Nepal - Third Water Supply and Sewerage Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 2925b-NEP NEPAL THIRD WATER SUPPLY AND SEWERAGE PROJECT STAFF APPRAISAL REPORT May 29, 1980 Regional Projects Department South Aaia Projecta This document has a restrieted distribution and may be usd by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (As of January 1, 1980) Currency Unit = Nepalese Rupee (NRs) NRs 1.00 = 100 Paisa US$ 1.00 = NRs 12.00 NRs 1.00 = US$0.083 MEASURES AND EQUIVALENTS 1 = Liter (1 liter = 0.26 US gallons) ld = Liter per capita3per day m Cubic meter (1 m = 1000 1) Ml Million liters (1 Ml = 1000 m ) Mld Million liters per day 1/sec Liter per second mm = Millimeter (1 mm = 0.03937 inch) m Meter (1 m = 3.28 feet) km Kilometer (1 km = 0.62 mile) sq km Square kilometer (1 sq km = 0.386 square mile) ha Hectare (10,000 square meters = 2.47 acres) ABBREVIATIONS AND ACRONYMS DHS = Department of Health Services DP = Development Plan EEC - European Economic Community GRDP 5 Groundwater Resources Development Project HEMG His Majesty's Government of Nepal ICB International Competitive Bidding LCB Local Competitive Bidding LDD Local Development Department MHP Ministry of Home and Panchayat MWPI = Ministry of Water, Power and Irrigation ODA = United Kingdom, Overseas Development Administration PPF = Project Preparation Facility UNDP = United Nations Development Programme UNICEF - United Nations International Children's Emergency Fund WHO World Health Organization WSSB = Water Supply and Sewerage Board WSSD = Water Supply and Sewerage Department FISCAL YEAR July 16 to July 15 The Project was appraised in January 1980 by Messrs. Tauno Skytta and Karl Stichenwirth.  FOR OFFICIAL USE ONLY NEPAL THIRD WATER SUPPLY AND SEWERAGE PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. THE WATER SUPPLY AND SANITATION SECTOR ................. 1 General ................................................ 1 Water Resources ........................................ 2 Sector Organization .................................... 3 Service Levels ......................................... 4 HMG's Development Plans and Sector Goals .... ........... 4 Sector Investments ..................................... 5 Sector Constraints ..................................... 6 Previous Bank Involvement .............................. 7 II. POPULATION, SERVICE LEVELS AND DEMAND IN THE PROJECT AREAS .......................................... 7 Project Areas ............................................ 7 Population ............................................. 8 Level of Water Supply Service .......................... 8 Level of Sanitation Service ............................ 9 Water Supply/Waste Disposal Systems and Demand .... ..... 10 III. THE PROJECT ............................................ 11 Project Background ..................................... 11 Project Objectives ..................................... 12 Technological Considerations ........................... 12 Description of Project Components ...................... 13 Cost Estimate .......................................... 14 Project Engineering and Implementation .... ............. 16 Land Acquisition ....................................... 17 Project Financing ...................................... 17 Procurement Procedures ................................. 17 Disbursements .......................................... 18 IV. THE BENEFICIARY ........................................ 19 The Water Supply and Sewerage Board (WSSB) .... ......... 19 Organization and Management ............................ 20 Staffing and Training .................................. 20 Takeover of Water Operations ........................... 21 Water and Sewerage Regulations ......................... 21 This document has a restricted distribution and may be used by recipients only in the performance of their oflmcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - TABLE OF CONTENTS (Con'd) Page No. V. FINANCIAL ASPECTS ...................................... 22 Background ............................................. *22 Tariffs ............ .................................... 23 HMG's Payments for Standpipes .......................... 24 Connection and Metering Program ........................ 25 Onlending Arrangements ................................. 25 WSSB's Present and Future Finances ..................... 26 Accounting, Billing and Collection ...................... 29 Audit . .................................................. 29 Insurance . .............................................. 29 VI. JUSTIFICATION .......................................... 29 Least Cost Solution .................................... 29 Internal Rate of Return ................................ 30 Project Benefits ................................ 31 Impact on Poverty Group .............................. 32 Project Risks ....................................... 33 VII. AGREEMENTS REACHED AND RECOMMENDATION ................... 33 Conditions of Effectiveness ............................ 33 Other Assurances ....................................... 34 Recommendation ......................................... 34 ANNEXES 1. Salient Data and Service Levels - Water Supply .... ..... 