Nepal - Water Supply and Sewerage Project

Report No. 270a-NEP FILE COPY Nepal Water Supply and Sewerage Project April 10, 1974 Asia Projects Department Water Supply Division Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS (As of March 1, 1974) Currency Unit Nepalese Rupee (NRe) NRe 1.00 = 100 Paisa US$ 1.00 = NRs 10.56 US$ 1 million = NRs 10.56 million NRe 1.00 = US$ 0.09 NRs 1 million US$ 94,700 MEASURES AND EQUIVALENTS 1 = Liter (1 liter = 0.26 US gallons) 1/cd = Liter per capita per day m3 = Cubic meter or 1,000 liters (1,000 liters = 264 US gallons) 1/sec = Liter per second (0.035 cubic feet per second) mm = Millimeter (0.03937 inch) m = Meter (3.28 feet) km = Kilometer (0.62 mile) ha = Hectare (10,000 square meters or 2.47 acres) ABBREVIATIONS AND ACRONYMS HMG = His Majesty's Government of Nepal ICM = Indian Cooperative Mission MWP = Ministry of Water and Power ODA = United Kingdom Overseas Development Administration UNDP = United Nations Development Programme UNICEF = United Nations International Children's Emergency Fund WD = Department of Water Supply and Sewerage of Ministry of Water and Power WHO = World Health Organization WSSB = Water Supply and Sewerage Board FISCAL YEAR July 16 to July 15  NEPAL APPRAISAL OF A WATER SUPPLY AND SEWERAGE PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS .............................. i-ii I. INTRODUCTION ........................................ 1 II. THE SECTOR ................................. 2 Present Situation ..... ........................ . 2 Sector Development .... ............................. 2 Sector Organization ..... ....................... 3 III. THE PROJECT ........ .................................. 4 Description of the Project .... ........... 4 Cost Estimates ................................. 6 Amount of IDA Credit ..... .............. 8 Procurement ................................ . 8 Disbursement ...... .............................. 8 Design, Construction and Supervision of Construction ...... ................... ..... 9 Land Acquisition and Wayleaves .. ................ 9 Environmental Impact ..... .............. 9 IV. JUSTIFICATION ....... ................................. 9 V. THE BORROWER AND BENEFICIARY ..... .................... 11 The Borrower .................................... 11 The Beneficiary ...... .......................... 11 Organization and Management ................. .... 11 Management Systems ......................... ... . 12 Staff ........................................... 12 Training ....... ................................. 12 Audit ........................................... 13 This report was prepared by Messrs. A. Saravanapavan and L.V. Smith.  -2- Page No. VI. FINANCE ............ .................................. 13 General ......... ................................ '13 Budgetary and Accounting Systems .... ............ 13 Past Performance and Present Financial Position .. 13 Financing Plan ................................... 14 Water and Sewerage Charges ... .................... 16 Connection Charges . .............................. 16 Present Water Charges ...... ...................... 16 Future Water and Sewerage Charges ............. ... 16 Tariff Study ....... .............................. 17 Future Finance . .... ......................... 17 VII. AGREEMENTS REACHED AND RECOMMENDATIONS .... ............ 18 ANNEXES 1. Description of the Project - Water Supply 2. Description of the Project - Sewerage 3. Project Cost Estimates 4. Estimated Schedule of Disbursements 5. Construction Schedule 6. Existing Facilities - Water Supply 7. Existing Situation - Sewerage 8. Population Projections and Water Demand 9. Population and Water Production Statistics and Projections 10. Internal Financial Rate of Return 11. Organization Chart of the Water Supply and Sewerage Board 12. Consolidated Summary Income and Expenditure Statements 13. Consolidated Cash Flow Statements 14. Consolidated Balance Sheets 15. Assumptions for Financial Projections 16. Schedule of Present Water Charges 17. Schedule of Proposed Water and Sewerage Charges NAGPS IBRD 10643 - NEPAL: Existing and Planned Water Supplies IBRD 10644R - KATHMANDU VALLEY: Existing Water Supplies IBRD 10645 - KATHMANDU WATER SUPPLY: Existing and Proposed Distribution System IBRD 10646R - POKHARA: Existing Water Supplies and Proposed Project IBRD 10647 - KATHMANDU SEWERAGE: Existing and Proposed Sewerage System  NEPAL APPRAISAL OF A WATER SUPPLY AND SEWERAGE PROJECT SUMMARY AND CONCLUSIONS i. This report covers the appraisal of a project for improving and extending water supply and sewerage facilities in Kathmandu, (the capital of Nepal) and Lalitpur and water supply facilities in Kathmandu Valley and Pokhara - a major regional town with potential as a tourist center. The project, to be executed over four years, is the first stage of the Government's long-range plan for the development of water supply and sewerage in the project area. The estimated cost of the project is US$10.4 million equivalent, with a foreign exchange component of US$6.5 million equivalent. An IDA credit of US$7.8 million equivalent is proposed to cover about 75% of the project's costs. ii. The project is based on studies financed mainly by the United Nations Development Program (UNDP), with the World Health Organization (WHO) as executing