India - Bombay Urban Development

 Bombay Urban Development Memorandum ; Country: India; Region: South Asia; Sector: Urban Development Adjustment; Major Sector: Urban Development; ProjectID: P009841 The Bombay Urban Development project, supported by Credit 1544-IN for US$138 million was approved in FY85. A total of US$44.3 million was canceled in 1991 and 1993 following project restructuring. The credit was closed on September 30, 1994, four years behind schedule. The Implementation Completion Report (ICR) was prepared by the South Asia Regional Office. The borrower’s comments are included as an appendix. The project’s objectives were to (i) increase the supply of residential land, infrastructure services, and housing, particularly for low-income families; (ii) improve local governments’ financial and administrative capacity to deliver services and to plan and execute urban projects; and (iii) direct a larger proportion of private investment in housing into low-cost units for low-income families. The project was restructured in 1990 by shifting its emphasis from slum upgrading to the provision of municipal and infrastructure services. There were four project components: (a) a Land Infrastructure Servicing Program (LISP) to provide site and service schemes; (b) a Slum Upgrading Program (SUP) to improve low-income housing on a cost-recovery basis; (iii) an institutional capacity-building component through Local Government Finance and Administrative Systems to improve urban services such as water and waste disposal based on user charges; and (d) a training and technical assistance component for improved management and financial systems. Overall, the project’s objectives were partially achieved. The LISP targets were almost 100 percent met, although over a nine- rather than five-year time span. Cost recovery was effective, and a revolving fund was established in the Bombay Metropolitan Region for further infrastructure development. Targets for the SUP were only partially met (22 percent of the SAR target) due to competition from subsidized slum development schemes. Institutional capacity in the main cooperating agencies has been strengthened, although coordination remains weak. The policy reform agenda in areas of rent control, property tax, and land ceilings was not achieved due to entrenched political forces that overrode the influence of a single project. The general lack of political commitment to the cost recovery and legislative reform requirements of the project has reduced the likelihood of sustainability. The economic rate of return at completion ranged from 33.5 to 40.9 percent, higher than the weighted average estimate of 20.4 percent at appraisal. OED agrees with the ICR which rates the project’s outcome as marginally satisfactory, institutional development as modest, sustainability as unlikely, and Bank performance as satisfactory. Major lessons learned are (i) the need to adopt less ambitious reform options in a project where sociopolitical forces have a major impact on sector policy; (ii) the importance of interagency coordination when multiple agencies are involved in project implementation; and (iii) the need to avoid frequent changes of key staff in implementing long- term programs. The ICR is highly satisfactory, providing an exceptionally detailed and balanced analysis of the project. An audit is planned given the unresolved issue of policy reform concerns that were built into this ambitious and complex project, yet which were not fully addressed by either the Bank or borrower during execution. Moreover, the difference in the opinions expressed by the borrower and the Bank in the ICR merits further examination, as do the reasons for the doubtful sustainability of the some of the investments.