India - Kanpur Urban Development Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-3125-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE KANPUR URBAN DEVELOPMENT PROJECT September 30, 1981 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT (as of September 15, 1981) Rs 1 Paise 100 US$1.00 Rs 9.032827 Rs 1.00 = US$0.110707 Rs 1 million = US$110,707 The US Dollar/Rupee exchange rate is subject to change. Conversions in the Staff Appraisal Report were, except as otherwise noted, made at the rate of US$1 to Rs 8.0, which represents the projected exchange rate over the disbursement period. FISCAL YEAR April 1 - March 31 ABBREVIATIONS EWS - Economically Weaker Section GOI - Government of India GOUP - Government of Uttar Pradesh HUDCO - Housing and Urban Development Corporation KAVAL - Cities of Kanpur, Agra, Varanasi, Allahabad, and Lucknow KDA - Kanpur Development Authority KJS - Kanpur Jal Sansthan (water and sewerage authority) KNM - Kanpur Nagar Mahapalika (municipal authority) LIG - Lower Income Group lcd - liters per capita per day mld - million liters per day UNICEF - United Nations Children's Fund  FOR OFFICIAL USE ONLY INDIA KANPUR URBAN DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President (GOI). Beneficiaries: The Government of Uttar Pradesh (GOUP). The Kanpur Development Authority (KDA). The Kanpur Nagar Mahapalika (KNM). The Kanpur Jal Sansthan (KJS). Amount: SDR 22.2 million (US$25 million equivalent). Terms: Standard. Relending Terms: From GOI to GOUP: As part of Central assistance to State development projects on terms and conditions applicable at the time. From GOUP to KDA, KNM, KJS for technical assistance: Grants. From GOUP to KDA, KNM, KJS for all other activities: Loans at 7% p.a. interest over 25 years including five years' grace. These agencies would on-lend to the beneficiaries at not less than 12% per annum over varying periods of time. Project Description: The project would support: (i) the development of approximately 14,800 residential and 540 small business plots on three sites covering 200 ha, together with shelter loans and small business loans and assistance; (ii) provision of basic infrastructure, land tenure, and home improvement loans to about 20,000 slum families; (iii) a broad range of investments to improve trunk and branch water supply, sewerage, and drainage infrastructure in central Kanpur; (iv) the improvement of solid waste collection and disposal, infrastructure maintenance and traffic management in Kanpur; and (v) consultant and advisory services for the purpose of strengthening urban institutions in Kanpur and Uttar Pradesh. The potential risks facing the project relate to land acquisition for the slum improvement program and to the implementation capacity of key agencies. This documnent has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contenst may not otherwise be disclosed without World Bank authorization.  -ii- Estimated Cost: a! (US$ Millions) Local Foreign Total Sites and Services 16.0 1.3 17.3 Slum Upgrading 8.1 0.6 8.7 Supporting Infrastructure 5.8 0.9 6.7 Maintenance Equipment 0.9 0.1 1.0 Solid Waste Management 1.0 0.3 1.3 Traffic Management 0.8 0.1 0.9 Technical Assistance 0.8 0.2 1.0 Design, Supervision and Management 3.5 0.4 3.9 Base Cost 36.9 3.9 40.8 Physical Contingencies 2.2 0.3 2.5 Price Contingencies 7.5 0.9 8.4 46.6 5.1 51.7 Financing Plan: (US$ Millions) Local Foreign Total IDA 19.9 5.1 25.0 GOUP Loans and Direct Expenditures 26.7 - 26.7 46.6 5.1 51.7 Estimated Disbursements: (US$ Millions) IDA-FY FY82 FY83 FY84 FY85 FY86 Annual 1.2 7.0 7.6 6.2 3.0 Cumulative 1.2 8.2 15.8 22.0 25.0 Rate of Return: 21% on 70% of total project cost for which benefits are quantifiable. Appraisal Report: No.3504-IN, dated September 25, 1981. a/ Including an estimated US$2.3 million in taxes and duties.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO INDIA FOR THE KANPUR URBAN DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed development credit to India for SDR 22.2 million (US$25 million equivalent) on standard IDA terms, to help finance a project to provide improved shelter and urban services in Kanpur, Uttar Pradesh, and to strengthen metropolitan planning and management in Kanpur and other urban areas in the State. The proceeds of the credit would be channelled to the Government of Uttar Pradesh in accordance with the Government of India's (GOI's) standard terms and arrangements for the financing of State development projects. The exchange risk will be borne by GOI. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (3401-IN, dated April 15, 1981), was distributed to the Executive Directors on April 16, 1981. Country data sheets are attached as Annex I. Background 3. India is a large and diverse country with a population of about 688 million (in mid-1981) and an annual per capita income of US$190. Agriculture continues to dominate India's economy, employing over two-thirds of the labor force. However, the land base is not sufficient to provide an adequate livelihood to all those engaged in agricultural activities, especially the landless or nearly landless who have only an insecure grasp on the means of existence. Over the past 30 years, the share of agriculture in GDP at factor cost (measured in 1970/71 prices) has declined from 60% to about 40%, while the share of industry has increased from 15% to about 24%. But industrialization has not been rapid enough to absorb the growing labor force, nor to bring about the economic transformation that has led to sig- nificantly higher productivity in some other developing countries. 4. Economic growth has been slow in the past, averaging about 3.5% per annum over the past 30 years. Slow growth of value-added in agriculture -- 2.1% per annum over the three decades -- has constrained overall growth, not 1/ Parts I and II of the report are substantially the same as Parts I and II of the President's Reports for the West Bengal Social Forestry Project (No. P-3119-IN), dated September 15, 1981.  -2- only because of the high share of agriculture in GDP but also because scarce foreign exchange has often been required to import food. Industrial value-added has grown more rapidly, at 5.4% per annum between 1950/51 and 1979/80. Over the same period, gross domestic savings more than doubled from 10% of GDP to 21.2%, while gross domestic investment rose from 10% of GDP to just over 21.8%. Foreign savings have never financed a large portion of domestic investment: a peak of about 20% was reached during the early 1960s; by the end of the 1970s, the proportion had returned to below 3%. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance has never risen above 3% of GDP, and was less than 1% at the end of the 1970s. 5. Over the past 30 years as a whole, India has placed relatively little emphasis on exports and has tended to pursue a strategy of import substitu- tion. The volume growth of exports between 1950/51 and 1979/80 averaged only 3.6% per annum, about the same as the volume growth of imports over the same period. Between 1970 and 1977, however, India's terms of trade, which had remained roughly constant during the 1960s, deteriorated sharply. In response, the Government introduced various policy measures designed to stimulate exports. The volume of India's exports grew on average about 9% per annum between 1971/72 and 1976/77. Although export growth has slowed in recent years, due in large part to domestic supply constraints, this experience demonstrates that sustained rapid growth is possible. While expanding world markets, particularly in the nearby Middle East, contributed to this growth, liberalized access to imported inputs and more effective export incentives played a major role. Recent Trends 6. Over the period 1975/76 to 1978/79, growth in real GDP (at factor cost), agricultural value-added and industrial value-added averaged 5.4%, 3.1% and 7.9% per annum, respectively. These trends represent a substan- tially better growth performance than the historical 30-year trends (paragraph 4). However, GDP declined by about 4.5% in 1979/80 due both to the severe drought which reduced agricultural production and to input con- straints in other sectors. Agricultural output fell by about 16% in 1979/80. Industrial production stagnated, largely due to shortfalls in the production of major inputs such as coal, steel and cement, as well as infrastructural constraints, notably in power and transportation. As a consequence of these developments, the remarkable price stability that India had enjoyed after 1975 came to an abrupt end at the close of fiscal year 1978/79, with prices increasing 21% during 1979/80. 7. In 1980/81, the economy recovered substantially, so that real GDP growth for the year was about 6%-7%. During the summer and fall of 1980 foodgrain prices rose, but more slowly than other prices and more slowly than the drop in production in 1979/80 would have suggested. This was made pos- sible through the drawdown of substantial buffer stocks built up by the Government in years of good harvests. These stocks ensured adequate supplies of grain to low-income groups in urban areas through the public distribution system and also provided resources for a large-scale drought relief employ- ment program for low-income groups in rural areas. Aided by a normal monsoon in the summer of 1980, agricultural production rose by about 17%-19%. The industrial sector recovered more slowly, with production in 1980/81 rising  -3- only about 4% above the average for 1979/80, but output increased substan- tially during the year so that production in April 1981 was about 9% higher than in April 1980. The rise in prices slowed during the second half of 1980/81 so that by March 1981 the wholesale price index was 15.7% above its level a year earlier. 