agency and carried out by Binnie & Partners, London. iii. The credit will be made to His Majesty's Government of Nepal (HMG) and onlent to the Water Supply and Sewerage Board (WSSB) at 6% for a term of 25 years, including five years of grace on payment of principal and interest. WSSB is a semi-autonomous government entity, recently es- tablished to take over responsibility for the sector from the Department of Water Supply and Sewerage (WD). iv. The project has a high priority because of the inadequate service to the growing population in the project area and the health hazards involved in the present systems. The project will rehabilitate and extend existing water supply and sewerage systems to provide (1) a safe and uninterrupted piped water supply for the principal urban areas in Kathmandu Valley and Pokhara (2) waterborne sewerage for certain areas of Kathmandu and Lalitpur with modern sewage disposal facilities thereby reducing pollution of the Bagmati River, and, will develop WSSB as a viable entity capable of taking responsibility for water supply and sewerage throughout Nepal. v. The water supply component of the project includes the development of two new spring sources for Kathmandu and Pokhara; a pumping station; transmission and distribution main extensions and replacements; a service reservoir; improvements and repairs to existing systems; service connections and meters. With a planned reduction of wastage and leakage from the current 50% of supply to 35%, these facilities will be adequate to meet average day requirements of water supply in the project area up to about 1981. Six new wells with an estimated yield adequate to meet peak day requirements for Kathmandu are also included in the project. The sewerage component of the project includes about 40 km of sewers, a pumping station and two waste stabilization lagoons for Kathmandu and Lalitpur. WSSB staff will be trained in administration, accounting, engineering, operations and maintenance;  - ii - adequate facilities, equipment and vehicles are included in the project for this purpose. Special equipments required for reducing leakage and wastage and for collecting hydrological data are also provided. vi. Of the estimated total project cost of NRs 109.5 million (US$10.4 million equivalent), NRs 51.7 million (US$4.9 million equivalent) is for water supply, NRs 49.4 million (US$4.7 million equivalent) is for sewerage and NRs 8.4 million (US$0.8 million equivalent) for tariff and second stage feasib4lity and project preparation studies. The proposed credit will cover the US$6.5 million equivalent foreign exchange component of the project cost and US$1.3 million representing 34X of the local costs. The remaining NRs 27.2 million (US$2.6 million) will be financed by HMG. vii. All contracts will be awarded on the basis of international competitive bidding in accordance with IDA guidelines, except for minor civil works, equipment and electrical connections from the grid, totalling about US$250,000 equivalent. viii. HMG has agreed in principle to increase water charges by about 60% in FY1975. With the increased charges the return on average net fixed assets in service for water supply would be about 8% in FY1981. HMG has also agreed to levy a sewerage charge in FY1978 when the sewerage service comes into use and to maintain water and sewerage charges at a level to provide revenues sufficient to produce an annual rate of return on all of WSSB's net fixed assets in operation of at least 5% in FY1981 increasing to at least 8% in FY1987 and thereafter. ix The expected internal financial rate of return on the project is about 7.6%. X. The project is suitable for an IDA credit of US$7.8 million equivalent.  NEPAL APPRAISAL OF A WATER SUPPLY AND SEWERAGE PROJECT I. INTRODUCTION 1.01 His Majesty's Government of Nepal (HMG) has requested an IDA credit to help finance the improvement and extension of the water supply and sewerage facilities in Kathmandu Valley including Kathmandu itself and water supply in Pokhara, a major regional center. The project is estimated to cost NRs 109.5 million (US$10.4 million). The proposed credit of US$7.8 million will cover about 75% of the project costs; the remainder will be financed by IIMG. 1.02 The project is based on the following four studies carried out by Binnie & Partners, London: (a) A master plan and feasibility studies for water supply and sewerage for Kathmandu, Lalitpur and Bhaktapur financed by UNDP with WHO as executing agency; (b) Preliminary studies of water supply and sanitation in the villages of Kathmandu Valley financed by HMG; (c) A study presently under review by WHO of water and sewerage sector in Nepal financed by UNDP; and (d) Feasibility studies of water supply and sewerage for four regional centers, including Pokhara, financed by HMG. 1.03 Additional follow up studies to the master plan and feasibility studies are being carried out by Binnie & Partners. HMG is financing these studies which include an exploratory groundwater test drilling program. 