India - Bombay Sewage Disposal Project

Document of The World Bank Report No. 14294-IN STAFF APPRAISAL REPORT INDIA BOMBAY SEWAGE DISPOSAL PROJECT JUNE 12, 1995 Agriculture and Water Operations Division Country Department II - Bhutan, India, Nepal South Asia Regional Office  CURRENCY EOUIVALENTS (January 31, 1995) Currency Unit Indian Rupee (Rs.) US$1.00 Rs 31.00 Rs. 1.00 US$0.03125 MEASURES AND EOUIVALENTS mmn millimeter (1 millimeter = 0.039 inches) m = meter (1 meter = 3.28 feet) km = kilometer (1 kilometer = 0.62 miles) km2 = square kilometer (1 km2 = 0.386 square miles) ha hectare (1 hectare = 10,000 square meters = 2.47 acres) lit = liter (0.22 Imperial gallons or 0.264 US gallons) Ipcd = liters per capita per day m3 = cubic meters (220 Imperial gallons or 264.2 US gallons) Ml = million liters Mid = million liters per day (0.220 mill Imperial gallons or 0.264 mill US gallons) MIGD = million Imperial gallons per day (1 MIGD = 4,546 m3/day) ABBREVIATIONS AND ACRONYMS BCWQS = Bombay Coastal Water Quality Studies BMR Bombay Metropolitan Region BMRDA = Bombay Metropolitan Regional Development Authority CPHEEO Central Public Health and Environmental Engineering Organization MoRDE Ministry of Rural Development and Employment DWF = Dry Weather Flow EA = Environmental Assessment FY = Fiscal Year GNP = Gross National Product Gol = Government of India GoM = Government of Maharashtra ICB International Competitive Bidding LCB = Local Competitive Bidding MCGB Municipal Corporation of Greater Bombay MoUAE = Ministry of Urban Affairs and Employment NEERI = National Environmental Engineering Research Institute NDP = Net Domestic Product NGO = Non-Governmental Organization PCRs = Project Completion Reports PPARs = Project Performance Audit Reports R&R = Resettlement and Rehabilitation SOE = Statement of Expenditure WSSD = Water Supply and Sewerage Department GOVERNMENT FISCAL YEAR April I to March 31  BOMBAY BOMBAY SEWAGE DISPOSAL PROJECT Table of Contents Page No. Credit, Loan and Project Summary ........................... ....................... iii I THE SECTOR ................... .......................................... 1 Introduction ............................................................. 1 The Sector Context in India ........................................................... 1 The Sector Context in Maharashtra and Bombay .......... .................... 2 Sector Organization . ............................................................. 3 Sector Development . ............................................................. 4 Government's Sectoral Policy ............................................................ 5 Main Sector Issues . ............................................................. 7 The Bank's Sector Objectives ........................................................... 8 Performance in Previous Bank Operations ............... ......................... 9 Rationale for Bank Involvement in the Proposed Project .................... 10 II PROJECT AREA, SERVICES AND DEMAND .......... ................... 12 Project Area ............................................................. 12 Water Supply Services .............................................................. 12 Sanitary Sewerage Development and Service Levels .......... ................... 13 III THE PROJECT ............................................................. 17 Objectives ............................................................. 17 Description ............................................................. 18 Status of Project Preparation ........................................................... 21 Project Cost ............................................................. 22 Financing Plan .................... ......................................... 22 Implementation ............................................................. 24 Procurement ............................................................. 24 Disbursement .................... ......................................... 26 Operation and Maintenance ........................................................... 27 Supervision ............................................................. 27 Land Acquisition-Resettlement and Rehabilitation (R&R) ................... 28 Environmental Aspects ........................................................... 28 Monitoring Indicators .............................................................. 28 Conditions for Negotiations and Effectiveness .............. ......................... 29 IV THE IMPLEMENTING AGENCY ......................... ........................ 31 The Water Supply and Sewerage Department of the Municipal Corporation of Greater Bombay ........... 31 Organization and Management ........................................................... 31 Project Management and Organizaton .............. ......................... 31 Training ............................................................. 32 Insurance ........ ............................................................... 32  - ii - Page No. V FINANCIAL ASPECTS ........................................................... 33 Recent Financial Performance ........................................................... 33 Tariff Analysis ............................................................ 34 Customer Receivables ............................................................. 35 Accounts and Audit . ............................................................ 36 Future Financial Performance ........................................................... 36 VI PROJECT JUSTIFICATION ........................................................... 38 Project Benefits ............................................................ 38 Rate of Return ............................................................ 38 Least-cost Solution . ............................................................ 38 Enviromnental Impact ............................................................. 39 Resettlement and Rehabilitation .......................... ....................... 41 Project Risks ............................................................ 41 VII AGREEMENTS TO BE REACHED AND RECOMMENDATIONS ......... 43 Recommendation ............................................................ 44 ANNEXES 1 Existing Water Supply and Sewerage Facilities .......... .................... 45 2 Sewage Treatment and Disposal-The Master Plan Recommendations .......... 50 3 Project Description . ............................................................ 54 4 Implementation Schedules - Contracts - Costs - Procurement Mode .......... 63 5 The Second Stage Program ........................................................... 67 6 Implementation Schedule Chart .......................... ....................... 73 7 Estimated Schedule of Dissbursements ........................ ......................... 74 8 Progress Reporting and Project Supervision .............. ......................... 75 9 MCGB Organization Chart ......................................................... 78 10 Financial Statements and Major Assumptions ............... ......................... 79 11 Environmental Assessment Summary ........................... ...................... 87 12 Monitoring Indicators . ............................................................ 109 13 Lessons Learned and Their Application ............... ........................ 111 14 Slum Sanitation Schemes ............................................................ 122 15 Documents and Data Available on Project File .............. ......................... 139 MAP IBRD No 26628: INDIA - Bombay Sewage Disposal Project This report is based on the findings of an appraisal mission to Bombay in February 1995, comprising Messrs/Mmes W. Roach - Task Manager and Senior Financial Analyst, C. Couzens - Principal Sanitary Engineer, and S. Choudhry - Consultant (SA2IN); T. Walton, Envirorunental Planner (ASTEN); and P. Ware, Engineering Consultant.  - ii - INDIA BOMBAY SEWAGE DISPOSAL PROJECT CREDIT, LOAN AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiaries: Maharashtra and Municipal Corporation of Greater Bombay (MCGB). Poverty Category: Not applicable. While a slum sanitation component is specifically designed to benefit slum-dwellers, it represents less than 25 % of the project costs. Amount: IDA Credit of SDR 15.9 (US$25.0 million equivalent). IBRD Loan of US$167.0 million equivalent. Terms: Credit on standard terms with 35 years maturity. Loan repayable in 20 years, including 5 years of grace, at standard variable interest rate. Commitment Fee: Loan: 0.75% of undisbursed balance, beginning 60 days after signing, less any waiver. Onlending Terms: India to Maharashtra - as part of the central assistance to States for development project on terms and conditions applicable at the time. Maharashtra to MCGB - 25 year term, five years of grace at an interest rate of 13%. India will bear the foreign exchange risk. Project Objectives: These are: (a) strengthening the capacity of MCGB's WSSD in all aspects of the management of the provision of sewerage services; (b) sustaining the financial viability of the provision of water supply and sewerage services in Greater Bombay through direct charges to beneficiaries at appropriate levels; and (c) improving the health and environmental conditions in Greater Bombay including slum dwellers.  - iv - Description: The project includes: (b) the construction of two 3km submarine tunnel outfall sewers of about 3.5m diameter at each of Worli and Bandra to convey partially treated sewage effluent to the Arabian Sea; (b) a pumping station at Bandra; (c) two aerated sewage treatment lagoons at Ghatkopar and Bhandup; (d) facilities to prevent siltation in the influent tunnel at Ghatkopar; (e) the rehabilitation of the existing Ghatkopar tunnel; (f) measures to improve the structural stability of five existing sewage pumping stations; (g) conveyance systems improvements; and (h) slum sanitation schemes. It also includes technical and social services to assist implementation of the physical works, to upgrade MCGB's operational and maintenance capabilities with respect to Bombay's sewerage system and to plan and design a "Second Stage" program to further improve health and environmental conditions. US$ million Project Costs: Foreign Local TOTAL Worli and Bandra Outfalls 36.2 50.4 86.6 Bandra Pumping Station 2.8 29.6 31.4 Bhandup and Ghatkopar Lagoons 6.2 25.4 31.6 Remedial Works 8.1 27.7 35.8 Slum Sanitation 2.0 20.1 22.1 Technical Assistance 7.7 8.4 16.1 Planning-Design Stage 2 7.1 10.9 18.0 TOTAL BASE COSTS 70.1 171.5 241.6 Physical Contingencies 14.8 37.8 52.6 Price Contingencies 5.0 -3.6 1.4 TOTAL PROJECT COST 89.9 205.7 295.6 Financing: IBRD 167.0 IDA 25.0 Subtotal 89.9 102.1 192.0 MCGB 0.0 103.6 103.6 TOTAL PROJECT COST 89.9 205.7 295.6 The above figures include taxes and duties estimated at US$21.3 million US$ million Estimated Bank FY 1996 1997 1998 1999 2000 2001 2002 2003 Disbursements: IBRD Loan 2.2 36.1 54.8 47.6 16.9 4.6 3.5 1.3 IDA Credit 25.0 - - - - - - - TOTAL Cumulative 27.2 63.3 118.1 165.7 182.6 187.2 190.7 192.0  Project Benefits: The potential health and environmental benefits of improving the disposal of more than 60% of the sewage from the Greater Bombay area are considered substantial even though they are not readily quantifiable - particularly in economic terms. Under this "First Stage" of development, some partially treated sewage from two drainage areas will be discharged into the Arabian Sea at a distance of three kilometers from the shore line. Sewage from three other drainage areas will receive the equivalent of primary treatment before being discharged to tidal creeks. This level of sewage treatment and the effluent disposal arrangements will be a significant improvement over the present situation, in which sewage is discharged to the shoreline and to surface water drains and channels within the heavily populated urban area. Furthermore, under the Project, detailed studies will be conducted and a time-based program established for the "Second Stage" Program of sewage treatment and disposal facilities to further improve the quality of receiving waters. The provision of sewage treatment and disposal facilities under this Project will enable the very extensive collection and conveyance systems, which have been constructed under the Second and Third Bombay Water Supply and Sewerage Projects, to be effectively utilized. The slum sanitation schemes will help alleviate the harsh living conditions of some one million slum dwellers, mainly those occupying municipally-owned lands, by providing improved sanitation facilities - principally for safe excreta disposal. The implementation of this component will involve beneficiary consultation as to the details of the facilities to be provided and participation in the physical implementation and subsequent operations. Agreed implementation "Policy Guidelines" will ensure that any resettlement requirements are voluntary. The direct physical benefits of the Project will come from removing domestic sewage and industrial wastes from the inner city's natural water courses, surface water drains, shore line and beaches thus improving the living conditions of the urban population living in close proximity to the many "open sewers" which presently exist. This will reduce health risks as well as improve the city's visual and aesthetic environment. Economic No attempt has been made to estimate an economic rate of return. The Rate of Return: impacts on public health and the environment, which will result from the proposed investments, cannot readily be quantified in economic terms. Project Risks: MCGB's engineers have insufficient relevant experience to undertake large and specialized sewerage works of this nature; this increases the project risks. However, these risks will be mitigated by support from experienced consultants.  - vi - The aerated lagoons largely involve the placement and compaction of selected materials to form water retaining embankments and the construction of sand drains. These works require careful site supervision to attain the required level of construction quality, and sound on-site managemnent to avoid delays. The ocean outfalls present higher risks. Tunneling under the sea bed has fewer risks than constructing a pipeline on the surface of the sea bed, which is subject to weather and sea conditions. The inherent uncertainties with this kind of work, and the risk-sharing principles adopted in the contracts for this work (for reasons of cost containment and efficiency) do nonetheless bring a risk of cost overruns. Measures have been taken to contain the construction risks by ensuring that, prior to appraisal: (a) suitable contractors are pre-qualified under stringent criteria; (b) engineering designs are compatible with proven construction practices; (c) qualified consultants prepare the designs and supervise construction, having been delegated acceptable levels of responsibility; and (d) designs have been reviewed by qualified and experienced independent panels of experts, and their suggestions reflected in the final designs. To reduce the risk of cost over-runs, and any consequent delays in project implementation, physical contingencies of 25 % have been allowed for all civil, mechanical and electrical works, based on the rationale that for the Worli and Bandra marine outfalls and the Ghatkopar influent tunnel there are inherent uncertainties associated with tunnel construction. In the case of the aerated lagoons at Ghatkopar and Bhandup, there is uncertainty in the location of borrow areas that would yield sufficient laterite for embankment construction. In the case of the Bandra pumping station, the magnitude and complexity of work warrants a higher than average level of contingency. Similarly, because of the programmatic nature of the slum sanitation schemes, and the preliminary status of preparation of the pumping station structural improvements and the conveyance system improvements, higher than average physical contingencies are justified. Project ID: IN-PA-10480  - 1 - INDIA BOMBAY SEWAGE DISPOSAL PROJECT I THE WATER SUPPLY-SANITATION SECTOR Introduction 1.01 Urban water supply and sewerage (wastewater collection, treatment and disposal) are only two elements of the fabric of urban infrastructure. Other elements include, for example, roads and street lighting, storm water drainage works, electric power, telecommunications and so forth. However, water supply and sewerage are often separated from the others by two particular features: (i) they are not typically part of a "system" covering a much wider area as is the case, for example, in electric power and telecommunications; thus, the water supply and sewerage works are essentially "local" in character; and (ii) unlike roads an storm water drainage, water supply and sewerage lend themselves readily to being organized and managed as "utility" services with the possibility of full direct cost- recovery from beneficiaries. 1.02 These characteristics of water supply and sewerage have deserved its being classified as "a sector" in the Bank and in India. In the Bank, water supply and sewerage lending commenced in the mniddle 1960's - a few years before urban development lending commenced in the early 1970s. 1.03 In the late 1970s - it became recognized that water-borne sanitary sewerage, however desirable from an overall sanitation and environmental viewpoint, was sufficiently costly that lower cost alternatives were essential for many developing countries to realize improved sanitation and urban environmental conditions. Accordingly, much research - in the Bank and elsewhere - developed a number of lower cost alternatives for safe excreta disposal. In India, the twin-pit pour- flush water-seal household latrine was the alternative widely adopted. While not providing all the benefits of sanitary sewerage (since such latrines deal only with the safe disposal of excreta and not with wastewater generally) such programs have been found to bring substantial environmental benefit at more affordable costs than sanitary sewerage. 1.04 Accordingly, the sector in recent years has been more commonly referred to as the "water supply and sanitation" sector, with the word "sanitation" often having the restricted meaning of safe excreta disposal. The Sector Context in India 1.05 India is the world's second most populous nation (844 millions in 1991) and accounts for 16% of the world's population. India has a population nearly twice that of sub-Saharan Africa and of Latin America. However, it is only the world's seventh nation in area (3,287,000 km2) and the gross population densitv of 257 people per km2 is very high by world standards. 1.06 Urbanization, in India's 3,378 "urban communities", accounted for only 26% of the population in 1991. This is low by world standards and such low levels elsewhere are to be found mainly in other South Asian countries and in sub-Saharan Africa. However, this low level tends to mask its sheer size of some 217 million people. Moreover, according to the UN's "World Population Prospects" this population is projected to grow to 659 millions by the year 2015 - a growth of over  - 2 - 400 million people. This projected growth by itself exceeds the population of all countries of the world except China and India. In contrast, India's rural population is projected to decline marginally (from 596 million in 1990 to 570 million in the year 2025). 1.07 The urban contribution to India's economy has been estimated as 29% of NDP in 1951, rising to 55% in 1986 and is expected to exceed 60% by 2000. Thus, urban economic endeavor is making a disproportionately large contribution in relation to its population. 1.08 Under India's constitution, community water supplv and sanitation, and local government generally, are matters for India's 25 States. This is confirmed by the recent constitutional amendment (the Central Nagar Palika Act - 1992) since ratified by the requisite number of States. This constitutional amendment has three particular features worthy of note here: (i) the requirement that if elected local governments are "suspended" by State government action, then elections for a replacement are to be held within six months; (ii) the States are to constitute a "Municipal Finance Commission" to report to the State legislature on the matter of State-local finances and revenue sharing; and (iii) the States will appoint "District-level" (a geographic and administrative area within a State) "Planning Committees". More broadly, the themes of this constitutional amendment are oriented towards decentralization and local-level democracy and accountability. 