35 2. Connection and Metering Program ........................ 37 3. Major Work Components under the Project Table 1. Water Supply ............................... 39 Table 2. Sewerage ................................... 40 4. Summary Project Cost Estimate Table 1. Breakdown by Towns ......................... 41- Table 2. Annual Breakdown ........................... 43 5. Engineering Design and Construction Schedule .... ....... 44 6. Contract Schedule ...................................... 45 7. Estimated Schedule of Disbursements .................... 46 8. Organization Chart of the Water Supply and Sewerage Board ................................................ 47 9. Financial Statements ................................... 48 10. Additional Information Available in Project File .... ... 55 MAPS IBRD-14959: Project Areas IBRD-14970: Kathmandu Valley - Water Supply IBRD-14971: Pokhara, Biratnagar, Birganj - Water Supply IBRD-14972: Six Provincial Towns - Water Supply IBRD-14973: Kathmandu Valley - Sewerage  NEPAL THIRD WATER SUPPLY AND SEWERAGE PROJECT STAFF APPRAISAL REPORT I. THE WATER SUPPLY AND SANITATION SECTOR General 1.01 Nepal, located northeast of India, is about 800 km long, and lies parallel to the main Himalayan mountain range. About two-thirds of the total land area of 141,000 sq km consists of high mountains and their foothills (the Mountains and the Hills), the remaining one-third, a narrow strip to the south called the Terai, is the borderline to the Indo Gangetic plains. Rainfall is substantial, ranging from 1,000 mm to 1,600 mm per year, but is unevenly dis- tributed with heavy concentrations in the monsoon season from June to September. Climatic conditions vary from tropical in the Terai plains to a tundra climate in the mountainous north. 1.02 At the time of the last census in 1971, Nepal's population was 11.6 million. It is now estimated to be over 14.0 million (about 2.1% average annual growth over a 10 year period). About 5% (0.7 million) live in more than 20 urban centers (Nagar Panchayats - urban community councils) whereas the rural population inhabit about 28,000 scattered villages spread over some 4,000 communities (Gram Panchayats - village councils). Almost half of the urban population live in the Kathmandu Valley. 1.03 Population projections are based on annual average growth rates of 1.5% for the Mountains, 2.25% for the Hills and 3% for the Terai and are as follows: 1980 % 1985 % 1990 % in Million in Million in Million Rural Mountains 1.24 9 1.32 9 1.40 8 Hills 7.19 53 8.05 52 8.88 52 Terai 5.27 38 6.00 39 6.88 40 Total, Rural 13.70 100/95 15.37 100/94 17.16 100/93 Urban Total, Urban 0.73/a 5 0.98 6 1.31 7 GRAND TOTAL NEPAL 14.43 100 16.35 100 18.47 100 /a This does not include the population of about 115,000 persons inhabiting semi-urban environs of some project towns (included in the rural population).  - 2 - The urban growth rate is estimated at 5% per year. There is a steady migration projected from the Hills to the Terai, particularly to the urban areas of the Terai market centers and the district or zone headquarters. 1.04 Water-borne as well as several other communicable diseases are prevalent in Nepal. Poor sanitation facilities and lack of convenient access to safe water are the main contributing factors. Insufficient hygiene results in diseases caused by parasites found in human feces (most commonly hookworm and ascaris) and also causes diarrheal diseases, an important cause for high infant mortality. The following information on water-borne diseases illustrates the situation in the proposed project towns during 1979: Incidences Deaths (a) cholera 811 7 (b) typhoid fever 505 12 (c) bacillary dysentry 539 26 (d)- amoebic dysentry 3,744 31 (e) diarrhoea and gastro enteritis 2,411 104 (f) lnfectious hepatitis 146 10 (g) hookworm 2,015 1 (h) roundworm 155 - The above statistics covers only the number of patients who were treated in hospitals. 1/ It does not include an allegedly large number of unreported cases. Water Resources 1.05 Dense river networks make Nepal a hydrologically favorable country. The rivers Sapta Kosi, Sapta Gandaki and Karnali are the major river systems in Nepal. The medium river systems are Kankai, Kamala, Bagmati, Tinau, Rapti and Babai which drain to the Southern Nepal. The medium rivers Mechi and Mahakali form the border with India in the east and in the west respectively. In the Hills springs are common and the possibilities of tapping groundwater near riverbeds are believed to be promising. Surface water sources supple- mented by groundwater are, therefore, plentiful. 1.06 In the Terai, groundwater is usually available in the required quantities. The water table is shallow, anywhere between ground level and 20 m below ground level. In some cases even artesian pressure exists. Know- ledge on groundwater availability has improved considerably through the two earlier IDA projects in the Kathmandu Valley and through the work of the Groundwater Resources Development Project (GRDP), which carries out regular drilling programs mainly for irrigation projects throughout Nepal, especially in the Terai. 1.07 Quality of water from spring and river intakes is generally accept- able, however, increases in color, turbidity and suspended solids occur during 1/ The total number of hospital cases was about 31,500.  - 3 - heavy rains. The bacteriological quality of the water requires chlorination. In the Terai, the groundwater is of acceptable quality but in some cases iron and manganese content may be above the level recommended by WHO. Chlorination is also recommended as a minimum treatment to ensure acceptable bacteriological quality of the water. Sector Organization 1.08 Provision of drinking water and sanitation facilities is the res- ponsibility of the following entities: (a) Water Supply and Sewerage Board (WSSB) under the Ministry for Water, Power and Irrigation (MWPI). It is planned that WSSB will gradually be responsible for the urban water and sanitation sector in communities with a population of more than 10,000 inhabitants. Frequently, fringe villages in surrounding areas also fall under its authority. WSSB carries out planning, design construction and operation of systems and works w:ithin its areas of operation. (b) Water Supply and Sewerage Department (WSSD) under MWPI. WSSD will be responsible for the sector in rural communities with populations between 1,500 to 10,000 but it presently also deals with some urban systems not yet taken over by WSSB. In discharging its responsibilities it carries out planning, design and construction of systems, and normally hands them over for operation to the respective panchayats. In case a community does not have the expertise or the funds for operating its system, WSSD assumes the responsibility of operating it. (c) Local Development Department (LDD) under the Ministry of Home and Panchayat (MHP). The Department is responsible for rural systems in communities with a population below 1,500. It carries out planning, design and construction of systems but transfers the operation to the respective panchayats. 1.09 WSSB has taken over operation of the water systems in six town panchayats, namely, Kathmandu, Lalitpur, Bhaktapur (together called the Kathmandu Valley), Pokhara, Biratnagar and Birganj, and the sewerage system in Kathmandu. These systems are now being extended under the two ongoing projects. WSSB's role will expand gradually through projects to cover addi- tional urban areas. 1.10 WSSD currently operates 38 water supply systems. Under the Fourth Development Plan (DP - 1971 through 1975), WSSD and LDD constructed some 100 medium and small water supply schemes, and the program under the Fifth DP (1976-80) called for construction of about 90 systems by WSSD, and over 500 systems by LDD. These targets are ambitious and it is estimated that they will be met only by the end of FY81.  - 4 - 1.11 In addition to the above-mentioned entities, HMG's Irrigation and Resettlement Departments occasionally provide water supply facilities on a limited scale through their various rural development projects. These proj- ects, however, are of limited importance and represent only a minute portion of the total sector development. Service Levels 1.12 Presently, all urban centers have piped water supply which serves approximately 80% of the urban population. Only about 30% of the urban popu- lation with water supply use private house connections and the average con- sumption is estimated to be about 50 lcd. However, most of the systems are not operated adequately, and many of them provide only very poor and inter- mittent supply. Within the systems operated by WSSB, served population is about 85% of the total population of those areas, 50% of the served popula- tion have private house connections and the average water consumption is about 78 lcd. 1.13 In rural areas only about 900,000 people living in over 200 villages (6% of the rural population) enjoy piped water supply. Average consumption is estimated to be 45 lcd. The newer systems are mainly in the Hills which have received priority over the Terai, mainly due to the fact that even untreated water is not within easy reach there. These rural systems have gravity supply from springs or rivers and the population is served through standpipes. The situation in the Terai is less severe because groundwater, is generally available. However, most of the dug wells and shallow tubewells with hand- pumps are polluted due to poor construction and/or improper use. 1.14 Countrywide only about 10% of the total population enjoy safe water supply and estimates are that only about 16% of the total served population have private house connections. The population not served with piped supply use springs, ponds, canals, streams and rivers. However, these sources are not protected and their degree of pollution is generally high. Furthermore, water use is reduced to a minimum because of long carrying distances which, in turn, has a detrimental effect on personal hygiene and public health. 1.15 The existing, fragmentary sewerage system in the core area of Kathmandu would be able to serve about 25,000 people if it were operative. However, due to lack of proper maintenance, the system has been out of commis- sion and is presently being rehabilitated. Together with the sewerage system in Bhaktapur, about 5% of the total urban population could enjoy the benefits of water-borne sewage disposal. In larger provincial towns less than 20% of the population has some latrine facilities whereas practically no sanitation facilities exist in smaller towns and rural areas. HMG's Development Plans and Sector Goals 1.16 In the light of the International Drinking Water and Sanitation Decade, HMG has carried out work for establishing a ten-year plan (1981-1990) for sector development. This plan is now being completed and draft reports have been made available. Utilizing the agencies described above (paras. 