8. In agriculture the positive results of large investments and appropriate policies in the past years are becoming increasingly apparent. The rate of expansion of irrigation has increased significantly from 1.3 mil- lion ha per year in the early 1970s to about 2.3 million ha in 1980/81. Fertilizer use reached about 5.6 million tons of nutrients in 1980/81, more than double 1974/75 levels. Over the decade before 1979/80, foodgrain production grew at about 2.75% per annum -- sufficient to meet consumer demand, to eliminate imports (which had averaged nearly 3 million tons per year for the 15 years preceding 1976), and to reduce real foodgrain prices for consumers. At the same time, India was able to build up substantial foodgrain buffer stocks which made it possible to l-mnit the effects of the 1979/80 drought, and to export a modest amount of grain in 1980. While the management of the foodgrain economy after the drought was a significant achievement, the effect of the drought on production re-emphasized the con- tinued importance of the monsoon in India's agriculture. The normal monsoon of 1980/81 brought foodgrain production back to around the previous record level of 132 million tons. While the performance of the recent past and the probable future trends suggest that on average foodgrain supplies will exceed demand, the balance remains delicate and the need for foodgrain imports to maintain consumer supplies or adequate buffer stocks could arise from time to time. For example, some wheat imports are likely in 1981/82 to ensure ade- quate build up of stocks. Programs to expand irrigation, strengthen exten- sion and encourage the efficient use of other agricultural inputs continue to receive high priority. 9. The Indian economy has shifted back from a situation of resource surplus, which had been a temporary phenomenon of the late 1970s, to one of resource scarcity. Investment has again overtaken domestic savings, and the scope for further increases in the latter appears limited. Marginal savings rates have recently been well above 30% in the household sector. Future increases in savings will depend heavily upon the enhanced profitability of public sector enterprises. Impending resource scarcity is even more apparent in the foreign sector. Between 1975/76 and 1978/79, India's current account deficit had remained comfortably small in relation both to GDP and to a growing pipeline of aid commitments. This was due to favorable terms of trade movements after 1977 and to rapidly growing workers' remittances as well as to the growth of exports. In 1980/81, however, the balance of pay- ments deteriorated sharply, with the current account deficit rising from US$850 million in 1979/80 to nearly US$3.4 billion in 1980/81. In part this was due to unique events during the year, such as the disruption of oil production in the Northeast, which, though the flows resumed again in February 1981, alone added over US$l billion to the oil import bill. Com- bined with unprecedented oil price increases, this caused the oil import bill to rise by over 75%, to a level equivalent to three-fourths of India's mer- chandise export earnings. The deficit on current account rose to 2% of GDP. India was able to finance this gap through a substantial drawing on IMF resources (the Trust Fund and the Compensatory Financing Facility), and  -4- through an increase in aid disbursements and a modest drawdown in foreign exchange reserves. 10. The trends in the volume and terms of India's trade indicate that significant adjustments will need to be made in the economy to bring India's external accounts into reasonable balance at a high level of growth. In particular, there is a need to increase the growth of exports, to increase production of commodities such as fertilizer, cement and steel which India can produce efficiently in order to reduce imports of these items, to moderate the rise in oil imports through greater domestic production and slower demand growth, and to reduce the constraints in transportation and other infrastructural facilities which are retarding growth in a wide range of activities, including exports. It is encouraging that, in response to the present balance of payments difficulties, the Government has not reacted by placing more stringent controls on imports, but rather has left in place the more liberal policies evolved in the past several years. Recent improvements in the availability of power, a major constraint facing exporters, and the adoption of several new export policy measures have improved the prospects for accelerating export growth. Development Prospects 11. The experience of recent years illustrates that India does have the capacity to grow and develop at a more rapid pace. Although the industrial sector is small compared to the size of the economy, it nevertheless is large in absolute terms and has a highly diversified structure, capable of manufac- turing a wide variety of consumer and capital goods. Basic infrastructure -- irrigation, railways, telecommunications, the power grid, roads and ports -- is extensive compared to many countries, although there is considerable need for additional capacity as well as improvement in the utilization of existing capacity. India is also well-endowed with human resources and with institu- tional infrastructure for development. Finally, India has an extensive natural resource base in terms of land, water, and minerals (primarily coal and ferrous ores, but also gas and oil). With good economic policies and sufficient access to foreign savings, India has the capability for managing these considerable resources to accelerate its long-term growth. 12. A new Sixth Five-Year Plan (1980-85) was approved in February 1981. The new Plan continues to assign priority to agriculture and power. Further- more, the Plan reflects the Government's efforts to bring about the necessary adjustments in the economy by emphasizing several priority areas. These include: (i) expansion of exports and an investment program to support increased production to replace imports of goods such as fertilizer, cement and steel which India produces competitively; (ii) an investment program and policy framework for more efficient development and use of energy resour- ces; (iii) removal of bottlenecks in infrastructure and related constraints on production of basic industrial inputs; and (iv) continuing emphasis on the development of agriculture. 13. The higher capital formation rates of the past few years augur well for future income growth. However, there are signs that the past programs and policies have led to relatively low growth in certain crucial sectors, namely power, coal, transport services, steel and cement. Potential output growth in sectors which have benefitted from large investments in the recent  -5- past may not materialize unless these input bottlenecks are alleviated. In the case of coal, steel and cement, domestic production appears to be clearly justified on grounds of comparative advantage, indicating an a priori case for policies to promote further investment. In 1980/81 these commodities were not imported in sufficient amounts to eliminate the shortages; increased short-term reliance on imports may be necessary to alleviate slowdowns and dislocation in user industries. In the case of sectors in which there is little scope to import the final product -- power and transportation -- the planning of capacity expansion becomes even more crucial. Although there is scope for improvement in thie short-run performance of these sectors, major investments in balancing and modernization programs as well as in new capacity are essential for adequate growth in the medium term. 14. Despite the relatively large investment programs for the develop- ment of domestic energy resources such as coal and hydroelectricity, and the recent development of offshore petroleum resources, India has not been able to eliminate the gap between its total energy demand and domestic production. During the past year, India continued to face power and coal shortages, but the situation improved substantially during the year so that power generation in June 1981 was around 20% higher than a year earlier. India is entering the Sixth Plan period with an ambitious energy production program backed by substantial financial commitment. In the oil sector, GOI is now accelerating its oil exploration capabilities and is opening up prospective areas for exploration by foreign firms. Prices of petroleum products were raised substantially in 1980 and again in July 1981 to bring domestic prices into line with world market prices, to raise resources for further oil and gas development and to encourage efficient use of energy. India is now committed to an expanded power program that emphasizes exploitation of its large hydro potential and development of its transmission and distribution system. In the coal sector, a policy decision in favor of mechanization has been made in order to achieve more rapid growth of coal production. 15. Agricultural policies, development programs and secular trends all seem favorable for sustaining the past agricultural growth during the 1980s. India ended 1980 with grain stocks of about 12 million tons, without having imported foodgrains during the year. This reflects the trends of the last decade which point to an improvement in foodgrain availability in the economy. Growing output, combined with the projected fall in the population growth rate, suggest favorable long-run prospects for foodgrain supply and demand balances. An occasional need to import grains, particularly wheat, could arise, but if the efforts to develop agriculture over the past decade are sustained and intensified, as suggested in the new Plan, persistent shortage seems unlikely. This development could give rise to a range of policy options including a slowly falling real price of foodgrains to increase the affordability of foodgrains to low-income families, foodgrain exports, and diversification to the production of other, higher-value crops. 