India - Gujarat Water Supply and Sewerage Project

Documt of The World Bank FOR OMCAL USE ONLY Repwt N 12349 PROJECT COMEION ORT DIDIA GJARAT WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 1280-IN) SEPEBER 24, 1993 MICROORFAPHICS Report No: 12349 Type: PCR Infrastructure Operations Division Country Department 1I South Asia Regional Office This document has a restricted distribution and may be used by recipients only in the perfonnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  gJlARAT WA1R SUPPL AND SEWERAGE MM= - {~C,REDIT I1tIM CURCY EQUIVAAe US$1.00 5 Rs 25.00 Rs 1.00 = US$0.04 -m millimeter (0.04 inches) cm - centimeter (0.39 inches) m - meter (39.37 Inches or 3.28 ft) m - klometer (0.62 miles) ha - hecte (10,000 square meters or 2.47 acres) sq k-m - square kilometer (0.386 square miles) I liter (0.22 Impeial gallons or 0.264 US gallons) lcd - liters per capita per day cum - cubic meter (220 Imperial gallons or 264.2 US gallons) ml - million liters or 1,000 cubic meters mid - million liters per day (0.220 million Imperal gallons per day or 0.264 million US gallons per day) mgd - million gallons (mperial) per day Sg:IATINQ AND ACRQNM AIC - Average Incremental Costs AMC - Ahemedatad Municipal Corporation GO - Government of Gujarat GOI - Government of India GWSSB - Gujarat Water Supply and Sewerage Board IRR - Internal Rate of Return IRWSS - Individual Rural Water Supply Schemes NGO Non-Governmental Organization RMC - Rajkot Municipal Corporaton RWSS - Regional Water Supply Schemes SAR - Staff Appraisal Report FISCAL YEAR April 1 - March 31  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.SA Offic *f Director.-Ce"ral operatios Bveluatlou September 24, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECTs Project Completion Report on India ,Guarat water Suinlv and Sewerage Prgject (Credit 1280-IN) Attached is the report antitled "Project Completion Report on India - Gujarat Water Supply and Sewerage Project (Credit 1280-IN)" prepared by the South Asia Regional Office. No Part II was provided by the borrower. This, overly complex, project closed after a three year extension of the credit's closing date and a major restructuring with some of the major components still incomplete and SDR 15.6 million out of the original credit of SDR 63.8 million canceled. The large number of different components clearly overburdened both the newly created implementing agency and the Bank (over 300 contracts required Bank rwview). The projected institutional improvements did not materialixe and none of the financial covenants were complied with. The low cost sanitation component was, reportedly, successful, after a NGO took over anagement but no details are provided. Overall the performance of the project is rated as unsatisfactory, institutional development as negligible and the sustainability of its limited benefits as unlikely. The generally informative and well written PCR has some shortcomings in the provision of cost and financial data. The project may be audited. 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 authorization.  FOR OMICIL USE ONLY PROv.ut COiEoSurLEr Age= IND1I GUXMaR WATE SUPPL AND SKEMnfRAG PRQEC PCa :r 121 Tableg otet zag2 No. Prfc ....... . . . . . . . . . . . . . . . . . . . . .. . I , i Evalution summary .......I......... ........................... , f Part : PROJECr PWXVIWFROM BA S SPERSPMCM ........... I ProjectIdentity 1. Backgro n. . 1 Sector,Status,Objectives andPolicy ...... I ProjectObjectives ............ 2 ProjectDescription . 2 Project Design and Organizadon . 3 Project Implementation . 5 Project Results . 7 Financial Covenas . 8 Impactof theProject . 10 Bank Performance . 10 Borrower Perfornce .. 10 Project Relationships . 10 Consule&g Services .......................................... 10 Project Documentation and Data . 10 Studies . 10 Part I: PROJECT REVIEW E%QM BORROWR'S ERSPECl (under preparation) . 11 ParII: SAALRAT ...... 12 Related Bank Loam and Credits 12 ProjectTimetable 13 Estimated and Adu Disbursemen.s 14 Allocation of Credit Proceeds 15 Comparison of Planned vs. Actual Implementation Schedule 16 Economic Anaysis .17 Investment Coss and Financing ............................ .... 19 Overview of FinancW Covenants .20 Staffing and Missions .21 Annexes Annex 1: Financial Performance Profle .23 Annex 2: Compliance with Covenant Calculatiors ... ................... 33 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.  