1.08-1.10), HMG expects to reach the following goals:  (a) provide water supply services to all urban population in the country's Nagar Panchayats by 1990; and (b) provide at least one reliable source of water supply in each rural community. The estimates comprise about 2,250 1_)ed systems in the Mountains and the Hills and 35,000 shallow wells in the Terai, covering about 65% of the popu- lation in these areas by 1990. The overall population coverage would be about 68% by 1990. The program also makes a reference to providing sewerage facilities in six major urban centers, but no specific plan has so far been developed. 1.17 WSSB is expected to continue to take over more urban systems so that before the end of the decade it would operate all urban water systems. With respect to rural water supply, WSSD is expected to construct all medium size systems and 18,500 shallow tubewells, and LDD all small size systems and 16,500 shallow tubewells. The division of responsibility between WSSD and LDD seems artificial and is being studied further. 1.18 Apart from providing sewerage (or sanitation) facilities in urban areas through WSSB, HMG has plans to promote and coordinate environmental sanitation activities through the Department of Health Services (DHS). The immediate objective is to promote appreciation of the importance of sanitary disposal of waste water, excreta and solid wastes through motivating school authorities, government departments and local communities. Similarly, WSSD and LDD, assisted by WHO, UNICEF and bilateral donors, have plans to develop latrine construction programs in collaboration with panchayats. The UNDP Global Project on low cost sanitation, for which the Bank is Executing Agency, is establishing two demonstration projects for improving sanitation in urban environments. Sector Investments 1.19 The funds required to cover the above programs are estimated at US$162 million, US$59 million for the urban sub-sector and US$103 million for the rural sub-sector. According to the information obtained, the cost estimates on which these financing requirements are based represent 1980 price levels and do not include price escalation. Consequently, much higher costs must be expected and close monitoring of price escalations must be carried out annually for proper budget allocations. HMG's intention is to cover these costs under the Sixth and Seventh DPs. 1.20 In the past HMG' s investments in the sector have been as follows:  - 6- Investments for all Social Investments for/c %/a Services % - Drinking Water- %b NRs in Million NRs in Million Third DP (1966-70) 291.3 18 8.9 0.6 3 Fourth DP (1971-75) 615.5 19 55.4 1.7 9 Fifth DP - 1976 320.8 26 29.4 2.4 9 - 1977 420.0 28 61.2 4.1 15 - 1978 464.8 26 46.9 2.6 10 - 1979 (preliminary actuals) 530.7 26 81.0 3.9 15 - 1980 (budget estimates) 608.2 20 82.6 2.8 14 /a of development expenditures. /b of social services. 77 included in all social services. The table indicates that the water sector's share of development expenditures has been low. To meet the goals of the ten-year plan, however, investment levels must be increased considerably. Sector Constraints 1.21 Overall, future development of the water supply and sewerage sector faces three major constraints: manpower, supply of material and finances. It will only be possible to overcome gradually the shortage of manpower through continuous and patient training efforts which would not only provide the technical knowledge but also instill the necessary discipline that is a prerequisite for successful sector development and operation. Timely supply of material has in the past been an occasional problem due to Nepal's geographical remoteness. Sector financing is problematic mainly because of the Sector's heavy reliance on the Government budget due to a wide spread lack of capacity to generate sector-internal funds. WSSB has barely been able to cover its operating expenses and indications are that hardly any cost recovery has materialized in the rural areas. Although not yet firmed up, HMG plans to continue to use multilateral assistance for urban developments. It also intends to utilize external financing to a larger degree than in the past for rural schemes together with grant funds from the United Nations International Children's Emergency Fund (UNICEF) as well as bilateral donors. In view of the above, the overall sector targets in respect of population coverage seem to be very ambitious, and it will be necessary to exercise a certain degree of caution while setting up targets for individual projects in future.  -7- Previous Bank Involvement 1.22 IDA has had two prior lending operations for water supply and sewer- age. The first Credit (US$7.8 million, 470-NEP) was approved on April 30, 1974, and a supplement to it (US$4.0 million) on April 25, 1977. The first project financed under this Credit is expected to be completed by the end of 1980. 