16. Foreign exchange reserves are providing a cushion that helps the Government of India in short-term supply management. In March 1981, however, gross reserves were $320 million lower than the level of a year earlier and, in terms of import coverage, fell below the six-month level for the first time since 1977. A much larger decline in the reserve level would have been necessary in 1980/81 hiad IMF Trust Fund and Compensatory Financing Facilities, amounting to over US$1 billion, not been available. India's  -6- reserves provide some limited scope for narrowing the financing gap over the next few years, but successful management of the balance of payments will depend mainly on improved export performance, on import replacement, on the maintenance of aid flows and workers' remittances, and on a moderation in price increases for oil imports. While India's current account balance of payments deficits are not expected to be large relative to the size of the economy (e.g., on the order of two percent of GDP), the absolute amounts are large and will necessitate external borrowing beyond levels expected to be available from normal concessional sources. Accordingly, India has recently begun to undertake substantial borrowings in the financial markets to help finance selected major investment projects. 17. India's medium-term development prospects are mixed. Considerable progress continues to be made, particularly in agriculture, but the economy faces a period of difficult adjustments in the coming years. Investments required to relieve short-term supply constraints must compete with longer-term programs to accelerate growth and to develop India's considerable physical and human resources. The balancing of these objectives will place a difficult burden on those implementing India's Sixth Five-Year Plan. The primary focus must be on the implementation of appropriate domestic adjust- ment policies, although the aid community can and should play an important role in ensuring that India's efforts do not fail due to inadequate foreign resources. 18. Preliminary results from the March 1, 1981 Census, combined with 1971 Census figures adjusted for under-enumeration, suggest that the popula- tion growth rate declined from 2.3% p.a. in the late 1960s to about 2% at present. The rate of increase of population is expected to continue falling to around 1.8% by the first half of the 1990s. While the growth rate appears to be declining slowly, the 1981 Census population estimate was substantially higher than previous Government projections. The 1981 Census data are still incomplete but preliminary reports indicate that the rise in life expectancy was more than anticipated, suggesting that, on average, Indians can expect to live five years longer than they did a decade ago. This no doubt reflects improved availability of food and health services. This implies, however, an even greater need to reduce the birth rate to bring about the needed reduc- tion in the rate of growth of population. The Census results, therefore, re-emphasize the need for continuing efforts to strengthen a broad range of family planning activities to develop a wider clientele and to provide that clientele with a professional, technically competent advisory service which can provide the full variety of available birth prevention methods. The new Plan continues the high priority given to these efforts in earlier Plans. The ambition of its targets - implying a rise in the proportion of protected couples in the reproductive age group from its present estimated level of about 23% to over 35% by 1984/85 - seems fully justified. Such targets imply a serious long term commitment to moderating the population growth rate through an improved family planning program. 19. Reduction of poverty remains the central goal of Indian economic growth. More than one-third of the world's poor live in India, and more than 80% of the Indian poor belong to the rural households of landless laborers and small farmers. About 51% of the rural population and 38% of the urban population subsist below the poverty line (estimated at about US$114 and US$132 per capita per year for rural and urban areas, respectively).  -7- Improvements in the living standards of the poor will depend to a large extent on the overall growth of the economy; the circumstances require increases in agricultural production and employment, in non-farm rural employment, and also in employment opportunities in urban areas. These developments will have to stem in large part from market forces which, however, must be encouraged and reinforced by appropriate Government policies and the strengthening of basic services and infrastructure. The declining trend in real foodgrain prices between 1970 and 1979 reflects such develop- ments. There is also a role for direct Government action in faster implemen- tation of land reform (though the scope for significant reduction in poverty through land redistribution is quite limited in India), in increasing the supply of credit available to small farmers and rural artisans, and finally in broadening the provision of those services which enhance the human capital of the poor and improve living standards. Many of the latter are elements of the Minimum Needs Program, which has been an integral part of Indian planning for the past decade. Progress has been slow but steady in the expansion of primary education, the extension of rural health fac&lities and the provision of secure village water supplies. Innovations such as the community health volunteer program and the national adult literacy campaign provide encourag- ing evidence that well-targetted, relatively low-cost programs can lead to enhanced prospects for India's poor. PART II - BANK GROUP OPERATIONS IN INDIA 20. Since 1949, the Bank Group has made 61 loans and 141 development credits to India totalling US$2,833 million and US$9,323 million (both net of cancellation), respectively. Of these amounts, US$1,168 million had been repaid, and US$4,494 million was still undisbursed as of June 30, 1981. Bank Group disbursements to India in fiscal year 1981 totalled US$962 million, representing an increase of about 32% over the previous year. Annex II contains a summary statement of disbursements as of June 30, 1981, and notes on the execution of ongoing projects. 21. Since 1959, IFC has made 24 commitments in India totalling US$148.7 million, of which US$22.2 million has been repaid, US$27.7 million sold and US$7.5 million cancelled. Of the balance of US$91.3 million, US$82.3 million represents loans and US$9.0 million equity. A summary statement of IFC operations as of June 30, 1981, is also included in Annex II (page 4). 22. In recent years, Bank Group lending has emphasized agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit operations and in providing direct support to major and medium irrigation. Marketing, seed development, agricultural extension, dairying, and forestry are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in financing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. The Bank Group has also been active in supporting infrastruc- ture development for power, telecommunications, and railways. Family plan- ning, water supply development, urban investments and the development of oil and natural gas have also received Bank Group support in recent years.  -8- 23. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, power, water supply and other infrastructure sectors remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs, particularly water and credit for on-farm investments, will continue to receive emphasis. Improved water management and intensification and streamlining of extension systems form an important institution-building aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefitting small farmers. The Bank Group's continuing role in the fer- tilizer sector assists India in the more efficient provision of another key input in the agricultural growth process. Projects supporting water supply, sewerage, urban development and investments in the petroleum sector also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infrastructure and industrial investments will focus on those subsectors which have recently emerged as key constraints on India's overall growth, primarily power and transportation. 24. The need for a substantial net transfer of external resources in support of the development of India's economy has been a recurrent theme of Bank economic reports and of the discussions within the India Consortium. Thanks in part to the response of the aid community, India successfully adjusted to the changed world price situation of the mid-1970s. However, there is now a need for increased foreign assistance to adjust to an even greater deterioration in balance of payments anticipated during the 1980s by augmenting domestic resources and stimulating investment. As in the past, Bank Group assistance for projects in India should aim to include the financ- ing of local expenditures. India imports relatively few capital goods because of the capacity and competitiveness of the domestic capital goods industry. Consequently, the foreign exchange component tends to be small in most projects. This is particularly the case in such high-priority sec- tors as agriculture, irrigation, and water supply. 25. India's poverty and needs are such that whenever possible, external capital requirements should be provided on concessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support. Therefore, India should be eligible and regarded as creditworthy for some supplemental Bank lending. The ratio of India's debt service to the level of exports was about 10% in 1980/81 and is projected to remain below 20% through 1995/96. As of June 30, 1981, outstanding loans to India held by the Bank totalled US$1,742 million, of which US$874 million remain to be disbursed, leaving a net amount outstanding of US$868 million. 26. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with 49%, 36% and 44%, respectively, in 1980/81. On March 31, 1981, India's outstanding and disbursed external public debt was about US$17 billion, of which the Bank Group's share was US$6.2 billion or 36% (IDA's US$5.3 billion and IBRD's US$0.9 billion). Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1980/81, about 18.0% of India's total debt service payments were to the Bank Group.  -9- PART III - UTTAR PRADESH AND KANPUR Uttar Pradesh 26. Uttar Pradesh, located inland in north central India, is India's most populous State, with an estimated 1981 population of 110.8 million (provisional 1981 census figures). Were Uttar Pradesh an independent nation, it would be the eighth most populous in the world, after only China, the USSR, the United States, Japan, Indonesia, Brazil, and the rest of India. One of India's poorest States, Uttar Pradesh had an estimated per capita income in 1977/78 of Rs 817 (US$98), significantly below the national average of Rs 1,189 for that year. The State has the highest birth and death rates among the States of India, the highest urban and second highest rural infant mortality rates in the country, and the second lowest life expectancy (43 years). Uttar Pradesh's economy is dominated by agriculture, which employs 75% of the labor force and accounts for over 50% of total output. Per hectare yields of major foodgrains in Uttar Pradesh are above the all-India average; however, due to the relative density of population in the State, the value of output per person in the rural disricts is 18% below the national average. Within Uttar Pradesh's relatively small industrial sector (12% of State income in 1977/78), agricultural process- ing industries are dominant, although non-traditional industries such as light engineering and chemicals have been growing more rapidly than the average in recent years. 27. The 1981 census indicated that 18% of Uttar Pradesh's population resided in urban areas, the urban population having grown an average of 4.9% per year over the period 1971-81, up from a 2.7% annual growth rate during the preceding decade. It is estimated that approximately 40% of the recent growth has taken place in cities whose populations exceed 100,000, the five principal cities in this size class being Kanpur (1.7 million), Agra (1.0 million), Varanasi (0.8 million), Allahabad (0.8 million), and Lucknow (0.7 million). 1/ While relatively little emphasis has been placed on urban infrastructure in the State Government's past and current investment plans (2.8% of the current plan having been allocated to urban investment), the serious service deficiencies in Uttar Pradesh's major cities and the associated need for ameliorative measures and improved urban management have been recognized by the Government and have prompted new initiatives in recent years in water supply and sanitation, shel- ter and slum improvement. Kanpur 28. The Economy. Kanpur, the eighth largest metropolis in India, is Uttar Pradesh's largest city and chief industrial center. The city's industrial base, established in the mid-1800s, centers around cotton and wool textile mills and leather-tanning and processing factories. In the early 1970s, the Kanpur district accounted for 70% and 41% of net value added in the State's cotton textile and leather industries, respectively. In addition to these 1/ These five cities are referred to collectively as the KAVAL cities.  -10- industries, Kanpur supports a large fertilizer plant and several armament factories and a wide variety of small-scale industries, principally light engineering concerns and manufacturers of agricultural implements, bicycles, chemicals, paints and varnish. While industrial growth has been slow in Kanpur in the post-war period, in 1977 the city accounted for about 16% of the total employment and output in the State's organized manufacturing sector. 29. The 1971 census indicated that 35.5% of Kanpur's working population was employed in industry and more than 60% in trade, commerce and other serv- ices. Kanpur's annual per capita income was estimated at Rs 860 (approximately US$104 equivalent) in 1978. Approximately 45% of the city's population is composed of households which fall into what is known as the "economically weaker section (EWS)", defined as households having monthly incomes of Rs 350 (US$44 equivalent) or less. 30. Urban Administration. The Kanpur Nagar Mahapalika (KNM), or municipal authority, was created in 1959, under the State Department of Local Self Government, as an autonomous body to be responsible for municipal administra- tion in Kanpur. While KNM was initially intended to oversee both the develop- ment and the operation and maintenance of urban service systems, its functions have been eroded over the years, transforming it into largely an operation and maintenance organization responsible for solid waste management, sanitation, street lighting, city roads, traffic management, and, to some extent, education and maternal and child health care. 1/ Since 1974, the KNM has had no elected council, and has been run by an Administrator appointed by the State Govern- ment. Its chief sources of internally generated revenue are the octroi, a tax on goods entering the city, which constitutes about 45% of total revenues, and property taxes, which account for an additional 20% of total revenues. In addition, about 20% of KNM's funds are obtained through State Government loans and grants. 2/ 31. In 1974, the development wing of KNM was separated from the municipality, transformed into the Kanpur Development Authority (KDA), and given responsibility for planning, land development, and development control in the greater Kanpur area, which covers nearly four times the area of the municipality itself. The KDA's activities are directed by a Board of Direc- tors, chaired by the State's Secretary for Housing, under whose Ministry the KDA falls. The Vice-Chairman of the Board is the chief executive officer of the KDA, managing a staff of approximately 1,100 and an annual investment program that reached Rs 62 million (approximately US$7.8 million equivalent) in 1980/81. The principal components of KDA's capital works program are the acquisition and development of land for residential and commercial purposes and the construction of housing and commercial and industrial estates. Over the years, the proportion of KDA's investments earmarked for shelter has increased 1/ Actual construction of infrastructure has been taken over by various State and local agencies, such as the Kanpur Development Authority, the Uttar Pradesh Jal Nigam (a water supply and sewerage development corporation), the Departments of Health and Education, and the Kanpur Electricity Supply Administration (see paragraphs 31-32 below). 2/ Alternative sources of revenue generation are to be studied under the proposed project (see paragraph 47).  -1 1- markedly, from 24% in 1978/79 to 78% in 1980/81. Along with this increase has come a shift in the composition of shelter investments in favor of programs to benefit the "economically weaker section". The primary sources of funds for KDA's investment program are sales of serviced land and buildings, rents and loan charges, loans (from the State Government and GOI's Housing and Urban Development Corporation), and State Government grants. 32. Responsibility for the planning and execution of water supply and sewerage works in Uttar Pradesh was centralized in 1975 under a State-wide water supply and sewerage development corporation, the Jal Nigam. At the same time, provision was made for the establishment of local water and sewerage authorities (Jal Sansthans) to take charge of operation and maintenance of water and sewerage systems. In April 1980, the Kanpur Jal Sansthan (KJS) effectively took over operation and maintenance of water supply works from the KNM, and in April 1981, KJS took over sewerage works as well. 33. The agencies active in the Kanpur metropolitan area exhibit a number of weaknesses in administrative capability and financial management. The Government has engaged consultants for KDA and KNM to study their organiza- tional structure, systems and procedures, and resource mobilization. This is the first step toward a program of institutional strengthening for Kanpur, to be undertaken in conjunction with the proposed project (see paras 47-50 below). 34. Environmental Conditions and Urban Services. Health and environmental conditions in Kanpur are widely regarded as among the worst in the major cities in India. Infrastructure facilities, which proved inadequate to cope with the rapid growth of the city during the Second World War, have not been sig- nificantly expanded, nor adequately maintained, since. About 47% of Kanpur's households live in overcrowded and unhygienic slum areas and "ahatas", 1/ with virtually no access to basic sanitation. These areas are characterized by a high incidence of waterborne and communicable diseases, such as gastroen- teritis, cholera, hepatitis, and tuberculosis. Indeed, Kanpur has the highest reported incidence of tuberculosis in India, with an estimated 60% of slum children affected by the disease. While recent infant mortality figures are not available, 1965 data indicate a very high infant mortality rate of 249 per 1,000 live births, 2/ and it is judged unlikely that the situation has improved in the years since 1965. Thirty percent of the slum population has been class- ified as being "continuously sick" and it is estimated that the average absen- teeism among industrial workers runs as high as 60 days per worker per year. 35. The main features of key service sectors in the Kanpur metropolitan area are as follows. a. Shelter. A recent survey indicated that about 67% of total households in Kanpur live in single rooms. Of a total of about 340,000 households, an estimated 160,000 live in slum conditions, with minimal or no access to basic services. Estimates indicate a shelter backlog in Kanpur of up 1/ Privately-owned slum compounds. 2/ According to the 1980 World Development Report, Upper Volta exhibited the highest reported infant mortality rate, with 1960 data indicating a rate of 263/1,000.  -12- to 60,000 units, with a rate of new household formation of approximately 10,000 per year, half of these EWS households. Existing rent and development control regulations act as disincentives to private investment in shelter, which is minimal in general and virtually non-existent for very low income groups. Thus, the burden of shelter investment continues to fall on the public sector, which does not have the physical or financial capacity to meet projected demand. The KDA, the principal residential developer in the city, currently has over 5,000 new units under construction and, by 1980, had developed a program to deliver approximately 1,800 new units per year to EWS households. Under the proposed project, KDA's capacity would be significantly increased, with approximately 14,800 new units (10,000 EWS) to be constructed over a four-year period. Nevertheless, clearly KDA's efforts will have to be supple- mented by private sector investment if the projected growth of the city is to be adequately accommodated. b. Water Supply. About 50% of Kanpur's households are served by direct water connections, the remainder receiving water from public standpipes and, to a limited degree, shallow wells. Public standpipes are shared, on average, by about 50 families who receive an estimated 30 liters of water per capita per day (lcd), compared to a city-wide average consumption from all sources of 125 lcd. The existing production capacity of approximately 270 million liters of water per day (mld) will be augmented to about 385 mld under the IDA-supported Uttar Pradesh Water Supply and Sewerage Project (see para 37 below). However, extensions to the distribution network and improve- ments to reduce wastage and leakage will be required to achieve a broader distribution of water and to improve system reliability and efficiency. c. Sewerage. No central sewage treatment facilities exist in Kanpur. Raw sewage is either discharged directly into the River Ganga or mixed with river water for use on one 3,100-hectare sewage farm. While the existing trunk sewer network covers the central area of Kanpur, branch sewers cover only about 40% of the municipal area and serve only about 180,000 people. Of the remainder of the population, about 400,000 people are served by septic tanks, about 580,000 by bucket latrines, and the rest (about 600,000) are dependent on badly maintained public conveniences or have no means of sanitation at all. Existing branch sewers are old and partially blocked with silt and solid waste, largely due to inadequate flows. However, additional connections are dis- couraged by relatively high hook-up charges combined with weak enforcement of sewerage regulations. Of the estimated 375,000 liters of human waste generated daily in unsewered areas of the city, only about 15,000 are collected by KNM. A further 190,000 liters per day are collected from bucket latrines by private sweepers and deposited at authorized collection points. An estimated 85,000 liters per day, collected from bucket latrines, are dumped by private sweepers and householders into open drains, while another estimated 85,000 liters per day from households with no toilet facilities at all are deposited in open areas and drains. d. Solid Waste Management. About 30% of the estimated 900 tons of refuse generated in Kanpur per day goes uncollected, principally in the central city area. This refuse combines with uncollected nightsoil to litter drains and open areas. Of the solid waste collected, a portion is treated in a recently commissioned composting plant, which is working up to its design capacity of 350 tons per day. The remaining collected refuse is dumped in depressed areas at the periphery of the city without the benefit of proper sanitary landfill procedures.  -1 3- e. Drainage. While the design capacity of the main drainage outfalls for Kanpur appears to be adequate, lack of maintenance, blockage by silt and refuse, and insufficient provision of collector drains in developed areas has reduced the efficiency of the drainage system, leading to flooding of some low-lying areas during the monsoon. Desilting, widening of drains in selected places, and expansion of the collector system is a clear priority. f. Roads and Traffic Management. While the road network in Kanpur is reasonably adequate and comparatively well maintained, sidewalks and road-side drains are poorly maintained. This poor maintenance, combined with encroachment on sidewalks by hawkers and vendors, forces many pedestrians into the carriageway, where they compete with unmotorized and motorized vehicles. Thus, improved maintenance and traffic management are clearly called for. Bank Group Activities in Uttar Pradesh and Kanpur 36. In keeping with the State's largely agricultural character and its serious deficiencies in terms of health and population control, the Bank Group's activities in Uttar Pradesh have been primarily focussed on projects in the agriculture/rural development and health/population sectors. Chief among these are the First and Second Population Projects (Cr. 312-IN of June 14, 1972 and Cr. 981-IN of April 14, 1980), the Uttar Pradesh Tubewell Irrigation Project (Cr. 8-IN of September 6, 1961) and the Uttar Pradesh Public Tubewells Project (Cr. 1004-IN of May 12, 1980), the Uttar Pradesh Agricultural Credit Project (Cr. 392-IN of June 8, 1973), and the Uttar Pradesh Social Forestry Project (Cr. 925-IN of June 21, 1979). In addition to these activities, and in view of the significant coal resources in Uttar Pradesh, the Bank Group has financed two large power projects in the State, the First and Second Singrauli Thermal Power Projects (Cr. 685-IN of April 1, 1977 and Cr. 1027-IN of June 5, 1980), which will benefit Uttar Pradesh as well as several other States in the northern region. Finally, and of most direct relevance to the proposed credit, the Bank Group is participating in the Uttar Pradesh Water Supply and Sewerage Project (Cr. 585-IN of September 25, 1975), designed to alleviate the serious deficiencies in the availability of safe water and proper sanitation in both urban and rural areas. 37. It was in conjunction with the Uttar Pradesh Water Supply and Sewerage Project that the Jal Nigam and the Kanpur Jal Sansthan were created. Moreover, the project supports a number of sub-projects in Kanpur 1/ as well as in the other KAVAL cities and in some 2,000 villages. Physical performance under the project has been quite good, although some delays have been experienced on on-going sub-projects, due primarily to slow sub-project initiation and to a shortage of cement which has affected civil works throughout India. However, all sub-projects are now underway and materials procurement is functioning well; thus, it is estimated that the on-going sub-projects will be completed, within appraisal cost estimates, by July 1982. Progress in the institutional development program incorporated in the project has been uneven. The Jal Nigam 1/ Sub-projects in Kanpur focussed on augmentation of water supply (through construction of tubewells and distribution mains) to new areas of the city and provision of water meters. These works do not benefit the central city slum areas nor prospective sites and services areas to be served under the proposed project.  -14- and Regional Jal Sansthans (covering rural areas) have developed into reasonably well-functioning bodies, staffed and organized as recommended by project-financed management consultants, although the Regional Jal Sansthans still experience financial difficulties due to unavoidable revenue deficits in poor rural areas. The KAVAL Jal Sansthans, however, have lagged behind expec- tations. Recommended accounting systems have been introduced, billing and collection performance has improved, and tariffs and revenues have been increased over the project period. However, further improvements are required if the Jal Sansthans are to achieve the financial and operational objectives set at appraisal, and are the focus of continuing discussion between IDA and the Government of Uttar Pradesh (GOUP). 38. The Kanpur Jal Sansthan has encountered particular difficulty. It has only recently become a functioning entity, and has suffered from weak manage- ment; inadequate monitoring of operational parameters, such as wastage and leakage, supply, and consumption; poor accounting, billing, and collection; and lack of an effective meter connection, repair, and disconnection (in case of payment arrears) program. As a result of these deficiencies, the KJS has not been able to achieve the financial rate of return requirements incorporated as covenants in the credit agreements for the water supply project, nor is it likely to be able to achieve these target rates of return in the near future. In recognition of the weaknesses in KJS, GOUP has taken a number of steps over the past year to strengthen the organization. These include: (i) appointment of a new general manager for KJS; (ii) strengthening of middle-level management through the creation and filling of incremental posts; (iii) completion of new water meter repair facilities; (iv) stepping up of the billing and collection program, which has resulted in a 67% increase in collections in 1980/81 over the preceding year; (v) introduction of increased water and sewerage taxes; and (vi) introduction of an accrual accounting system. These improvements have enabled KJS to collect revenues adequate to cover its operational costs in 1980/81. Nevertheless, further improvements are critical if KJS is to achieve the operational and financial objectives set for it at the time of appraisal of the water supply project. Therefore, as an integral part of the proposed urban project in Kanpur, KJS would introduce further operational reforms, working toward a set of agreed operational and financial targets (see para 48-49 below), the achievement of which would move the KJS into a position of finan- cial solvency. PART IV - THE PROJECT 39. The proposed project was appraised by a mission which visited India in February 1981. A report entitled "Staff Appraisal Report, Kanpur Urban Development Project" (No. 3504-IN, dated September 25, 1981) is being dis- tributed separately to the Executive Directors. Negotiations were held in Washington in August/September 1981. The Governments of India and Uttar Pradesh were represented by a delegation coordinated by Mr. S. Kaul, Deputy Secretary, Department of Economic Affairs, Government of India (GOI). A Sup- plementary Project Data Sheet is attached as Annex III. Project Description 40. The proposed project would support the reorientation of shelter and infrastructure investments in Kanpur to make them more responsive to the press- ing needs of the city's low-income groups. It would do this by financing a program of investments which would provide basic services and residential and  -15- commercial/industrial plots to low-income beneficiaries and would address the worst-environmental conditions prevailing in the central core of the city. A second and equally important objective of the project would be to strengthen key urban institutions in Kanpur, with emphasis on their capabilities in the areas of management, finance, and maintenance of urban service systems. Finally, the project would support the development of a State-wide strategy for fostering urban development and improving urban management. The project would be carried out over the period April 1981-June 1985 and would consist of the following components. 