1.09 The Central-State constitutional division of responsibility is particularly reflected in the funding of urban (in some contrast to rural) water supply and sanitation investments as between the Central and State levels of government. The following figures are from the 1992-97 Eighth Plan in reporting actual expenditures under the 1986-91 Seventh Plan. It will be noted that the Central contribution to urban water supply-sanitation were a mere 0.4% of the total; in contrast the Center made a substantial (42%) contribution to such investments in rural areas. (Rs b is Rupees billion). WATER SUPPLY-SANITATION (WSS' EXPENDITURES UNDER THE 1985-90 7TH PLAN TOTAL TOTAL WSS URBAN WSS RURAL WSS Plan Rs b % Plan % TOTAL Rs b % TOTAL Rs b % TOTAL Center 1275.2 19.2 1.5% 27.1% 0.1 0.4% 19.4 42.2% States 915.1 51.7 5.6% 72.9% 25.5 99.6% 26.2 57.8% TOTAL 2190.3 70.9 3.2% 100.0% 25.6 100.0% 45.3 100.0% The Sector Context in Maharashtra and Bombay 1.10 Maharashtra is India's third largest State both by area (308,000 km2 - 9.4% India) and by total 1991 population (78.8 million - 9.3% India). However, it ranks first in 1991 urban population (30.5 million - 14.0% India) and first in absolute 1981-91 urban population growth (8.5 million) and accounts for nearly 15 % of India's urban population growth in this period. By 1991, 45 % of Maharashtra's population was urban. In 1989-90, Maharashtra accounted for 14% of India's NDP. 1.11 Bombay is India's largest city with a 1991 population in the urban agglomeration of 12.57 million or nearly 6% of India's total urban population. It is one of India's four "megacities" with a population of more than five million which together accounted for 17% of India's urban population in 1991. It contains India's largest seaport and is India's pre-eminent center of trade, commerce and finance. It is also a major manufacturing center and accounts for 30% of the value of India'a industrial production and an estimated 10% of India's industrial employment.  - 3 - 1.12 Bombay was the first beneficiary of Bank water supply-sanitation lending in India and there have been two subsequent loans to Bombay in this sector as follows: US$ million Credit/ Loan Project Closed 1st Bombay Water Supply and Sewerage Project FY73 C$ 55.0 $158.2 30-Jun-81 2nd Bombay Water Supply and Sewerage Project FY79 C$196.0 $411.6 31-Mar-88 3rd Bombay Water Supply and Sewerage Project FY86} C$145.0 } $304.3 Ongoing } L$ 40.0 } Sector Organization 1.13 Central-level. In recognition of the need for an urban policy focal point at the Center, the Government of India (Gol) organized a Ministry of Urban Affairs and Employment (MoUD) in 1985 (recently renamed the Ministry of Urban Affairs and Employment MoUAE). This replaced the erstwhile Central Ministry of Works and Housing. This Ministry has exercised influence through its role in the review of State development plans, publication of various design manuals, coordination of certain urban research and so forth. It has also influenced the polices and practices of India's Housing and Urban Development Corporation (HUDCO). This latter institution, formed in 1970, is a public-sector lending institution which was initially concerned with urban land development and public housing schemes but in recent years has financed some urban infrastructure. 1.14 Within MoUAE, a Central Public Health and Environmental Engineering Organization (CPHEEO) is a small group of public health/sanitary/environmental engineers which has organized some training for sector personnel, published planning and design manuals and advises Gol on technical matters in the sector. 1.15 State-level. In India's various States a typical pattern some 30 years ago was to form "Public Health Engineering Departments" (PHEDs) from specialized staff within their Public Works Departments (PWDs). These typically report through a State-level Department of Local Government or Urban Development. The PHEDs usually provide what is essentially a public-sector planning/ design/construction-management engineering service to local governments and turn over the completed water supply (or more rarely - sewerage) works to the local municipal governments for operation and maintenance. In some States, the PHEDs additionally depute staff to the local municipal governments to assist with and guide such operation and maintenance. 1.16. In some States, PHEDs have been superseded by "Water Supply and Sewerage Boards" constituted by special State-level legislation '/. Such legislation prescribes the appointment of the Board of Directors and senior officials of such "Boards" and which gives varying degrees of autonomy of such agencies. However, only in the case of Kerala does the "Board" (the Kerala Water Authority) function as a partially-autonomous utility organization with a full State-wide responsibility for planning, design, operation, maintenance, revenue billing and collection and so forth. In some other cases, the distinction between a "Board" and a PHED may be more apparent than real. '/ These presently exist in the eight Sates of Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka, Rajasthan, Bihar, Gujarat and Kerala.  - 4 - 1.17 Local-level. A responsibility for the provision of urban water supply and sanitation services is traditionally a responsibility of the local-level municipal government and this is so prescribed in the State-level "Municipal Act" or equivalent. Partly, no doubt, because of a typically weak technical and management capacity at this level, the States have frequently usurped a substantial part of this responsibility as described in paras 1.15 and 1.16. In the case of three large cities - Bangalore, Madras and Hyderabad - the States of Karnataka, Tamil Nadu and Andhra Pradesh respectively have constituted by State-level legislation "local-level" partially-autonomous "Water Supply and Sewerage Boards". These nominally have the mandate to function as "utility" organizations although their degree of autonomy in such matters as personnel appointments, salaries, and service tariffs may be quite limited. Thus, they may be much dependent on State-government support for the policies which they develop and the management actions which they propose. 1.18 Urban local government in Maharashtra is under the State's Department of Urban Development and governed by the Municipal and other Acts of the State's legislature. In the case of Bombay, the provision of water supply and sewerage/sanitation services is within the overall responsibility of the Municipal Corporation of Greater Bombay (MCGB). Here, there is an elected Council, and a "Standing Committee" of Council with executive authority. The most senior administrative official is the "Municipal Commissioner" a member of India's Administrative Service (IAS). 1.19 Within the MCGB organization is a Water Supply and Sewerage Department (WSSD). Unusually, in India, the WSSD has maintained separate commercial-type accounts and plans, designs, operates, maintains water supply and sewerage works and also conducts revenue billing and collection and advises on all policy and regulatory aspects of the provision of these services. Thus, WSSD has many of the features of a utility organization. This organizational arrangement evolved with relation to the First Bank-supported Water Supply and Sewerage Project (para 1.12). 1.20 The matter of water resources management, of obvious relevance to this water supply- sanitation sector, is assuming an increasing importance to both India and the Bank 2/, In India, water resources are again a State matter under India's constitution. At this time in Maharashtra, and quite commonly in other States, water resources planning and management is undertaken by State's Irrigation Department and its Central Design Organization. In a few other States, "Water Management Councils" (or some other title) with a broader water user representation than irrigation and with a broader view of "resource management" than mere quantitative allocations, are being established recently with Bank support in the preparation of several State-level "Water Resource Consolidation Projects". To date, work on such projects is underway in the States of Haryana and Tamil Nadu and is starting in other States. Additional Bank support to improved water resource management is being prepared under a proposed National Hydrology Project. Sector Development 1.21 The following table compares the state of sector development, in terms of "coverage", for the years 1981 and 1990 - the period of the UN-declared International Water Drinking Water Supply and Sanitation Decade. It indicates: (a) a 1990 "coverage" for urban water supply of 86% of the urban population; (b) about two-thirds of this "coverage" was by private connections; the rest by public standposts; (c) the coverage for urban sanitation was much less - 44% only; and 2/ See "Water Resources Management - a World Bank Policy Paper" approved by the Board in May-93.  (d) of this, about 70% was by sewerage; the balance by "other" (see para 1.03). Thus, only 31 % of India's 1990 urban population was served by sanitary sewers in 1990. INDIA: WATER SUPPLY AND SANITATION COVERAGE 1981 and 1990 POPULATION FIGURES IN MILLIONS TOTAL URBAN RURAL 1981 Population 687.3 100% 158.1 23% 529.2 77% Served Water Supply 285.8 42% 121.7 77% 164.1 31% Not Served WSupply 401.5 58% 36.4 23% 365.1 69% Served Sanitation 48.0 7% 42.7 27% 5.3 1% Not served - Sanit'n 639.3 93% 115.4 73% 523.9 99% 1990 Powulation 904.2 100% 232.7 26% 671.5 74% Served Water Supply Connec'n 130.3 56% Standpost 70.0 30% TOTAL Served Water Supply 663.3 73% 200.3 86% 463.0 69% Not Served WSupply 240.9 27% 32.4 14% 208.5 31% Served Sanitation Sewers 72.1 31% Other 30.2 13% 20.1 3% TOTAL Served Sanit'n 122.4 14% 102.3 44% 20.1 3% Not served - Sanit'n 781.8 86% 130.4 56% 651.4 97% Changes 1981-90 Population 216.9 74.6 142.3 TOTAL Served Water Supply 377.5 78.6 298.9 Not Served - Water Supply -160.6 -4.0 -156.6 TOTAL Served Sanitation 74.4 59.6 14.8 Not served - Sanitation 142.5 15.0 127.5 couzens c:\lotus\per\decade.wkl 07-Feb-93 Government's Sectoral Policy 1.22 The Central Government continues to recognize the importance of safe drinking water supply and basic sanitation for human health and welfare. Its Eighth Five Year Plan (1992-97) continues the strong support of the 1987 National Water Policy, which gives the highest priority to drinking water supply among all water uses, and recognizes the deficiencies in water and sanitation services in both urban and rural areas. Sector constraints are identified as a lack of funds for the development of water and sanitation (or sewerage) services in urban areas and a weak response by rural dwellers to proposals for sanitation (excreta disposal) facilities.  - 6 - 1.23 In reviewing performance in the sector under the 1985-90 Seventh Plan the Government concluded, inter alia, that: (a) in implementing water supply programs, the needs of backward and poorer segments of the population were often neglected; (b) there is a wide gap between the level of urban water services and sewerage services; (c) substantial improvements were needed in the pricing of water, billing and collection; (d) water losses due to wastage and leakage are substantial and require corrective measures; (e) there is a need for programs to be more cost effective; (f) operation and maintenance of water supply systems are badly neglected; (g) inadequate sewerage systems are contributing to the pollution of ground and surface water sources and to the increased incidence of water borne diseases; corrective measures need to be taken to prevent further pollution and to improve river water quality; (h) more attention should be given to the water supply and sanitation needs of small towns (up to population 20,000) since such towns have an inadequate financial base from which to finance such facilities; and (i) local funding requirements of externally financed projects should be more carefully examined to avoid implementation delays. 1.24 These issues are to be addressed under the Eighth Plan. In addition emphasis will be given to generally improving rural water supplies, to the reduction of water borne diseases and particularly to the eradication of guineaworm, and to improving water quality. A further objective is to increase the level of service of rural sanitation to 5 % of the rural population by the end of the Plan period. 1.25 In urban areas, the Plan proposes the extension of drinking water services to 100% of the population by the year 2000, with a priority given to small towns. In addition, financially viable sewerage systems are to be provided to cities with low-cost sanitation to fringe areas. Solid waste collection and disposal systems would be developed for major metropolitan areas. Some of the strategies identified in the Eighth Plan are listed below. They are discussed further under "The Main Sector Issues, in the context of this proposed project and other Bank endeavor, commencing para 1.26. (a) management of water as a commodity, as with any other resource; (b) freedom for local authorities to charge appropriate tariffs to cover operation and maintenance cost and also development costs where appropriate; (c) the encouragement of private sector efforts for both the construction and maintenance of water supply projects; (d) reduction of pollution by provision of treatment facilities for industrial wastes and sewage; and  (e) separation of the budget for water supply and sanitation from the general municipal budget. The Main Sector Issues 1.26 A weak policy and institutional framework for the allocation and management of water resources. Notwithstanding a National Water Policy (para 1.22), water resources are a State subject under India's constitution (para 1.20). Thus, addressing this issue is much dependent on action by the individual States or mutually agreed cooperative action between two or more States. The available water resources are subject to ever-increasing demand pressures, particularly for irrigation and for community water supply. Additionally, the quality of water available is being increasingly threatened by pollution of various kinds from both urban and rural sources. Such issues are being increasingly well-recognized in India (eg see para 1.25(a)) and some measures to address them have been initiated. Some Bank-supported endeavor in this area was noted in para 1.20. Additionally, the Bank is supporting two Industrial Pollution Control Projects (which include Maharashtra). However, as in many countries of the world, developed and developing, their full resolution is a long-term proposition. 1.27 The need for improved general, personnel and financial management in the water supply- sanitation sector institutions. In general, the sector institutions in India and their management have been much dominated by engineers and by a bureaucratic rather than an active management, commercial and consumer-service frame of mind which is essential for the effectiveness of the "utility" organizational model. Over the last few years, this issue has been increasingly recognized in India and the management and efficiency benefits of some of the institutional changes introduced in Bank-supported projects (including Bombay) are being seen as a path to follow more generally (see also para 1.33). 1.28 The need for improved cost-recovery from beneficiaries. The widespread failure to realize full cost-recovery for water supply-sanitation services has made sector investments dependent on State and local budgetary allocations and precluded the evolution of private debt financing of such investments. The net consequence has been that investments have been at inadequate levels; this in turn gives rise to valid complaints of poor service which in turn reduces the public willingness to pay. Breaking this unproductive cycle has been a key objective of Bank-supported investments in the sector in India and has been successfully implemented in Bombay. The need to address this issue is increasingly accepted in India (eg see para 1.25(b)); full cost-recovery was firmly endorsed at a National Conference on Water Supply and Sanitation Policy held in March, 1993. However, while implementing action is variable across the country, it has been achieved over many years in Bombay. 1.29 The intermittent delivery of water to consumers. With rare exception, urban water supply in India (including Bombay) is delivered to consumers intermittently, and sometimes for as little as two hours per day. This may be a "rationing" response to a sheer inadequacy of the amount of the water supply. However, it is often the result of: (i) excessive leakage from the water system; and (ii) of water wastage by consumers. The reasons for the excessive leakage are some combination of the use of poor quality or inappropriate pipe materials, of poor workmanship at the time of construction and of poor maintenance. The reasons for water wastage include the relative rarity of consumer metering and volumetric tariffs and under-pricing of water even where these exist. One obstacle to effective metering has been the frequently poor quality of such meters as manufactured in India. One consequence of intermittent water delivery is that it brings the risk of the ingress of contamination into the distribution system when it is not under pressure with obvious health risks. Another consequence is the encouragement of private investment in (uneconomic) household water storage by  those who can afford it. Yet a third consequence is that the water distribution system cannot perform as designed and that seriously low (or no) pressure reduces the level of consumer satisfaction with the water service. This issue is being vigorously addressed in more recent Bank-supported projects with the hope it will furnish some methodological models for wider application. Water supply continues to be intermittent in Bombay but this issue is outside the purview of this Bombay Sewage Disposal Project (BSDP). 1.30 The need for improved engineering planning and design and material/construction quality management. The soundness of sector investments is entirely dependent on the quality of these activities, which also embrace all aspects of procurement. This problem appears in both water supply and sewerage but tends to be greater in sewerage where there is much less indigenous experience. To address this issue, the Bank has been requiring or encouraging the use of the services of private sector independent consulting engineers. Frequently, in practice, such services have been obtained from foreign-local associations of firms which combines the benefits of experience elsewhere with local knowledge. To the extent that "good practice" is transferred to Indian firms and sector institutions by the foreign participation, this itself is a "development benefit". Private consulting engineering firms are necessarily much motivated by concern for their reputation since this plays a large part in their securing future assignments. They are also motivated by the risk of being found financially liable for the consequences of proven professional negligence. The use of private consulting engineering services, including those of foreign-local associations of firms, is gaining wider acceptance in India generally and in Bombay in particular. Such services have been used very extensively in the preparation of this BSDP and will be used extensively in its implementation. 1.31 Poor operation and maintenance. Even when well designed and constructed using appropriate materials of good quality, water and sewerage systems certainly need operation and periodic maintenance for the sake of realizing the full benefit potential of the investments. Specific measures are included in this BSDP to address this issue. The Bank's Sector Obiectives 1.32 The essence of the Bank's water supply and sanitation sector strategy in India has been and is to: (a) improve its mobilization of financial resources; and (b) to improve the efficiency of financial and human resource utilization. 1.33 In pursuit of these objectives, Bank projects have: (a) encouraged the efficient use of resources through appropriate technology choices and sound engineering design and construction; (b) supported institutional development and improved institutional capacity having a "consumer- service" orientation; (c) encouraged the financial viability and managerial efficiency of sector institutions through the adoption of commercial style accounting; (d) assisted in the formulation of pricing policies to encourage water conservation and to provide affordable water and sanitation services to the poor, consistent with adequate financing of current expenditures and the internal generation of funds for further investment; and (e) encouraging sector institutions to participate actively in improved institutional arrangements for water resources management (paras 1.20, 1.25(a) and 1.26). Such measures contribute to addressing the sector issues identified in paras 1.26 - 1.31. 