- theless the First Project was funded essentially as had been drawn up by the technical experts during the early stages. Institutional arrangements -- new and untried - proved to be inadequate because of the perceived temporary nature of the implementing agency, the management practices in effect, and the freqAent staff shifts from DWSS to WSSB and back. Training during this period was problematic, if not of little effect, because of frequent staff changes and low morale. Yet over 10 years was spent in this environment before institutional changes were made. 41. By 1983, an Operational Action Plan was drawn up to spur the recov- ery of the WSSB. The plan concentrated on consumer and bulk metering, reve- nue collection, and revision of tariffs for financial recovery. Operational performance can be expected to improve slowly. -9- Procurement 42. As stated in the PCR (paras. 5.21-5.22), the major problem with procurement was WSSB's delay in awarding contracts, resulting in a need in some cases for retendering as bid validity dates expired. Difficulties were experienced in determining the qualification of bidders because a pre- qualification procedure was not followed. The construction industry in Nepal is made up of small and poorly equipped contractors, and considerable delay was evident in the arrangement of letters of credit under local procedures. Project Costs 43. At appraisal of the First Project, total project costs were esti- mated to be US$10.4 million, of which US$2.6 million was for water supply, US$2.4 million was for sewerage, and the remainder was for consulting services (US$1.7 million), contingencies (US$3.2 million) and land (US$0.5 million). Actual costs to completion of the First Project were US$15.4 million (a 48 percent increase), as a result of changes in project scope, devaluation of the rupee, delays in project completion, and inflation (PCR. para. 3.44). 44. At appraisal of the Second Project, total project costs were esti- mated at US$11.3 million, of which US$5.1 million was for water supply, US$0.8 million for sewerage, and the remainder was for consulting services (US$1.5 million), contingencies (US$3.5 million), and miscellaneous expenses. Actual costs to completion of the Second Project were US$9.3 million (17 percent less than expected) since appraisal estimates assumed escalation rates higher than those which occurred. 45. Supplementary financing assistance of US$4.0 million was provided by IDA under CR470-NEP REV which was signed May 27, 1977, and became effec- tive November 17, 1977. Further supplementary assistance of US$3.0 million was later provided by an IDA-administered EEC Special Action Credit (26-NEP), signed August 9, 1979. This agreement also modified some of the covenants in CR470-NEP, CR470-NEP REV, and CR704-NEP. 46. Also see the PCR (paras. 3.42-3.48) for further information on project costs. Performance of Consultants. Contractors, and the Construction Industry 47. The PCR reports (para. 3.25-3.38) that project consultants gener- ally performed their work adequately. The audit believes, however, that the picture is more uncertain. It is difficult to explain the problems that developed on the First and Second Projects without faulting the responsible consultants for inadequacies in project design. 48. Most construction contractors were performing complex works for the first time when they were engaged for this effort. Mobilization tended to be slow, and local contractors were generally undercapitalized and poorly equip- ped. The implementating agency (WSSB/WSSC) did not withhold progress pay- ments to the extent necessary to maintain incentive for early completion. In general, the quality of the work was not very impressive. - 10 - Institutional Performance 49. The institutional arrangements made for the First Project (the formation of WSSB) proved to be inadequate. The Board was perceived by its staff and others in Nepal to be temporary in nature, since it was formed under legislation pertaining to development boards (which normally have a project implementation focus). This resulted in little staff commitment to its objectives. At the same time, WSSB was managed as if it was another Government department under the Ministry of Water Resources, with consider- able shifting of staff on secondment from DWSS to WSSB (and back). During this period (1974-1984), and in spite of considerable efforts at staff train- ing and agency improvement by ODA advisors and others, little improvement in general staff morale and competence occurred. 50. WSSB was faced with a number of management problems in 1974 at the outset of the First Project, including: (a) its newness as an organization, since it was only formed in 1973; (b) its perceived temporary nature; (c) the considerable shifting of staff between DWSS and WSSB throughout the implementation period (which hampered the development of a professional core with commitment to the agency - staff commitment tended to be to DWSS, from where the chance for permanence and advancement came); (d) the difficulties of introducing an accrual accounting system, not widely understood in Nepal; (e) the difficulties of general coordination among two expatriate con- sulting firms, IDA, and ODA advisors; as well as the large number of "assignments" allocated by WSSB as part of the First Project (42 design assignments, 56 procurement assignments, 102 construction assignments, etc.); (f) water tariffs, although raised twice (in April 1975 and September 1981), lagged considerably behind levels nezessary to achieve complete cost recovery, indicating the politically sensitive nature of the issue, and the slow decision-making process at the highest levels of Government; and (g) the Government, although willing to agree to make standpost pay- ments as their contribution to the financial health of WSSB/WSSC, was slow in actually making these payments, thus contributing to the cash flow problems that were experienced by WSSB. 51. Many of these difficulties can be attributed to the inexperience of WSSB, and the fact that it was dealing with its first multilaterally financed project. WSSB was faced with increasing activities in the sector simulta- neously across a broad front, including increasing capabilities for transport - 11 - of materials and personnel, construction supervision, training, and consul- tant assistance. In an environment void of modern management concepts, WSSB's efforts were not sufficient to handle the problems that developed. 52. A major deficiency of project implementation was the fact that WSSB/WSSC did not act soon enough and forcefully enough to tackle the problem of water system leakage/wastage/metering to manage demand, but rather concen- trated on supply augmentation alone until very late in project implementa- tion. Accounting 53. The WSSB commercial accounting system did not become fully opera- tional until August 1983 (file search), some years after the start of the First Project. A parallel government cash accounting system, required by the Ministry of Finance to comply with Government budgeting control procedures, was maintained until WSSC was formed in 1984 (public corporations are not required to have a cash accounting system in Nepal, although Government boards are). 54. The two most senior accounting staff have been with the organiza- tion since its inception, and received the benefit of working with ODA advi- sors. The remaining accounting staff have limited formal training and there is currently no sustained in-house training program, although efforts at training have been made from time to time. It should be noted that many of the accounting staff are in the field at sites throughout the country, so that the logistics of training are difficult. WSSB's senior accounting staff recognize that there is room for improvement of the accounting practices, and that there is a need for an accounting manual giving standard procedures in Nepali. They agree that much could be accomplished by an in-house training program, possibly with outside assistance, but find their own involvement in this impractical because of the pressures of their own duties. This raises questions whether it is correct spending the money, since local officials seem unlikely to be committed to use of the manual. 55. Also see the PCR (paras. 5.23-5.28) for further information on accounting, audit and accounting staff. Manpower and Training Development 56. WSSB was initially staffed at the higher levels primarily by pro- fessionals on secondment from DWSS, and at the lower levels by transfer to WSSB of the DWSS staff concerned with operation and maintenance. Slowly over the years WSSB recruited its own higher level staff, and after 1981 very few of its staff were on secondment from DWSS. A notable exception, however, is the position of General Manager of the Corporation, which has routinely been filled by a DWSS official on secondment, initially for a period of 2 years, but subject to extension. 57. Some eight ODA advisors provided services (funded through bilateral assistance) in seven fields between 1973 and 1981 as part of an institutional development effort which was to be coordinated with implementation of the - 12 - First and Second Projects. The advisors' fields of expertise included engi- neering, accounting, finance, laboratory analysis, water distribution, leak detection, and metering. There is a view held by some that the ODA program was not very successful in later years because of WSSB's failure to take advantage of the expertise available and to provide the necessary counterpart staff. 58. As part of the resources of the First Project, only US$4,000 was allocated to training (in water supply operations and maintenance), while US$8,000 was allocated in the Second Project (for textbooks and films). Since the formation of the Corporation, and thus the advent of an environment in which staff can feel more secure, little effort has been made to provide training. The audit believes that there is still a considerable need for training, particularly among the lower level staff involved in operation, maintenance, leak detection, and repair, 59. Also see PCR (para. 5.29-5.36) for additional discussion of staff recruitment, training and development. Operational Performance 60. At commencement of the First Project, operational performance of the Kathmandu and Lalitpur system was hindered by limited production capac- ity. Pharping Springs the site of an existing 500 kw hydroelectric plant and major new source proposed as part of the First Project, was to be turned over to WSSB from the Department of Power by July 15, 1975, as covenanted in the Development Credit Agreement for CR470-NEP (74c). It soon became evident that this was not possible, however, as power shortages began to develop in Kathmandu by 1975, necessitating load shedding. The covenanted date for transfer of full rights to Pharping Springs was revised to July 31, 1981, but the transfer did not actually take place until 1982, when the first stage of Kulekhani Hydroelectric Project (CR600-NEP) came on-line with 30 MW, some 21 months behind schedule (file search). 61. In addition to limited production capacity, operational performance was hindered by a lack of data on consumption, wastage and leakage. Bulk meters to be provided under the First Project were purchased under the Second Project (PCR, para. 5.09), but not actually installed until 1984. As of 1986, WSSC's private connections are about 80 percent metered. As yet, how- ever, no formal attempt has been made to aggregate production data (from bulk meters) on the one hand and consumer meter records on the other to get a more realistic picture of consumption, demand, and system leakage. In addition, public standpipes are a major unknown as far as the amount of water being used. An effort to aggregate and compare production data with consumption data should be given high priority (possibly to be implemented with outside assistance). Although unaccounted-for water is currently estimated at 45 percent, such estimates are little more than guesses. 62. A general trend within WSSB was to concentrate on supply augmenta- tion (e.g., more wells) and to delay concern about demand side problems (e.g., leakage and wastage, metering) until later stages, at which time ser- vice would have been improved. Howeer, it eventually became evident that - 13 - service was not going to improve significantly until these problems were tackled head-on. The resultant delay in focussing upon leakage and wastage, as well as delays in efforts toward improvements in billing and collection, have been major problems in project implementation. 63. During implementation WSSB/WSSC attacked the wastage problem in two ways, by metering private connections and by management efforts at public taps. A new draft sector study (1986)4/ indicates that these measures have been largely successful in eliminating wastage, (except at standposts) but that leakage is still a major problem. As the hours of service are increased, both leakage and wastage can be expected to increase as wel. - although, hopefully, not proportionally. 64. System leakage detection is hindered somewhat, however, as the pipes are not pressurized 24-hours a day. The leakage problem continues to proliferate because of the use of inappropriate materials and fittings for household connections, poor quality valves, and poor installation practices. Thus far repair crews have concentrated only on visible leaks. 65. It should be noted that gross per capita water consumption (water produced less leakage and wastage divided by the number of people served) has not changed markedly since inception of the First Project. This is to some extent the result of the higher than estimated population growth and partly the result of higher leakage and wastage. It was not until the Third Project, and the establishment of the Corporation (WSSC) that a significant effort has been made toward tackling leakage, wastage, billing and collection in the Operational Action Plan. The distribution department had been con- tinually plagued by insufficient equipment, and little or no serviceable transport. Although distribution system plans were updated with the assis- tance of ODA advisors, the audit could not find these drawings in the field, and no one seemed to know where they were. 66. There is a clear need for an ordered policy and procedures for new connections. For example, materials available in the market place and that can be purchased by potential users (for system connection) are generally of inferior quality, resulting in additional leakage on the "system side" of the meter. Policies should be developed to overcome these difficulties, to the satisfaction of both WSSC and its new customers. 67. Operation of the severege system in Kathmandu and Lalitpur has been too recent to allow much comment. By July 1985, there were some 6,000 con- nections, or about 35 percent of the potential. During the audit's visit to Nepal in April 1986, no treated sewage had yet been discharged from either treatment plant. Farmers adjacent to the plants had been pumping sewage from the oxidation ponds for irrigation of their fields. Some clgging of the branch lines and tampering with manholes was also reported by WSSC staff, because residents and street sweepers deposited refuse in the system. 68. Also see the PCR for additional information on operational perfor- mance (paras. 5.09-5.20). 4/ "Water Supply and Sanitation Sector Study," IBRD/HMG/UNDP, (draft) 1986. - 14 - Financial Performance 69. The PCR (paras. 2.43-2.49) lists the key financial covenants of the First, Second, and Third Project agreements. On the First Project, WSSB was required to produce a rate-of-return beginning at 1 percent in 1976, and rising to 8 percent by 1987. For the Second Project the Project Agreement specified a rate-of-return of 2 percent for the period 1979-1982, 3 percent for 1983, 4 percent for 1984, and at least 6 percent in 1987 and thereafter. WSSB/WSSC lagged considerably behind these covenanted rates of return, how- ever. Subsequent agreements softened the required financial performance terms, or delayed the time necessary for implementation. 70. During project implementation, upward tariff adjustments were slow in coming because of the political sensitivity of such moves, which had to be made by the highest levels of Government. Financial performance continued to lag while expenses rose quickly. One tariff adjustment became effective in April 1975, whil.- a second did not come until September 1981. A further tariff adjustment vas slated to take place in July 1986. 71. Financial performance of WSSB/WSSC to the present has been gener- ally poor, as evidenced by the following: (a) total revenues were always less than forecast at appraisal; (b) total operating expenses have been more than forecast; and (c) no sewerage revenues have been realized. The above factors resulted in internal cash generation substantially below levels forecast. 72. Because of its financial difficulties, WSSB requested IDA for debt rescheduling in January 1984. Although unresolved for some months, this issue was later linked with discussions regarding the establishment of the Corporation. In 1985, there were growing feelings in the Bank Group about the danger of a default by WSSB due to cash flow problems. HMG agreed in 1986 to convert outstanding debt and accrued interest on the First and Second Projects to an HMG equity contribution to WSSC immediately, with the budget- ary provision to be incorporated in the 1986/87 national budget. In addi- tion, water tariffs were to be revised by July 16, 1986 (up 65%), along with an increase in standpost charges. HMG also agreed to give authority to WSSC for automatic tar:ff increases annually based on chemical and power inflation costs. 73. Also refer to the PCR (para. 4.01-4.19) for further discussion of financial performance. Performance of the Bank 74. The PCR (6.01-6.05) notes that the covenants of the Credit Agree- ments were realistic for the most part, and that they had been generally met, although occasionally with delay. The audit believes, however, that rate- of-return covenants included in the First and Second Projects could not be - 15 - workable in the absence of a proven accounting team in place at the beginning of the project or shortly thereafter which is well acquainted with accrual accounting procedures. Such was not the case in the WSSB, since the com- mercial accounting system only became fully operational in WSSB in 1983 (file search), some nine years after the start of the First Project. 75. Early Bank supervision missions tended to be narrowly focussed on project implementation matters, seemingly without attention to the general institutional difficulties that were emerging. It was only as several years passed that increasing emphasis was given to operational and institutional development matters, although as pointed out in the PCR (para. 3.33), an emphasis upon general management advice was still not forthcoming. The audit believes that IDA could have been more helpful in the areas of institutional development. The fact that the Bank Group did not link at an early date the success of the First and Second Projects with a program for leakage and wastage reduction, improvements in billing and collection, and management, operations, and maintenance, resulted in several years delay in focusing upon these critical areas (only after financial performance lagged considerably). 76. Although the Bank Group apparently recognized the risk of dealing with a newly formed institution, the audit believes that too much emphasis was placed on the ODA advisors for training and institution building. There seemed to be no early realization on the part of IDA that institutional difficulties were emerging because of the perceived temporary nature of WSSB and the personnel management practices that were being used at the time (paras. 49-50). Sociocultural Issues/Community Support 77. The IDA projects were begun at a time when the water supply system was capable of only supplying water in Kathmandu for 4-6 hours per day. As for sewerage, systems were old, in poor repair, and much of the populace used nearby river banks and vacant land for defecation. A highly traditional populace was still prevalent in the urbanized areas of the Kathmandu Valley, a populace whose attitudes and beliefs toward water supply and sanitation would be important to the outcome of the IDA-financed projects. 78. There is little evidence that the designers of the First or Second Project were aware of, or attempted to find out, the concerns and desires of the community members in relation to the proposed facilities. For water supply, a considerable proportion of the populace drew their supply from public standposts, many of which were in disrepair. But the project con- tained no provision for repairs to standposts nor was a systematic attempt made to meter their usage in order to provide data on community demand. 