1.23 The second IDA Credit (US$8.0 million, 704-NEP) was approved on April 26, 1977. The Credit was later supplemented with an EEC Special Action Credit (US$3.0 million, 26-NEP) to assist HMG in meeting its share of project financing. In addition to the two water supply credits IDA also assists in developing rural water supply through Rural Development Projects. 1.24 In the past IDA has concentrated on assisting HMG in implementing its program in the urban sub-sector. The proposed Project generally continues along the same line but also includes areas with a distinctly rural character. After a very slow start which resulted in a delay of project completion of about three years for the first project, WSSB has considerably improved its project implementation capabilities and has started to build up operational units capable of constructing, operating and maintaining their installations. This recent encouraging performance on the technical side is unfortunately not being matched by WSSB's financial results which is predominantly a result of low tariff levels. Chapter V deals in detail with this aspect. II. POPULATION, SERVICE LEVELS AND DEMAND IN THE PROJECT AREAS Project Areas 2.01 The project area covers the towns of Kathmandu, Lalitpur and Bhaktapur in the Kathmandu Valley (capital area of Nepal, the Valley), Pokhara (capital of Kaski District), Biratnagar (capital of Morang District), Birganj (capital of Parsa District) and of six provincial towns; Bhairawa (capital of Rupandehi District), Butwal (in Palpa District), Dharan (in Sunsari District), Hetauda (in Makwanpur District), Janakpur (capital of Dhanusha District) and Nepalganj (capital of Banke District). The first project included the Valley and Pokhara. The second project extended WSSB operations to Biratnagar and Birganj. Loca- tions of the project towns are shown on map IBRD 14959. 2.02 Kathmandu and Lalitpur are separate Nagar Panchayats, and Bhaktapur, a neighboring town, is an important trading center and historical tourist attraction in the Valley. The nine provincial towns are important local trading centers and some of them are district capitals. Biratnagar, Birganj and especially Hetauda, also have significant importance as growing industrial centers. Bhairawa, Biratnagar, Birganj, Janakpur and Nepalganj are located in the Terai and Butwal, Dharan and Hetauda (450 m above sea level) on the hills north of the Terai. Pokhara is located in a valley on the foothills of the Himalayas. Because of its location close to several of the highest peaks of the Himalayas, Pokhara is also a major tourist center in Nepal. A common feature of the project towns is that the environs of the developed town area include several fringe villages with considerable population and with a dis- tinctly rural character.  -8- Population 2.03 The latest available national census results are from 1971 published by the Central Bureau of Statistics. Results of this census are given for various towns by panchayats and wards but their boundaries were in some cases changed in the following years. The present total population has been derived from various other sources, such as data collected by panchayats for elections and other purposes. Future growth rates have been estimated at 3% per annum based on historic trends except for Pokhara and Butwal, where a 5% increase has been assumed because of heavier migrations from surrounding areas to these towns, and for Hetauda where a rate of 7% is expected because of its growing industrial nature. In some Terai towns such as Biratnagar and Birganj, the growth rates of environs are estimated at 4%,also due to migration. 2.04 The population projections through 2000 are as follows: 1980 1985 1990 2000 Kathmandu Valley 399,700 471,900 548,900 715,600 Pokhara 54,300 68,500 83,300 124,800 Biratnagar 73,700 89,000 97,700 128,300 Birganj 37,000 42,900 49,700 66,800 Six Towns /a 162,900 197,000 236,300 414,900 Total Project Area 727,600 869,300 1,015,900 1,450,400 /a The largest town is Dharan, with the present population estimated at 43,100, and the smallest is Butwal with a population of about 20,000. The details for the Six Towns are given in Annex 1. Level of Water Supply Service 2.05 The existing service levels in the Kathmandu Valley and Pokhara, the areas where improvements were already started under the first project, are reasonably high, 94% of population served in the Valley and 90% in Pokhara. Respective consumption levels are 80 lcd and 62 lcd. In the Valley almost half of the served population receives its supply through private house connections, but in Pokhara only about 37%. Service hours in the Valley are three hours in the morning and three in the evening but are being significantly increased after commissioning of new sources under the first project. Since completion of the first project works in March 1979, Pokhara has enjoyed 24 hour supply. 