41. Sites and Services (US$17.3 million) 1/ - Three sites, located within 3.5 to 6.0 kilometers of the city center and covering a total of 200 hectares, have been selected for development under the project on the basis of their proximity to employment opportunities, existing residential development, and available trunk infrastructure. All three sites have already been acquired. Approximately 14,800 residential plots 2/ and 540 small industry plots would be developed on these sites, which would be provided with access roads and foot- paths, water supply, sewerage, drainage, street lighting, and facilities for individual power connections. A variety of plot sizes and options in terms of on-plot super-structure (from an un-roofed sanitary core alone to a complete sanitary core and one-room shelter) would be provided to suit the varying needs and repayment capacities of a range of income groups. Optional shelter con- struction loans for beneficiary households with incomes under Rs 600 (US$75)/month and building construction loans for purchasers of small industry plots (which would have no on-plot development) would be provided under the project. 3/ In addition, the Directorate of Industries would provide technical assistance to small industry owners to upgrade their skills and would operate a common facilities center (constructed under the project) at two of the sites, which would rent equipment and tools and offer quality control assistance to small entrepreneurs unable initially to purchase their own equipment. Finally, each site would be provided with commercial areas, schools, a health center and a community hall, and two of the sites would be provided with police posts and post offices. 42. Slum Upgrading (US$8.7 million) - About 20,000 households in slum areas located in the central core of the city and in pockets within and adjacent to the sites and services areas would be provided with basic infrastructure, land tenure, and home improvement loans under the project. Infrastructure provided would include pedestrian access, drainage, street lighting, landscaping, water supply and sewerage networks designed to permit individual connections, and public standpipes and latrines for households who cannot afford individual facilities. Two types of optional loans would be offered -- a home improvement loan for additions or structural improvements to dwellings and a loan for the construction of a sanitary core, including water and sewerage connections. 3/ 1/ Figures in parenthesis are estimates of the total cost of each component, exclusive of contingencies and design and supervision costs. 2/ Of which approximately 290 would be residential-cum-business sites. 3/ Terms of these loans as well as arrangements for leasehold sale of serv- iced land in upgraded slums and sites and services areas are discussed in paras 54-58 below.  -16- It is estimated that about 30% of beneficiaries will opt for a home improvement loan and about 50% for a sanitary core loan. While no health or community facilities will be provided under this component of the project, the slum areas will be served by three mobile medical units recently introduced in Kanpur and will benefit from a number of community development programs and facilities to be provided in conjunction with a UNICEF-sponsored Community Development Project. 1/ In addition, provision has been made for the construction of one common facilities center for small industries in the central city slum area, provided space for such a facility can be found. 43. Supporting Infrastructure (US$6.7 million) - In order to extend serv- ices to the slum areas to be upgraded, certain basic trunk and branch infrastructure must be extended or improved. Therefore, the project would support investments to: (i) augment the water supply to the center city slum areas and commence a wastage and leakage reduction program to identify water losses in the system and take measures to reduce those losses; (ii) install approximately 30,400 meters of new sewer lines in the slum areas, replace sewer lines which have deteriorated beyond repair or require upgrading to accommodate increased flow (approximately 30,800 meters), and desilt about 53,000 meters of blocked sewer lines; and (iii) augment drainage networks, connect slums to be upgraded to existing outfall drains, and desilt and remodel 13 existing outfall drains to restore them to design capacity. Detailed work programs for these physical works will be formulated and agreed with IDA annually as acquisition of slum areas progresses and the phasing of slum upgrading is determined (Sec- tion 2.07, Project Agreement). A significant part of the sewerage problem in Kanpur up to the present has been caused by inadequate flows in the sewerage system. New branch sewers to be installed under the project will have the capacity to serve a wider population than just the slum households likely to take sewer connections in upgraded areas. Therefore, in addition to the loan funds to be provided to households in upgraded slums for sewer connections, the project will include a Rs 10 million (US$1.25 million equivalent) revolving fund to provide loans, for sewer connections to households outside the slums to be upgraded. The revolving fund will be adequate to finance approximately 20,000 sewer connections during the project period. 2/ In order to ensure that the rate of sewer connection is in fact increased, GOUP has prepared and sub- mitted to IDA a program for improved enforcement of existing by-laws regarding sewer connections. Uttar Pradesh would ensure that the terms and conditions of sewer connection loans would be satisfactory to IDA (Section 3.05, Project Agreement). 44. Solid Waste Management (US$1.3 million) - In order to effect environ- mental improvements and safeguard existing and new infrastructure against blockage by refuse and nightsoil, the project would provide vehicles, equipment and minor civil works to improve refuse and nightsoil collection and disposal. 1/ The UNICEF program will also serve project-supported sites and services areas. 2/ On average, recipients under this program would provide 50% of the cost of sewer connections themselves and receive a loan for the remaining 50%. Loans would be provided at an interest rate of not less than 12% p.a. for a period of four years.  -1 7- Acquisition of sweeper carts, masonry bins, and various vehicles (jeeps, tipper trucks, bulldozers, etc.), complemented by improvements to existing workshops and to the city's composting facility, would enable the KNM to collect and transfer about 90% of the refuse generated and to begin sanitary landfill operations in place of current unsatisfactory dumping techniques. The provi- sion of nightsoil carrier trucks, carts, and collection vessels for house-to-house nightsoil collection will expand nightsoil collection con- siderably, thereby reducing the human waste which is dumped in open drains. To support these investments, KNM has included in the terms of reference of con- sultants engaged to do an overall organization and management study for the municipality (see para 47 below), a review of the organization of solid waste management operations, responsibility for which is currently shared by a number of municipal departments. Appropriate organizational changes will be effected, after discussion of the results of this study with IDA, by April 1, 1983 (Sec- tion 3.10, Project Agreement). To complement investments in nightsoil collec- tion equipment, KNM has developed a program to expand and streamline its own nightsoil collection effort, and to encourage the expansion of private nightsoil collection, register private collectors, and improve enforcement of regulations regarding nightsoil collection and disposal. 45. Traffic Management (US$0.9 million) - While traffic management is deficient in Kanpur, no traffic management or engineering expertise exists in the KNM. The project would thus support the establishment of a Traffic Engineering and Management Cell in the KNM, and would provide Rs 7.3 million (US$0.9 million) to fund initial, low-cost traffic management schemes, focuss- ing on such measures as intersection improvements, channelization, provision of cycle tracks, and regulation of pedestrian movement in central city areas. The Traffic Engineering and Management Cell would be established with adequate staff by April 1, 1982 (Section 3.09(i), Project Agreement). All traffic management schemes to be supported by the project prepared by the Cell would be agreed between GOUP and IDA prior to implementation (Section 3.09(ii), Project Agreement). 46. Maintenance (US$1.0 million) - A considerable maintenance backlog has built up in Kanpur due primarily to poor operation and maintenance procedures and inadequate plant and equipment for maintenance. As part of the institu- tional strengthening program begun by KNM (see para 47 below), consultants have been engaged to study KNM's maintenance activities and recommend improvements, 1/ including the identification of equipment required to meet current maintenance responsibilities and the added requirements to be generated by project-supported investments. A budget of Rs 8.1 million (US$1 million equivalent) has been included in the project to meet initial equipment require- ments identified by the study. Investments under this component will be selected after mutual agreement on the basis of a joint (IDA/KNM/KJS) review of the consultants' recommendations (Section 3.11, Project Agreement). 