79. On the sewerage side, the old system was a combined sewer, effluent from which was commonly used for irrigation of fields. No effort was made to find out the reaction of farmers to the proposed sewerage scheme, or to harness their willingness to use the wastewater for productive purposes. In the central core area of Kathmandu, where an old system existed, it was commor.ly connected with courtyard drainage, roof drainage, and other effluent - 16 - sources. Little effort was made as part of the First or Second Project to disconnect these sources, or to educate community members about the differ- ence between the new system and the old, thus community perceptions remained the same. 80. It should be noted that the words in Nepali for sewerage and drainage are the same, thus there is no concept of separate sewers in Nepal. In addition, 150 mm pipes were used as the smallest lateral in the sewerage system, and it was found that they were easily clogged, particularly since residents reportedly dumped street sweepings and other refuse into the manholes. There continues ta he a considerable difficulty in conceptualizing a solution to the problem, since the system is designed as a separate sewer, but is being operated as a combined sewer in parts of the core area. Commun- ity resistance to laying of new sewers has been seen in some areas, because residents view the pipes (designed only to carry sanitary sewage) to be too small to handle their needs for both storm drainage and sanitary sewage. Thus far WSSB/WSSC has made little effort to enlist the help of community groups in using the system properly. 81. In general in both the First and Second Project, there seems to have been little attention paid to the interaction between the proposed interventions and the users themselves. There is a need for more dialogue with the beneficiaries, mobilization of local support and establishment of local users committees to assist in these efforts. There is a need to mobilize the support of standpost users to facilitate maintenance and eventual cost recovery. 82. Outside the urban core area of the Kathmandu Valley, on-site sanitation alternatives can be expected to compete in the future with full sewerage as a solution to meeting the needs for sanitation coverage. III. CONCLUSIONS AND FOLLOW-UP Sustainability of Benefits 83. It is still too early to say whether the new institutional arrange- ments (formation of WSSC in 1984) will be ultimately successful. There remain certain conflicts and duplication of effort between DWSS aad WSSC in some areas. The Operational Action Plan has drawn attention to the need for better financial performance in WSSC if financial recovery is to take place, and the availability of future funding is to be ensured. For sewerage, a more broad based taxing system is required, rather than the approved water surcharge system (25 perceut of each water bill). 84. Since the formation of the Corporation, and thus the advent of an environment in which staff can feel more secure, little effort has been made to provide training. The audit believes that there is still a considerable need for training, particularly among the lower level staff involved in operation, maintenance, leak detection, and repair. - 17 - 85. Domestic metering has curtailed wastage at individual connections, but wastage at standposts and leakage throughout the distribution system are still major concerns. A major new effort is needed to obtain the involvement of the community in solving the current problems. In the past, many of the design assumptions have been inappropriate to local needs. On-site sanita- tion has considerable merit for the future, and needs to be studied further. 86. As more and more schemes are completed, the primary emphasis of the Corporation will need to be shifted to operation and maintenance, and concom- itant .'creases in those capabilities need to be developed across a broad front. Current strategies call for financial recovery through improvements in several areas, including billing and collection, the store/materials management system, fixed assets accounting system, as well as improvement in organization and management. On the operational side, performance is still hampered by leakage in the water distribution system. 87. Since Government is the principal source of demand for construction in Nepal, executing much of the work and regulating the industry, it should play a more significant role in strengthening the local construction indus- try. Some policy changes may be required, including re-registration and categorization periodically of contractors based upon demonstrated perform- ance. Economic and Financial Evaluation 88. The financial viability of WSSC has yet to be demonstrated. Although the Operational Action Plan has addressed some of the basic problems of wastage, leakage, and inefficiency in billing and collection, it remains to be seen whether or not its ultimate aims will be achieved. The revenues being generated by the Corporation have yet to show significant improvement. An internal financial rate of return was estimated at appraisal of the First Project (7.6 percent) based upon tariffs assumed to be in place, but was not fulfilled because of delays in tariff increases and metering, as well as greater than anticipated difficulties with wastage and leakage. At appraisal of the Second Project it was not believed that a meaningful internal finan- cial rate of return could be calculated (President's Report). No calcula- tions were made of the economic rate-of-return of the First or Second Pro- jects, either at appraisal or after completion (PCR, para. 7.14). Conclusions and Recommendations 89. Limited progress has been made in achieving the objectives of the First and Second Projects. Although 24-hour water supply service has not yet been possible in Kathmandu and Lalitpur, service hours have been increase from an average of about 4-6 hours per day in 1973 to about 12-14 hours per day in 1986. In addition, population served by WSSB/WSSC has increased from about 324,000 in 1974/1975 to 810,000 in 1983/1984 (the last year for which data are available). 90. Water service delivered has been less than expected at appraisal because of several factors, namely: (a) underestimation of population growth during project design, (b) overestimation of the reduction in distribution - 18 - system leakage that would be achieved in the short-term, (c) overestimation of the yield of new groundwater sources scheduled to be developed, (d) over- optimism regarding the availability of Pharping Springs as a new source for water supply, and (d) delays in project completion. 91. The audit believes that the WSSB/WSSC extended water service too rapidly to additional areas in the Kathmandu Valley without the necessary increase in supply availability, and without sufficient attention to early repair of distribution system leaks, both of which would have been required if 24-hour service objectives were to be achieved. WSSB/WSSC policies thus ensured that more people would receive limited access to water supply from the central system, but that individual consumers in the original service area would notice little overall improvement in service during the period 1974-1986. It could be said in defense of WSSB/WSSC that political pressures may have made the above policy the only viable choice. 92. On the sewerage side, the decision to provide separately for storm water and sewage (with only sanitary sewers to be constructed initially), was probably not a wise decision from the sociocultural point of view. For one thing, the beneficiaries did not understand the difference between storm sewers and sanitary sewers. Operational difficulties have developed in the sewered core areas because residents reportedly have dumped street sweepings and other refuse in the manholes. Community resistance has been seen in some areas to laying of new sewers because residents view the small pipes (de- signed only to carry sanitary sewage) to be too small to handle their needs for both storm drainage and sanitary sewage. At the minimum, the project should have included a component for educating the community about the pur- poses of the sewer system, and to enlist their support and help in using the system properly. A better solution, however, might have been to select a combined sewer system. 93. In both the First and Second Project there seems to have been little attention paid to the interaction between the proposed interventions and the users themselves. It should be noted that no consultant sociologists were engaged to determine the acceptance of the project proposals to the beneficiaries. There was a need for more dialogue with the beneficiaries, mobilization of local support, and establishment of local users committees to assist in these efforts. 94. If the above-cited miscalculations had not occurred at the design stage, neither the First nor the Second IDA Projects would have appeared to be viable and separate projects in and of themselves. Each have required, in fact, continuing support and funding from follow-on projects in order to continue efforts to achieve their original objectives. 95. Although clear difficulties remain to be overcome in the urban water supply and sanitation area, the risks are not without potential rewards. If continuous service can be achieved in urban water supply with cost recovery (and adequate results achieved in urban sanitation), experience in this sector can serve as an example to other sectors in need of encourage- - 19 - ment in Nepal. Diligent staff efforts and enlightened management will con- tinue to be required from the implementing agency (as part of the Third IDA Project) in order to achieve these goals. - 20 - PROJECT COMPLETION REPORT NEPAL: FIRST AND SECOND WATER SUPPLY AND SEWERAGE PROJECTS (CREDITS 470-NEP AND 704-NEP) I. INTRODUCTION 1.01 The purpose of this report is to review the experience of IDA's first and second water supply and sewerage credits in Nepal and draw conclusions to guide further endeavor. In this introduction, the "context" is set out in terms of (i) Nepal and its development history, (ii) the history and evolu- tion of water supply (and sewerage) institutions in Nepal and (iii) the physical nature of pre-existing water supply (and sewerage) facilities in the four communities for which improvements were included in these projects. The National Context 1.02 The First and Second Water Supply and Sewerage Projects were imple- mented between 1974 and 1985. The projects were implemented with difficulty and delay, and with major cost overruns in the case of the First Project. Financial performance has been less than satisfactory, and much remains to be achieved in institutional development, although a useful start has been made. 1.03 Nepal is a small (1981 population 15 million) land-locked country between the People's Republic of China (Tibet) to the north and the Republic of India to the south. Geographically, in three east-west bands, from north to south, are: (i) the high Himalaya, (ii) the Hills and (iii) the Terai (an extension of the Indo-Gangetic Plain). The urban population in 1981 was about one million in the (then) 23 "Nagar Panchayats" (Towns). The remaining population resides in some 4,000 scattered villages. 1.04 Nepal was virtually closed to the outside world until the 1950s, and systematic development effort did not really commence until the 1960s. Prior to this time, Government concerns had been largely confined to revenue, defence, security and the administration of justice. 1.05 Nepal's terrain is, for the most part, very rugged. With the excep- tion of the partially completed east-west highway along the Terai, and motor road access to the Hill towns of the Kathmandu Valley and Pokhara, the move- ment of people is mostly on foot and the movement of goods is mostly by porter. Internal air travel is constrained by limited aircraft capacity and the difficult weather conditions during the monsoons. Thus, Nepal faces transport and communications problems of some magnitude. A limited telephone network of limited reliability connects the towns; mail service is slow and unreliable. 1.06 The climate in Nepal is characterized by (i) the monsoon rains from June through September, (ii) a period of generally clear weather with generally declining temperatures through February, followed by a period of generally clear weather with gradually increasing temperatures through May - usually the hottest month. This seasonal climatic pattern has implications - 21 - for water supply projects. While the annual precipitation (about 1,500 mm) is fairly abundant, the peak seasonal water demands tend to occur towards the end of the dry season in April and May; this is exactly out-of-phase with the seasonal availability of water, from either surface or ground sources (wells and springs). 1.07 The total population of Nepal is growing rapidly (2.7% annually from 1971 to 1981). But the urban population is growing even more rapidly. The total urban population was a mere 300,000 in 1961; two thirds of this (200,000) was in the adjoining Kathmandu Valley towns of Kathmandu and Lalitpur and the nearby town of Bhaktapur. In the period 1971 to 1981, the total urban population grew at an annual rate of 7%, and in one town the rate was 14%. Much of this growth is attributable to rural-to-urban migration, but an increase in rural densities has, nonetheless, continued. 1.08 The economy of Nepal is dominated by agriculture. In terms of for- eign exchange earnings, the largest contributor is international tourism, which grew rapidly through the 1960s and 1970s. Kathmandu and Pokhara are the two urban areas most affected by tourism. The role of urban areas varies between them, but typically: (i) they have an important role in the dispersal of government services. (ii) they are a focus of commerce and trade. (iii) they may be the location of Nepal's budding industrial endeavor. Larger institutions and enterprises in Nepal tend to be all or partly in the public sector. Thus, there is, as yet, little indigeneous experience in the management of large institutions along commercial lines. 1.09 In summary, the national context is characterized by: (a) a very recent (say 20-25 year) history of significant development effort, and thus a limited experience of development and administra- tion, and a limited infusion into the country of concepts and experience of development elsewhere; (c) a land-locked territory (relying for an international freight connection on high-cost air cargo, or the Indian port of Calcutta); (d) difficult internal transport and communications; (e) a climate providing a generally adequate but highly seasonal rainfall which is out-of-phase with water demand patterns; (f) a high population growth rate; (g) a recent history of very rapidly growing urban areas, mainly as a result of rural-to-urban migration; - 22 - (h) little indigenous experience of managing large institutions along commercial lines. The Institutional Concept 1.10 In 1972, HMG and the Ministry of Water Resources (MWR) separated the community water supply function from the Department of Irrigation. There emerged, under the Ministry: (a) the Department of Meteorology, Hydrology and Irrigation (DMHI), and (b) the Department of Water Supply and Sewerage (DWSS). 1.11 Separately (in 1971), under the Ministry of Home and Panchayat (now under the Ministry of Panchayat and Local Development - MPLD), the Local Development Department (LDD) was given the responsibility for water supply for small schemes in the villages. While the exact division of respon- sibility between DWSS and LDD was not always clear, LDD projects typically have been smaller and less complex technically. 1.12 Both DWSS and LDD have operated in a broad policy environment favor- ing the turning-over of completed projects to the local (Town or Village - or even District, in some cases) Panchayats for operation and maintenance. However, experience with such a turning-over was very mixed; DWSS has con- tinued to operate and maintain many of the systems it had constructed. 1.13 In 1973, HMG created the Water Supply and Sewerage Board (WSSB) ukider the MWR to implement these First and Second Projects. The eventual goal was the creation of a (Government) corporation with a broader responsibility for, and a greater autonomy in the management of, water jupply and sewerage. (WSSB became a corporation (WSSC) on July 15, 1984.) 1.14 Both DWSS and (to a lesser extent and more recently) LDD have some history of charging users for water. But WSSB was the first introduction in Nepal of the self-sufficient water and sewerage utility concept. This con- cept was particularly reinforced by provisions of the Development Credit Agreements (DCAs) for the First and Second Projects and by provision of the corresponding Subsidiary Loan Agreements (SLAs) between HMG and WSSB. 1.15 Of particular relevance to this report: (a) WSSB was a new institution in 1973 (immediately prior to the commen- cement of implementation of the First Project), with no experience or history of its own in either project implementation, operation and maintenance, or accounting, nor any administrative infrastructure in the way of policies, procedures, systems, records, and so forth. - 23 - (b) WSSB was, from the outset, pioneering the introduction to Nepal of a new institutional concept for the delivery of water supply and sewerage services - that of a financially viable utility organiza- tion. This had implications for its relationship with other governments agencies and for its staffing and staff motivation needs, and its relationship with the public. The Physical Context 1.16 A detailed description of the First Project is provided in Annex i and of the Second Project in Annex 14. In simplified summary: ewerage Water Supply Improvements Kathmandu Kathmandu- Lalitpur Lalpur Bode Pokhara Birgan Biratnagar First Project x x x x Second Project x x x x x x 1.17 Kathmandu (the national capital) and Latitpur are adjoining urban communities in the Kathmandu Valley, located in "the Hills" (para 1.03). The valley floor is about 1,300 m MSL; the surrounding hills rise to 2,000 -2,800 meters. (Bhaktapur, a third urban community in the Valley, is some 15 km further east and has a separate water supply and sewerage system, for which improvements have been provided with technical and financial assistance from CTZ of FR Germany.) 1.18 At the time of appraisal of the First Project, water supply for Kathmandu-Lalitpur (and some nearby villages, including Bode) was provided from six "source systems" as follows (all of these sources provided a gravity supply except Sundarighat): Treatment RSF - Rapid Sand Filtration Effective /a Source System Yield (Year) Sources (Year) lit/s m3/d Tri Bim Dhara (1931) 5 Springs/Streams RSF - Balaju (1960) 32 2,800 Bir Dhara (1895) 2 Streams RSF - Maharajganj (1961) 23 2,000 Sundarijal (1966) Bagmati (upstream of KTM) RSF - Sundarijal (1966) 203 17,500 Sundarighat (1971) Bagmati (downstream of KTM) RSF - Sundarighat (1971) 9 800 Doodpokhari (1896) Spring NIL or Sundarighat 21 1,800 Lokhot (year unknown) Spring NIL 6 500 294 25,400 la Based on the pipeline or treatment plant capacity when the daily flow is at the minimum in an average year. - 24 - The first distribution network in Kathmandu was constructed in 1896. This was extended in 1920, 1930 and 1966. In Lalitpur, the system was first constructed in 1896 and remained unchaged until 1972 when some trunk mains were reinforced. 1.19 At appraisal of the First Project, it was estimated the system provided an intermittent service (6 hours per day) to some 233,000 people (about 127,000 through connections and 106,000 through private taps). The residential connections numbered 11,580 (of which 2,008 were metered); there were 296 standposts and 1,033 metered non-domestic connections. 1.20 The sewerage facilities in Kathmandu comprised a combined system, of very limited extent, in the core area of the city, which had been constructed between 1896 and 1905. Some 7,000 connections discharged their sanitary waste to this system, which then flowed (together with surface runoff at times of rain) for irrigation use on vegetable plots or to the Bagmati River. No sewage treatment was provided. Apart from the more well-to-do having septic tanks, excreta disposal was to open drains, or through defecation at river banks, or in streets and lanes and in vacant urban lands. Bode had, and still has, no formal sewerage arrangements except for a few cess pits. 1.21 Pokhara, the headquarters of the Western Region and a major tourist centre, is located about 200 (road) km west of Kathmandu. It is also situated in a valley in "the Hills" (para 1.03), but at a somewhat lower altitude (about 800 m MSL). 