PROJECT COMPLEllON REPORT INDIA OUJARAT WATER SUPPLY AND SEWERAGE PJROJECT (CEMDIT 1280-IN) P,reface This is the Project Completion Report (PCR) for the Gujarat Water Supply and Sewerage Project for which an IDA Credit in the amount of SDR 63.8 million was approved on July 6, 1982 and which became effective on February 8, 1983. An amount of SDR 11.0 million was cancelled on December 5, 1991. The project was officially restructured in March 1, 1989. The Credit was closed on December 31, 1991 and an undisbursed amount of SDR 4,610,215.56 was cancelled on May 13, 1992. The PCR was prepared by the Infrastructure Operations Division of the South Asia Regional Office (Preface, Evaluation Summary, Parts I and III). Preparation of the PCR commenced during the February 1992 supervision mission and is based, inter alia, on the Staff Appraisal Report, Credit and Project Agreements, supervision reports, correspondence between the Bank and the Borrower and internal Bank memoranda. PCR preparation was delayed because the Governent needed time to prepare the financial and cost tables following the last disbursement in May 1992.  - ii. - PROJECT COMPLETION REPORT INDIA GUJARAT WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 1280M1 ESvaluation Summar 1. bei,e 1.1 The project included both urban and rural areas in the state of Gujarat. The objectives of the project were to: (i) bring water to rural communities where water is scarce or unsafe for human con- sumption; (i) improve or extend water supply and sewerage services in selected urban centers; (iii) extend and upgrade sewage collection and disposal systems in densely populated areas in major municipa- lities, including the capital city of Ahemedabad; (iv) provide low-cost sanitation in medium-size towns which are unable to afford water-borne sewerage; and (v) strengthen the institutional framework of the sector through Improved financil nanagement, accounting, billing and collection practices, the intro- duction of cost recovery and the establishment of training facilities for water supply and sewerage personnel at all levels within the sector. 2. ImDlementation Exgerience 2.1 Both the Gujarat Water Supply and Sewerage Board (GWSSB) and the Ahemedabad Municipal Corporation (AMC) were expected to implement the project in a four- to five-year period com- mencing with detailed design in July 1981 and the first disbursement in December 1982. Physical constuction was expected to have been completed by December 1986, at which time all schemes should have been operational. It was also anticipated that the rural schemes would be completed one year ahead of the urban schemes. However, land acquisition and preparation of tender documents did not proceed as smoothly as expected to permit the timely bidding and awarding of major contracts. Ibis resulted in long implementation delays. In December 1986, the initially planned physical completion date, less than one-quarter of the Credit had been disbursed and none of the major components were completed. The original closing date was September 30, 1987. 2.2 On March 1, 1989, the project was officially restructured to include additional water supply components to help the hardest hit of the drought-stricken rural areas of Gujarat. The closing date was extended to September 30, 1990 and then to September 30, 1991. The overall disbursement rate was increased from approximately 50% to approximately 80%1 and covenants dealing with cost recovery and billings and collections modified so that compliance with revised target dates could be reasonably expected. The closing date was extended once again to December 31, 1991 in order to produce an acceptable action plan for cost recovery in rural water schemes. However, The Government did not produce an acceptable plan and the Credit was closed on December 31, 1991. An undisbursed balance of SDR 4.6 million was cancelled on May 13, 1992. t The inreaset disbursemt rate was to assist the Government of India in dealing with the oil crisis at ht time.  - iii - S \ t. ~Resu; 3.1 Project results are mixed. The GWSSB, created during project preparation as the successor to an erstwhile government department, hc Po experience with the Bank and did not at the beginning believe in appointing enginiering and financial management consultants to assist with project imple- mentation. There were considerable procurement delays and physical implementation was behind schedule. In the end, most of the project components were *'wmpleted except for some minor works and the major AMC sewage treatment plants, which experienced lengthy land acquisition delays, were s:ill under construction on the closing date. The low-st sanitation progran in the and rural urban areas, implemented by a Non-Governmenta Organization (NGO), was successful. 