1.34 The growing acceptance by the central and state governments of these basic objectives, as witnessed by the Central Government's strategies expressed in the Eighth Five Year Plan (paras 1.23 - 1.25), indicates a potential for considerable further sector performance improvement in the medium and long term. However, it is clear that in future, continued effort will be needed to address the issues outlined above (paras 1.26 - 1.31) and to improve, in particular:  - 9 - (a) unaccounted-for-water management and water conservation (with the objective of continuous delivery to consumers) through consumer metering, leak detection and repair (or replacement of leaking pipes beyond repair), good water system surveillance to control illicit connections and good management and management of meter reading, revenue billing and collection; supplies for a few hours per day; (b) the design of tariffs charged for water supply and sewerage services which serve at the same time the objectives of the avoidance of complexity, the affordability of services to the poor and the achievement of full financial viability; (c) the management capacity in sector institutions through personnel training programs; (d) operation and maintenance practices and performance, also through personnel training; and (e) the quality of engineering planning-design and construction quality surveillance through the use of the services of private firms of consulting engineers and otherwise. Performance in Previous Bank Operations 1.35 The Bank Group began supporting water supply and sewerage/sanitation projects in India in FY1974 (the first Bombay Water Supply and Sewerage Project) and by the end of FY 1992 had approved 13 such projects. These have accounted for US$994 million in IDA Credits and US$93 million in IBRD Loans. In addition, a further 11 urban projects have been approved, accounting for US$990 million in Credits and US$44 million in Loans. In these urban projects, on the average, more than half the investments have been for water supply and sewerage/sanitation investments forming part of a city-wide infrastructure. 1.36 Of the 13 water supply and sewerage projects, the following six projects have been completed and project completion reports (PCRs) or project performance audit reports (PPARs) have been prepared. These are the First and Second Bombay Water Supply and Sewerage Projects; Uttar Pradesh; Punjab; Maharashtra; and Rajasthan. A review of the project completion reports 3/ indicates that in most cases the physical work has been brought to completion although in most projects there have been implementation delays. However, in some instances the quality of construction work is questioned. In the case of the Second Bombay Water Supply and Sewerage Project, both procurement management and construction quality were found to be very seriously inadequate. Thus, an Annex 13 to this SAR entitled "Lessons Learned and their Application" also contains the full text of the Evaluation Summary from the relevant OED PPAR Report No 9265 of December, 1990. 1.37 The reported poor quality of construction has been due largely to lack of experience and ability on the part of the engineers supervising construction, and a failure to require contractors to comply with the terms of the contract documents. Implementation delays appear to have resulted primarily from ineffective construction management on the part of the contractors and the government entity supervising the work, although there are a number of other factors to which delays may be attributed, such as: lack of counterpart funds; inability to prepare clear and concise procurement documents and to reach procurement decisions; poor procurement management, disputes between 3 The report numbers and dates are, respectively: PCR 5875 (Oct. 1985); PPAR 9265 (Dec 1990); PCR 6242 (June 1986); 6935 (Sep. 1987); 7202 (April 1988); PCR 8090 (Sep 1989).  - 10 - contractors and the implementing agencies; poor planning and insufficiently detailed project preparation; and land acquisition difficulties. 1.38 The more successful aspects of the projects have included the economic selection of components through careful comparison of alternatives during the project preparation stages. The use of lower cost technical options has sometimes been possible and successful. In addition, programs to develop low-cost sanitation for the fringes of urban areas and for areas having lower population densities have achieved increasing acceptance from sector institutions and the public. One of the most serious and pervasive sector deficiencies is the lack of incentive and ability to operate and maintain completed facilities to acceptable standards. 1.39 The trend of objectives in earlier projects has been to improve: cost recovery; institutional efficiency through improved management; financial accounting and reporting systems. Associated objectives have attempted to reduce unaccounted-for water and improve user charging by metering and more efficient billing and collection. A report prepared in 1986 in collaboration between the Government of India and the Bank, titled "Water Supply and Sewerage Projects Financed By the World Bank in India - Financial and Institutional Performance" concluded that in general terms these objectives have not been achieved to an appreciable extent. Reasons for the apparent lack of achievement are widespread, but the major constraints are summarized as: (a) popular opposition to tariff increases because, traditionally, water was regarded as a free good; (b) the objectives were too ambitious and inadequate planning and preparation preceded the attempts to achieve them; However, there is a growing recognition throughout the sector, and by the public, that adequate tariffs are justifiable as the only available mechanism for realizing the resources to improve services. 1.40 More recent Bank-supported projects have aimed to reflect the lessons of experience. Ongoing projects in Madras (FY87 Cr 1822-IN and Ln 2846-IN) and in Hyderabad (FY90 Cr 2115-IN and Ln 3181-IN) are performing rather better than earlier projects. Both include substantial unaccounted-for water management efforts. In Hyderabad, strong general management is building a capable senior management team which has instituted many personnel reforms (many aimed at inculcating a consumer-service orientation), a comprehensive personnel training program, improved and computerized financial accounting systems and good construction quality management practices and improved operations. 1.41 Thus, there is evidence that persistence and effort, on the part of the Bank and the sector agencies, supported by the State and Central governments, can yield substantial development benefits. At the samne time, it is recognized that many objectives will only be achieved in the medium and longer term. Rationale for Bank Involvement in the Proposed Proiect 1.42 The Country Assistance Strategy (CAS) of 19-May-95, to be reviewed by the Bank's Board on 20-Jun-95, has emphasized that, in urban areas, there is an urgent need to build the institutional and financial framework that will enable cities to provide critically-needed services to a rapidly growing population. Its paragraph 32 discusses the key urban issues and its Attachment 1 lists the  - 11 - sectoral reform objectives. One key theme of this CAS is State-level finances (and, by implication, local-level finances). 1.43 Attachment 1 to this 1995 CAS reviews the status of sectoral objectives to be supported through the Bank's lending operations as outlined in the 1994 CAS. It notes, under urban infrastructure, the impending commencement of a comprehensive review of urban infrastructure financing. 1.44 In the design of the project and the related dialogue with MCGB during preparation and appraisal, particular attention has been paid to the lessons of experience (Annex 13). Due account has also been taken of the five areas of the Bank's special operational emphasis. These are reviewed in turn in the context of features and components of the Project. 1.45 Poverty Alleviation. The slum sanitation component is explicitly focussed on alleviating health risks, and improving the urban environmental conditions for some one million slum dwellers in Bombay. 1.46 Participation. Specific investments under the slum sanitation components will be planned following the conduct of social surveys and taking account of beneficiary preferences and attitudes. The public participation and review in the environmental assessment process during project preparation was an important force in stimulating MCGB's commitment to this component, which will be implemented with the assistance, inter alia, of NGOs. 1.47 Gender Issues. The Slum Sanitation Schemes will provide a particular benefit to women, who have stronger concerns for privacy and who bear the brunt of the problems arising from ill health in the family. 1.48 Environment. The entire project is to be perceived as an important part of a staged program to realize urban environmental improvements through improved wastewater conveyance, treatment and disposal and improved excreta disposal facilities for the poor. 1.49 Private Sector Development. The goods and works will be procured by open bidding and contracts are expected to awarded to private sector suppliers and contractors; this is normal Bank and Indian practice. However, in this project, a greater role than has been normal in Indian practice has been assigned to private consulting engineering firms for both engineering planning and design and for the supervision of construction, including quality management. 1.50 In addition to features of the Project which respond to the five areas of special emphasis, it is noted here that the project includes foreign-local consulting services to review MCGB's WSSD sewerage system operation and maintenance organization, management and practices and to make recommendations and furnish personnel training for improvements. Although a small part of the Project in financial terms this element of the Project should make an important contribution to institutional development and to the eventual efficiency of prior, proposed and future sewerage system investments.  - 12 - II PROJECT AREA, SERVICES AND DEMAND The Project Area 2.01 Bombay is the capital city of Maharashtra State. The Bombay urban agglomeration, and its total 1991 population of 12.57 million, was described in para 1. 