1.22 At appraisal of the First Project, Pokhara was supplied with water from two source systems: Effective /a Source System Yield Estimates (Year) Sources Treatment lit/s m3/d Bal Dhara (1920) Springs NIL 1 90 Bhote Khola (1965) Stream NIL 16 1.380 17 /b 1,470 /a Based on the pipeline capacity when the daily flow is at the minimum in an average year. /b Because of transmission losses, the volume received for distribution was only about 11 lit/s, or 1,000 m3/d. The distribution network in Pokhara was first constructed in the 1920.1 and extended in 1965. 1.23 At appraisal of the First Project, the system provided an incermit- tent service (about 6 hours per day) to some 30,000 people - about 4,000 through 714 unmetered domestic connections and the remaining 26,000 through 854 public standposts. - 25 - 1.24 Pokhara had no sewerage facilities. 1.25 In addition to further improvements in the water supply systems for Kathmandu-Lalitpur, Bode and Pokhara, and further improvements to the sewerage facilities of Kathmandu-Lalitpur, the Second Project included water supply improvements to the towns of Birganj and Biratnagar. 1.26 Birganj is on the Terai at the Indian border, some 186 (road) km south of Kathmandu and at only 100 m MSL. It is the main point of entry for goods arriving from or through India. 1.27 At appraisal of the Second Project, the pre-existing water supply system(s) of Birganj comprised two somewhat separate but connected systems. The first, completed in 1965, comprised a deep tube well discharging to a concrete elevated tank and then providing intermittent service to a distribu- tion network. The second, completed in 1973, is similar to the first. Together they supplied an estimated 18,000 people, through 1,030 unmetered connections and 80 standposts. 1.28 Birganj had no sewerage system. 1.29 Biratnagar is also on the Terai, also at the Indian border, but in the eastern part of Nepal and at about 60 to 70 meters above MSL. At the 1981 Census, it replaced Lalitpur as the second largest town in Nepal; it has a significant industrial employment base. 1.30 At appraisal of the Second Project, the pre-existing water system, constructed in 1965, served only the northern part of the town. It was supplied from a single deep tube well, which discharged to an elevated con- crete tank, which, in turn, provided intermittent service to a distribution network and to some 700 unmetered connections and 240 public standposts serving an estimated 17,000 people. 1.31 Biratnagar had no sewerage system. 1.32 The water supply and sewerage conditions in the five communities for which improvements were provided in the First and Second Projects can be summarized as follows: (a) In all of the communities, water supply was provided on an intermit- tent basis to a part of the population. (b) Intermittent service was provided partly because of source inade- quacies (Kathmandu-Lalitpur and Pokhara), partly because of power costs for pumping (Birganj and Biratnagar), and partly because of high distribution system leakage, as well as high water wastage in both standpipes and unmetered connections. - 26 - (c) Regardless of the water treatment provided (in Kathmandu-Lalitpur), intermittent distribution brought the risk of ingress of contaminated groundwater into the system when not under pressure, and this brought the risk of delivery of such contaminated water to consumers when the pressure was reapplied. (d) Sewerage was non-existent, except for a very limited combined system serving a small portion of the core area of Kathmandu. This system discharged untreated sanitary wastes to vegetable gardens or directly to the Bagmati River. Otherwise (apart from the well-to-do having septic tanks), disposal was to open drains or through defecation at river banks, on streets and lanes, and in vacant urban lands. 1.33 In this introduction, we have set out, in turn, the national context, the institutional context and physical context (pre-existing water supply and sewerage systems) in which the First and Second Projects were launched. This report goes on to consider, in turn, II - Project Preparation and Appraisal, III - Project Implementation and Costs, IV - Financial Performance, V - Institutional Performance, VI - Bank Performance, VII - Project Justification and concludes with VIII - Conclusions and Lessons Learned. Frequent reference is made to annexes which are listed on the Table of Contents at the beginning of this report. II. PROJECT PREPARATION AND APPRAISAL Preparations 2.01 The studies and reports forming the basis of appraisal were conducted by consultants. 2.02 The studies and reports on the "Master Plan for Water Supply and Sewerage for Greater Kathmandu 1/ and Bhaktapur" were managed by the World Health Organization (WHO) and financed by the United Nations Development Program (UNDP). They were executed during the period January 1971 to mid-1974, an elapsed time of 3 1/2 years. These reports were very comprehen- sive in scope and were published in 10 substantial volumes. They covered, inter alia: (a) a detailed review of the existing facilities, their performance and condition, and recommendations covering remedial and rehabilitative measures; 1/ The expression "Greater Kathmandu" was used to connote the Nagar Panchayats of Kathmandu and Lalitpur, and a number of nearby villages. - 27 - (b) a Master Plan giving a staged program of works requirements to meet water supply and sewerage needs to the year 2000; (c) a proposed "Immediate Works" program comprising the earliest stage of the Master Plan; and (d) organization, management, finanancial and legal studies. 2.03 A water supply and sewerage sector study report was also carried out by the same consultant under UNDP/WHO auspices during the same period. 2.04 There were also studies and reports by the same consultant during the same period financed directly by HMG: (a) Water supply, sewerage and drainage report (one volume each) for each of the towns of Pokhara, Birganj and Biratnagar, and water supply report for Kathmandu Villages. These were somewhat less detailed in scope than the reports described in para 2.02. (b) An exploratory groundwater drilling program in the Kathmandu Valley. 2.05 These documents and the findings of IDA Missions during and after their preparation formed the basis for appraisal of the First and Second Projects. (IDA participated as an observer at formal UNDP/WHO reviews of the consultant's work.) 2.06 A Second Project was anticipated at the time of appraisal of the First Project. An amount of US$800,000 was included in the First Project estimates for the costs of consulting services for a tariff study, feasibility studies and detailed engineering of a next-stage project, projected for about 1978-81. In fact, such studies and designs were not conducted under the First Project. Appraisals 2.07 The Staff Appraisal Report (No. 270a-NEP) for the First Project was dated April 10, 1974. 2.08 The SAR notes the 1973 formation of WSSB for the specific purpose of commencement of the First Project. This was noted as an interim step in the eventual establishment of a more autonomous corporation, as had been recom- mended by the consultants. 2.09 The SAR notes that the initial staff and offices of WSSB would be that of DWSS, then serving the Kathmandu and Pokhara areas, gives the proposed organization chart, and notes that the positions of Manager of Engineering and Manager of Administration and Finance have been filled by two expatriates provided by the Overseas Development Administration (ODA) of UK. - 28 - Their duties would include on-the-job training of WSSB counterpart and other staff. The chief executive of WSSB had the title of "Project-in-Charge", and this position was filled by a suitably qualified Nepali at the time of appraisal. Further technical assistance from ODA had been requested by HMG at the time of appraisal (a Superintendent of Meter Workshops, a Superinten- dent of Leak Detection and Waste Prevention and a Superintendent of Water Production) 2.10 The SAR anticipated some difficulties in institutional development, but expected reasonable progress, in light of the sector priority being accorded by HMG. 2.11 The First Project at appraisal was for (i) water supply improvements in Kathmandu-Lalitpur, Bode and Pokhara, (ii) sewerage improvements in Kath- mandu and the initiation of a sewerage system in Lalitpur, (iii) the consult- ing services noted in para 2.09, and (iv) engineering studies for a second stage project and tariff studies. The cost estimates in summary were: First Project - Credit 470-NEP: Cost Esimates at Appraisal - Summary (in US$ million) Local Foreign Total (% Total) (i) Water Supply 1.3 2.8 4.1 ( 39%) (ii) Sewerage 2.4 1.3 3.7 ( 36%) (iii) Consulting Services; design and supervision of (i) and (ii) 0.1 1.3 1.4 ( 13%) (iv) Studies - Second Stage and Tariff Study 0.1 1.1 1.2 ( 12%) TOTAL 3.9 6.5 10.4 (100%) (38%) (62%) (100%) 2.12 At appraisal, the IDA credit of US$7.8 million was expected to cover all the foreign exchange costs and about one third of the local costs; this represented about 75% of the total estimated project costs. The balance was to be financed by HMG equity contributions. The credit proceeds were onlent to WSSB over a 25-year term, to be repaid by 40 semi-annual payments of principal and interest at 6%, following a five-year grace period on interest and principal. 2.13 The scale of the project was considered appropriate to Nepal's implementation capability and financial constraints, but was much less than had been proposed by the consultants. Reports on the water supply and sewerage needs of Birganj and Biratnagar were reviewed, but due to financial constraints, improvements in these towns were not included in the First Project. (They were later included in the Second Project.) - 29 - 2.14 The absence of historic data constrained the preparation of financial projections at appraisal; approximate "actual" and "probable" accounts had been constructed by the consultants from the DWSS's cash accounting records and from a valuation of assets. 2.15 It was determined that the then cur nt tariff covered operation and maintenance costs, but only part of the depciation. Specific measures noted in the SAR and agreed to at negotiations included: (a) the continuation of a consumer metering program commenced in FY 1971 for the sake of wastage reduction; (b) the introduction, on July 15, 1974, of f. two-tier progressive tariff for metered connections and an increase in the unmetered tariff, which together represented a tariff increase of about 60% above prior levels; (c) the introduction of a monthly rate per standpost payable by HMG to WSSB; (d) a tariff provision for both water and sewerage connection charges; (e) the removal of the exemption from payments for water (and sewerage) services from government offices, schools and similar institutions. (f) the introduction of a sewerage service charge by July 15, 1977 (the estimated date at which the sewerage system would come into use) calculated as a surcharge on the water bill, estimated at 50% thereof, and payable by those connected to the sewerage system. The objective of these measures was to allow WSSB to make a positive return on net fixed assets from FY 1976 onwards while at the same time giving lower income groups benefits from the new and improved services. 2.16 Since financial projections in the SAR were tenuous (para 2.14), the project, at appraisal, included tariff studies scheduled for FY 1977, with the objective of a comprehensive review of all aspects of the level and structure of water and sewerage service tariffs appropriate to the conditions in Nepal. (Such a study was actually carried out in 1979 under the auspices of the Second Project.) 2.17 The SAR financial projections indicated for FY 1981 an annual rate of return on net fixed assets of 5%, made up of 8% on water supply assets of MRs 114 million and 0.2% on sewerage assets of NRs 75 million. They indi- cated the internal generation of NRs 22 million for the second stage and other works by FY 1981. 2.18 At the time of appraisal of the Second Project (April 1977), an HMC request for supplementary financing assistance for the First Project was under consideration by IDA. The need arose from implementation delays and - 30 - steep worldwide inflation. A supplementary agreement (470-NEP REV) was signed May 27, 1977. This provided an additional US$4.0 million, bringing the total IDA First Project credit to US$11.8 million. 2.19 The SAR for the Second Project (No. 1420-b-NEP) was dated April 11, 1977. The timing was consistent with that anticipated in the First Project SAR. (Planned implementation of the Second Project 1978-81.) 2.20 The SAR reviewed the institutional development of WSSB. It noted that performance, had been poorer than expected at appraisal of the First Project - firstly, in project implementation (especially, delays in the award of contracts, but this was partly the result of very much higher than expected bid prices) and, secondly, in the implementation of a public utility accrual accounting system. 2.21 The report acknowledged the long prolcess of institution-building and the risks of dealing with an inexperienced institution, and noted the role of supervision missions in helping to remedy any situation before it severely affected the project. 2.22 The need for continuation of technical assistance from ODM (UK) and from consultants was anticipated (and was provided). 2.23 This Second Project, at appraisal, was for (i) further water supply improvements in Kathmandu-Lalitpur, Bode and Pokhara (storagp and distribu- tion), and water supply improvements in Birganj and Biratnagar (supply, storage and distribution), (ii) sewerage extensions in Kathmandu-Lalitpur, (iii) consulting services, and (iv) engineering studies, covering both this and a prospective next-stage project, and tariff studies. 2.24 The cost estimates in summary were: Second Project - Credit 704-NEP: Cost Estimates at Appraisal - Summary (in US$ million) Local Foreign Total (% Total) (i) Water Supply 4.1 3.7 7.8 ( 60%) (ii) Sewerage 0.8 0.4 1.2 ( 11%) (iii) Consulting Services; design and supervision of (i) and (ii) 0.3 0.5 0.8 ( 7%) (iv) Consulting Services - Studies 0.5 1.0 1.5 ( 13%) TOTAL 5.7 5.6 11.3 (100%) (50%) (50%) (100%) 2.25 At appraisal, the IDA credit of US$8.0 million was estimated to cover all the foreign exchange costs and 42% of the local costs; together, this represented 73% of the total project cost. The remaining costs were to be - 31 - financed by HMG as an equity contribution to WSSB. The credit proceeds were onlent to WSSB over a 25-year term, to be repaid by 40 semi-annual payments of principal and interest at 9%, following a five year grace period on prin- cipal and interest. 2.26 The financial projections in the Second Project SAR noted the his- toric impact of the 60% tariff increase (para 2.15(b)) in FY 1975, from which the full financial benefits were realized in FY 1976. 2.27 The SAR financial analysis anticipated a further 100% tariff increase in FY 1979/1980, and further increases of about 50% every two or three years thereafter. With these important assumptions, the average rate of return on net fixed assets was projected to reach 4% in FY 1984; this was made up of 6% on water supply assets and a barely positive rate on sewerage assets. Negotiations and Approvals 2.28 An IDA Credit (470-NEP) of US$7.8 million for the First Project to finance about 75% of the total project cost was approved by the Board on April 30, 1974. The Development Credit Agreement (DCA) between the IDA and HMG was signed on May 8, 1974. 2.29 A Supplementary Credit (470-NEP REV) of US$4.0 million for the First Project (needed as a result of rapid inflation and project implementation delays) was approved by the Board on April 25, 1977. The DCA between the Bank and HMG was signed on May 27, 1977. 2.30 An IDA Credit (704-NEP) of US$8.0 million for the Second Project to finance about 73% of the total project cost was approved by the Board on April 26, 1977. The DCA between the Bank and HMG was signed on May 27, 1977. This agreement modified some of the covenants in Credit 470-NEP. 2.31 An agreement for a US$3.0 million, IDA-administered, EEC Special Action Credit (26-NEP) was signed August 9, 1979. It provided that the funds flow to WSSB as a grant (equity contribution). This agreement modified some of the covenants in Credits 470-NEP, 470-NEP REV and 704-NEP. 2.32 An agreement for a Third Project (beyond the scope of this report) between IDA and HMG was signed September 29, 1980. This is mentioned here because, again, some of the covenants of the previous credit agreements (paras 2.28-2.31) were modified by this agreement. 2.33 The general trend of successive modifications to covenants was to both defer and reduce the minimum performance of WSSB in terms of the rate of return on net fixed assets. - 32 - The Main Objectives of the Projects 2.34 The main objectives of the First Ptoject were: (a) to provide a safe and uninterrupted piped water supply for Kathmandu-Lalitpur, Bode and Pokhara; (b) to provide waterborne sewerage for certain areas of Kathmandu- Lalitpur, and to provide sewage treatment facilities for reducing the pollution in the Bagmati River; and (c) to develop WSSB as a viable utility capable of taking responsibility for water supply and sewerage throughout Nepal. 2.35 The major objectives of the Second Project were: (a) to strengthen and extend the distribution components of the water supply systems in Kathmandu-Lalitpur, Bode and Pokhara, in which supply and distribution improvements were being provided under the First Project; (b) to extend the waterborne sewage collection system in Kathmandu- Lalitpur, which had been initiated under the First Project; and (c) to continue to develop WSSB as a satisfactory institution to (i) operate the facilities provided by the project and (ii) to extend its expertise and services into additional areas in Nepal. Prcject Descriptions The First Project 2.36 The main components of the First Project were water supply improve- ments for Kathmandu-Lalitpur, Bode and Pokhara, sewerage system improvements for Kathmandu-Lalitpur, the provision of vehicles, tools and equipment (mainly oriented to improved operations) and consulting services. The provi- sion of institutional development and on-the-job training services was to be provided by a parallel arrangement between HMC and ODA (UK). 2.37 The principal elements of the project can be summarised as follows: - 33 - FIRST PROJECT - PRINCIPAL ELEMENTS A. Kathmandu Valley (Kathmandu-Lalitpur, and Bode) Water Systems (i) Pharping scheme: a new supply from 3 springs and 3 tubewells at Pharping and the related 6.8 km of transmission, and pumping station facilities, having an annual minimum yield of 249 lit/s (21,500 m3/d). (ii) The equipping of two previously drilled exploration wells at Balaju (Baniatar) and Bansbari, and the related transmission works, having a combined yield of 52 lit/s (4,500 m3/d) and the provision of a new 4,500 m3 surface reservoir at Mahankalchaur. (iii) The drilling, construction and equipping of a new well to serve Bode and adjoining villages (yield not known). (iv) The provision of some 52.1 km of distribution piping extensions and improvements, the provision of 100 fire hydrants, the provision of 7,000 new connections and the replacement of 5,400 existing connections, the provision of 7,000 meters and the replacement of 5,000 existing meters. (v) Various improvements and repairs to seven existing headworks and treatment plants, including the provision of chlorination. (vi) The provision of a workshop and of a laboratory. (vii) The provision of 18 bulk water meters to permit the development of sources yield records. B. Pokhara Water System (i) The provision of new supply from three Kali Khola spring sources - a yield of 52 lit/s (4,500 m3/d) was assumed from conflicting data available at appraisal, and the related 10.3 km of transmission lines. (ii) The drilling of one exploratory well to provide information of potential use in planning future water supply improvements. (iii) The provision of 10.3 km of distribution improvements, 100 fire hydrants, 400 new service connections, 400 consumer meters and the replacement of 600 existing meters. C. Kathmandu-Lalitpur Sewerage (i) Repairs and replacements to the existing 11.7 km core area combined sewerage system. - 34 - (ii) The provision of 9.6 km of trunk sewers, 31.2 km of local collection sewers and 3,800 sewer tonnections. (iii) The construction of the Kirtipur Sewage Pumping Station (3 pumps @ 830 lit/s (or 72 m1d) each - two duty and one standby) to convey wastewater through 1.76 km of forcemain to the Dobighat stabilization pond sewage treatment plant. (iv) The construction of the Dobighat 3-stage stabilization pond sewage treatment plant to receive flows from Kathmandu, with a hydraulic capacity of 540 lit/s (47 mid) and an outfall to the Bagmati River. (v) The construction of the Kodkhu 3-stage stabilization pond sewage treatment plant, with a hydraulic capacity of 60 lit/s and an outfall to the Bagmati River. D. Vehicles, Tools and Equipment (i) Vehicles (2 trucks and 5 jeeps). (ii) Workshop tools and equipment; laboratory supplies and equipment; (iii) Leak detectic equipment. (iv) Hydrological equipment (rain gauges and river level gauges). (v) Mechanized billing equipment. E. Consulting Services (i) Preliminary engineering not in UNDP Study. (ii) Design and supervision. (iii) Preparation of next stage project. (iv) Tariff study. 