3.2 RCatively little progress was made on sector policy and institutional issues. The Government of Gujarat (GOG) did not comply with the financial covenJ. which required a modest tariff to meet operation and maintenance costs for rural water supply. Also, AMC was not in compliance with the cost recovery covenants for water supply and sewerage services. GWSSB's own institutional develop- ment was long delayed because of the reluctance to obtain assistance from consultants and consequent delays in the timely submission of financial statements and audit reports. Nevertheless, as project imple- mentation advanced, there was improvement in most of these aspects including the concept of cost recovery, on which there is a greater awareness of the need given GOG's shrinking resources. 4. Sustainabilky 4.1 The prospects for achieving project sustainability are not good unless GO0 takes the necessary actions to increase tariffs/collections and improve efficiency. As projected in the SAR, ihe necessary resources for Ahemedabad car. be achieved through the delinking of water and sewerage bills from property tax. GOG has initiated actions designed to implement delinking and tariff increases in 1993 under the Gujarat Urban Development Project. Annual twriff increases are also needed in the other municipalities during the project phase-in period. For rural areas, again some actions have been taken to increase tariffs and improve recovery levels to 50% in 1993 and 100% by 199S, but the effects in increased resources have yet to be confirmed. 5. L-essons LW_en 5.1 rojecPreparation. While project preparation did address most of the main sector issues, implementation delays might have been avoided if the design engineering and procurement arrangements for major contracts had been further advanced before project approval. 5.2 Water Tariffs. One of the key policy elements of the project was the increase and mainten- ance of tariffs at an adequate level to allow sustainable operations. This objective was never achieved. In hindsight, more prompt and forceful actions were needed: (i) during preparation, some 'up-front" action should have been taken towards meeting this objective; and (ii) during implementation, suspension of the Credit when covenants were not being met. In addition, less complex tariff covenants might have obtained better results. 5.3 NGO Involvement. Progress was minimal in the low-cost sanitation program in the rural areas until the appointment of a reputable NGO. The importance of NGO involvement and community participation is apparent.  - iv - 5.4 Instittional A gemMents. In effect, GWSSB's main function has been to arrange the design and constmction of water schemes. Operations and maintenance of the schemes was left with the municipalities and local bodies. This separation of major functions has not provided the proper incentives needed to operate in an efficient manner. An institutional arrangement which embraces both the construction and the operations and maintenance functions and also Includes resource mobilization and financial management is needed.  PROJECT COMM=rlN BEE=R INA GUJARAT WATER SUPPLY AM SEWERAGE PROJECT D1TE 12K0-1N) Part I: PROJECT EVIEW FROM BANK'S PERSPECTVYE 1, Project Identity Name : Gujarat Water Supply and Sewerage Project Credit No. : 12804IN RVP Unit : South Asia Country : India Sector : Water Supply and Sanitation 2. Bakeround 2.1 As in much of India, water supply and sewerage systems in the urban centers of Gujarat state are owned, operated and maintained by local bodies such as municipal corporations, municipalities and towns. In the rural areas, Regional Water Supply Schemes (RWSS), serving several communities, are owned by the Government of Gujarat (OG), and Individual Rural Water Supply Schemes (IRWSS), each serving a single village, are built by GO and handed over to the Village Panchayats for operation and maintenance (O&M). The Gujarat Water Supply and Sewerage Board (GWSSB), under the Water Supply, Health and Family Welfare Department, GO, builds, operates and maintains the stateowned RWSS and builds and hands over, for O&M, the IRWSS to the Village Panchayats. Created by 000 in 1979, GWSSB became fully effective in April 19Q1. In addition to building the RWSS and IRWSS, its mandate was to also finance, build and commission water and sewer projects in the urban areas and hand over the facilities to the respective local bodies for operation and maintenance. However, local bodies have the option to finance and execute such projects by themselves. 2.2 The amount of financial assistance provided by GOG varies depending on the size of the local entity. Municipal Corporations do not normally have access to GOG funds for capital works while the smaller municipalities and town Panchayats are supported by GOG at varying levels based on size and importance. The Ahiemedabad Municipal Corporation (AMC), which should finance its own services, is the largest of the municipalities in the state and was the executing agency for a large sewerage component under a separate Project Agreement of this Credit. 