1.04 Following a project identification mission in December 1971, three IDA pre-appraisal missions visited Nepal in April, July and December 1972 to determine the scope of the project, the project entity and to ex- pedite project preparation. An appraisal mission composed of Messrs. A. Saravanapavan and L.V. Smith visited Nepal in May/June 1973. In November 1973 a further visit was made and the financial data updated. After a review by the mission, the project components were defined and the con- struction program was rescheduled. This report is based on information provided by HMG, Binnie & Partners' draft reports of the various studies, and the mission's findings.  - 2 - II. THE SECTOR Present Situation 2.01 Nepal, with a population of 11.2 million and an area of 141,000 sq km is almost rectangular in shape, about 800 km long, and lies parallel to the main Himalayan range of mountains. About two-thirds of the land area is taken up by high mountains and the lower slopes and the remaining one-third -- a narrow strip to the south, called the Terai -- is the border- line of the Indo Gangetic plains (see Map IBRD 10643). 2.02 About 10% of the population live in the Himalayan region, 50% in the hills of the lower slopes and the remainder in the Terai. Severe pressure on land in the hills has increased southward migration and strained the lim- ited utility services, such as water supplies, in some of the foothill and Terai towns where such services are available. 2.03 Though rainfall is generally substantial, varying between 1,000 mm and 1,600 mm per annum, it is unevenly distributed with heavy concentrations in the June/September monsoon season. Five rivers, Kankai Mai, Karnala, Bagmati, Rapti and Babai follow this monsoon regime, but do not go completely dry, as do numerous smaller rivers. The four main rivers in the coumtry, the Mahakali, Karnali, Narayani and Sapta Kosi are all snow-fed and have a sus- tained flow. Surface water resources are therefore plentiful. 2.04 In recent years test well drilling has indicated the availability of groundwater in limited quantities, as a possible source both for irriga- tion and community water supplies. Groundwater may prove an economic interim solution for some community water supplies, but further test drilling is needed to confirm availability. In the long term surface water sources will have to be developed. 2.05 At present only about 5% of the people of Nepal living in some 58 communities have piped water supplies, and the majority of these live in the larger urban areas. Apart from a small section of Kathmandu none of these communities have sewage disposal facilities. Sector Development 2.06 Urban water supplies are in most cases inadequate. Several towns and villages are supplied from perennial streams, and water intakes have been sited to obtain relatively safe untreated gravity supplies. The quantity of such water is limited. Adequate alternative river sources are available, but the water will have to be pumped from river intakes and will require full treatment. The water systems in general are inadequate both in terms of source and service reservoir capacity. Water supply hours are consequently restricted. Tubewells have been badly designed or developed. Standby pumping capacity is not available at the wells and spares are inadequate. In the event of mechanical plant failure, the supplies have to be discontinued.  2.07 Village water supplies are generally restricted to the provision of public standpipes together with a small number of private connections to hospitals and public buildings. In addition to the village water supply schemes constructed by HMG (see para 2.10) there is a modest program (run by a WHO expert with some U.S. Peace Corps and German volunteers) under which aid is given to small rural communities in the form of materials and technical assistance, to improve their water supply facilities. The number of people served by village water supplies is unknown. 2.08 There are no proposals at present for providing water-borne sewerage outside Kathmandu Valley or for improving rural sanitation. Pilot projects have been initiated to provide earth latrines in model rural com- munities. A considerable decrease in the incidence of hookworm has been reported following the initiation of one such scheme. The improvement of rural sanitation will depend mainly on education aimed at altering the habits of the people. 2.09 Except for broad government guidelines for the preparation of the annual development budgets and this project, there are no plans for the development of the sector. However the sector study report contains recommendations for the planned development of the sector up to 1987. Sector Organization 2.10 Near the end of the last century the first water supply schemes were ccnstructed by expatriate engineers in Kathmandu Valley and Pokhara. Not until the middle of this century was an effort made to organize the sector, when the Department of Irrigation and Water Supply under the Ministry of Water and Power (MWP) was made responsible for construction of water supply schemes. As the department lacked the needed technical manpower, it has been assisted since 1954 by an Indian Cooperative Mission (ICM) in a program for the construction of 9 urban and 14 rural water schemes. The ICM program is almost completed and under another more recent technical assistance program by UNICEF, about 87 rural water supply schemes serving some 7,300 houses have been undertaken by the Land Development Department. 