2.38 A comparison of the scope of the originally appraised project and the project as finally executed is given in Annex 5. The Second Project 2.39 The main components of the Second Project were for further improve- ments to the water distribution systems of Kathmandu-Lalitpur, Bode and Pokhara, further extensions and improvements to the sewage collection system in Kathmandu-Lalitpur, improvements to the water supply systems in Birganj - 35 - and Biratnagar, the provision of vehicles, tools, equipment and water meters, and the provision of consulting services. 2.40 The provision of in-house, on-the-job training of WSSB staff through experts arranged between HMG and ODM (UK) was expected to continue. 2.41 The principal elements of the project can be summarized as follows: SECOND PROJECT - PRINCIPAL ELEMENTS A. Kathmandu Valley (Kathmandu-Lalitpur and Bode) Water Systems (i) The provision of 48 km of secondary distribution mains, the rehabilitation of 4 km of existing leaky mains, and the provision of a 20 km tranmission/distribution main to supply ten nearby villages. (ii) The provision of a 500 m3 reservoir at Bode and 6.5 km of distribution mains from the Bode system. B. Kathmandu-Lalitpur Sewerage (i) The provision of 9.0 km of branch sewer extensions. C. Pokhara Water System (i) The provision of a 500 m3 surface distribution reservoir. (ii) The provision of 11.0 km of secondary distribution mains. D. Biratnagar Water System (i) The provision of 2 new tube wells, each of 4,200 m3/d capacity. (ii) The provision of a 500 m3 elevated storage tank. (iii) The provision of 24 km of primary and 10 km of secondary distribution main extensions. E. Birganj Water System (i) The provision of improvements to two existing wells, including facilities for chlorination. (ii) The provision of a 500 m3 surface reservoir and a high-lift pumping station near one of these wells. (iii) The provision of 6 km of primary and 21 km of secondary distribution main extensions. - 36 - F. Vehicles, Tools and Equipment (i) The provision of 6 trucks, 4 jeep-type, 10 motorcycles and 50 bicycles. (ii) The provision of miscellaneous tools. G. Water Meters (i) The supply of 27,000 consumer meters for use in all the communities under WWSB jurisdiction. H. Consulting Services (i) Engineering services related to the design and supervision of the Second Project. (ii) The updating of the earlier (paras 2.02 and 2.04) consultant- prepared water supply and sewerage master plans for the Kathmandu Valley, Pokhara, Birganj and Biratnagar. (iii) The execution of water supply and sewerage feasibility studies for the towns of Nepalganj, Bhairawa, Butwal, Hetauda, Janakpur and Dharan. 2.42 A comparison of the scope of the originaliy appraised project and the project as finally executed is given in Annex 14. Project Agreements 2.43 It has been noted (para 2.33) that successive agreements from the First Project (1974) through the First Project Revision (1977), the Second Project (1977) and the EEC Special Action Credit (1979), as well as the Third Project (1980), modified some of the provisions of the prior agreements. 2.44 In the Project Agreement (1974) for the First Project, the following conditions were included (inter alia): (a) Section 3.02A concerns the onlending arrangements to WSSB. The due date for the first interest and principal payments was extended by two years to June 30, 1981. The accrued interest was recorded in the accounts of WSSB in FY 1982/83, but not the principal; the amount due was not actually paid. Rate of return provisions were modified by both the Second and Third Project Agreements. - 37 - (b) Section 3.03A concerns the employment of consultants for engineering design, the evaluation of bids and the supervision of construction. This condition was complied with in advance of the required date. (c) Section 3.11A concerns the maintenance of water rates and charges at levels approved by IDA. A tariff increase of about 60% was made effective April 1975; there was a further increase of about 50% in September 1981. (d) Section 3.118 concerns the maintenance of sewer rates and charges at levels approved by IDA; this was superseded by Section 4.04C of the Second Project Agreement and again by 4.04(c) of the Third Project Agreement. Delays in completion of the sewerage system caused delays in the introduction of a sewerage charge. A charge calculated as 25% of the water bill payable by those having a sewerage connection was included in 1983/84, but yielded only nominal revenues that year. (e) Section 4.018 concerns the submission to IDA of WSSB's audited accounts and related audit reports within six months of each finan- cial year end. (Parallel provisions are contained in the Second and Third Project Agreements.) This condition has been fulfilled, but usually with delay. (f) Section 4.05B concerns the transfer of professional and technical staff by HMG to WSSB. This condition was largely fulfilled by March 1975, but most of these transfers were on a temporary secondment basis. This did not aid organizational stability or the development of a strong institution. 2.45 In the Second Project Agreement (1977), the following conditions were included (inter alia): (a) Section 3.03 concerns the appointment of consultants to assist in engineering design and supervision. This condition was fulfilled, but some 7 months late. (b) Sections 3.03A and 3.07 concern the appointment of a tariff consult- ant and the execution of a tariff study. Again, this condition was fulfilled, but here the delay was some 15 months. The report was dated October 1979, but tariff adjustments were not made until September 1981 (para 2.44(c)). (c) Section 3.08A requires WSSB to submit a detailed training program to IDA; thisr was fulfilled, but some 27 months late. (d) Section 3.08B requires the continuation of training to WSSB account- ing staff; this was provided through until March 1978 by the ODM experts. - 38 - (e) Section 4.048 (Second and Third Project) is concerned with the pay- ment of water charges (including monthly standpost charges) by HMG to WSSB. Arrears were cleared November 1981. 2.46 Sections 4.04(c) and 4.06 of the Project Agreement for the Third Project are the effective financial performance and sewerage rates covenants. These provide that revenues should cover at least: (a) In FY 1981 and FY 1982, all operations, maintenance and administra- tion costs, plus depreciation (Section 4.06); (b) In FY 1983 and thereafter, all operations, maintenance and administration costs, plus the higher of (i) depreciation or (ii) debt service (Section 4.06); (c) In FY 1981, sewerage charges would be 25% of the metered water charges of consumers with sewerage service (Section b.04(c)); and (d) In FY 1982 and thereafter, the sewerage surcharge rate would be 50% (Section 4.04(c)). 2.47 The covenants described in para 2.46 above modified and softened those of earlier project agreements. The First Project Agreement required tariffs to produce a rate of return of 1% on net fixed assets in FY 1976 through 1978, 2% in 1979; 3% in 1980; 5% in 1981 and rising to 8% in 1987 and thereafter, and that sewerage charges would be introduced by 15 July 1977, which were estimated to be 50% of the water charges. The Second Project covenants reduced the required rate of return to 2% from FY 1979 through 1982, and set this at 3% for FY 1983, at 4% for FY 1984 and at 6% for FY 1987 and thereafter; sewerage service surcharges would be levied at 50%, commenc- ing FY 1978 (one year after the date in the First Project Agreement). 2.48 In addition to modifications to rates of return (para 2.47), the due dates of debt service payments by WSSB were extended from time to time. The year of the initial debt service payments under Credit 470 (First Project) was originally FY 1979. This was successively extended to FY 1983. For Credit 704 (Second Project), the extension was by one year from the original FY 1983 to FY 1984. 2.49 Onlending interest rates to WSSB were, successively, 6% for the First Project, 9% for the Second Project, nil for the IDA-administered EEC Special Action Credit (equity contribution) and 3/4% for the Third Project. * - 39 - III. PROJECT IMPLEMENTATION AND COSTS Introduction 3.01 This chapter will show that the First Project was completed with considerable difficulty and delay, and with costs very substantially in excess of those estimated at the initial appraisal. The Second Project faced somewhat less difficulty, but completion was two years after the date estimated at appraisal. 3.02 For the sake of perspective, it is useful to consider the management problems facing WSSB at the outset of the First Project: (a) WSSB was a new organization, having none of the procedural and administrative infrastructure found in more seasoned organizations. (b) WSSB's role, function and future prospects as an organization were not well defined or clear to many HMG offices, to its own staff or to the general public. "Development Boards" in Nepal have primarily (according to the relevant legislation) a "project implementation focus"; the title of the chief executive, "Project-in- Charge", confirms this. The status and title of the organization did not reflect its "viable utility organization" objectives. (c) WSSB's actual staff was a blend of staff seconded from DWSS and its own specially-recruited staff. The proportion of seconded staff was initially very high and gradually reduced as these people returned to DWSS. But the seconded staff tended to be the more seasoned and exprienced professional staff; their temporary status with WSSB hampered the development of a corporate morale. Further, the terms of employment of WSSB own staff were, and were perceived to be, somewhat less attractive, at least in terms of security and benefits, than those of other public service employees. (d) WSSB was faced with the introduction of an accrual accounting system, which has a very different philosophy and practice from traditional Nepalese government accounting. This accrual concept (and commercial accounting) were not widely understood. The WSSB management problems, in this regard, related not only to training staff to carry out this work, but also to dealing with other public agencies (the Ministry of Finance). The manaifestation of this problem in practice was the need for WSSB to maintain two parallel systems of accounts, one in government and the other in commercial format. (e) WSSB was dealing with (i) two expatriate consulting firms (the con- sultant engaged for project preparation was succeeded by a different firm for final design and supervision, but there was an overlap), (ii) IDA and the details of IDA procedures for the first time and (iii) ODA advisors in engineering and in finance/ administration. - 40 - (f) WSSB was dealing with its first multilaterally-financed project; with an inherently complex water system in Kathor; vehicle shortages and transport difficulties; experience and resource limitations of local contractors; periodic construction material shortages; a general shortage of trained professional and technical staff; and a par- ticular shortage of staff with relevant past experience. 3.03 The summary description of the First Project (para 2.37) does not fully indicate its complexity. A schedule in the project records identifies 125 project components, for which organizational arrangements and respon- sibilities were as follows: No. of Project Components - First Project Supervision Procure- Construc- of TOTAL Design ment tion Construction Preparation Consultants 6 6 - First Proj.Consultants 96 72 - - 24 Consultants and WSSB 96 5 35 - 56 WSSB 245 42 56 102 45 Int'l. Supply Contractor 20 - 2U - - Contractor 37 - 14 23 - TOTAL 500 125 125 125 125 - 41 - Thus, WSSB was faced with - - 42 design assignments (plus 5 more with consultants) - 56 procurement assignments (plus 35 more with consultants) - 102 construction assignments, and - 45 supervision assignments (plus 56 more with consultants) 3.04 It is true that many of the "assignments" noted above were small in financial terms; such small items were frequently related to the renovation and rehabilitation of existing plant. But it is also true that such items tend to need an inordinately large amount of investigative, technical and management time in relation to their cost. 3.05 This, then, was the management demands for execution of the First Project. Effectiveness 3.06 The First Project was declared effective June 26, 1974, promptly after the Project Agreement date of May 8, 1974. 3.07 The Second Project was not declared effective until February 28, 1978, some 9 months after the Project Agreement date of May 27, 1977. There were three conditions of effectiveness: (1) The effectiveness of 470-NEP REV (which required appropriate revi- sions to the corresponding Subsidiary Loan Agreement). (2) The execution of a Subsidiary Loan Agreement for 704-NEP. (3) The employment of consultants for design and supervision. The delay related to effectiveness condition (3) above. The same consultant who had been engaged for the First Project was eventually appointed also for the Second Project. Start-Up 3.08 Start-up for the First Project was quite rapid. A certain momentum was realized from the prior preparation of some bid documents by the project preparation consultant, and through the project preparation effort itself. The engineering consultant for the First Project was engaged by an agreement of June 2, 1974. 3.09 One year after commencement, most of the design work by the consult- ant had been completed and some 5 major contracts had been advertized for - 42 - bids. However, by this time, a schedule of some 31 (proposed or agreed) revisions to the project description had been prepared; cost estimates were revised, and a completion delay of six months was then anticipated. 3.10 The start-up of the Second Project was delayed at the outset by the delay in the employment of the engineering consultant (para 3.07). In this project, the execution of studies (para 2.41, H (ii) and (iii)) proceeded concurrently with the final design of the Second Project works. By mid-1979 (some 16 months after effectiveness), this final design and bid document preparation was completed, and the study reports in their final form were issued later that year. Under the circumstances, project progress was con- sidered satisfactory and completion as planned was anticipated. Revisions 3.11 There were two phases of significant revisions to the First Project. The first resulted from the more detailed technical effort in final design during the first year of implementation and in anticipation of a substantial increase in costs; a schedule of some 31 changes was prepared in June 1975 (para 3.09). The estimated net effect was a cost increase of about 17% from the cost estimated at appraisal. The more significant revisions were: (a) WSSB's drilling rig became unserviceable; it was necessary to tender drilling work for an estimated cost increase of NRs 0.6 million. (b) Layout revisions to the Mahankalchaur Reservoir (2 circular tanks vs one rectangular tank because of foundation conditions). The estimated cost increase was NRs 0.5 million. (c) Substitution of a 2,700 m3 reservoir for the previously proposed break pressure tank at Sainbhu. The estimated cost increase was NRs 1.1 million. (d) Consulting fees for additional work resulting from (a) and (c) above, for network analysis and for assistance to WSSB with design of the central workshop and the airport booster pumping station. The estimated cost increase was NRs 2.3 million. (e) Deletion of the tariff studies (para 2.37E(iv)). (f) Deletion of the studies for preparation of the next-stage projects (para 2.37E(iii)). Items (e) and (f) together were US$0.8 million (NRs 10.0m). 3.12 The second phase of revisions was a schedule of "supplementary works" discussed in September 1979, well after the IDA supplementary financing had been agreed (1977), and immediately after the further EEC Special Action Credit had been agreed in August 1979. The supplementary works were mainly - 43 - the replacement or reconstruction of intakes and transmission facilities, and the repair of one reservoir in water systems of Kathmandu and Pokhara; and a substantial increase in the number of vehicles. This cost was estimated at NRs 6.6 million (about US$0.55 million). 3.13 A schedule comparing the major project elements at appraisal with those actually implemented in the First Project is contained in Annex 5. Of significance for operations: (a) very few old and leaky connections were replaced in either Kathmandu or Pokhara; (b) bulk water meters to permit the reliable maintenance of supply records were not obtained; and (c) a large number of additional vehicles were obtained. 3.14 Much fewer revisions were made to the Second Project. A schedule comparing the major project elements at appraisal with those actually imple- mented is contained in Annex 14. The more significant changes were: (a) an increase in the length of distribution main improvements in Kathmandu from 78.5 km to 102.3 km; (b) a revised design concept for the use of deep tube well water in Birganj (a 500 m3 surface reservoir and a pumping station were deleted); and (c) the number of consumer meters provided was increased substantially from 27,000 to 47,000. Implementation Schedules 3.15 A comparison of actual schedules and those estimated at appraisal for the First and Second Projects is as follows: Commencement Elapsed Time (Mos) Completion Appraisal Actual Appraisal Actual Appraisal Actual First Project 5/74 6/74 42 109 12/77 6/83 Second Project 7/77 3/78 48 76 6/81 6/85 3.16 The reasons for the delays include: (a) Slow decision-making by WSSB on the award of contracts, including decisions not to make an award, with the resulting time requirements for rebidding, re-evaluation, and so forth. - 44- (b) Material deliveries taking longer than estimated. (c) The pace of construction being slower than estimated. This was (i) sometimes the result of local material shortages (cement, bricks, reinforcing steel); (ii) sometimes the result of contractor inexperience as to methods; (iii) sometimes the result of contractor not having the right materials or equipment for temporary works or for managing difficult subsoil conditions; and (iv) sometimes the result of the non-availability, in a timely manner, of road opening permits from the road authority. (d) The pace of WSSB design (para 3.03) was generally slower than estimated. (e) The pace of preparation of WSSB procurement (para 3.03) was generally slower than estimated. Nonetheless, it is now concluded that the appraisal schedules were unrealistically optimistic. 3.17 As the implementation of the First Project progressed, estimates of the completion date were successively extended; there were three extensions of the credit closing date of one year each, and one extension of two years. 3.18 In June 1977, the project completion date was estimated by the consultants as FYE 1978, or about one year after the date estimated at the original appraisal. In June 1979, much of the major work had been completed. The water supply improvements in Pokhara were fully completed and operational; this community was enjoying a continuous supply. The more critical items in terms of the estimated remaining time for completion were: (a) The equipping and commissioning of wells; (b) The completion of the Kirtipur Sewage Pumping Station; (c) The completion of the sewage treatment works; and (d) The completion of the sanitary sewer construction. 3.19 The first of these (a) was critical to increasing the fundamental quantity of water supplied to the Kathmandu-Lalitpur and Bode water systems. This piablem (supply quantity increase) was compounded by a delay in allocating the water from the Pharping Spring for drinking water use, pending the completion of a hydroelectric power generation works at a different site. The remaining items, (b) and (c), were critical to the initial operation of the sewerage system of Kathmandu. 3.20 By August 1981, these same items remained incomplete; but by the following year (June 1982), only item (d) of the major items, the construction -45 of sewers, remained outstanding. The contract for this work came into dispute. The services of the contractor were eventually terminated, and the work was completed by WSSB and a local contractor. 