3. Sector. Status. Objectives and Policy 3.1 Gujarat state covers an area of 187,091 sq kIn, is situated in the northwest of India and has a total population of about 40 million distributed among some 216 urban areas and 18,275 villages where- in 70% of the Gujaratis live. The area has an uneven distribution of water resources which causes nearly half of the village population to suffer from lack of safe drinking water. There are three perennial rivers - Narmada, Tapi and Mahi - all of which are located to the south. The semi-arid area of Kutch, to the northwest, has no reliable source of water supply. More, with few exceptions, ground water is the main source of water supply. However, it is greatly limited because of rocky stratum, or increasing salinity  -2 - and contamination by fluorides, as in the Mehsana District, due to overpumping for irrigation and lack of GOG regulation. In recent years, the seasonally low ground water supply levels have become even lower, due to frequent and long droughts, the severest occurring in 1986/87 when most wells failed completely. A water resource sector development plan and the political will for its implementation are urgently needed to prioritize actions which would encourage water conservation and control pumping for irrigation, the main cause f3r the irreversible degradation of aquifers and increasing shortages of potable water supplies in the rural areas. 3.2 Resources devoted to the sector have not been sufficient or well focused. GOI, in the sixth Five Year Plan (1980-85) provided 2.2% of the Plan for rural water ($505 million) and 1.8% for urban water ($411 million), an increase of three to four times over the previous plan. At the GOG level, how- ever, because of competing demands for resources within the state by other sectors, cyclical droughts, lack of planning, variable technical and management skills, shortages of key materials and equipment, as well as foreign exchange constraints, only 1%-2% of public expenditure were being invested in the sector. in general, COG's Dolicy has been to extend distribution systems, with limited emphasis on source development and little or no attempt to Improve safety of the drinking water quality through improved operation and maintenance and the reduction of unaccounted. for water. This policy has resulted in even greater water shortages. A comprehensive sector planning study Is therefore needed. 3.3 The GOI sector development objective for sewerage coverage was 80%. In Gujarat, 19 urban areas have water-borne se werage facilities with partial service coverage and only primary sewage treatment. However, the major cities of Ahemedabad, Baroda, Bhavnagar and Surat operate systems with secondary sewage treatment facilities. GOI's target of 80% urban sewerage coverage became unachiev- able in the near term, and the sector development objective has shifted to greater use of low-cost sanita- tion technology, wherever feasible. The project's low-cost sanitation program, developed with this objective in view, has surpassed expectations but much remains to be done. 4. Proect Objietiv 4.1 The objectives of the project were to: (i) bring water to rural commrunities where water is scarce or unsafe for human consumption; (ii) improve or extend water supply and sewerage services in selected urban centers; (Iii) extend and upgrade sewage collection and disposal systems in densely popu- lated areas In major municipalities, including the capital city of Ahemedabad; (iv) provide low-ost sanita- tion in medium-size towns which are unable to afford water-borne sewerage; and (v) strengthen the institutional framework of the sector through improved financial management, accounting, billing and collection practices, the introduction of cost recovery and the establishment of training facilities for water supply and sewerage personnel at all levels within the sector. 5. Project Description 5. 1 The project had six components: (1) Urban Water Supplies - Source Development, Transmission. Treatment and Distribution Systems (a) Blhavnagar - 60 mld from Shetrunji irrigation reservoir; (b) lamnagar - 25 mid from Und-l irrigation reservoir; (c) Godhra - 10.65 mld from the Pan-AM irrigation canal;  -3- (d) NMiad - 9 tube-wells yielding 16.8 mid; and (e) And - 3 tube-wells yielding 5.28 mid. (2) UJrbn Sewerage (f) Ahemedabad - peripheral trunk sewers, one on either side of the Sabarmati River, terminating at two pumping stations of 621 ndd and 795 mld peak capacity and two aerated lagoons 227 mld and 155 mld average flow capacity. (g)