11. Urban planning for the whole agglomeration is the mandate of the Bombay Metropolitan Region Development Authority (BMRDA). Within this agglomeration the municipal boundaries of the MCGB - the Project Area - occupy an area of 440 km2 and account for an estimated population of about 10 million - about 3 million on Bombay Island and 7 million in the "suburbs". These boundaries were established in the 1950s with their extension from the "Island" to include "the suburbs". 2.02 The annual average population growth in Bombay's urban agglomeration between 1981 and 1991 rate was 4.3%; this is significantly higher than the 3.1% average for India's urban areas as a whole. This rate of growth ranked seventh highest among India's 23 metropolitan cities having a population of more than one million, but it was the highest in absolute terms. 2.03 Unfortunately, the provision of infrastructure and housing has not nearly kept pace with such growth rate. Bombay's population was a mere 3 millions in 1951. Thus, Bombay economic strength and its role in India's economy has created abundant employment opportunities and attracted rural migrants but an estimated 5 million of the present population live in slum conditions and about one million of these have occupied municipally-owned lands. Water Supplv Services 2.04 Annex 1 gives a brief history of Bombay's water supply system which was initially constructed in the mid-19th century to serve commercial and residential areas in the southern portion of Bombay Island near the harbor and the Fort. Subsequent rapid expansion of commerce and development of industry required the addition of a new source of supply, setting a pattern which was to be repeated in 1879, 1883, 1944, 1957, 1965, 1979, 1984 and 1990. On completion of the ongoing Bank and IDA assisted Third Bombay Water Supply and Sewerage project in 1996, the total water supply to the Greater Bombay area will reach an average of 2,930 Mld (644 MIGD) or about 80% of an estimated gross water demand of about 3,570 Mld (785 MIGD). 2.05 The 1996 water supply of 2,930 Mld represents an average daily per capita domestic water supply of about 130 liters after deductions for transmission system, distribution system and treatment plant losses and for industrial, commercial and government use. Despite the considerable efforts over almost half a century to develop new water sources, Bombay has failed to meet the demand for water due to rapid population increases, geographic expansion of the area, insufficient sector investments and system leakage. This has resulted in an intermittent water delivery to consumers for periods ranging from 2 to 5 hours per day. This operational mode causes technical difficulties with regard to metering, leakage detection and system maintenance and may also jeopardize public health (para 1.29). Investment funding constraints and the higher priority accorded to water supply has led to a comparative neglect of sewage collection, treatment and disposal creating serious environmental problems and risks to public health. 2.06 The Central Design Organization of the GOM Irrigation Department, is responsible for master plan water resource studies to meet BMR's future water needs (para 1.20). This organization in conjunction with BMRDA, which is responsible under GOM's Department of Urban Development for planning and investment programming, has proposed four sources of water supply for future  - 13 - development. For the sake of public health and of the economic provision of water supply services, the next water supply objective should be the provision of water delivery on a continuous (24 hour per day) basis (para 1.29). This will require, inter alia, the establishment of full consumer metering and a volumetric tariff, as a means of controlling consumption and waste and a vigorous "unaccounted-for water management program" including leak detection and repair to control system leakage within acceptable limits. Sanitary Sewerage Development and Service Levels 2.07 Over the past fifty years, in the efforts to develop urban infrastructure and keep pace with rapid urban growth being experienced in Bombay, a higher priority was accorded to water supply as compared to sanitary sewerage. This factor, and financial resource constraints, led to a situation in which only a very small area of the city was served by a piped sewerage system and the remainder of the urban area discharged wastewater indiscriminately to surface water streams, gullies and to open stormwater drains. The history of evolution of the sewerage system is also given in Annex 1. 2.08 The beginning of a planned attempt to reverse this situation was under the FY73 Bank-assisted First Bombay Water Supply and Sewerage Project (Credit 390-IN). Various sewerage system studies were undertaken in the 1970's and a Sewerage Master Plan 41 was completed in 1979 which provides the basis for collection, conveyance and disposal of sewage from the Greater Bombay area to the year 2005. Under this First Bank-assisted project, implementation difficulties and cost overruns resulted in reduction in the scope of work and deferral of the sewerage system expansion to the FY79 Second Bombay water Supply and Sewerage Project (Cr 842-IN). Although this credit closed on 31-Mar-88, parts of some components of the project are still under construction. 2.09 The objective of the Second Project was to improve and extend the sewage collection system to serve between 80% and 90% of the properties throughout the whole of the Greater Bombay area and to provide treatment facilities and a safe means of sewage effluent disposal. The FY86 Bank- supported Third Bombay Water Supply and Sewerage Project (Cr. 1750-IN/Ln 2769-IN) primarily addressed expansion of the water supply system and included only relatively minor extensions of the sewage collection system in suburban areas. However, mechanical and electrical works (outstanding from the Second Project) for two major pumping stations (Bhandup and Ghatkopar) were added to this Third project after credit/loan effectiveness. 2.10 The proposed project represents most of the first stage of development of facilities to partially treat and dispose of sewage which is collected and conveyed to the proposed treatment and disposal sites by facilities constructed under the three earlier Bombay Water Supply and Sewage Projects. The major part of these collection and conveyance facilities is completed; the remainder (including some remedial works, the Bandra pumping station, facilities to overcome siltation in the Ghatkopar influent and an influent tunnel to Ghatkopar pumping station) are included in the proposed project. 2.11 The configuration of the Greater Bombay sewerage system is appropriately planned and constructed around seven natural drainage or service areas (Annex 1). The Table below provides an 4 "Methods for Treatment and Disposal of Wastewaters from Greater Bombay"; Metcalf and Eddy Inc., Consulting Engineers, in association with Environmental Engineering Consultants; May 1979. The main features of this plan are reviewed in Annex 2.  - 14 - outline of the status of the sewage treatment and disposal methods which serve the seven drainage areas. In the table, the estimated quantity and percentage of dry weather flow (DWF) from each of the drainage areas indicates its relative size, and "PT" is preliminary treatment for the removal of grit and screenings. SEVEN DRAINAGE AREAS - SEWAGE TREATMENT AND DISPOSAL FACILITIES GREATER BOMBAY AREA (see also Map No 26628 attached) Dry. Weather _ Flow DWF Status and Action DWF . Treatment/Disposal Proposedtunder the D)rainage Area: (Md) Total Methods Prect 1 Colaba 30 1.2 PT/discharge to the Complete ocean through a 1.1 km outfall 2 Worli 760 30.1 PT/discharge to the PT complete; outfall to be ocean through a constructed under the 3.0 km long outfall project 3 Bandra 796 31.5 PT/discharge to the Construction of pumping ocean through a station, PT and outfall 3.0 km long outfall under the project 4 Versova 140 5.5 PT/primary treatment in PT and lagoons under aerated lagoons construction (BUDP) 5 Malad 240 9.5 Present discharge of The project includes untreated sewage to studies and eng. Malad creek to continue design for 2nd stage pending second stage treatment and disposal works works 6 Ghatkopar 386 15.3 PT and primary PT to be completed by treatment in aerated mid 1996; lagoons to be lagoons, discharge to constructed under the Thane creek project 7 Bhandup 280 6.9 PT and primary PT to be completed by treatment in aerated mid-1996; lagoons to be lagoons, discharge constructed under the to Thane creek project 2.12 In the First Stage of development, sewage from three service areas (Versova, Bhandup and Ghatkopar) will be treated in facilities to remove screenings and grit, and will then pass to aerated lagoons which will provide biological treatment to the level of conventional primary treatment. The treated effluent will then be discharged to Malad and Thane tidal creeks. One of the three aerated lagoons (Versova) is under construction, partially financed under the Bombay Urban Development Project (Cr. 1544-IN) and BWSSP III (Cr 1750-IN/Ln 2769-IN) and is due to be completed in  - 15 - December 1996. Bid invitations for the remaining two aerated lagoons (Bhandup and Ghatkopar) were issued in April 1995 and these lagoons would be financed under the proposed project. The original Master Plan Study (para 2.08) recommended that sewage from Malad service area also be treated in aerated lagoons prior to discharge to Malad creek. However, more recent studies showed this to be impracticable due to the limited assimilative capacity of the creek. These works have therefore been deferred to the Second Stage Program (Annex 5) to allow sufficient time for further study of treatment and disposal alternatives. 2.13 Sewage from two of the remaining three service areas (Worli and Bandra), which account for about 60% of Bombay's total flow, will receive partial treatment, comprising screening and grit removal, and will then be discharged into the ocean through two marine outfalls. These outfalls, which are 3.5 meters in diameter and three kilometers long, and for which bids have been received, would be financed under the proposed project. 2.14 Sewage from the remaining service area, which is the smallest of the seven service areas, receives preliminary treatment at a completed installation (at Colaba) and is discharged to the harbor through a 1. 