3.21 The preceding discussion was concerned with major project components and contracts. However, a much larger number of procurement and construction works continued through to June 1983, the crcdit closing date of the First Project. Some of these were parts of the supplementary works (para 3.12). 3.22 The Second Project was considerably simpler, and comprised mainly water .distribution piping and branch sewers, although there was deep well construction or improvements in Birganj and Biratnagar. Initiation of the project was delayed (para 3.10). By the originally scheduled completion date (June 1981), only some of the procurement components had been completed. 3.23 One year later, June 1982, there were delays in the receipt of pipe and fittings, which delayed the watermain installation work. The contract for the installation of sewers had been awarded to the First Project contractor for such work (para 3.20) and, as noted, this contract was eventually terminated. 3.24 Again, one year later (Fall 1983), this sewer constructioi was the only major outstanding item. This work was completed by local contractors, following the dismissal of the previous contractor. The works were completed in 1985. Performance of Consultants, Advisors, Supplers, Contractors and the Beneficiary 3.25 The project preparation consultant produced a very thorough and comprehensive series of reports. The main findings and recommendations have been largely adopted by HMG and WSSB in the formulation of projects; and the main technical findings have largely been supported by the findings of sub- sequent study effort by two other consultants. 3.26 Concerning the institutional aspects of the project preparation efforts, it seems probable from the record that more dialogue between the consultant and HMG and the World Bank might have been fruitful. 3.27 The engineering consultant for the First and Second Projects com- pleted the designs and preparation of bid documents in a timely fashion. The studies and reports prepared under the Second Project were also completed on time. Their main findings and recommendations have been accepted by WSSB and have largely been supported by the findings of subsequent study effort by another consultant. 3.28 Some technical issues can be discussed from the experience of project implementation as follows: - 46 - (a) Bid experience on the Third Project indicates ductile iron pipe is both bt-,ter and less costly than the cast iron pipe, which was used in the First and Second Projects for watermains; (b) The continued use of galvanized steel pipe for small diameter water- mains is a major source of substantial system leakage, because the pipe rapidly corrodes. (c) Mortared sleeve joint couplings used in sanitary sewerage in the First and Second Projects are less watertight than the rubber gasket tongue and groove pipe joints used in modern sewerage practice. Watertightness controls the infiltration of groundwater into the sewer, and is important in areas such as Kathmandu-Lalitpur, where groundwater levels are high and where sewage flows must be pumped. (d) The choice of 150 mm as the minimum diameter of sanitary sewer as compared to the 200 mm recommended by the consultants gave rise to operating problems from frequent blockage, and were found to be difficult to clean. Some have been replaced by WSSB and no more such small diameter pipes are being used. (e) The wells constructed in Biratnagar have not performed well; it seems that the agency constructing them did not follow the consultant's advice as to gravel-packing of the screens during construction. 3.29 Notwithstanding the above, the works are generally performing as planned, and this is indicative of the adequacy of the design and supervision services. 3.30 The WSSB was assisted from inception through to mid 1981 by a series of expert advisors provided through ODM (UK) as follows: Advisor in Timing of Services Engineering 9/74 to 2/79 Finance and Administration (i) 8/73 to 8/75 Finance and Administration (ii) 3/76 to 3/78 Water Production 10/77 to 10/79 Laboratory Analysis 6/79 to 5/81 Water Distribution 4/78 to 4/81 Leak Detection and Repair 9/74 to 4/77 Metering 9/74 to 7/77 3.31 There is no doubt the services of these advisors were of considerable value to WSSB and WSSB staff. The advisors experienced some operating dif- ficulties. These were sometimes the result of delays in appointing their Nepali counterparts and sometimes because of a shortage of vehicles for their use, or for the use of teams with whom they were working. - 47 - 3.32 It may have served the interests of overall coordination of the project, and the institutional development of WSSB, if the advisors had produced periodic written reports on their efforts and plans for the formal consideration of WSSB, and for review by Bank supervision missions. 3.33 The advisory services did not include a "management" advisor, who could have conducted in-house training on good management practices, and helped to institute good internal systems and procedures. Bearing in mind that engineers and accountants in Nepal have little opportunity for formal or informal training in such matters, and that such matters are crucial to the operational efficiency and staff development objectives of a water and sewerage utility, such advisory services may have been very useful to WSSB. 3.34 The benefits of the advisory services provided have been partly reduced by the transfer of trained staff to other organizations or to dif- ferent duties. 3.35 The materials provided by suppliers were, on the whole, satisfactory, but there were substantial delivery delays in some instances. There was also one instance of the delivery of equipment which failed to meet specifications by a significant margin, but for which substantial payment by letter of credit had been made. 3.36 On the whole, the quality of works by civil contractors was satisfac- tory, but the work proceeded much more slowly than expected, even by the contractors themselves. Contract completion dates were rarely met, but because of extenuating circumstances and factors beyond the contractors' control (e.g. the timely availability of road opening permits and of materials), liquidated damages provisions were not considered enforceable. 3.37 Two project components presented particular difficulties to the respective contractors. One was the Kirtipur Sewage Pumping Station and the other the sanitary sewer construction. The character of the difficulties was the same; that of deep excavations in wet soils. Special construction tech- niques and temporary works are required in such conditions, and it seems to be the case the respective contractors did not have relevant experience or convenient access to temporary works materials (e.g. sheet piling). 3.38 WSSB brought the First and Second Projects to a satisfactory conclu- sion. Uifortunately, there were: (a) delays in decisions concerning contract awards; (b) delays in completing the designs not being undertaken by consultants (para 3.03); and (c) delays snd procedural insufficiencies in liaison with the World Bank, and in processing disbursement requests. - 48 - These matters can be attributed to the formative stage of the organization and its lack of prior experience with a multilaterally-financed project. As we have noted (para 3.02), the management challenges faced by WSSB at the very outset of its existence were considerable. Disbursements 3.39 Schedules comparing the disbursement forecast at appraisal and those actually made for each of the First and Second Projects are given on the Basic Data Sheets, pages IV through IX at the beginning of this report, and are shown graphically below. 3.40 For the First Project, the patterns show a level of disbursements close to the original credit amount and only one year after the originally estimated closing date. The accelerated pace estimated at the time of the preparation of the revised estimates was nearly realized through to mid-1979, but thereafter the pace of disbursements declined steadily through the very slow final completion period. 3.41 For the Second Project, the results of the start-up delay are apparent. Further the disbursement rate forecast at appraisal was never realized. Again, the total time frame concludes with A somewhat lower dis- bursement rate: riut uATR sil?ty X- stEAGE PXO.MCT - CREDIT 470-NIP CMDIT DISURSEMTS 12.0 11.0 IMMM DWAflU LY. AND SWERACI PRO= NUA- 10.0 CMIT 70i-UP ~.~iITiiiI7__SZDEVIS D RDTDSmgE 9.0' rTMZCt 1EM" 6.0 ACMU s.o. 75 76 77 75 79 80 81 8 83 84 i8 it so 1 82 83 64 8 8 . .. .. .. .Ift liscal Y" .-.---------------------- - - - - - - - - -- ca O ----- - 49 - Project Costs 3.42 For the First Project, a comparison of the project costs at appraisal with the actual costs is given in Annex 1 (expressed in NRs million) and in Annex 2 (expressed in US dollars). In brief summary: NRs million Increase as % Appraisal Appraisal Actual Total Local Foreign In NRs million 109.52 190.56 74% 111% 52% In US$ million 10.37 15.38 48% 80/5 29% The higher percentage increase in the total costs when expressed in NRs reflects the declining value of the rupee during the project implementation period (from NRs 10.56 to NRs 15.20 to US$1.00). The final project costs were close to the revised project estimates prepared in October 1977 (of US$16.0 million), which formed the basis for appraisal of the Supplementary Credit for this project. 3.43 It is noted (para 3.11) that estimates of cost increases resulting from 1975 changes to the project scope amounted to 17% of the appraisal cost estimates, and also (para 3.12) that the cost of the later inclusion of "supplementary works" was estimated at US$0.55 million (or about 5% of the costs estimated at appraisal). 3.44 An evaluation of the effects on costs of (i) rupee devaluation, (ii) higher escalation rates than thoie used to estimate price contingencies at appraisal, and (iii) the effects of project completion delay indicates the make up of the total cost increase as follows: First Project - 470-NEP % Project Cost Project Costs Estimate at NRs million (%) Appraisal Estimated costs at appraisal 109 100% Changes in project scope - 22% (a) - (para 3.43) 24 22% Devaluation of rupee 16 15% Escalation higher than forecast 10 9% Delay in completion 45 Appraisal cost estimation 41% error (13) (12%) TOTAL 191 175% - 50 - 3.45 It may be noted that from the mid 1970s to the early 1980s was a period of particularly high inflation both in Nepal and throughout the world. The delay in project completion, together with higher than expected infla- tion, accounts for more than half of the cost increases. 3.46 For the Second Project, despite completion delays, the final project costs were less than those estimated at appraisal. The details are in Annex 10 (expressed in NRs million) and in Annex 11 (expressed in US$ million). In summary: NRs million Increase as % Appraisal Appraisal Actual Total Local Foreign In NRs million 141.08 134.07 - 5% -58% +48% In US$ million 11.30 9.35 -17% -63% +29% Again, Lhe difference in the percentage increase rates when expressed in NRs as compared to those expressed in US$ is accounted for by the continuing decline in value of the rupee during the project implementation period. 3.47 Here, changes in project scope (para 3.14) can be judged to have an insignificant effect. The make up of the cost changes has been estimated as follows: Second Project - 704-NEP % Project Cost Project Costs Estimate at NRs million (%) Appraisal Estimated costs at appraisal 141 100% Changes in project scope - (para 3.38) Nil - Devaluation of rupee 13 9% Escalation higher than forecast (13) (9%) Delay in completion 10 Appraisal cost estimation 7% error (17) (12%) 134 95% 3.48 For the Second Project, the final costs were slightly lower (5%) than those forecast at appraisal. The escalation rates assumed at appraisal were higher than those which occurred, but the cost reduction accruing was largely offset by cost increases resulting from delay. - 51 - Reporting 3.49 WSSB's adherence to the Bank's reporting requirements was sporadic, and there were often delays in report submission. Generally, the reports were quarterly. A particular reporting effort was made by WSSB following a September 1983 Bank Mission during which an example of the kind of reports desired was provided. But the effort was not sustained. 3.50 The provision by WSSB to the Bank of its audited financial statements and auditor's report within 6 months of the end of WSSB financial year is a requirement of both the First and Second Project Agreements. This covenant was generally met by WSSB, but with some delay. - 52 - IV. FINANCIAL PERFORMANCE Financial Covenants 4.01 A descriptive summary of the key financial covenants of the First, Second and Third Project Agreements is given (inter alia) in paras 2.43-2.49. Successive agreements (the First and Second DCAs of 1974 and 1977, the EEC Special Action Credit of 1979 and Third Project DCA of 1980) softened the required financial performance terms, or delayed the time required for their realization. Further, by exchange of letters, agreements were reached defer- ring the due date of debt service payments by WSSB under the SLAs (para 2.48). 4.02 The effective financial performance covenants are in Sections 4.04(c) and 4.06 of the Third Project Agreement: (a) In FY 1981 and FY 1982, revenues were to cover all operations, main- tenance and administration costs, plus depreciation (Section 4.06); (b) In FY 1983 and thereafter, revenues were to cover all operations, maintenance and administration costs, plus the higher of (i) depreciation or (ii) debt service (Section 4.06); (c) In FY 1981, sewerage charges would be 25% of the metered water charges of consumers with sewerage serviLe (Section 4.04(c); and (d) In FY 1982 and thereafter, the sewerage surcharge rate would be 50% (section 4.04(c)). Appraisal and Actual Financial Statements 4.03 Schedules comparing forecast (at appraisal) and actual financial statements for the First Project are provided in Annexes 6 (Incomes State- ments), 7 (Cash Flow) and 8 (Balance Sheets). Of note, through the seven year period from 1974/75 through 1980/81: (a) Total revenues were always less than forecast. - 53 - (b) No sewerage revenues were realized. (c) Total operating expenses were usually more than forecast. (d) Income before interest but after depreciation was positive in three of the years and negative in four of them. (e) The effects of (a), (b) and (c) were a substantial reduction in internal cash generation below the levels forecast. (f) Balance sheet totals (assets, Liabilities and equity) are, towards the end of the forecast period, reasonably close to forecasts. 4.04 The First Project appraisal assumed execution of a tariff study during FY 1977. Funds for this purpose were originally included in the First Project, but this compon...t was subsequently agreed to be deleted. (The study was done later under the Second Project.) 4.05 Schedules comparing forecast (at appraisal) and actual financial statements for the Second Project are provided in Annexes 15 (Income State- ments), 16 (Cash Flow) and 17 (Balance Sheets). Of note, through the ten-year period from 1974/75 through 1983/84: (a) Actual revenues were always less, and as time progressed, very sub- stantially less than those forecast at appraisal. (b) Operating costs were less than forecast through to 1980/81, but rose sharply to some 40% higher than forecast by 1983/84. (c) Income before interest but after d ation was positive for all years following Second Project ap. 1 (1977), except 1980/81 and 1983/84. However, the actual amounLd were nominal, whereas the income amounts forecast at appraisal were substantial. (d) The effects of (a) and (b) were a reduction in internal cash gener- ation to a nominal level and greatly below the levels forecast. (e) By 1983/84, balance sheet totals (of assets, liabilities and equity) were substantially lower than those forecast at appraisal. Project Structure and Implementation Implications for Financial Performance 4.06 Four aspects of project structure and implementation have had a particular influence on WSSB's financial performance history. 4.07 The First Project provided for a substantial increase in source water production. In Kathmandu-Lalitpur this amounted to a near doubling of production (see paras 1.22 and 2.37A) and in Pokhara a trebling of capacity (see paras 1.22 and 2.37B). The project actually provided an increase of about 23,000 m3/day or nearly 90% of the amount projected at appraisal. The - 54 - full benefit to consumers of the additional water supplies, however, came about two years late because of implementation delays. The realization of revenue benefits were similarly delayed because service could not be extended or expanded as rapidly to new metered customers as had been projected. This was particularly significant in the Kathmandu system as it represents such a large part of WSSC's operations. 4.08 Annex 4 "Estimated and Annual Operational Data" (First Project) indicates that gross per capita water consumption (production less leakage and wastage divided by number of people served) has not changed markedly since First Project inception. It has still not reached the level forecast at appraisal. This is partly the result of the higher than estimated popula- tion growth and partly the result of higher leakage and wastage (see para 4.09) than forecast at appraisal. The SAR itself (at 4.03) notes that the forecast losses were low compared with the levels prevailing in some Asian cities. The Second Project provided for no additional water production except in Biratnagar. The on-going Third Water Supply project, however, will more than double production in the Kathmandu and Pokhara systems to meet expanded growth and per capita demand; meanwhile, WSSC is tackling leakage and waste in an Operational Action Plan (para 5.20). 4.09 The First Project SAR -eported the consultant's finding that water leakage and gross wastage could be as high as 75% of production in Kathmandu- Lalitpur, if the system were operated on a continuous rather than on inter- mittent basis. However, the forecasts were for an initial 50% rate, declin- ing to 35% in 1981. During this period the number of connections in Kath- mandu-Lalitpur and in Pokhara changed as follows: No. of Connections 1973 1981 Metered Unmetered TOTAL Metered Unmetered Total Kathmandu-Lalitpur 3,041 9,572 12,613 23,693 6,909 30,602 Pokhara - 714 714 3,025 589 3,614 TOTAL 3,041 10,286 13,327 26,718 7,498 34,216 (%) (23%) (77%) (100%) (78%) (22%) (100%) It can be expected that this very substantial increase in the number and proportion of metered connections greatly aided the control of water wastage, but that wastage through the 22% remaining unmetered connections may still be considerable. The matter of leakage control had been the subject of con- siderable effort by both WSSB and their ODA advisors. But it seems unlikely that major achievements can be realized in leakage control until: (i) there is sufficient water production to maintain distribution system pressures on a continuous basis and (ii) there is a definitive program and the appropriate budgets to replace both distribution pipes and consumer connections which have deteriorated beyond repair. - 55 - 4.10 Of the funds invested in new works, the proportion invested in sewerage was 51% in the First Project (Annex 1) and 18% in the Second Project (Annex 10); in the two projects together, the proportion was 38%. But the SARa acknowledged the marginal viability of these investments, and there is no documented justification for the water rate surcharge concept of revenue collection; certainly the willingness of the public to pay at the proposed 50% level was untested. Again, completion delays hampered the realization of revenue benefits. Financial Position 4.11 An assessment of the history of WSSB's financial performance must consider (i) the successive changes (and softening) of performance covenants and (ii) periodic agreements that WSSB could defer debt service payments. 