1/ While KNM has recently handed over responsibility for sewerage operation and maintenance to KJS, the study will cover sewerage maintenance deficiencies and requirements. Any equipment to be procured for sewerage maintenance will be provided to KJS.  -18- 47. Technical Assistance and Institutional Strengthening (US$1.0 million) - A considerable effort would be made under the project to strengthen KDA, KNM, and KJS and to further develop State-level urban planning and management capabilities. KDA has already commenced a 47-man-month consultancy study covering organization and management systems and methods and accounting sys- tems, particularly project cost accounting, charging and collection. Similarly, KNM has initiated three studies, with consultant assistance, focuss- ing on: (i) institutional strengthening -- the identification of potential improvements in organization, accounting, management information systems, stores operation, property assessment, revenue collection, and project cost accounting; (ii) financial strengthening -- investigation of alternative sour- ces of revenue and imDrovements to the existing system of revenue generation; and (iii) means of improving KNM's maintenance of urban service systems. The terms of reference for all of these studies have been reviewed and approved by IDA and provision has been made for follow-up consultancy assistance (including staff training) during implementation of appropriate reforms. KDA and KNM would introduce improved accounting systems, designed on the basis of the consultants' findings, which would be fully operational by April 1, 1983 (Sec- tion 3.06, Project Agreement). Following review of the relevant consultants' recommendations and consultation with IDA, KNM would also introduce, by April 1, 1983, measures satisfactory to IDA to increase municipal revenues (Section 3.12, Project Agreement). 48. Technical assistance to KJS would focus on developing a billing manage- ment program in order to improve KJS's collection of current and past due receivables. In addition, Uttar Pradesh would ensure to introduce a new accounting system in KJS, to be fully operational by April 1, 1982 (Sec- tion 3.06, Project Agreement), and has begun a consumer survey, to be completed by March 1982, to collect essential data on water usage, consumption, and the number, type (e.g., commercial, industrial, domestic) and status of all water connections. In order to overcome the operational problems which have arisen due to a shortage of working capital (and as required under the Uttar Pradesh Water Supply and Sewerage Project), GOUP has provided a term loan of Rs 12.5 million (US$1.56 million equivalent) to KJS for working capital. Finally, during the course of project implementation, KJS would take the following steps to improve operating efficiency and financial performance: (i) implement, by April 1, 1982, a water wastage and leakage detection program, including production metering and area-wise bulk metering (Section 3.07(i), Project Agreement); (ii) develop and implement, by September 30, 1982, on the basis of the findings of the wastage and leakage detection effort, an action program to reduce water wastage and leakage to a level, and in accordance with a time schedule, acceptable to IDA (Sec- tion 3.07(ii) and (iii), Project Agreement); (iii) initiate an accelerated water connection program, to achieve not less than 80,500 billable connections (compared to approximately 45,000 at present) by March 31, 1985 (Section 3.08(a)(i), Project Agreement);  -19- (iv) introduce quarterly water meter reading and semi-annual billing for all connections during fiscal year 1981/82, progressing to quarterly billing with effect from fiscal year 1982/83 (Sec- tion 3.08(a)(ii), Project Agreement); (v) improve its meter repair and replacement capability, through the provision of adequate staff and spare parts, to ensure that not less than 75% and 90% of installed meters are fully functional in each quarter with effect from the quarters beginning on January 1 and October 1, 1983, respectively (Section 3.08(a)(iii), Project Agreement); (vi) improve collection procedures, including procedures for disconnec- tion in the event of payment default, to achieve cash collections of not less than 60%, 65%, 70%, 75%, and 80% of the current year's receivables during fiscal years 1981/82, 1982/83, 1983/84, 1984/85, and 1985/86, respectively (Section 3.08(a)(iv), Project Agreement). 49. The operational improvements included in the project are expected to help improve revenue generation of KJS significantly. Uttar Pradesh would cause KJS to generate adequate revenues, through operational improvements and, if necessary, tariff revisions, to cover not less than 75% of the costs of operation, maintenance and debt service for its water supply operations for the fiscal year beginning April 1, 1982, 100% of the costs of operation, main- tenance and debt service for its water supply operations for the fiscal year beginning April 1, 1983, and 100% of the costs of operation, maintenance and debt service for its water supply and sewerage operations for each year with effect from the fiscal year beginning April 1, 1984 (Section 3.08(a)(v), Project Agreement). 50. At the State level, the Town and Country Planning Department (in the Department of Housing) would receive assistance to enhance its economic and spatial planning capabilities, and thus its capacity to develop a State-wide urban development strategy, and to enable it, in cooperation with the Depart- ment of Urban Development, to assist local development authorities in carrying out their planning function and in improving urban management and finance within their jurisdictions. A particular focus of the effort to develop a State-wide urban development strategy would be the identification of incentives for and methods of private sector participation in land and shelter develop- ment. Assistance to the Town and Country Planning Department would include local consultancy for specific studies; equipment, including mapping and photo interpretation facilities; training; and establishment costs for the expansion of the specialist staff. Project Implementation 51. Project execution would be coordinated and monitored at the working level by KDA, which would prepare monthly progress reports on the basis of information supplied by each executing agency. These reports would be sub- mitted to the Project Management and Monitoring Committee, which would oversee project coordination and address any problems which arise in implementation at the local level. Established in April 1981, this Committee consists of the Secretaries of Housing and Urban Development, the Chief Town Planner, the  -20- Vice-Chairman of KDA, and the Administrator of KNM. In addition, an execu- tive-level Steering Committee, chaired by the Chief Secretary of Uttar Pradesh and consisting of the senior officials of all relevant agencies, which was formed during project preparation, will continue to meet periodically to provide project-related policy guidance. 52. Primary responsibility for individual project components would be assumed by the following agencies: Sites and Services and KDA Slum Upgrading Supporting Infrastructure KJS/KNM Solid Waste Management KNM Traffic Management KNM Maintenance KNM/KJS Technical Assistance and KDA/KNM/KJS/Department of Institutional Strengthening Town and Country Planning, Directorate of Industries (GOUP) Project Costs and Financing 53. The total cost of the project is estimated at US$51.7 million, of which US$5.1 million, or about 10% of total project cost, represents foreign exchange costs. Cost estimates are based on final engineering designs for all three sites for the sites and services component, on final engineering designs for ten representative slum areas for the slum upgrading component, and on prelimi- nary engineering designs for the remaining civil works. Costs for consultant and advisory services, all of which would be locally procured, have been estimated at Rs 8,500 (US$1,063 equivalent) per man-month. Physical contingen- cies of 10% have been applied to civil works for which detailed engineering has been completed and of 15% for civil works estimated on the basis of preliminary engineering. Price contingencies have been estimated at 9%, 8.5%, 7.5% and 7.5% per year for the fiscal years 1981/82-1984/85, respectively. 54. The proposed credit of US$25 million would finance about 50% of project cost net of taxes and duties, which are estimated at US$2.3 million equivalent. Retroactive financing of up to US$250,000 would be provided to KDA and KNM for expenditures made after October 1, 1980 for consultant services required for project preparation, with an additional US$250,000 in retroactive financing to be made available to KDA for expenditures incurred after April 1, 1981 for preliminary civil works. The Government of India would make the proceeds of the credit available to COUP on the standard terms and conditions for State development projects. GOUP would, in turn, provide funds equivalent to the proceeds of the credit, together with the balance of project costs, to the implementing agencies on the terms and conditions indicated below.  -21- Financing Plan (US$ Millions) Primary Implementing Direct GOUP Total Component Agency(ies) Expenditures 1/ Loans 2/ Cost Sites and Services KDA 1.6 23.1 24.7 Slum Upgrading KDA 0.1 11.1 11.2 Supporting Infrastructure Water Supply KJS - 0.9 0.9 Sewerage KJS - 7.2 7.2 Drainage KNM - 2.4 2.4 Solid Waste Management KNM - 1.5 1.5 Maintenance KNM/KJS - 1.2 1.2 Traffic Management KNM - 1.4 1.4 Technical Assistance KDA/KNM/ KJS/GOUP 1.2 - 1.2 TOTAL 2.9 48.8 51.7 1/ Passed directly from GOUP to the budgets of State Government departments, KDA, KJS and KNM for community facilities, small industry centers and skills training, and technical assistance. 