2.06 In general the situation in the provincial project towns is much worse. Less than 40% of the population is served (lowest 27% in Bhairawa) and the average consumption amounts to about 60 lcd. Supply hours vary from five hours to ten hours per day. The proportion of population served through stand- pipes is usually more than 50% (highest 78% in Biratnagar). However, there are  - 9 - a few exceptions: in Birganj where the existing system serves a limited area, the population served is 59% of the total and out of that, 77% are served through private connection; in Bhairawa only 27% of the population has acctss to safe water supply of which 68% own private connections; in Butwal there is a large existing system serving about 85% of the population, and out of that, 72% through standpipes; Dharan has a similar situation. After comple- tion of the proposed Project, about 83% of the population in the project areas will have access to safe water. This means that the total of about 720,000 (out of that 156,000 incremental) people will have significantly improved water supply after the Project and about 900,000 (336,000 incremental) people by 1990. Details of existing and future service levels are given in Annex 1. 2.07 Presently, the water production is not metered and installation of bulk water meters is underway in the Kathmandu Valley and Pokhara. All new sources being constructed under the two projects will be metered. Metering of house connections is well underway in the Valley and Pokhara (about 60% in the Valley and 80% in Pokhara) and is being started in Biratnagar and Birganj. All house connections in the Six Towns are unmetered and therefore the con- sumption statistics are of questionable accuracy and only based on sample investigations by consultants. Non-domestic consumption, including industrial, commercial, institutional and public consumption, is also based on similar investigations and is estimated to be from 10 lcd to 18 lcd in the Valley, depending on the nature of the area. In the provincial towns this is esti- mated to be 8 lcd, except in Birganj (12 lcd), and in Pokhara (14 lcd). There are only a few large non-domestic water users who often have their own independent supplies. Unaccounted for water is estimated to range from 40% to 60% of production based on assessment of the condition and age of the supply system. Level of Sanitation Service 2.08 In the core area of Kathmandu the old combined sewerage system was established around 1900, but due to lack of adequate maintenance it is virtually non-operational. The first project provided equipment for sewer cleaning and WSSB has taken up the necessary rehabilitaiton work. This old system covers an area with a population of about 25,000 which is estimated to grow to about 30,000 by 1985 and to 40,000 by 1990. Under the first project sewage treat- ment works were constructed (three stage stabilization ponds) with a capacity estimated to be adequate beyond 1990. The system is also being extended, including interceptor sewers, trunk mains and laterals. This will be further extended under the second project and the proposed project. Total population coverage after these extensions is estimated to be about 67,000 by 1985 (104,000 by 1990). 2.09 In Bhaktapur the sewerage system is also being improved and extended under the Bhaktapur Development Project which is assisted by the German techni- cal aid. The system includes house connections and public toilets; the exist- ing population coverage is about 10,000 and is estimated to be increased to 18,000 by 1985. At present an interim sewage treatment is provided by means of oxidation ponds, and permanent treatment works will be constructed in the near future.  -10 - 2.10 The total population served by sewerage systems is only about 9% in the Valley but is estimated to increase to 18% by 1985 and 25% by 1990. About 60% of the households in Kathmandu have latrine facilities inside the houses and 23% outside the houses. The rest use public toilets or defecate in the fields. This information is based on a household survey in Kathmandu. The situation is believed to be worse in other parts of the Valley. In provincial towns (Pokhara, Biratnagar and Birganj), based on some sample surveys, less than 20% of the population have latrine facilities inside the houses and more than 50% are without any latrine facilities. In the six new towns there is no data available, but it is believed that the majority,probably more than 60% of the population,is without latrine facilities. Septic tanks are used at some institutional and commercial buildings. A few private houses also use septic tanks as well as pit privies. 2.11 HMG has initiated a health education program in Nepal which includes sanitation. Health inspectors are trained and assigned to work at Health Posts throughout the country. Technical knowhow and assistance is being pro- vided through other donor agencies (para. 1.18), especially with respect to sanitation in rural areas. WSSB is especially interested in the results of demonstration projects under UNDP's global project in order to apply that experience to improving sanitation in its areas of operation. Water Supply/Waste Disposal Systems and Demand 2.12 Annex 1 shows the production capacities of the existing water supply systems, as well as capacities of the proposed new works (see also paras. 