1/ With reference to para 2.46(b) above, it should be noted that debt service payments were well in excess of depreciation allowances. In brief summary, WSSB met or about met required rates of return through until FY 1978. The difficulties of FY 1979 were expected to be resolved through implementation of the findings of the tariff study in progress during that year. The actual tariff increase was not, however, approved until September 1981. The rates of return were not met in that year because of the part-year effect of the timing of the tariff increase, but were met in 1982. In 1983 (and again in 1984), debt service payments were due; these were not made and financial performance covenants were not met. 4.12 The recent financial history of WSSB can be summarized as follows: NRs million FY 1982 FY 1983 FY 1984 Total Income 13.57 16.89 18.96 Less Operating Expenses 10.34 13.19 16.69 Operating Income 3.23 3.70 2.27 Less Depreciation 2.78 3.37 6.48 Net Income Before Interest 0.45 0.33 (4.21) Less Interest - 21.50 13.89 SURPLUS (DEFICIT) 0.45 (21.17) (18.10) 1/ Thus, the initial debt service payment for Credit 470-NEP (First Project) was originally scheduled to be due in FY 1979; this was successively extended to FY 1983. For Credit 704-NEP, the originally scheduled ini- tial debt service payment was FY 1983; this was extended to FY 1984. - 56 - It can be noted that for the first ten years during which debt service is payable, principal amortization payments are more than the estimated annual depreciation. Thus, an operating surplus is required to meet the financial covenants described in para 4.02(b). Consumer Charges and Tariffs 4.13 The following is a brief history of tariffs and related issues (the details are in Annex 21): (a) At the time of first project appraisal (1974), the prevailing tariff had been unchanged since 1966. (b) A water rate increase of about 60% was made effective April 1975; this was some 10 months later than covenanted (DCA 470-NEP, Section 3.11(a)). (c) A tariff study scheduled for FY 1977 to be funded under the First Project did not take place. (d) The financial projections of the SAR for the Second Project anticipated the need for a 100% tariff increase in 1979 (or 1980), and further increases of 50% every two or three years thereafter. (e) A tariff study consultant was appointed by WSSB in March 1979, some 15 months after the date stated in the Second Project Agreement (DCA 704-NEP, Section 3.03A). The consultant's report was dated October 1979. (f) A tariff increase of about 50% was made September 1981. (This related to a condition of effectiveness for the Third Project, Credit 1059-NEP.) (g) A sewerage surcharge rate of 25% was actually introduced in FY 1984, but collected only nominal revenues in that year. (See para 2.43 (c) and (d) above.) (h) In early 1984, WSSB responded to increasing concerns regarding its finances with a "proposal to increase tariffs", which amounted to an increase of 183% above previous water rates. The document did not discuss sewerage rates. This proposal awaited HMG approval in - 57 - 1985. 1/ (i) In April 1985, consultants preparing a possible Fourth Project reviewed WSSB's tariff proposals 2/ and (subject to some minor modifications) determined that these proposals were (i) "affordable" and (ii), subject to annual escalation at assumed future inflation rates, would eventually yield a satisfactory position for WSSC, after a few years of less than satisfactory returns and cash flow difficul- ties (assumed financed by overdrafts). 4.14 In summary of the above as it relates to water tariffs: - an original 1966 tariff (para 4.13(1) above) - a 60% increase in 1975 (para 4.13(2) above) - a 50% increase in 1981 (para 4.13(6) above) - no further increase until 1985 (para 4.13(8) above) 1/ In late 1985 further analyses were made of what was then the WSSC's financial condition, and a financial action plan was approved by HMG in November, 1985. This plan included the conversion by WSSC debt on the first and second second projects to a HMG equity contribution, overall tariff increases amounting to 65%, and provisions for automatically increasing tariffs annually (beginning in FY1987) according to annual increases in power and chemical costs. 2/ Proctor & Redfern International Limited: "Water Supply and Sewerage Studies - Nepal (NEP/79/032): Volume V - Preliminary Engineering Report, Chapter V", Kathmandu/Toronto, April 1985. - 58 - 4.15 This history can be presented in comparison with price changes in Nepal as represented by the Consumer Price Index as follows: 4.8. 4.6 4.4 4.2 I 4.0 cond Project SAR Estiastes-p 3.8 1 3.6 3.4 WSSB Proposed Tariff Rates - -** 3.2 - a3.0 1 2.8 .ONSUMER PRICE INDEX * 2.6,I (5Z annial increase is 2.4 assumed fro 1966 to 197) 2.2 2.0 1.8I 1.6 1.4 1.2 ACTUAL TARIFF RATES 1.0 E 6 6 6 69 I I I 7 7 78 8 1 82 YEA1t 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 - 59 - 4.16 The preceding comparison indicates that the WSSB 1984 proposed tariff increase of 183% was not inconsistent with consumer price changes since 1966. At the same time, it was recognized that an increase of this magnitude at one time would be difficult politically. 4.17 The figures in para 4.12 demonstrate the sharp impact of the incep- tion of interest payments on long-term debt; however, this event is fully foreseeable. 4.18 - The conclusion is that a series (even annual)of more modest increases would have both enhanced WSSB's financial position and would have been more palatable at the political level and to the general public. 4.19 The evidence is that the Second Project SAR estimates of future tariff increase needs (para 4.13(4)) were quite realistic. V. INSTITUTIONAL PERFORMANCE Organization and Management 5.01 The institutional context for WSSB is described in paras 1.10-1.15. WSSB was a new organization (formed 1973) at inception of the First Project (1974). 5.02 At inception, under the "Project-in-Charge" (reporting to the Board of Directors, in turn reporting to the Secretary of Ministry of Water and Power), there were two main divisions under a Manager of Engineering and a Manager of Finance and Administration. These positions were initially filled by expatriates provided by ODA (UK). 5.03 Under the Manager of Engineering there were three main departments, led by an Engineer/Manager in Pokhara, by a Chief of Design and Construction, and by a Chief of Operations. Under the Manager ot Finance and Administra- tion, there were two departments, led by a Chief of Administration, and by a Chief of Finance. 5.04 The organization chart at that time is produced here as Annex 19. It is similar to that recommended by the project preparation consultant. The span of control is very narrow at the two upper levels. 5.05 The organization chart has undergone many revisions since 1974. The organization has expanded its staff from an initial 500 to some 2,000; and its mandate has expanded from the initial two communities (Kathmandu Valley and Pokhara) to eleven (a further eight communities under the Second and Third Projects plus Banepa). - 60 - 5.06 The present (March 1985) organization chart is given here as Annex 20. In this chart, the span of control at the top level is very wide; there are some 12 people reporting directly to the General Manager. Certain revisions to the present organization have been recommended in Fourth Project Study reports and are under consideration. 5.07 The Board of the WSSB was chaired first by the Secretary of Ministry of Water Resources and later by the Chief Engineer (the most senior official) of the Department of Water Supply and Sewerage (DWSS), and it included a representative from each of the Ministries of .Finance, Health, Water Resour- ces and Panchayet and Local Development, and from the National Planning Commission and the Department of Housing and Physical Planning. The Secretary of the Board was the Project-in-Charge (General Manager). The Board reported to HMG through the Ministry of Water Resources. 5.08 The Board of Directors of the WSSC (WSSB's successor, founded in July 1984) is presently chaired by the Secretary (the most senior official) of the Ministry of Water Resources. Other members are the Chief Engineer of DWSS, the Joint Secretary of the Ministry of Finance, the Under-Secretary of the Ministry of Home Affairs, the Department of Roads Zonal Engineer (Bagmati Zone), a representative of the Ministry of Health, and a representative of the non-Government sector. The General Manager of WSSC serves as a Member- Secretary to the Board. Operational 5.09 Definitive data on production and consumption remains unavailable. Bulk meters to generate such data on production were included in the First Project, but actually purchased under the Second Project. There was a prolonged delay in their installation after delivery; this was initially because certain special fittings were not ordered concurrently with the meters and later because of slow installation on the part of WSSB. The net consequence was that these meters were not installed until 1984, and there has not, as yet, been the opportunity to accumulate meaningful records. 5.10 Similarly, no formal attempt is made to aggregate consumer meter records to generate consumption and demand data. 5.11 The schedules in Annex 4 (First Project) and Annex 13 (Second Project) compare the forecasts made at appraisal with WSSB estimates of various operational data. 5.12 In Annex 13, a somewhat higher water production than forecast is more than offset by higher than forecast "unaccounted" percentage. Average annual per capita consumption is lower than forecast (see also paras 4.08 and 4.09). 5.13 Sewerage connections during this period are not recorded; the system was not operational and no revenues were collected. - 61 - 5.14 The conclusions from the First Project are: (a) Population growth was underestimated at appraisal. (b) Consumption demand was underestimated at appraisal. (c) Leakage and wastage reduction was overestimated at appraisal, although some substantial reduction in the volume of actual losses has been realized, especially through consumer metering. (d) It was not found possible to achieve continuous (rather than inter- mittent) operation as had been forecast at appraisal. This has implications for water quality (para 1.32(c)). 5.15 At the time of Second Project appraisal, there had been no further studies on which to base new projections. The SAR assumed a Third Project, and Annex 13 is prepared accordingly. 5.16 Again, the actual population and the actual population served are higher than forecast at appraisal. The water production is close to that forecast, but the "unaccounted" proportion is higher, and the water sold correspondingly lower. The average production per person served is slightly lower than forecast, but the average consumption per month per connection (18 m3 in 1983/84) is only 75% of that forecast. 5.17 The average charge for water per cubic meter :onsumed was only NRs 0.94 in 1983/84, or 40% of the assumed rate in the forecasts of NRs 2.32; the total revenues were only 34% of those forecast. 5.18 The number of sewerage connections was estimated by WSSB to be 5,000 in 1983/84, following their connection survey during that year, but not all these were officially registered. Regardless, the revenues were insig- nificant, but had been forecast to be NRs 6.40 million (from 17,000 connec- tions), or about 13% of the total water revenues for that year. 5.19 The conclusions from Second Project are: (a) Population and population served were underestimated at appraisal. (b) The number of water connections was underestimated at appraisal. (c) The number of sewerage connections (and the population served by sewerage) was greatly overestimated at appraisal. (d) The revenues forecast at appraisal were partly based on assumed tariff increases and partly on connection and consumption forecasts. While actual number of water connections is higher, the actual total water consumption is less, and the actual sewer connections much - 62 - fewer than forecast. But the level of tariff increase was very much less than forecast (see para 4.13 (4), (6) and (7)). 5.20 To help improve operational efficiency and financial results, WSSB and the Bank discussed an "Operational Action Plan" in September 1983, and such a plan was put into effect by WSSB. Its main components were: (a) Water wastage and loss reduction (bulk meter installation, standpost control, leak detection and repair, and acceleration of consumer metering which had been temporarily stalled by a shortage of meters). (b) A collection drive (especially in Kathmandu Valley), including col- lection of arrears, disconnection of defaulters, and tracing of illegal connections. (c) Immediate imposition of sewerage surcharge (the sewerage system had recently become operational). (d) The preparation of water tariff revision proposals. (e) The preparation of debt rescheduling proposals. WSSB acted vigorously on all of these items. Some real accomplishments were made in water loss reduction and revenue collections. The sewerage surcharge was put into effect at a 25% level, and water tariff revision and debt res- cheduling proposals were made early 1984. Procurement 5.21 The major problem with procurement was WSSB delays in awarding con- tracts; in some cases, retendering was required as bid validity dates expired. In general, for both materials/equipment supply and for civil works contracts, a "post-qualification" procedure was followed (ie. bidders provided details of their qualifications, experience, personnel, equipment and financial resources, and so forth, with their bids). This procedure was designed to save the time required for a "pre-qualification" procedure, but sometimes led to difficulties of determination of the adequacy of qualifica- tions. 5.22 A further problem faced by WSSB (in 1978) was the time requirement, under local procedures, to arrange letters of credit in foreign exchange; this can be up to 3 to 4 months. Yet another problem related to much of WSSB's equipment and supplies, as well as some civil works contractors, having to come from India. Indian suppliers and contractors receive export incentive grants from the Government of India when the payments are made in hard currency, such that they are able to provide the purchasers with dis- counts of up to 25%. However, the Bank's policy is to make all payments to Indian suppliers and contractors in Indian currency. - 63 - Accounting, Audit and Accounting Staff 5.23 At appraisal of the First Project (1974), the introduction of a commercial accounting system based upon proper systems and procedures had been initiated with assistance from ODA advisors. At appraisal of the Second Project (1977), it was noted that progress had been slower than expected, but the fact that the introduction of a public utility accounting system entailed a complete change of accounting philosophy was noted. At this time, systems had been designed by consultants for the First Project for long-range plan- ning, budgetary controls and reporting procedures, as well as for accounting based upon accrual accounting principles. 5.24 Until FY1984, WSSB was being required by HMC to also maintain records on a cash basis to comply with Government budgetary control procedures. This placed an additional burden on WSSB's already understaffed accounting department. 5.25 The First Project SAR (1974) anticipated auditors, appointed by the Auditor General and paid for by WSSB. Bank concerns regarding the adequacy of the audit were reviewed with the Auditor General; improvements were anticipated. 5.26 Subsequently, the audit has been carried out by several different private accounting firms. The corresponding reports have been provided to IDA, but often late. They have consistently drawn attention to where improvements could be made in WSSB's accounting and financial practices and procedures. 5.27 At the present time (1985), WSSC has 8 "Officer Level" (Chief Accountant, Senior Accountant) and 23 "Assistant Level" (Accountant) staff, for a total of 31 people with some level of accounting or bookkeeping train- ing. The two most senior accounting staff have been with the organization since inception and received the benefit of working with the ODA advisors. The remaining staff have limited formal training, and there is no sustained in-house training program, although sporadic efforts have been made from time to time. 5.28 WSSB's senior accounting staff recognize there is room for further development and improvement in their accounting practices and that there is a need for an accounting manual giving the codes of accounts and policies for their use. They agree that much could be accomplished through an in-house training program (with some outside assistance), but find this impracticable because of time constraints and the pressures of other duties. - 64 - Staff Recruitment, Training and Development 5.29 At inception of the First Project (1974), a suitably qualified Project-in-Charge (General Manager) had been appointed. It was intended that the remaining staff required would comprise the DWSS staff then working in the Kathmandu Valley and Pokhara. Such a staff transfer occurred, but with delay, largely because of the shortage of qualified and trained staff, at both the professional and the artisan level, prevailing in Nepal at that time. During this initial period, the staff shortage forced an extra burden on the ODM advisors in Engineering and Administration and Finance; thus, their training efforts were delayed. 5.30 Such problems were resolved progressively over the next couple of years. By the time of appraisal of the Second Project, the staff had been built up to satisfactory levels. 5.31 WSSB continued under the leadership of the same Project-in-Charge until early 1982; then there followed a period of about two years with two successors holding the position with an "acting" status. A further successor appointed early 1984 became the first General Manager of WSSC on July 15, 1984, and is the incumbent at this time. The General Manager is appointed for a term normally of two years, subject to renewal, on a secondment basis from the staff of DWSS. 5.32 Many of WSSB's staff, and especially the more seasoned experienced professional staff, were provided to WSSB by DWSS on a secondment basis. This, together with periodic transfers back and forth between the organiza- tions, inhibited the development of a sense of permanency and corporate morale. This problem was compounded by the fact that direct employment by WSSB was not, and was not perceived to be, as desirable as employment by DWSS in terms of security and benefits. 5.33 By late 1983, most of the DWSS staff had returned to their parent organization. The remaining WSSB professional staff is a blend of people with up to ten years of experience and some relatively new recruits. 5.34 July 15, 1984, WSSB became a corporation - WSSC; this change was supported by the prospects for staff stability. 5.35 Staff training and development in WSSB has largely been accomplished (i) through the services of the ODA advisors and (ii) through the opportunity to work as counterpart staff under the technical direction of the expatriate consultants. The ODA training is discussed in paras 3.30-3.34. The advisors covered key financial and engineering functions, but no advisors addressed the need for improved general management practices. 5.36 Some other aspects of the institutional context are in paras 1.10- 1.15, and WSSB's institutional development and initial challenges are described in paras 3.01-3.05. - 65 - VI. BANK PERFORMANCE 6.01 The Bank's appraisals were based on the reports of the consultants; actual events have varied from the appraisal forecasts, but not by large margins, except in the areas of cost recovery and tariffs. The appraisal recognized the risks of dealing with a newly-formed institution and accepted the arrangements between HMG and ODM as appropriate for personnel training and institution-building. 6.02 There were 18 Bank supervision missions in the 12-year period covered by this report. The average interval was 8 months, but in six years, there was only one mission a year. WSSB has indicated an interval between missions of 6 months would be ideal on their part, and further that they have found Bank missions to be extremely helpful to them, not only in project implemen- tation, but in many other operational matters. The consultants have also acknowledged that Bank missions have been most helpful. 6.03 An emphasis (but not an exclusive emphasis) in the earlier Bank mission reports and in follow-up correspondence was on project implementation matters. As time progressed, increasing emphasis was given to operational and institutional development matters. However, insufficient emphasis was given to general management advice. 6.04 The evidence is that the covenants of the DCAs were realistic and that for the most part these have been met, although sometimes with delay. The Bank acted with appropriate administrative flexibility. 6.05 The covenant not met in recent times is that relating to financial performance and tariffs. But WSSB responded promptly with a realistic appraisal of the tariff requirements when the Bank's concerns were drawn to their attention. VII. PROJECT JUSTIFICATION 7.01 WSSB has satisfactorily completed the First and Second Projects, albeit with delays. Their major objectives are stated in paras 2.34 and 2.35. - 66 - Water Supply Improvements 7.02 Tn Kathmandu-Lalitpur the projects have improved the service level to a population which grew at over 4% annually between 1971 and 1981. However, a continuous (uninterrupted) supply has not proved possible, and this has implications for water quality (para 1.32(c)). 