2.11 The responsibility for maintenance of water supply systems has not been clearly defined. In two instances local authorities perform this important function, but otherwise MWP has the responsibility for urban schemes. For rural schemes no adequate organization exists at present. 2.12 The local authorities have been responsible for sewerage and sanitation, but have not been able to perform this function satisfactorily in most cases. 2.13 In 1972 E1MG separated the water supply function from the Department of Irrigation and created a Department of Water Supply and Sewerage (WD). In the following year 1MG created a Water Supply and Sewerage Board (WSSB) to carry out the project (see para 5.02) and with the ultimate goal of creating a corporation to be fully responsible for water supply and sewerage in Nepal. WD continues to operate in cr-her areas at present.  - 4 - 2.14 The concept of paying adequate rates for water service has been unknown in Nepal. Piped water is wrongly regarded as being freely available in unlimited quantities, and wastage is therefore very high. As WSSB extends its area of activities in the future and improves service, water charges will have to be increased in all areas, if the services are to be provided on a self-supporting basis. 2.15 It is not possible to forecast when WSSB will reach its ultimate goal of taking responsibility for water supply and sewerage services through- out Nepal as there is a general shortage of trained and motivated staff at all levels. WSSB will need technical assistance for a few more years (see para 5.07) and is presently obtaining this from the United Kingdom Overseas Development Administration (ODA). 2.16 The project will have a significant role in shaping the future development of WSSB and in helping to establish policies for its sound management. Difficulties will have to be overcome, but as HMG has given priority to the sector, reasonable progress may be expected. III. THE PROJECT Description of the Project 3.01 The project is the first stage (1974-1978) of a 25 year master plan for water supply and sewerage in Kathmandu Valley together with facil- ities to augment and extend the water supply of Pokhara. With facilities to be provided by the project, the systems will be adequate to meet the water supply requirements of the Valley and Pokhara until 1981; i.e. for 327,000 people, representing 95% of the population in the project area. The provision of sewerage in the congested, popular tourist areas of Kathmandu and Lalitpur will improve sanitation and public health and reduce the pollution of the Bagmati river. 3.02 A detailed description of the project components is in Annexes 1 and 2 and illustrated in Maps IBRD 10644R to 10647. A summary is given below: A. Water Supply (i) Development of the Pharping springs together with three deep wells equipped with submersible pumps and a pumping station to supply about 200 1/sec; appropriate pipelines including a 4.5 km steel transmission line to a break-pressure tank, lime dosing and chlorination facilities at Shainbu; minor repairs and replacements of existing pipelines.  - 5 - (ii) Three new intakes and about 2 km connecting pipework from Kali Khola springs, a collecting chamber and 4.7 km transmission pipeline and 3.6 km replacement trunk pipeline to augment Pokhara water supply by about 52 1/sec, including an exploratory well. (iii) Provision of about 4,500 m3 service storage at Mahankalchaur; expansion and replacement of water distribution network in Kathmandu, Lalitpur and Pokhara (including installation of 60 km of various diameter pipelines, house connections and 13,000 water meters). (iv) Extension of supplies to eight villages in the Kathmandu Valley. (v) Improvement and repairs to existing reservoirs, treatment plants or headworks; provision of staff housing, a workshop, garage and a depot. (vi) Equipment for maintenance and leak detection; hydro- logical equipment for data collection, billing machines and vehicles. B. Ongoing Exploratory Drilling Program Mi) Two wells, connecting pipework of about 4.1 km to provide about 52 1/sec for Kathmandu; one well to provide about 12 1/sec for Bode and two exploratory test wells at Sankhu. Submersible pumps and elec- tricity supplies for all wells. C. Sewera e (i) About 3.0 km of reinforced concrete rectangular outfall sewer with three storm overflows, 4.5 km of trunk sewers and about 23 km of sewer laterals for Kathmandu, with minor repairs to the existing system. A pumping station at Kirtipur to lift flows averaging 830 1/sec, from the outfall sewer to waste stabilization ponds at Dhobighat. Maintenance facilities and one vehicle. (ii) A collection network of about 7.1 km for Lalitpur with 1.3 km of trunk sewers and waste stabilization ponds at Kodku. D. Consulting Services Consulting services including preliminary engineering for parts of project not covered by the UNDP study, detailed design, preparation of tender documents, evaluation of bids,  -6- and supervision of construction of the project. Consulting services and associated fees for the exploratory drilling and well testing program. A tariff study in FY 1977 and engineering studies for a second stage planned for 1978-81 for which US$800,000 equivalent has been provided. E. Training of Staff (see para 5.09). Cost Estimates 3.03 The estimated costs of the project are summarized below and detailed in Annex 3. Item Local Foreign Total Local Foreign Total