3.03 and 3.04). In the Kathmandu Valley about 70% of the existing production capacity comes from surface sources, river and spring intakes. Major surface sources are provided with various types of treatment which usually are used only during the monsoon season in order to reduce turbidity. All other times of the year the physical and chemical quality is acceptable. However, these sources are subject to pollution. Chlorination is therefore required and will also be needed in the future. New spring sources constructed under the first project are designed in such a way that with the exception of chlorination, no additional treatment is needed. The quality of groundwater to be tapped in the future is expected to be good. 2.13 In the provincial towns where river/spring intakes are in use as a water source, turbidity during monsoon rains has been a problem. However, construction of infiltration galleries (para. 3.04) is believed to reduce this problem. Groundwater quality in the Terai is generally good. 2.14 The water demand at various project towns is calculated on the basis of population and per capita consumption projections and of the estimated reductions in the unaccounted for water. Generally,the proposed increase in production capacity will be adequate beyond 1990. In the Kathmandu Valley, however, it is recommended to develop the proposed well fields gradually in order to obtain better field data; as a first step, 1990 requirements would be met. 2.15 In carrying out the sample consumption investigations, consultants have classified households with different types of sanitary facilities and have  - 11 - studied correlations relative to water consumption (modern sanitary facilities, hand flushed toilets, dry pit toilets and no toilets). The basic estimate of per capita water consumption in the various categories has been kept unchanged during the forecast period. However, as a result of the fact that customers will gradually improve their sanitation facilities and thus increase their demand for water, a moderate growth in the overall average per capita consump- tion has been assumed. Per capita consumption through standpipes is estimated to be about 40 lcd and is kept unchanged over the projected period. Details of projected service levels and future water demands are given in Annex 1. In summary, consumption levels after completion of the Project are estimated to be about 70 lcd average in the provincial towns (ranging from 60 lcd to 85 lcd) and about 105 lcd in the Kathmandu Valley. Served population in the Valley and Pokhara would be 97% and in the other provincial towns close to 60%. At that time only 50% or less of the population is expected to be served through standpipes, the lowest estimated figure being in Hetauda (18%). Based on the established connection program (para. 5.11 and Annex 2), which is considered to represent the minimum of what WSSB is expected to implement 1/, the pro- posed Project would constitute a substantial step with respect to HMG's goal of serving 100% of the urban population in the country by 1990 (para. 1.16). However, it is expected to meet, by 1985, only about 25% of the incremental population in the project towns and about 21% countrywide. This shows that HMG should make great efforts in addition to the Project in order to reach the 1990 target of 100% urban population coverage. The scheduled works under the Project (paras. 3.08 and 3.09) will provide a 24 hour supply for the estimated served population. 2.16 Sewerage flows for the Kathmandu system extension were calculated by assuming that 85% of the water used would be returned to the sewers from households with higher standard sanitary facilities (washbasin, shower and cistern flushed toilets). A 50% return assumption has been used for those households which have only handflushed toilets or a latrine facility outside the house (the proportion of these households will decrease over time). Also, sewage flows for 1990 and 2000 have been projected and indications are that the sewage treatment capacity now constructed under the first project will be adequate beyond 1990. A program for installing new sewer connections has been established and is presented in Annex 2. III. THE PROJECT Project Background 3.01 The Project is part of HMG's ten-year development plan (paras. 1.16 and 1.17) for the water sector. The need for the Project was recognized when the second project was appraised and, consequently, funds were included for preparing the necessary studies (master plans and feasibility studies) for the proposed Project. For the purposes of the above studies WSSB 1/ A very cautious approach was taken in establishing the program and improvements may well occur.  - 12 - had selected six provincial towns (para. 2.01) to be included in the proposed Project in addition to the areas covered by the first and second projects. The Project would cover about 35% of HMG's sector development program from FY81 through FY85 (para. 1.19). Project ObJectives 3.02 The Project is designed to continue HMG's efforts to provide safe water supply to all urban population by 1990. This is planned to be achieved through a series of projects expanding WSSB's operation to new provincial towns. The main objectives of this Project are: (a) to further improve the water supply situation in the four areas now being covered under the second project through extending supply hours and expanding services to a larger portion of the population; (b) to augment and extend the water supply systems in six addi- tional towns which also cover areas with a distinctly rural character; (c) to extend the sewerage system in the Kathmandu Valley; and (d) to continue to assist WSSB's development into a self- sufficient public utility organization and to improve the local capacity in carrying out design and supervi- sion of water supply and sanitary engineering works. Technological Considerations 3.03 On the basis of experience from the first project the most feasible new source of water in the Kathmandu Valley is considered to be groundwater which will be obtained through developing well fields at three different loca- tions. An attempt to start tapping groundwater is also planned for Pokhara, and expectations based on the consultant's study are that this will be success- ful. While there are additional surface sources beyond those constructed under the first project in both areas, they are much further distant from the supply area, and thus proportionately more expensive. 3.04 The towns located on hills just north of the Terai (Butwal, Dharan and Hetauda) will continue to rely on river and spring sources. The intake structures will, however, be improved under the Project to include infiltration galleries at spring intakes and river side collection chambers with horizontal infiltration pipes at river intakes. The infiltration galleries are now being tested under the preliminary engineering (para. 3.16) in Pokhara and are believed to provide a simple, inexpensive water treatment, requiring only supplemental treatment through chlorination. 3.05 The basic design criteria of the Project have been kept modest in order to keep the investment costs at the lowest possible level. However, certain system components, such as transmission mains, have been designed for the full capacity of the respective source keeping in mind that the main  - 13 - components of the system should be able to accommodate peak hour flows in the future without costly modifications. 3.06 WSSB's performance with respect to implementation of the proposed Project can be expected to improve further for the following reasons: (a) In-house staff involvement in project design and supervision will be significantly increased with a corresponding decrease in consultant's assistance; and (b) WSSB is now capable of handling major international contracts and procurement. Furthermore, local civil works contractors have successfully participated to an increasing degree in the execution of works which resulted in savings in mobilization time due to Nepal's relative remoteness. Description of Project Components 3.07 The Project includes the following major components: (a) further extensions of water supply source and distribution works in the Kathmandu Valley, Pokhara, Biratnagar and Birganj (in towns where the water supply systems have been or are now being constructed under the two previous projects), Maps IBRD 14970 and IBRD 14971; (b) augmentation and extension of water supply systems in the Six Towns, Map IBRD 14972; (c) extension of the sewerage network in the Kathmandu Valley (Kathmandu - Lalitpur), Map IBRD 14973; (d) consultants' services; and (e) improvement of WSSB's operating capabilities. The major physical components are shown in detail in Annex 3. 3.08 The improvements to source works are planned to increase production capacities to meet the projected peak day demand in 1990. However, in the Terai towns where the source is groundwater it is recommended that new wells would have a minimum capacity of 4.0 Mid. This capacity in many smaller schemes will, together with small existing capacities, be adequate well beyond 1990. The investment is justified because the incremental cost for providing tubewells with a capacity which is higher than that immediately required, is negligible. In the Kathmandu Valley the development of groundwater sources is planned to meet the requirements up to about 1990. Apart from meeting this demand, the drilling program will also provide a sound basis for defining additional well drilling programs in future.  - 14 - 3.09 The distribution systems are planned to enable WSSB to meet at least the minimum connection program (para. 2.15). A 24-hour service would be available, but minimum residual pressure of about 5 meters would be provided at peak hours only. Service reservoir capacities are planned to be expanded to meet at least three hours storage capacity at peak hour flows. 3.10 Sewerage system extension is a minimum program which will provide sewer services to central areas of Kathmandu and will enable WSSB to meet 17% population coverage in Kathmandu and Lalitpur by 1985. 3.11 WSSB's operational capacity will be improved through (a) manpower training, (b) providing service vehicles and equipment, and (c) constructing essential operational buildings, such as technical offices, workshops, stores and garages at various project locations. Training will include 4 to 5 fellowships for key senior level staff and equipment and facilities for imple- menting the established training program. Cost Estimates 3.12 The detailed project cost estimate is given in Annex 4 and summarized below. % of Local Foreign Total Local Foreign Total Grand Total ----NRs Million-- -----US$ Millio