7.03 In Bode, and nearby villages, the projects successfully restored a supply which had failed, and the water quality here is considered good. 7.04 In Pokhara (where population growth was nearly 9% annually between 1971 and 1981), the projects have improved the service level to the point where a continuous supply is provided for about nine months per year. 7.05 In Birganj, the system, as improved by the Second Project and as presently operated, provides intermittent service during three periods of 3 to 4 hours each; again, the population has been growing rapidly, at a rate of over 13% annually between 1971 and 1981. Here, an even better service level could be realized by operating the wells continuously. The greater revenues from sales would more than offset the higher costs of electricity for pumping. 7.06 In Biratnagar, the system as improved by the Second Project and as presently operated provides intermittent service during two separate periods, totalling 9 hours per day. The population has grown at a rate of 7.6% annually between 1971 and 1981. The possibility exists of further improving the service level to provide continuous service with the present plant. Again, increased revenues from sales would more than offset the higher costs of electricity for pumping. Sewerage Improvements 7.07 The sewerage systems, including sewage treatment works for Kathmandu- Lalitpur, were constructed with particular difficulty. The initial operation of the system is too recent to permit comment on its performance. At July 1985 there were some 6,000 connections, or about 35% of the potential. Of these, about one half were actually paying a sewerage rate calculated as 25% surcharge on the water bill (compared to 50% surcharge covenanted and used in financial forecasts at appraisal). 7.08 Clearly the sewerage system has not, as yet, provided the service nor realized the level of cost recovery anticipated. The systems, as planned, have the potential to serve about the estimated 1985 population of Kathmandu- Lalitpur. 7.09 There is an operatieal risk facing the sewerage system. It has been designed as a sanitary sewerage system, and is not intended to receive storm - 67 - water from runoff at times of rain. (Such a "combined" system woull have required a much greater pipe capacity, and the costs would have been very substantially higher.) However, storm water flooding presents a serious problem to many areas of Kathmandu-Latitpur. This problem is at the "nuisance level" (i.e. does not result in significant property damaga or any loss of life). Nonetheless, it is a matter of popular concern. The risk is that people may attempt to direct such flood water to the sanitary sewer system, and if this occurs, the system will be unable to perform its intended purpose. Institutional Development 7.10 WSSB's development since 1974 has been hampered by its perceived status as a temporary organization; by its employment terms not being per- ceived to provide security and benefits commensurate with other public serv- ice organizations; by transfers of seconded staff out of the organization, which curtailed the benefits of accumulated experience; and by the "acting" status of its chief executive for more than two years. 7.11 Despite these constraints, WSSB has completed the projects satisfac- torily (albeit with delay), and this has been accomplished notwithstanding the problems faced at inception (para 1.15 and elaborated in para 3.02). 7.12 In recent years, WSSB gave increasing attention to the operational aspects of its responsibilities and has realized some successes (para 5.20). 7.13 On July 15, 1984, WSSB became a "Corporation" (WSSC). This overt confirmation of its permanent status should aid the institution - building process. The present leadership is able and experienced. While it is too early to record the effects of this change, it is to be expected this will be a positive step. Economic Evaluatiox. 7.14 At project appraisals, no attempt was made to derive an economic rate of return for the projects. The appraisals considered the economic role of the towns in which project improvements were to be made, and especially noted their role as regional centres and, in the case of Kathmandu Valley and Pokhara, their roles as tourist centres. The low levelVof water supply service (both in quality and quantity), the absence of sewerage facilities, the high incidence of water- and faecal-borne diseases are all noted. Without the project, a deterioration of these already unsatisfactory conditions was expected because of population growth. 7.15 The major project components were selected from several alternatives as the least-cost solution for disccunt rates of 5%, 10% and 15%. - 68 - 7.16 In the appraisal of the Second Project (1977), the present value of both (then) present and future "probable" tariffs was compared to the average incremental costs (AIC) of water and sewerage. The appraisal anticipated future tariff increases in 1979, 1981, and 1983, such that their present values were well above the long term average incremental costs (AIC) in the case of water, but remained somewhat below the AIC in the case of sewerage. (These estimates were made with full knowledge of the scale of the cost overruns on the First Project.) 7.17 In fact, there has been only one tariff increase (in 1981) since Second Project appraisal, and the present tariff is below the AIC even for water. WSSB's recent (1984) proposal (para 4.13(8)) for a tariff increase would bring the level close to the 1983 level anticipated at appraisal. 7.18 The health and convenience benefits of project implementation cannot be readily quantified in economic terms. VIII. CONCLUSIONS AND LESSONS LEARNED Conclusions 8.01 Apart from delays, and substantial overruns in the case of the First Project, the projects were largely successful in all their major aspects: (i) The water supply improvements provided by the projects perform largely as expected, subject to higher than expected urban population growth. (ii) The sewerage improvements provided by the projects are too recently completed to permit definitive reporting on performance, but connec- tions are now being made and a start has been made on revenue gener- ation from this service. (iii) WSSB has managed the project completion, has pioneered the introduc- tion of the viable water and sewerage utility concept in Nepal and has successfully introduced an accrual accounting system. HMG's decision to convert the organization to a Corporation gives recogni- tion to its future permanent status. (iv) Although cost-recovery has been less than expected at appraisal, and the tariff increases have been approved only after delays, WSSB has demonstrated its capacity to formulate realistic tariff proposals. - 69 - Lessons Learned Project Preparation and Formulation 8.02 Field data gathered on actual water consumption is an inadequate basis for demand forecasting when consumption is constrained by inadequate supply. Data from other places of similar climate and level of development (where supply is not a constraint) is preferred (para 4.08). 8.03 Having regard to the vagaries of population forecasting, water production requirement estimates should err on the generous side, such that there is reasonable confidence continuous supply can be provided. This has implications for water quality and for the practicality of effective leakage control measures (para 5.14). 8.04 Realistic scheduling of project implementation must include a contin- gent time allowance for events which are unforeseen and unforeseeable at project inception. While some delays which occurred (especially those relat- ing to decisions concerning contract awards) were avoidable, many others were not (para 3.16). 8.05 The financial feasibility of introducing sanitary sewerage to a community for the first time, and of realizing cost recovery on the basis of water rate surcharge, is unproven by this project experience to this time. The sewerage component of these two projects represents 38% of the investment in new works (para 4.10). It was the source of particular difficulties and delays during construction (para 3.20) and is threatened by some operational risks (para 7.09). Although operation is recent, and perforwance cannot be quantified, this component has presented a substantial management burden to WSSB. The deferral of this component to a later stage project, or a much reduced sewerage component, would have reduced these burdens and have reduced the organizational complexity arising from the project (para 3.03), in addi- tion to enhancing WSSB's financial position. 8.06 Recognition must be given at appraisal to the disproportionate tech- nical and management effort usually required for project components involving the rehabilitation and repair of existing plant (para 3.04). 8.07 Project preparation may require effort beyond the preliminary engineering stage to reduce the risk of project scope changes and cost over- runs (para 3.11). Project appraisals and approvals may have taken place too early. 8.08 With a new agency particular care must be taken in project prepara- tion and at appraisal to ensure that operational tools and quipment, includ- ing office and drawing office needs and vehicle needs, are fully assessed and provided for (para 3.12). - 70 - 8.09 In an appraisal of technical assistance, consideration must be given to the need for management advice and training, in addition to pure engineer- ing and accounting. Management advice would include assistance in designing the organizational structure; in developing written policies and procedures; in both corporate and activity planning; in introducing the concepts of delegation and supervision; in organizing a management information system embracing both accounting and operational data; and in designing the systems and procedures for gathering, assembly and analysis and use of such informa- tion; and in personnel management, including policies, job classifications and descriptions (pare 3.33). Final Design and Implementation 8.10 The organizational arrangements for project implementation should be as simple as possible, and responsibilities between the implementing agency and their consultants and advisors should be clearly defined at project appraisal (para 3.03). 8.11 Care is required to ensure that all reasonable choices for materials selection and specification are considered, and that their relative advantages and disadvantages are weighed in making the choice (para 3.28). 8.12 Experience has indicated operational difficulties, and excessive blockage and cleaning requirements in sewer pipes of 150 mm dia. A minimum size of 200 mm dia., as widely adopted in some developed countries may need to be considered (para 3.28). The alternative is more attention to main- tenance, finishing and better trap arrangements at connections. 8.13 Final design efforts should consider the possible need for (i) spe- cialized imported materials for temporary works and for (ii) specialized technical advice if it seems probable such materials or advice may be needed by prospective contractors to successfully complete the works (para 3.37). 8.14 Project completion delays have major implications for final project costs during times of inflation. In the First Project, where final project costs were 75% above original estimates, completion schedules longer th.n estimated accounted for 56% of the cost increases (para 3.44). 8.15 In addition to the effect on capital costs (para 8.14), project completion delays have other important implications for utility finances. The delay retards the realization of revenues from the completed project, and while some operating costs may also be retarded, other costs such as interest payments are not (para 4.07). Operational 8.16 Organizational arrangements which provide for periodic written reports of prior accomplishments and of future plans, and their circulation to all agencies concerned with the project would aid overall project coor- dination and institutional development (para 3.32). - 71 - 8.17 The effectiveness of advisors is dependent on the timely appointment of their counterparts and on such support as access to vehicle transport (para 3.31). 8.18 Key operational data remains of limited quality mainly because of inordinate delays in the acquisition and installation of bulk meters (para 5.09). Reliable information to guide both investment and operational deci- sions is of great importance for efficiency, and priorities must be accorded with this in mind. Included under this item is increased attention to the waste and leakage programs, together with follow-up. The limited success of this effort in these projects may have been due to over concentration on the program of new investments. Institutional 8.19 The Bank can provide useful assistance by placing a balanced emphasis on project implementation, operational matters, and overall coordination and management matters during project supervision (paras 6.02 and 6.03). 8.20 The quality of leadership in the institution is critical; leadership for a prolonged period by people in an "acting" capacity, who have less than a full commitment to the organization, does not aid institutional development (paras 5.30 and 7.10). 8.21 Details of the staffing mechanisms, the terms of staff employment and the prospective and perceived permanence of the organization have impor- tant implications for the institution-building process (paras 3.02 (b) and (c), 5.31 and 7.10). 8.22 Staff continuity has implications for the benefits attainable from technical assistance efforts (para 3.34), and for the institution-building process in general (para 5.31). 8.23 The level of the tariff increases needed to meet financial perfor- mance covenants of the DCAs was not markedly different from long-term general price increases as indicated by the Consumer Price Index. Formal annual reviews of tariffs and an agreed basis for their revision, without awaiting the results of comprehensive tariff studies, may have avoided the need for a very substantial revision at one time (paras 4.15-4.18). 8.24 The introduction of new accounting concepts to an organization can present difficulties of liaison with other organizations (pars 5.24). - 72- ANNE i NEPAL IDA CREDIT 470-NEP (FIRST) WATER SUPPLY AND SEUERAGE PROJECT PROJECT COMPLETION REPORT ESTIMATED AND ACTUAL PROJECT COSTS Nepalese Rupees - Million ri1 stieste8) Actual Costa teee (Dcreae) Prject Lements _L- ..[ .j ,FC C .j- _P,, - 4 UTAfl somPL Developmnt of $pring and Well Sources 0.55 4.54 3.09) 2.45 8.11 10.36 1.53 1.21 2.74 Pumpias Statioae 0.37 2.36 2.73) Trasiselon and Kiatribution Pipelinog 6.97 13.46 20.43 16.91 19.30 3.22 .9.95 5.84 15.79 Røservoirs 1.46 1.72 3.16 5.12 10.87 1$.99 3.66 9.15 12.81 Ifprov~nt* to Treatmemt Plants 0.27 0.87 1.14 1.13 1.01 2.16. 0.80 0.14 1.02 -4eter eters and s"gipent 0.62 4.36 4.98 3.80 3.80 (0.62) (0.16) (1.18) Vehicles and Eqipent 0.22 1.43 1.65 0.23 5.34 5.57 0.01 3.91 3.92 Staff Quartør* 0.34 .10 _.4 .89 - _ 69 .JL. <Ij0. .A TOTAL MTU SUpMLT 10.80 8.84 .9,.64 j2.6,.43 76.19 1696 .19.. . ,3 &Sch Trunk and Local Soverg 10.91 7.26 18.17) &~r Outalt aM Storm Ovstilov 1.98 2.26 4.24> 22.80 20.76 43.36 9.91 11.24 21.15 F%opinø Stations and Workhopo 1.71 4.03 5.74 4.48 14.05 18.53 2.77 10.02 12.79 Treatmat Plant and Effluent Outtati 6.22 2.16 8.38 12.76 2.79 1$.5$ 6.54 0.63 7.17 Vehileøs and squipment _ ,0.29 0,9 _ .. 1.09 ! .80 0.8L TOTAL SEMEAG 20.82 16.00 36.82 40.04 38.69 78.73 19.22.69 41.91 C LAND 7.08 - g 15.9 , ..1.39. .1 8..11 0 TRAINIng 0.06 - 0.06 0.10 • 0.10 .04 .004 £ CONSULTING suvCES - 1(0) 1.40 12.33- 13,73 4.03 16.12 0.15 2.63 3.79 6.42 - 2 _.2 099 .12,19 --..... . .. ,j:39 :4 (12.19> .AL cou im savics 2.6S .2 5. 2 _1.0.2 6 .12J 20.» 1.8 2..U> . 7 1~OT1AL Mj~ 1gj ýL0 J j I.32 34 ~ 45.9 gi 5»13 81.0 - - -_ - -«- () To allov for direat c~aris beten the estimuted and actual coat of projeet elments, the phy "ical and price omtifgacies forecast at appraisal vore redistributed amg the item to show their costs in currnt price. (b> • 1: Pr&liaiaer-engineeriag, ender documetø. bid øvaluation, Gupervisio4 • 2: Lgoing exploration, drilIng, *tc.$ preparation of meat stag projets Tarif Study. 73 ANEX 2 IDA CREDIT 470-NEP (fIRST) WATE SUPPLY AND SEERAGE PROJECT PROJECT COMPLETION REPORT ESTIMATED AND ACTUAL PROJECT COSTS U.S. Dollars - Million Aperatsal Eftime4ma) Actual Cost& lmaee (Decrese) roject Xlcamts ix 9 _R. .-T_ _PC.. _jc _L I w aevelgI bt of Sprtng and Well Somces 0.03 0.43 0.48> 0.20 0.66 0.86 0.12 0.01 0.13 t~mping Statim~ 0.03 0.22 0.23) Tua=Lutöm, and Dlstributiom Pipellmce 0.66 1.27 1.93 1.36 1.33 2.89 0.70 0.26 0.96 ~ ~svoirs 0.14 0.16 0.30 0.41 0.89 1.30 0.27 0.73 1.00 hpowven~ te to Tretamat plat* 0.03 0.08 0.11 0.08 0.07 0.13 0.05 (0.01) 0.04 Mter Mters and fitting 0.06 0.42 0.48 - 0.31 0.31 (0.06) (0.11) (0.17) Vehicle amd zipceni 0.02 0.14 0.16 0.02 0.42 0.44 - 0.28 0.28 . Sta Quarters 0.03 0.01 0.04 0.1 _- 0.15 0.12 <001> 0.11 TOTAL AlE Su L? 1.02 2.73 3.73 . 3.88 120 1.13 2.33 8 $81E5108 Braach Truak and loca1 Severa 1.03 0.69 1.72) 1.83 1.68 3.53 0.63 0.78 1.41 Sever Outfall and Stora Oeflöw 0.19 0.21 0.40) Puping Stationa and vorhape 0.16 0.38 0.34 0.36 1.12 1.48 0.20 0.74 0.94 Treatment Plat and stfluent Outta11 0.59 0.20 0.79 1.03 0.22 1.23 0.44 0.02 0.46 Vehicle* and Bquipment 0.03 0.03 - 0.08 0.08 - 0.05 0.05 IOAL Bas 1.97 1.51 3.48 3.24 3.10 6.34 1.27 1.39 2.86 0 M PD0 0 6. .2.3 .02 00.5 6 C LAND 0.0.67 .6 12 - 123 j50.5 D AINING 0.01 --, 0 0 o. - CfUSiLTIN0 sEavics - i(b) 0.13 1.17 1.30 0.34 1.36 1.70 0.21 0.19 0.40 -2 0 .12 }.04 _1 16. ~ _j ..-_ (012) Q.04 1 16) T OmA m =oSSaLTIN0 s0.len 1._1 . .. 0 .. . 10 TOTAL3.92 g .4 10.37 70 . 15.38 .11 1.89 .01 (a> to allo. fot dlrect c~paio beteen the taximated and actual cost of proent element, the physceal and price cout *gencies forecat et appraisa1 ver redigtributed aomt the ie.. co sho &hetr cost in curreni pricas. (6) • 1: Preluasry engciering, tendet documate, bid evaluation, supervistou - 2: 06going exploratio, drill"g, etc.; preparation of next *tage project srUift Study. NEPAL IDA CREDIT 470-NEP (FIRST) WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT ESTIMATED AND ACTUAL ANNUAL EXPENDITURES Nepalese Rupees - Million 1973e74 1974/15 197S/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 Item TOTAL- - APPAISAL Water Supply 38.96 0.72 3.08 15.65 18.00 1.51 Sewerage 36.93 * 6.60 13.82 12.08 4.43 Land 6.33 - 0.43 5.90 - - Training 0.06 - 0.02 0.02 0.02 - - Vehicles. Equipment 2.00 - - 1.93 0.07 - Consulting Services 25.24 2.20 2.17 4.86 10.08 5.93 TOTAL 109.52 2.92 12.30 42.18 40.25 11.87 ACTUAL Water Supply 70.61 - 0.43 3.23 10.72 12.44 16.81 9.01 11.82 3.05 2.30 0.78 St-erage 77.64 - - 0.09 0.03 14.51 19.77 18.71 20.05 1.55 0.71 2.22 Land 15.39 - * S.81 4.58 3.26 0.54 0.07 0.15 0.98 - - Training 0.10 - - - 0.10 - - - -- - Vehicles, Equipment 6.67 - 0.04 0.04 0.02 0.52 2.46 0.96 0.52 0,27 1.84 Consulting Serices 20.16 - 10.93 2.35 0.17 2.42 3.50 0.69 0.04 0.46 -- TOTAL 190.57 - 11.42 11.52 15.62 32.75 43.08 29.44 32.58 6.31 4.85 3.00 Physical and Price Contingencies and Duties and Taxes have been included in the Item as given here. NEPAL IDA CREDIT 470-NEP (FIRST) WATER SUPPLY AND SEWERAGE PROJECT PROECT COMPLETION REPRT, ESTIMATED AND ACTUAL ANNUAL OPERATIONAL DATA 2031132 1974/75 2032133 1975176 2033/34 1976/77 2034/35 1977/78 2035136 1976179 2036137 1979180 2037138 1980/81 Particulaters Forecast Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual forecast Actual 8o. of Comnectione - water 20,376 18,638 23,563 21,438 26,723 24,096 29,991 26,951 33,265 30,514 36,685 34,849 40.246 48,862(t) Volume Produced - so '000 8,690 13,505 12,320 14,490 15,550 14,490 16,470 14,490 18,360 16,300 18,360 19,560 18,900 21,350 VOlum SOIA (Et.) - a' '000 4,345 6,753 6,160 7,970 7,775 7,970 8,235 7,970 9,630 8,970 11,145 10,800 12,290 11,700 Unaccounted - 50 50 so 45 50 45 50 45 47.5 45 40 45 35 45 Average Water Charge - USale 0.66 0.29 0.70 0.49 0.71 0.57 0.89 0.61 0.90 0.61 0.91 0.57 1.15 0.61 Mropulation Total - '000 369 369 380 389 390 411 401 433 413 457 424 482 436 509(7) Pop'n Served - Water Supply - '000 356 356 367 37S 379 394 390 415 402 437 415 460 427 484 Average Water Consumption - led 33 52 46 58 56 55 58 54 66 56 74 66 79 66 .1 -I Connections - Beverage 3,300 ? 3,300 1 5,100 ? 7,100 ? 9,100 ? 11,100 T 13,100 f Average Sewerage Charge - 5Rs/Connection/Month - - - - - - 8.1 - 9.89 - 11.11 - 13.93 - Revenue - Water - NR million 2.89 1.93 4.30 3.91 5.51 4.51 7.34 4.86 8.64 5.47 10.09 6.14 14.10 7.12 - Sewerage - NRs million - - - - - - 0.69 - 1.08 - 1.48 - 2.19 - S- Includes about 7,000 Connections in girganj, Biratager and Cbaran. Not included in the Forecast. I to Kathmendu Valley and Pokhara. 1w -- 8a n E 4, I'. . 1, * Il 1 1 j - [-- . a * la - .4 4. 