1 km long 1.2 meter diameter outfall. 2.15 The construction of the two outfalls at Worli and Bandra is a major engineering task. As previously designed, they were to consist of reinforced concrete pipes laid in a sea bed trench. A 1984 contract (financed under the Second Bombay Water Supply and Sewerage Project Cr 842-IN) to construct the two outfalls was terminated in 1987 as a result of technical difficulties, contractual disputes and disputed data concerning the seabed conditions. The contract is now under litigation. 2.16 In March 1988, Credit 842-IN was drawn down and closed. Because of implementation delays, cost overruns, technical problems, funding problems and litigation, MCGB was unable to proceed with completion of the two marine outfalls and the aerated lagoons at versova. MCGB retained foreign consultants (financed under the Third Bombay Water Supply and Sewerage Project) to reinvestigate the sea bed conditions, to further evaluate the costs, benefits and risks of alternative approaches to completing the outfalls, and to prepare detailed engineering designs. To curtail the debate on the least-cost construction method, it was decided to prepare designs and invite bids for two alternatives: (i) a dredged seabed trench and pipe alternative, similar in many respects to that described in para 2.15; and (ii) for submarine tunnel alternative; it was agreed that the decision on the choice would be made on the basis of bid price. However, it is noted here that the tunnel choice has the least adverse effect on the environment (see Annex 11). As noted (para 2.13), designs and bidding procedures (by ICB - from stringently pre-qualified bidders) for the outfalls have now been completed. The bid evaluation has been completed and furnished to the Bank, and award of a construction contract for their construction in submarine tunnel is being processed; the award is now scheduled for the second half of 1995. The lowest bid for the seabed trench/pipe alternative was more than double that for the submarine tunnel. 2.17 A number of design and construction deficiencies in pumping stations and other components financed under the Second Bombay Water Supply and Sewerage Project were reported by a Bank supervision mission in 1989. As a consequence, the Municipal Corporation of Greater Bombay (MCGB) was asked to appoint consultants, acceptable to the Bank, to review these works and to assist MCGB in the coordination and supervision of the remaining works forming part of the overall, integrated sewerage system. Such consultants were duly appointed in May 1991 and a "Remedial Works Program" was formulated and agreed upon and implementation of works to remedy some of these defects is now proceeding. MCGB has agreed to a dated action program for implementation of  - 16 - the Remainder of the Remedial Works Program (Annex 1, paras 12-16). At negotiations. agreement was reached that MCGB will complete the implementation of the Remedial Works Program. 2.18 Upon completion of these remedial works and completion of other components that are now under construction under MCGB financing and under the Third Bombay Water Supply and Sewerage Project, about 80% to 90% of the properties and an estimated 45 % of the population of the Greater Bombay area (total estimated population 10 million) will be connected to a water-borne sewerage system capable of conveying domestic and industrial wastes to facilities for partial treatment and disposal. 2.19 With the exception of the Malad drainage area, the works ongoing and proposed as described above will complete the "First Stage Works" conceived in the Master Plan. As part of the "Second Stage Program" either a further outfall or a sewage treatment facility (or a combination of both) will be required to serve the Malad and Versova service areas. These components will bring the entire sewerage system into full operation. However, further works are desirable for further environmental improvement and are proposed under "Stage 2" of the program - see Annexes 2 and 5. 2.20 The portion of the population not served by the system, estimated at 40% to 50%, represents the pavement and slum-dwellers with no permanent housing. The solution to this issue does not rely on the development of the sewerage system, which has been designed, and is being constructed, to serve the entire urban area including those parts of the city occupied by the slum dwellers and the homeless. The solution lies in the provision of sanitation facilities explicitly for these poorer segments of the population. A part of these needs are also proposed to be met by the slum sanitation schemes included in the Project.  - 17 - III THE PROJECT Objectives 3.01 The major policy objectives of the first three Bank-supported water supply-sanitation projects were: (a) to establish an appropriate and effective public institution in Bombay to manage the planning, design construction, operation and maintenance for the provision of water supply and sewerage services; and (b) to establish a revenue stream to finance maintenance and operation and a portion of capital investment. 3.02 With regard to the first of these earlier objectives MCGB's WSSD has shown marked improvement in the water supply subsector but achievements in the sewerage subsector fall far short of the level required for an entity of this magnitude and importance. Some on-the-job training and further experience has been given by deputing some WSSD staff to work with the consultants assisting project preparation and such arrangements are planned during project implementation. One of the objectives of the proposed project would, therefore, address the further improvement of WSSD's ability in planning and implementation of sewerage works, with particular emphasis on construction management and supervision. 3.03 The second of these earlier objectives, the establishment of a revenue stream to finance maintenance and operation of the water supply and sewerage facilities and a portion of capital investment, has been substantially achieved in recent years but will require further effort and action to sustain these gains to date. 3.04 A further institutional objective was the development of MCGB's capacity to fully understand and manage the conduct of good environmental impact assessments in conjunction with project formulation and design. This has been substantially achieved during the preparation phase of the project, albeit the use of assistance from consultants in such efforts in the future will, no doubt, be both desirable and cost-effective. 3.05 An additional institutional development aspect of this Project is concerned with organizational changes, the establishment of procedures and provision of additional facilities to raise the standards of WSSD's operation and maintenance practices for the entire sewerage system to a level consistent with good and cost-effective practice (see Annex 3, paras 28 and 29). 3.06 The physical objectives of the Project are to complete the facilities (originally proposed and partially completed under the First, Second and Third Water Supply and Sewerage Projects) and provide for the improved safety of the disposal of sewage from Greater Bombay, to complete these in substantial accordance with realistic timetables, and with a good construction quality (see para 1.37). This will realize further benefits from achieving full utilization of facilities which have been constructed so far and set the stage for further such improvements under the "second stage" program (Annex 5). They are also to construct sanitation improvement facilities, mainly for safe excreta disposal, to benefit up to one million slum dwellers residing in some 164 slums on municipally-owned lands. This is proposed to be implemented following social and physical/technical surveys and a beneficiary consultation process. Thus, beneficiary preferences will be fully taken into account in the determination of the works selected for implementation - all in the context of technically-feasible and cost-effective options. These processes are designed, inter alia, to identify, on a slum by slum basis, where no involuntary resettlement is required for implementation (para 6.20 and Annex 14).  - 18 - 3.07 In summary, from the preceding, the Project objectives are: (a) strengthening the capacity of MCGB's WSSD in all aspects of the management of the provision of sewerage services including planning, design, construction supervision including materials and construction quality management, operation and maintenance; (b) sustaining the financial viability of the provision of water supply and sewerage services in Greater Bombay through direct charges to beneficiaries at appropriate levels; (c) imnproving the health and environmental conditions in Greater Bombay through the construction of sewerage works improvements so designed and constructed as to conveniently and economically permit a further level of such improvements in the future; and (d) improving the health and environmental conditions for a significant portion of the slum dwellers of Bombay through the construction of sustainable sanitation improvement facilities, mainly for safe excreta disposal, of a kind and nature determined in consultation with the prospective beneficiaries. Description 3.08 The project components are described in more detail in Annex 3 and are summarized in the schedules and detailed cost estimates in Annex 4. The locations of the project physical works are shown on Map IBRD 26628. Physical components of the project are summarized below; design capacities, which are based on year 2005 flows, are shown in parentheses and represent average dry weather flows in million liters per day (Mld). Physical Components (a) Construction of a 3 km long and 3.5 meter diameter marine outfall in submarine tunnel at Worli (or Lovegrove) (760) and a similar outfall at Bandra (796); (b) Construction of Bandra pumping station (796); (c) Construction of aerated lagoons at Ghatkopar (386) and Bhandup (176); (d) Construction of facilities to overcome siltation in an influent tunnel at Ghatkopar and rehabilitation of an existing tunnel (386); (e) The implementation of Slum Sanitation Schemes, conducted using beneficiary participation methods, in those of 164 slums which occupy municipally-owned lands (which are inhabited by an estimated one million people). Stage 1 would be a "pilot stage" covering about 10-15% of the beneficiaries; following a review of the findings of implementation experience and of an independent monitoring and evaluation process, Stage 2 for the remaining work would be designed and would proceed to implementation; independent monitoring and evaluation would continue. Agreement was reached at negotiations that implementation will proceed in accordance with "Policy Guidelines for the Implementation" (see Annex 14) and further that certification of conmliance with these Policy Guidelines will accompanv each withdrawal reguest with respect to this aspect of the Project.  - 19 - (f) Addition of structural features to improve the stability of five existing sewage pumping stations; and (g) Conveyance system improvements. 3.09 Project supDort and technical assistance will be provided in the form of consultants' services for the tasks listed below in each of three categories. This technical assistance, its estimated gross costs (in US$ million in parentheses) and its classification per GP 8.40 are as follows: (a) Policy Support NIL (b) Project Support paras 3.10 (13.3), 3.13 (1.8), 3.14 (2.2) and 3.15 (23.0) TOTAL US$40.3 million (c) Institutional Development para 3.11, 3.12 - US$2.5 million Categorv 1: roject Support 3.10 Supervision of Construction of the Worli and Bandra Outfalls. the Bandra Pumping Station, and the Ghatkopr Influent Tunnel. An ongoing contract, which expires in 30-Jun-96, provides for construction supervision by international Consultants. As a condition of effectiveness MCGB will either: (i) extend the duration of this contract; or (iu) before 31-Jul-95 furnish in a form satisfactory to the Bank, consultant recruitment documentation and a consultant recruitment program to ensure continuity of the provision of such services. Under the ongoing contract, and its extension or substitute contract, the consultant will be designated as the "engineer", as reflected in the general conditions of contract, for the construction of the Worli and Bandra outfalls, and (ultimately) in the general conditions of contract for the construction of the Bandra pumping station, and works to overcome siltation is the Ghatkopar Influent Tunnel. Assurances were also obtained at negotiations that consultants will also supervise the construction of the Ghatkonar and Bhandup lagoons, the slum sanitation schemes and the pmnping station structural modifications but may not be designated as the "engineer" for this work, unless such an arrangement is requested by MCGB. 3.11 Upgrading WSSD Operation and Maintenance Practices. The level of maintenance of the existing sewerage system has been consistently poor, lacking adequately trained and skilled staff, suitable facilities and appropriate plant and equipment. In addition, preventive maintenance procedures are inadequate and the organizational structure of that section of WSSD dealing with sewerage maintenance needs reform. 3.12 MCGB has agreed to address this issue with the assistance of suitably qualified consultants, acceptable to the Bank, to implement a comprehensive study and to introduce improved operation and maintenance practices and organizational reforms. The consultant recruitment documentation for this study are available in the project file (Annex 15) and the award of this consulting services contract was made a condition for negotiations. 3.13 Topoeranhic and Condition Surveys of the Conveyance System. These surveys would be implemented in connection with the component for the Conveyance System Remedial Works [para 3.08(g) above]. The topographic survey would enable record plans of the conveyance system to be prepared and would be followed by a condition survey of the system to provide input for the preparation of a program for remedial works. Requests for proposal for these surveys are available in  - 20 - the project file (Annex 15) and the award of this consulting services contract was also a condition for negotiations. 3.14 The Slum Sanitation Technical Assistance relates to the physical component described in para 3.08(e); the program and some further details of this technical assistance are described in Annex 14. An understanding, in the form of agreed terms of reference, was obtained at negotiations for this TA which will comprise, in those slums selected: (1) publicity for the slum sanitation schemes; (2) the work of multi-disciplinary teams (social surveys; physical surveys and the assessment of physically feasible and economical technical options; beneficiary consultations for the purposes of the determination of community preferences, of beneficiary contributions to investments and to subsequent operation and maintenance); (3) independent monitoring and evaluation of both the procedures and the activities described in (1) and (2) above and reporting thereon; Category 2: Studies, Site Investigations and Engineering for Second Stage Works 3.15 The Environmental Impact Assessment (Annex 11) that has been carried out for the first stage of development of sewage treatment and disposal facilities to serve the Greater Bombay area, confirms that higher levels of treatment and/or improved disposal methods will be required to meet future coastal water quality standards. Planning for these improvements in sewage treatment and disposal facilities has, therefore, been included in the proposed project in the form of: (i) the Bombay Coastal Water Quality Study (para 3.17) which is under implementation; and (ii) the Second Stage Program, which includes provision for feasibility studies, and engineering designs for sewage treatment and disposal facilities in six service areas. The agreed schedule for implementation of the Second Stage Program and a description of the scope of each of the studies in the Program are detailed in Annex 5. Category 3: Complementary Studies 3.16 These studies have been, or are being implemented under separate financing in the preparation of components of the proposed project and of the program of Second Stage works. 3.17 The Bombay Coastal Water Oualitv Study. This study is financed under a Japanese grant and is being implemented by India's National Environmental Engineering Research Institute (NEERI) under the direction of MCGB. The study supplements the hydrographic work carried out as part of the 1979 Master Plan and extends the work under a recent study implemented by NEERI, as part of the Environmental Impact Assessment. The study will estimate receiving water quality that would result from various lengths of outfalls discharging to the Arabian Sea, and/or sewage treatment options, for Worli and Bandra service areas, in addition to the effects of various outfall locations for Malad and Versova service areas. The extended study will examine the quality of receiving waters along the coastline (to about 8 to 10 km from the shore line) from a point about 20 km north of Malad creek to a point about 7 km south of the Worli outfall. A further study will extend the water quality studies of Thane creek almost to a point at which the creek reaches the sea (adjacent to Bombay harbor).  - 21 - 3.18 The results of the study will enable MCGB to assess the improvement in coastal waters which would result from various methods of sewage treatment and disposal, and the effects of extending the outfalls to various distances from the shore line under the Second Stage Program, in order to satisfy future environmental standards. Results of the study would provide the "starting point" and primary input for engineering feasibility studies for sewage treatment and disposal facilities to be constructed in the Second Stage Program to serve the six drainage areas (Annex 5). 3.19 The remaining three complementary studies that have been implemented to resolve issues arising from deficiencies in some of the existing facilities as outlined above. These three studies address the following items: Bandra Purning Station [para 3.08(b)1: Ghatkopar Influent Tunnel [para 3.08(g)1: and Pumping Station Structural Stability [paras 3.08(f)1. Reports on these studies are available in the Project File (Annex 15). Status of Project Preparation 3.20 The status of preparation for each of the physical components is outlined in the following table. OUTLINE of the STATUS of PREPARATION of EACH COMPONENT DATES OF COMPLETION of EACH ACTIVITY (month/vear) Physical Components Eng Design- - Feasibility Procure- (or other) ment Bidding Contract No Component Study Documents Procedures Award M Worli and Bandra Completed Completed Completed 9/95 _Marine Outfalls (b) Bandra Pumping Completed Completed 6/95 & 8/96 2/96 & Station 3/97 (c) Ghatkopar & Completed Completed 8/95 11/95 Bhandup Lagoons (d) Ghatkopar Siltat'nnt In Process - 4/96 8/96 12/96 Prevention due 1/96 (e) Slum Sanitation 9/95 3/96 7/96 11/96 Schemes Stage 1 Stage 1 Stage 1 Stage 1 (f) Improve Structural Completed 7/95 11/95 3/96 Stability of Five Pumping Stations (g) Conveyance System Part 8/95 12/95 4/96 Improvements In Process  - 22 - Project Cost 3.21 The project has a total estimated cost of US$295.6 million, or US$274.3 million excluding taxes and duties of US$21.3 million. The estimates take account of the bids received for the construction of the Worli and Bandra marine outfalls; for other components the bids are based on data gathered by WSSD and consultants from similar works implemented throughout the world, adjusted to reflect conditions in India and to a January 1995 base. 3.22 Physical contingencies of 25% have been allowed for all civil, mechanical and electrical works, based on the following rationale: * Worli and Bandra marine outfalls : Inherent uncertainties associated and Ghatkopar influent tunnel : with tunnel construction. * Aerated lagoons at Ghatkopar : Uncertainty in the location of and Bhandup : borrow areas yielding laterite for embankment construction. * Bandra pumping station : Magnitude and complexity of work. * Slum sanitation : The programmatic nature of the component and the resulting difficulties of cost estimation. * Pumping station structural : Preliminary status of preparation. improvements and conveyance system improvements. Physical contingencies of 10% have been included for all technical assistance, studies, site investigations and engineering required for the Second Stage Program. 3.23 To provide for inflation throughout the project implementation period (estimated at 71