3 . fl* 63- u a r &! :: 81113 iti i 1 8:jI -77- S 55 5 55! !55 1 R i 1 e193 R n 9"a sa Ja * s qq q es 1 0-4U 5.51 5 51 5.5 44d i 4 0 8 x q 2U 3 3 a MI 8 4 R~ 3 U R 91 Et 1e 4 . i.4 00 -4 e -e00 : ese- e . ti z a0 9 - ag a- e 24 44s 4 eis es 353-3 3 4 3 33 3 NEPAL IDA CREDIT 470-NEP (FIRST) WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT APPRAISAL AND ACTUAL CASH FLOV Nepalese Rupees - MIl1on 2032/33 1973/76 203334 9 2m34/35 197778 20336 197ZO79 2036137 1979M 20 3 190/1 sagtiestateW I.0.1 voeatata einc eeateta ar~ac oeatata vari~nc F1.9m9s W M1~n w~ine eat Act=et vari~*m aeres talf vart~m le.tet ma c --- 0m -• ftt asn ad~e. lateet 1.27 (0.18> t 1.40) 1.81 0,76 < 1.05) 1.42 0.36 (1.0) 2.3 .02 < 2.31) 4.14 0.31 ( 3.83 *.7n (0.9> (9.3> 1~esåeUa 1.20 1.36 0.36 1.47 1.47 - 3.64 1.8 ( 1.76) 3.97 2.33 < 1.62) 4.00 2.43 t 1.5~> 4.02 2.46 ( 1.36> ~s t Ien~.. Cu aefta m 2.47 1. 1.8) 3.28 2.23 ( 1.03) 3.06 2.24 ( 2.82 6.3M 2.37 <4.3> 8.14 2.76 (5.38> 12.73 2.03 (10.0> 0mteriutie to 80.fty ~a tq.lep - (0.4 < (0.40) - (0.03) (0.05> • - - 0.22 0.22 • - - (3.48 <3.48> ~ ~C aenebut 13.86 12.21 ( t.65) 10.62 15.66 3.04 4.32 13.39 10.87 .23 1243 10.50 9.29 13.G2 6.53 0.23 22.61 33.3n l efi k cetai me Squty 13.86 11.89 (2.0) 10.62 13,61 4.99 4.32 1s.39 10.87 2.13 12.43 10.32 9.29 13.82 4.3 9.25 19.13 9.88 00 1 P.jec 1 29.70 3.68 (24.02) 31.»0 17.94 (13.%6) 9.37 17.88 8.31 - 44.31 44.31 - 8.25 8.23 - 12.31 2.1 SDS Psejlet 12 - - - - 3.36 0.90 ( 2.26) 11.80 4.41 ( 6.60) 22.17 10.06 (12.11) 22.17 14.5 ( 7.42) u fejet tar - - - - - - - - - 0.37 0.3 - 1.33 1.37 t~te1 ~ess lirn te 29.10 5.A (26.02) 31.30 17.94 (13.56) 12.33 18.78 6.25 11.09 48.72 37.44 22.17 18.88 3.29> 22.17 28.3 .28 toeal DieM~t ~g.e 43.36 17.49 (26.07> 42.12 33.3 ( 8.37> 17.06 34.17 17.11 13.22 61.17 47.96 3.46 32.70 1.24 31.42 47.36 16.14 1024L sea~ 46.03 18.87 (27.16) 43.40 33.78 ( 9.62) 22.11 36.41 14.30 19.71 63.34 43.83 39.40 33.46 (4.4> 44.19 49.3 .44 ~at an fpm 43.14 12.94 30.20 43.27 22.28 18.99 18.10 42.40 (24.38) 19.63 S2.03 (32.40> 38.73 41.33 ( 2.79) 40.06 36.13 13.9 - 1.. atieg-a- - -- - 1.09 1.9 2.2 - 2.2 2.42 - 2.42 - - - - - 2.47 - 2.47 4.84 - 4.84 4.3W - 4.70 ~4t1a 8n81ie - - - - - 3.36 °• 3.36 3.12 - 7.12 1 7.12 - 7.12 C~ene in Ust9 8Opia adft ~... - (1.50) 1.50 - 13.16 (13.16) - 0.39 ( 0.39> •. 4.35 4.3.33> - (8.20> 8.20 • 14.45 (14.45) Kawbotties 0.74 0.29 0.43 0.86 (0.4> 1.48 0.24 1.13 (0.93> 0.26 2.62 ( 2.36) 0.27 5.13 ( 4.80 0.2 0.2 0.01 *c--t Sesema 0.23 0.64 (0.37) 0.31 0.9 t 0.30 0.27 1.83 f 1.6> 009 0.72 < 0.63) (0.02> (0.0) 0.03 0.85 (2.83) 3.40 (1eye1t (2.1 Oj(0.47) ( 1.64) (0.52) 0.23 ( 0.0> 1.48 (7.65> 9.13 0.33 1.83 t 1.32) (2.00 (1.30) ( 0.70> 1.96) 2.30 ( 4.26 Oepseel - <0.02) 0.02 - 0.02 (0.02) - (0.01) 0.01 - <0.05> 0.03 - (0.18> 0.18 - (0.03> 0.03 lassrest es to.. - - - - . . . . . . . . , se imgs s~isig mpia Matome Cach (1.10) (0.66), (0.44) 0.53 13.66 (13.13) 1.99 (4.09 6.08 0.48 9.69 ( 9.01) O1.75) <4.38 2.83 (0.82) 14.17 (14.99 2~AL ^9LICAT~088 42.04 12.28 29.76 41.80 33.94 3.86 20.09 38.39 ( 1.30) 23.87 61.72 (37.83) 44.10 36.94 7.16 46.36 40.32 6.06 Ose a ea 81.5. 3.99 6.9 2.80 3.60 (0.14) ( 3.76) 2.02 (1.98) t 4.00% (4.160 1.82 5.9 (4.0> (1.48) 3.02 (2.37 9.31 21.4 Uftaan Isesabt hswd 1.83 1.19 (0.66) 5.84 7.78 1.94 9.44 7.62 < 3.82) 13.46 $.84 3.02> 7.30 7.46 0.14 2.00 3.98 3.28 Uslaes. Crred liguagd 3..4 7.78 1.94 9.44 .7.62 ( 1.82) 11.46 5.64 ( 3.82) 7.30 7.46 0.56 2.80 5.98 3.1m 0.63 5.29 84.46 79- ANMEX 8 5 .- -s afl - a4-i 4 4m ,.. . nXA , c4 d ä 4=42 - 3W.C , - 5 ma*u, , a a E a t., : a aR 51 5 fl j ai• 8 jl j. H.5 J aRa l ' : i ' zl i d. * $10 '. 2,1 ge * . ad f * 4 - a aq 4 Kl R 11 q : RX RA : %Å %a Ul k . a. n 4• *0 et R gint a 14n KRg, 9 g3 b d U i i- - a Rz- 8 3 a • an a a-: aS- - a": !!• Snu 4, n 9 ,1 a to: g- ! u: s 1!4 RRi..¥ , i an a stgna x 8! # I g z$ 9 a 4· ng i -- -•2aa s • • 4 ut ag Xxstaaa z a a ag t in j44 d 4 ja n0 P4 a 0 4d-35 8 ~ . ., * Alg8 3 NEPAL IDA CREDIT 470-NEP (FIRST) WATER SUPPLY AND SEERAGE PROJECT PROJECT COMPLETION REPORT ESTIMATED AND ACTUAL CUMULATIVE EXPENDITURES BY YEAR Nepalese Rupees - Million (Z Total) - iater Supplt Sera;e Ober(l) TOai, Appraisal Actual Appralsal Actual AppraIi Actual AppraAsl Actual (7aO) O) (2 TOT .(1) ( TOT) (I wt) ( 2 TO 1 1973/74 0.72 ( 2) - * * 2.20 (7) - 2.92 () - (-) 2 1974/75 3.80 ( 10) 0.45 ( 1) 6.0 ( 17) - 4.82 ( 14) 10.97 ( 26) IS.22 ( 14) 11.43 ( 6) 3 1975176 19.45 ( 50) 3.68 ( 5) 20.42 ( 55) 0.09 ( - ) 17.53 ( 52) 19.17 ( 45) 57.40 ( St) 22.94 ( 12) * 1976/77 37.45 ( 96) 14.40 1 20) 32.30 ( 6B) 0.12 ( - ) 27.70 (82) 24.04 ( 57) 97.65 ( 69) 38.56 ( 20) 5 1977/78 38.96 (100) 26.84 ( 38) 36.93 (100) 14.63 ( 19) 33.62 (100) 29.84 ( 71) 109.51 (100) 71.31 ( 37) A 6 1970/179 43.65 ( 66) 34.40 ( 44) 36.34 ( 8) 114.39 6 40) 0 7 1979/80 52.66 ( 75) 53.11 ( 68) 38.06 ( 90) 143.83 ( 75) 8 1900/81 4.40 9t) 73.16 ( 94) 38.77 ( 92) 176.41 ( 93) 9 1981/82 67.53 ( 96) 74.71 ( 96) 40.48 ( 96) 182.72 ( 96) 10 1982/83 69.83 ( 99) 75.42 ( 97) 42.32 (100) 187.57 ( 90) It 1983/84 T.61 (100) 77.64 (100) 42.32 (100) 190.57 (100) (1) aTeinh Ubiles. fquipont Consulting Services TOt Haeep of Appra" alt 6.33 0.06 2.00 25.24 33.63 Makeup of Acta 15.39 0.10 6.67 20.16 42.32 * - 81 - NU4AL ANEX 10 IDA CREDIT 704-NEP (SECOND) WATER SUPPLY AND SEERAGE PROJECT PROJECT COPLETION REPORT ESTIMTED AND ACTUAL PROJECT COSTS Nepalese Rupees - Mill:ion ugatte ut ges(a) sA.tual costc e ( a pr..e Te IG JGE.. Ioucees 1.92 2.75 4.67 0.53 8.5» 9.08 (1.39> 5.80 4.41 pietributim~ 40.85 31.70 72.55 4.52 54.51 59.03 (36.33) 22.81 (13.52) eftserwirc 2.72 0.89 3.61 3.24 3.73 6.97 0.52 2.84 3.36 Mater ~ 10a5ot4ons 2.47 8.65 11.12 0.57 9.59 10.16 (1.90) 0.94 (0.96) ~9eoDUs, &WMtipMnt 0.97 1.98 2.15 - 3.32 3.32 (0.97) 1.34 0.37 Statt Qiarte~ 0.0 350 168 5 18 2. 84 _.61 4.45 i0T41 Mtt 80PL? .59 46. 04 95-63 181. 93.74 537.23 3.34 Q.8.9 ysten Itesiona 9.14 6.08 15.22 4.20 10.97 15.17 (4.94) 4.89 0.05> C LAm 073 - 1.3 1.2ff17 i0.9g 0.99 9 AIN1I0 0 } 6.- - (0 066) ~ MSULt%NG 8~V1Cb) 4.7? Ila 26.76 2.96 «12.00 14.96 - (3.99K11.80) ~ 4iNmIS g2.10 - .2.58 t 8. 4 0 -...0 10.97 00 :4- 1_1 1 7214.j <41.25> 34.24 3 ..01. (a) to ött<w for drct effarsou be~wee. ehe #as 4ed and ecal cst of projecc eleffntc, the ptsical and price .assLagucLa forecast eat appralal mer. redistrbutd a g the d i ta show theft coast ta ousse (b)- åt Npdato et noscer as for Ena Valley, Pokhsa, utrgmaj ced urasffar, lInuding roadf r ~ ~uesatie i Stasagar. - 2: Ieasbillty Stamle for Måpöstcaj, bairwa, lutval, Esadah Janakpur and Charaf - 3t Datailed decig and supervlou • 4. Tarift Saudies. -82- ..NEåk ANEE 11 IDA CREDIT 704-NEP (SECOND) WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT ESTIMATED AND ACTUAL PROJECT COSTS U.S. %ollars - Million Appraisal Estimag(a) Actual Costt Ifcrease (fEreage) "*oet. glemnt* _LG_ vc f LC_ Fc T £ uuAE SUPPLT Sources 0.13 0.22 0.37 0.04 0.53 0.37 (0.11) 0.31 0.20 Distribution pipelias 3.27 2.34 3.81 0.31 3.79 4.10 (2.96) 1.25 (1.71) Ruservoira 0.22 0.07 0.29 0.23 0.26 0.49 0.01 0.19 0.20 Vater Connectione 0.20 0.69 0.89 0.04 0.69 0.73 (0.16) - (0.16) Vehicles, Tols, Equipment 0.08 0.16 0.24 - 0.23 0.23 (0.08) 0.07 (0.01) Staff Qurtørs 0 _0 006 ø23 0.11 0.34 03_,6 0.10 Ø38 A0TaL VATRm SMUPLY 3 697 j 9 7.66 0 L L 6 " UJ2 Syste Extesions 0 0.49 1.22 29 067 0.96 <0.44) .1£ S0.26 c LAND 0.06 - 006 12 - 012 006 0.06 D iu-t-i- --W - 2-U D AII?UG 0.0- 0.01 0 0 - (0 - 0.1 £ CONSULTING SER9icES(b) .0 14 .4 02 09 04> <. i AINISTATION 0.21 - 0.21 0.61 - 4.61 0,40 0.40 TTAL 68 5.62 11.30 2.11 7.24 3 ( 62 19 (<) To 11o for direct co~arison between the tstimated and attual cost o1 project eents, the physical and price contingencies forecast at appraial «ere redistributed ag the items to show their costo in curreat price*. (b) - 1: Update of Kaster Plans for Katbmu Valley. Pokhara, sirganj and sirataagar, imeluding gro4ndwter investigation in sittagr. - 2: Peasibility Studies for mepsgnj, haira*, nutual, møtaudes Janakpur and Sharan - 3: Detailed design and supervisiom • 4 Tariff Studies. - 83 - ANANE 12 IDA CREDIT 704-N (SECOND) WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT ESTIMATED AND ACTUAL ANNUAL EXPENDITURES Nepalese Rupees - Million 1977/7$ 1978/79 1979/80 1980/81 1981/87 1982/83 1983/84 1984/85 198186 knew TOMA A** MISAL Uter Supply 96.03 2.19 31.58 38.74 23.42 $0werage 15.78 * 1.29 8.99 5.50 Lamd 0.67 - 0.67 - Training 0.16 - 0.06 0.08 0.04 Adaastratiou (3S) 2.49 0.36 0.36 0.70 0.87 Consulting Services 25.94 4.30 8.86 8.25 4.53 TOTAL 141.07 185 43.00 5.76 34.46 ACUAL t e Supply 93.74 - 0.0 3.39 12.05 31.13 20.61 6.56 3.01 14.90 Seerage 15.17 - - 0.06 1.20 2.09 2.48 4.84 3.30 1.20 ted 1.72 * - - 0.35 0.29 1.08 - - - Administration (vS S) 86.48 0.23 0.27 1.86 2.55 2.71 0.81 0.05 Consulting Servia** 1 . 4.62 2.67 4.39 3.05 0.03 * * TOTAL 134.07 4.96 8.39 20.05 39.11 26.91 12.21 6.36 16.10 Physical and Price Contingencies and Duties and Taxes have been included in the Itees given bere. - 84 - A101EX 13 ali: Z 9 a i s ts ta i ad a a.l... 31.23 5 . R.83a : *a 99.2 ! : sagg- 2 Sa.. 3 22 3. 2~q 14.#a 2ai 2 . $'3.2 3 . 3. n.ia 331 :.5 q - 3 1 3aa f f a å å i b0s;i:a a li å11 4 n 8 Mi .4 5 :sola -85- A~0EX 14 EPAL - CURED1 304-lP - (SCOND» WATUR UUPPLY AND SEBRArN töolg Pm~,iCT COMPT10 #XF0M Nalor Project Riementa - Appraipal and Actual koMeparison WRK 0AWT8 JegiAppratsal Actuil a- PAT"AU VALLEY VATu SYSTEM 1. secondary DIstribution ma~n 80-1500 48 km 2. Rehabilitatoan of Exiatiag Leaky Naine 80-300 0 4 km 78.5 a 88.8km ,80 3. Supply to 10 VtIlages 80-200- 20 km 4. sode Ditibugt ton 80-200 0 6.3 kaj ~. od. Reservoir 300 s 500 a* 5 RAt-LALiTPUR SU5ERAGE l. lanch Seuer Extenoeus Core Area 200-5000 9.0km ? h e ; 2.0 k o Swerhab. C eIARA VATER SYSTEm 1. siadbhasiat Regervor 500 S 300 aS 2. Oustribution äxtenaon 80-100 011.0 km 12.1 la (80-300 0) D ITUATNACAR VARU SYSTEN 1. New Tubeell (Cap. 4,200 to /d each) 2 No. 3 No. (1 No. collapsed; 1 No. de- terioratiag). &edrilling under 3Ud froject. 2. Elevated Storoge Tank 500 aS 3a. Distribution Improvements 100-350 0 24 km 26.4 k* (80-300 0) b. Distribution Ieprove~enta $0-80 0 10 km Approx. per Appraisal E sluAmJ VATER SYSTE la. Adareha N Vell Sita - Chlottoator and Store 1 No. 1 No. b. Strganj Well tte - Overhaul Prnp - Chorinator and Stor. - Surface Reservoir 500 aS UIL - Punpng station 6,000 s/d mIL 2a. Ditributim Iaproven~nta 100-2500 6 km 24.9 k8 b. Diribution pvemente 50-0 0 21 km Approx. per Appvalsal 7 V ~ICLES. TOOL. E0UIPMUT la. Trucke 6 No. Appox. pur Appraital b. Jep ype 4 da. c. motor Cyclem 101.. U AS d. BicyCle 50**. " ö. Kicellaneous Toalg le* 7e 1. Supply weter matera 27,000 xo. 47,000 lo. U CONSULTING SERvicBg 1. Updat* mnter Plan (includItg ground- matar Inveatigatione 1n lratuefter) for IM Vaney, Pokhara, U~gani and ltrat- aser (for 3rd Project). Don 2. sastbf.tty ~uis for Wepalgani, ~ ^eisua, atel. letanda, Jamepur and Mhran (fot rd Prject). Don 3. 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Cl.O弱討開參，,.,’開一。d‘•權闢一嚇朋．q《勰．,)“一，開．Ot神．觔“‘必‘寫．。，．蠶一tt拿憫一啄露‘驢．tl綢．唱車勰哺“調•叫陶 露”奮自悶物雙“．碼•d目唱 鴉，，開．‘細總‘颼轉一，t露寡召齡．驚婦‘奮寫一體．Ct‘必．fl一‘症．藝露寫名一C,1症．C一”一，－一，一“F．吃•響唱妒馴唱 默．彆，粤l&:::”仔訪計裂：訂狀：齡默：::::：二：::::,，驟婪 “唱‘“唱網閱 離以·：：、．以·“；儲·糎以，t，、魷，馮、“,,.，號·，.r磚0o·，。、‘·，,“·曉常。t：·““·、、“·“魷·曉to·：&t：·、．::，認，計，:,,&，州州“。，“肱·、．&1二。嗚·：,&,;．一”山“&- 『、。盒•撾名仰寫騙“開 闐膩•二•．。·偶儲，“杷‘，二寫，.,“電開·齣，以，。‘,&，彼t乙，&‘二州“二“·“必膩·膩》”·‘t寫二、：《‘，·魷，喊·《，審名·“‘零‘·‘，》．，·”名，，犧lo．·露，，點，“。·』“：·o,．·。，’·“－→ I‘哺·：，佻·“。·0.&，·““·“．鸛二•‘·，.,，·“o0·‘,‘鈴籵，&&,&“·”‘記‘·‘:.“·“；祖，0．倪·‘t,‘亂，&.t，·0．。‘，·‘.,&，·喊”·以衛·1•．“·“‘二，&&，·。：&“•·“•”•開唱，一州．0．磯 緣：g,，開’辟，卹“‘夜‘．壯為，必‘取他．辟，婦·跑認．奮C幼·膩嚇“魷）C，一魷喲．仰《之籐．勰）購．屆審個．舛（魷I》t必一計卹．弱儲t，儲，嚇•零啊’以t！矗一賽呂》飴，&!“一勰一騙．‘飾．t•••“颼物．寫露．”亂 嗡．。一‘:，電之．闢個＇&tr．奮‘劈，’寥露個．綢嗡·露付》儲‘o儲．個《C,．必I丰《C．寡幼饞gd侈．•g奮．0一，一。二。，-．馴囉‘開””叫 狀狀·：界計界計：狀‘粤。二‘誹：.’發嗡彆召等r狀，祝“‘粤弄，；斗籐認谷論斗么馴‘.1..．織．“騙。．:’織…，:．弋綴 •門“屹個•唱 &.&g纏．膩的．龍魷『，；么。，.C夜號·‘(t認·奮為朧．勰儲．韶盧總二丰C言．驢弱一t寡可齡·盧為開．‘•粤．t名細．‘寫計．之：C,，膩榣認．必才勰＊仰胎．9寥開·01．·‘寥寫一‘寫4,,．神一言I辟‘寥細翻州圈夠•寥，閑個•馴口．t.”名 鈞叮究”勸，‘伊彆‘&&’彆g擊蹴劉勰狀“尸價‘’彆，•伊‘要計婪：‘乎‘,&,&，彆，k“擺唱二翻甲瀾嗡森禮勿，，兀霄婪 _“州唱“州，q掬•． 緣U一計，韶．：開．辭嗡開·“，馳，（魷．h嗚亂，.，權）粤．C‘寥．館電“．闕》閱，寥飼．讓寫《磚．•么魷·蔥購．!:4審奮．‘》遞膩．亂魷，編《論，．方鰓．露魷·召啊，•q．之鵝．露唱啊．勵膩，祖魷．t•零”細•袖甲勺神叫陽，日奮•“唱 &J::，謐婪齡親髯器樣狀乏默J森養豔粤；｝狀：:：群弄I狀皺仳：:’鸚狀：:：義鸚“礦嗡義一細咸當群物 個叮••丰“開嗚甲個，胛馴•馴開 個寫口口口 上竺邊還還鈕竺匕益名識壯變鹽釐甕亂竺日蘇粤孺需劉整養訃礫聶豐吵藹轟令襯■付然親託耑州．勿黔波諾憫機■臉仕滿綸去罷一必必亡臘營二高二 切，tt州一•柄滷噸••．！吋州 觔滷蒲間P麗面醉爾叮1頑爾網區評 物配網瀆顱矓頗隨爾叮】馴開爾可 工爾而釀「廳蘭面而爾酒爾了編面n 灑面神雨「訂面而而市 徊鳥圈麗 I 閑謬矗乙 壟區工糅礬黑界化州彎 韭壟望豐睦蠻口墮」圈雙觀尸鷺劉驟啊蠻匯界啊瞋購 糅蠻選畫Lq壇豐單憚殲黑彎卑間 膠夠騙1馴嬝夢p劍才顛L勵禹L觔啊讓寫開口幼個 馳開1.,，細糾袖•一袱1110。 一‘.，汗二，&7一■機務偺辟礪蘇’鑿鈕鑑誣石登量豐涵必彊豔墨玉匹濯 自國目體 t亂•j細瞭開勵 化豐他整豐墾乞”黠丑警豐仔叩他巒，!．變整巒朴巒．!．豐變牌合他待懸塑弓他巒矓游編”0,t.m議酒紙，聰〝物聯·，,&..&j,.,&’細酒－“〝m&.，州．,，州濤，&”為二一卿．.&, －二”&&．。游．．鵠低謝亂為亂”州m..&,. .0...”。．,..,t亂川一蘇湯不認11湯瀾瀾訕不「一訌祕瀾jii：蘇C膩認，不瀾蘇而i瀾萬于不二h斗：騙斤：祕不石不斗斤：;；于 怎他雙豐變雙他伶豐t’關鰍豐整雙鈴然扑贊修變縫徑登＿界變馳巒徑件巒’t,.&,1.,．冷．,,,&&l，紙幼嗡L”•．.，鰍“,1t•聯，&“亂”權“.,&,“·訕調洶開·州增馮黝，.“馬以 臘。h,,“闢u涌縫．•。”.&&.,,,I．開，輪．，。，,．…磁．&,．誠”。，*&.&&&，嚇丁面h獸胎膩必一不；面痲：面’一膩面訕瀾t乃j一斗i祈一蘇瀾鑲：i汗’爾二i蒲騙g蘇石不瀾”召汗排：萬’一叢萬’ •．.n••口．．馴”•開一自t鯧。歸電鳥．俗件縫二計t7．討權常．個奮t為．‘忽神．勵權的。，奮參勵訕．n鳥磚．語電：陰。‘響〕）奮寫：．才才自個．儲t露磚n）開卜露才細購．&l•乃．討》．開．唱，nl‘歸C讓n．鉀紮訕•．歸讓儲一‘才嗡露閱。自奮華藝鳥。細中磚一遺分口馴陽．，妒觔露論儲．協“t論》J口。 也闢州“開．．馴開•‘電 他豐乞＿＿黔吋黠豐。卜竺．參雙擊竺整叩堅豐．!．登神牌．.,“攤1,:,,&“·，,&&L鵪”瀾，.&l.&,k&&,L&&.,”荊L&”囀”t‘亂，，。”，戶OO 仕豐州乏＿一‘＿秀登秀丑“一黝各墾擊竺巒竺，合趁抑豐t整合計擊雙，雙t整懿．獸籐一籐瀾6痲g沼騙萬藪痲．．認tt.:&‘薦j”一痲州一亂這必瀾以不痲獸編B‘日必必召：不B 竺合“,．開•“目“，乞整乞整森＿L墾鼾竺丰然豐拷，各柑參鈴L”二”.,,i嚇痲么。鴉痲亡細必丁面亂弱，．必涌祕吃，.&,..”亂讓。鳥亂痲，h不’i兩t’一于不，蘇祈不茫．電：祈，一 蛐．.0 ..t,..&.&t．論情一，,，亂”,．。｀&，滷，.&‘載必獸痲云騙i汗載騙。亂泌州認床斤疲以h織痲•甲i’必斗，z．汗騙編’．祈邢‘;．以寫：:’森：.&. 奮闢d魚“，•”一。，．乞．幼亂楓t－討t么協t:．的輪‘含I》• .n詐．神勵分．絡常．觔才，一鈴當，一‘,I，一為。1,‘飼曆寺．,：器開給二勵必．月勵扑俗1一‘蠶1．婦討．。！婦一。才t彥』口討j口緣討。｀個哺一h”。：）祝弘．。‘t論唔、 -－胤•氣，你榭亂“他訕，.．州嬝瀾舉灘伐·m澗贗∥游，｀榭饑·”辦瀾“”謝嗡淤押灣個嚇·黝劇游衛·I．偽．..,,”。潤計t’認•聯〞”“體．&t，•”·”州斗，:’才〝 劇開觔斤盧間馴闢劇盤綢陰口 輪d,,h•馴j劇淌歸‘”一儲饞．論方歸．,t戶．:,f.．倘，許．計誇一n權•．,,，諦．汁”.n電參．,，計”.,，論．“。．j）。鈴一，，鈴．&e..，寫華鈴．,,”件寫）．•，，界．,,n。〝嗡】劇計紳一，,”鳥權奮一t．計，，計鵠t，二， h&,，唱．目，由．••“自•‘一柑．‘勵•。：I鷓．o,t方‘訪•．購，:．結開．的t二弘．歸騙。儲緣鳥一騙勵個斗．的儲J!t奮“二爭奮鸛一念當，-‘嬌屹，才．啊卜個n．繪偶．輪t論．儲馴開：.：跑自給一）念唱論．婦中口飼。合：個，&．界啼t,&：》一言乏一：計r，略t&.&. 細•．••寫“結么網州喲＇磁ht。‘，合柑．觔勵磚．婦計參．婦觸．幼，e由．開，神二：).．為方•二••。辟•．細0．餐•．l.t，申）•．,，。為，．怏，吋．,，煙．•，。唱．,：言縴言．神0．為電露】．婦，他：神奮．，『t細一磚計：才．神喝為．婦珍t纏．:l擊．自．,t常nj．。會鈴‘, 細黝“.．細•細•．‘。，」寫一‘鳥．物，.&t勵一神．，卜，1.．訂．ot.．計，：寫．弘一《•，.&,，觔一嗡，儲，，。”一C發．胎，，二‘乞。tt•一》丰才‘才。一屹鉀·。計。口開一〞t otl•．:,f&，。越·t卜，．必：, 細•．’個憚崤神購．訕“』•權，．縫》輪‘胎”．待t,．鈴黝壯。細n．購t婦．鈴訕細開一針‘擊I坤。•，勻：鷺．開口開。結《輪．協》t計。弘：個‘。“t為．n含口馳．論t訪．偶tl戲．n｀計嗚．吋勵倘＊才1常：論．九》，儿．參f鴉症．婦t才tj．騙•磚1．卜吋，。界仃彎鵠， 由．閑、，•細•個魚“禎珍•‘：忽．.n一才，.,I電，■令：一”．袖開．計t：矓。闢計•雙一鵝鷥洛，《發。當，,.:‘祕鈴．”電口奮神，當。，．儲命坤．話《儲．神黝n，·個鴉唔．&t當購．魷·當抽”勵闖．論C計．綢勺n自．論綱。二）t:,．舛，,,t神鈴，nt,1.,,, 魚口••目亂騙緘勵縫細• 乞豐雙巒、團“陌巒·變巒·巒＿_&＿巒“中·吋低‘”亂”二“t二‘,,‘。二”，二，．瀾二”，詣：．憐，.,，二轉l&&，怎，．偽．,，亂”,.0.&,.&,.,，儲。5.,,,.&& 乞豐巒＿＿。＿_._＿繡．.0 t...&,．洶．．騙·取“.．•t…．。•游，亂州”,o•常亂聯亂”•瀾．湧．.,,..&.．神•”‘洶t州“痲，祈云云萬亂痲一痲一必 h•．•“間h閑．細”“•·…：-－一二－－一二－－一y,’一”‘一r&&&，一’一’－一二－一二－－一”&?”→－－一’．·。二。·＝=，·＇，。·二。·二 一”一，一一－---－一。－一妒。－一領－-－一h一胎圳．輪。認．磚為．鏽 ,&&．•州”開d闢，,’以亂幼亂器個．馴，Lo..,I執‘訂．．。•一娼喝．.t.’亂路．t,，路．鈴．．仰，.:,I．鈴，.&..,,L磚，.”亂鈴I路，.t.,..,,.“計．&&.,,,.,&.,,,，。 ，開臨網劇”•．t••．&“•。牌”·“0二，&.&&.01二州韋協瀾•．婦。”.&，攔游以．&c外婦，，訕．,，州．”。，&．論，．購．”。鑄．。，，。。”，謝．”州．•州‘一州，、。，，。．&,,&&&,,.&-.t,.”·，&,.&.&”之訕仇，．跚． 二”&&-! 屆｀遞 IDA CMMIT 704-1W PRWZCT 129!ýVnffi RWORT (SECOND) WATER SUMY AND SEWE~ PROJECr ESTIMM-AND ACMAL CUMULATIVE MENDITURES BY YZAR Mepal~e RWees - Million (X Total) 2111 Awai"I Ui att "i ~ - (z- WO (9 m) (Z g =) g Mr) a (Z 2.19 2) - 4.66 16) - 6.85 5) a &9M/» 33.77 < 33) 9.09 1.29 < 8) 14.19 31) 4.85 19) 49.85 33> 4.94 t 4) 3 1979/80 72.31 ( 76) 3.49 6) 10.28 t 63) 0.06 ( 23.82 (81) 7.79 31) 106.61 76) 13.33 10) 4 1906191 96.03 (100) 17.53 19) 15.78 (100) 1.26 ( 8) 29.26 (100) 14.39 60) 141.07 (100) 33.38 23) cc 3 1981/N 48M 52) 3.35 ( 22) 20.48 81) 72.49 34) 6 1%2183 61>27 74) 5.83 ( 38) 24.30 (91) ~ 0 74) 1 1963/84 73.83 81) 10.66 70) 15.12 (100) 111.61 83) 8 1984M 78.84 80 13.96 92> 25.16 (100) 117.97 88) 9 IMM 93.74 000) 15.17 (100 25.16 (900) 134.07 (100) (1) Lffid Traimird ~ nistratim c~ tug sar~ * u~ 02 Afflai»1 t 9.67 0.16 2.49 25.94 29.26 m~ « Actual * 1.72 - 8.48 14.96 23.16 J - 90 - 'ANNEX 19 NEPAL - CREDIT 470-NEP> - (PIRST) WATER SUPPLY AND SENERAGE PROJECT NEPAL - CREDIT 704-NEP> - (SECOND) WATER SUPPLY AND SEWERAGE PROJECT .PROJECT COMPLETION REPOR" Ei qO a NEPAL - CREDIT 470-NEP - (FIRST) WATER SUPPLY AND SEWERAGE PROJECT NEPAL - CREDIT 704-NEP - (SECOND) WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT WATER SUPPLY AtN SEWERME CORPOMAMM -NEPAL ffi. s -fl- ' "I'. - e,au. 0 ( ...... O * ,-.m. JI;W__ -4Vr II FINANCE A C C-ICAL SERVICES NOINEERIN19 77AQ O C t I C ) _A T WSSC - ARC H 19 8 5 ORGANIZATION (AND OFFICE LEVEL STAFF) - 92 - ANNEX 21 NEPAL - CREDIT 470-NEP - (vIRST) WATER SUPPLY AND SEWERAGE PROJECT NEPAL - CREDIT 704-NEP - (SECOND) VATER SUPPLY AND SEMERAGE PROJECT PROJECT COPLETION REPORT TARIF HISTORY AM PROPOSALS <0) (2) (3) (4) (5) (6 () Alloffble connectio Coesueption for Charge per 8' Cunmetion Charge Charte/ftt Nov Cuoer Knieum Charg Witta Charge guces Oet <3) up to 100 ft eess of (3) Deposit Ns/.onth 40 /soth fl . Was II. Nas 4I 3 1 0 10 28 80 2 3 08 L103.8 mo3* 1.0 .8 - 1 .0 Watered 1 5 3 30 10 10 '1 .801.10 3.40 400 00 - 0.70 3.00 - - 8W 3/4 30 38 00 39 37 37 0.808.30 3.40 - 200 350 • 8.00 1.80 • • 1,000 8 40 54160534 50 50 0.80 .203.40 •• 4004600 • 2.005.00 • •-4,000 ii 130 168 410 134 140 140 0.80 1.30 3.40 00 00 - 3.00 3.00 - - 10.000 a 200 280 00 234 335 233 0.80 1.20 3.40 800 1,000 • 4.00 7.00 0 • 5,000 3 600 840 3,360 754 700 700 0.80 1.20 3.40 - 1.200 1,300 - 6.00 10.00 • • 30,000 4 1,300 1,680 4,720 1,504 1,400 1,400 0.80 1.20 3.40 - 1,600 3,o • 8.00 12.00 - • $0,000 * Possibly thit should bo 460 - *** note (2) betot. Usetered ain Lima Mditional sranch Monnetion Nothly Nonthly Carge 81se (in.) fl,NR 9 13 38 3 4 1 3/4 30 45 132 6 9 1 NT a A A b A 0 1 60 90 264" 12 10 ? APPLICA9L - 8 170 270 490 30 45 ? 3 340 450 820 30 75 7 3 930 1,350 2,460 100 50 ? 4 1,930 2,800 5,100 235 340 1 ** A apparten typographic ertr ta use' Proposal correctod bere. 8tsndpost: 100 1a 330.90 (NI/aob/tetadposti payable by m00 winistry of lpinec*) • ttecettv Apr 1975 : a Eff«eciv. St 1981:: 23% of Matar 8ill (parable by those connewted). u sI¢ proposd 1984 Nmot smioned. 502T3S (1) thr~hout, the uter tariff structurt ts two-tier: (i) a minimu base charga ~enthly for up to a given minia quatity (ii) an "~ucess over bas" charge (per 90) for Gny additional coaaumption. (2) 'M "bas charge" calculated as a rate par as for te allowable consuapcion Is: Conection Stsi (ta.) *_ f 0.50 0.70 2.00 3/4 . 0.69 1.03 2.96 1 0.74 1.12 3.20 1I 0.77 8.20 2.93 2 0.79 1.20 .3.40 3 0.80 1.20 3.37 4 0.80 1.20 3.37 (3) nhe Moaunt of the bse charge for 3/4" and above (properly) refleett th delivery cap#city of various dig* et eection#. a A uin~na charge of mSa 460 ould yield nus 3.30/9*: Ibis. ts more conUistent with the patterns. NEPAL IDA CREDITS 470-NEP AND 704-NEP FIRST AND SECOND WATER SUPPLY AND SEWERAGE PROJECTS PROJECT COMPLETON REPORTS APPRAISAL AND ACTUAL FINANCING PLANS (NRs '000) Sm of let Project Appraisal Actual 2nd Project Appraisal Actual 73/74 to 77/78 end Actual Actual* 73/74 to 77/78 73/74 to 77/78 77/78 to 80/81 Appraisal 77/78 to 80/81 73/74 to 80/81 73174 to 85/86 APPLICATIONS Amount I Avoumt 2 Amount 2 Amount z Amount I Amount 2 let Project 101.015 75.23 71.310 63.74 124.730 37.81 220,960 50.02 176.397 67.72 190.536 34.12 2nd Project 13,668 10.17 - - 135.130 40.96 135.130 30.59 33.384 12.82 134.070 24.00 3rd Project - - 24.920 22.20 3.750 9.63 31.7 7.19 6,149 2.36 271.901 48.66 WSSB(C) Works 6.300 4.69 2490 2.8 11.000 3.33 I1.00O 2.49) Duties and Taxes - - - - 4.200 1.27 4.200 0.95 - - - - Increase in Working Capital 13.32 9.91 15.640 13.98 23.080 7.00 388720 8.76 44.570 37.11 (37.960) D680) TOTMA APPLICATIONS 11i.263 100.00 111"s 329.890 100.00 100.00 26500 100.00 58. 100.00 SOURCES Internal Cash Generation 12,271 9.13 7.310 6.53 45.120 13.68 $2.430 11.87 14.510 S.S7 23.720 4.25 LESS Debt Service - - - - . 5.91 19049q 4.41 - - 35,400 6.34 Net Internal Sources 12.271 9.13 7.310 6.53 25.630 7.77 32.940 7.46 14.510 5.57 (11.680) (2.09) Borrouiag: IDA Credit lot Project 82.368 61.30 53.300 47.65 91.880 27.85 15,180 32.86 118.170 45.36 133.300 23.66 IDA Credit 2nd Project 3.68 2.36 900 0.80 100.000 30.31 100.900 22.84 30.120 11.56 86.947 15.57 IDA Credit 3rd Project - - - - 2 D00 6.37 21,000 4.75 - 1,0 0.75 157.240 28.13 Total Borrowing 85.536 63.66 54,200 48.45 212.880 64.53 267.080 60.45 150.230 57.67 377.487 67.58 Equity: Lst Project 30.455 22.67 17.110 15.30 29.680 9.00 80.040 16.12 58.227 22.35 57.236 10.25 2nu Project - - - - 37.500 11.37 37.500 8.49 3.264 1.25 47.123 8.44 3rd Project )33,250 29.72 9.000 2.73 9.000 2.04 )34,269 13.16 88.381 15.82 WSSX(C) Wlorks 3,5 11.000 3.33 12.000 2.49) Consumers' Contribution 6.101 4.54 - - - - - - - - - - -PStoegand Taxes - - - - 4,200 1.27 4.200 0.95 - - Total Equity 36.556 27.21 50.360 45.02 91.380 27.70 141.i4; 32.09 95.760 36.76 92.,40 -34.51 TtAL SOUREF 134.36 3 100.00 13.87 300.00 329.890 100.00 4 100.00 260=00 100.00 58 i7 L00.00 * Actual includes 2nd Project ear Imated costs for 1984/85 and 1985/86 of NRa 22.457 thousand. Sources of finance for this Investoent assume IDA 652, HMG 351 - ie.. the actual fir.cing ratio up to 1981/84.