2/ At 7% per year over 25 years including five years' grace, in accordance with current State Government practice. Cost Recovery 55. Strong emphasis has been placed on cost recovery under the proposed project, in order to ensure the long-term replicability of the service programs supported so that these programs can be expanded to respond to the growing service needs of Kanpur's population. Moreover, it is hoped that the cost recovery experience in Kanpur will serve as an example to other cities in the State to encourage the expansion of low-cost, cost-recoverable service programs. It has been estimated that about 66% of the total project costs would be directly recovered from the beneficiaries. Cost recovery measures to be taken under the direct service components are outlined below. The terms and conditions for on-lending to beneficiaries under the shelter components are significantly more stringent than under existing Government programs and are expected to be positive in real terms. They should be evaluated against a background of overall price stability in India over the period 1974/75-1978/79. Although consumer prices in 1979/80 and 1980/81 rose at a rate of about 12% per annum, the average annual rate of inflation over the project period is expected to be under 9%. 56. Sites and Services. Approximately 86% of total component cost is attributable to directly chargeable costs (land, site preparation, on-site infrastructure, on-plot development, and shelter loans), which would be fully recovered through plot sales and loan repayments. Prices of residential plots would reflect differences in plot size, infrastructure levels, on-plot develop- ment, and location, as well as a degree of cross-subsidy across income groups. EWS plots would be priced at less than average square meter cost, while prices for plots for higher-income groups and for commercial and industrial users  -22- would be set above average cost to offset the subsidy to the poorest beneficiaries. Plots would be sold with 90-year leasehold titles. The terms and conditions of lease and mortgage and accompanying loans would be acceptable to IDA (Section 3.04, Project Agreement), and would include: (i) for residen- tial plots and shelter loans designated for EWS and LIG (Lower Income Group) 1/ households, payment by beneficiaries of a 10% down payment on the price of the plot, 2/ with the balance of plot price and loan amount (if any) to be repaid at not less than 12% per annum interest over 20 years; (ii) for other residen- tial and industrial and commercial plots, payment by beneficiaries of a 25% down payment on the price of the plot, with the balance of plot price to be repaid at not less than 12% per annum interest over 10 years; and (iii) for small industry loans, repayment at not less than 12% per annum interest over 20 years. For dwellings falling below the property tax threshold (due to phased house construction), a maintenance charge ranging from Rs 2.5/month to Rs 30/month (depending on plot type) would be charged and passed to KNM to finance infrastructure maintenance until property tax payment begins. Settler selection criteria would be satisfactory to IDA (Section 3.04(i), Project Agreement) and would be based primarily on income, in order to ensure that various plot size and design alternatives are reserved for intended income groups. 57. The remainder of the cost of the sites and services component is accounted for by land, buildings and equipment for community facilities (5%), off-site infrastructure (7%), and the small industry assistance program (2%). The cost of off-site infrastructure would be partly recovered through user charges, the application and collection of which should be improved through the project-supported institutional strengthening program. The cost of community facilities and small industry assistance would be largely unrecovered, with the exception of partial recovery of the cost of land for community facilities (through plot charges) and of the cost of small business common facilities centers (through user charges for equipment). 58. Slum Upgrading. About 99% of the cost of this component is accounted for by directly chargeable costs (land, on-site infrastructure, loans for home improvement), which would be fully recovered through land and improvement charges and loan repayments. Tenure to improved land would be provided to beneficiaries through 90-year leasehold titles. Terms and conditions of leases and home improvement loans would be satisfactory to IDA (Section 3.05(i), Project Agreement), and would include payment by beneficiaries of a 5% down payment against the price of the serviced land, with the balance of the plot charge and home improvement loan amount (if any) to be repaid over 20 years at not less than 12% per annum interest. Repayment would be made in monthly installments ranging from approximately Rs 13 to Rs 50, depending on the size of the serviced plot. 3/ In addition, a maintenance charge of Rs 2.5 for 1/ Households with monthly incomes in the range of Rs 350-600. 2/ With the exception of EWS I (the lowest income group) beneficiaries, who would be required to pay only a 5% down payment. 3/ These amounts are estimates, pending final acquisition of slum areas to be upgraded (see para 67 below).  -23- smaller plots and Rs 5 for larger plots would be charged and passed to KNM to support service maintenance. 59. The remaining 1% of component cost is accounted for by the proposed common facilities center for small industries, the cost of which would be partially recovered through charges levied for the use of the facilities. 60. Supporting Infrastructure, Solid Waste Management, Traffic Management, and Maintenance. The costs of water and sewerage works would be partially recovered through user charges, which by the fiscal year beginning April 1, 1983 would cover the entire costs of operation, maintenance, and debt service for water supply and by the fiscal year beginning April 1, 1984 would cover the entire costs of operation, maintenance, and debt service for sewerage (see para 49 above). The solid waste management, traffic management and maintenance components would be financed by KNM out of general revenues. While no specific charges for these services would be introduced under the project, 1/ steps would be taken by KNM (see para 47 above) to increase the municipality's revenue base and to improve revenue collection. Procurement and Disbursement 61. The total estimated value of civil works contracts under the project is approximately US$25.3 million equivalent. 2/ The largest of these works are the civil works for the Barra and Gujaini sites and services developments (the value of works on the two sites totalling US$7.6 million and US$4.5 million, respectively), the slum upgrading works (totalling US$4.6 million) and construction of branch sewers (US$4.7 million). Contracts for works on the two larger sites and services developments and for branch sewers will be let on a "slicing and packaging" basis after all-India competi- tive bidding among pre-qualified bidders in accordance with procedures satis- factory to the Association. A technical consultant, experienced in the administration of large civil works contracts, will be hired by KDA to assist in contract award and administration (Section 2.02(i), Project Agreement). Design objectives for the sites and services works call for the use of simple labor-intensive technology and easily available local materials (e.g., brick, lime, and fly-ash, as opposed to less accessible cement, steel, and stone aggregate), in order to minimize cost, maximize employment of local labor and facilitate compatible self-help additions to initial structures. In view of the need to coordinate with the phasing of the slum upgrading program, branch sewer construction will be done under annual contracts averaging only about US$0.8 million. Thus, neither of these categories of works would attract the interest of foreign contractors. 62. The slum upgrading works would be distributed over nearly 90 slum areas, progressing slum-by-slum as lands are acquired. Thus, individual con- tracts would be very small, and would be let on the basis of local competitive bidding in accordance with procedures satisfactory to IDA. The remaining civil works, totalling US$3.9 million (for water supply, sewerage and drainage works, 1/ With the exception of the maintenance charges in sites and services and upgraded slum areas (see paras 56 and 58 above). 2/ Costs cited in this section are exclusive of contingencies.  -24- site preparation, and the Pokharpur sites and services area) would be individually small and scattered and would also be let on the basis of competi- tive bidding following local advertisement in accordance with procedures satis- factory to IDA. 63. Plant, equipment, and vehicles valued at about US$2.4 million equiv- alent would be procured under the project. Contracts totalling approximately US$300,000 equivalent would be awarded on the basis of international competi- tive bidding in accordance with IDA guidelines. Contracts, for equipment totalling about US$1.9 million would be let on the basis of competitive bidding advertised locally, in accordance with procedures satisfactory to the Associa- tion. This equipment, will be procured in stages through small contracts covering about 25 different categories (such as refuse carts, maintenance tools and vehicles) involving a large number of manufacturers and would not attract interest of foreign suppliers. Also included are equipment for which local availability of spare parts and maintenance facilities is important. The remaining equipment (total value US$200,000), to be procured under the project, would involve small contracts (under US$50,000) for items which would be procured through normal commercial channels after obtaining quotations from at least three suppliers. 64. The proceeds of the credit would be disbursed against: (a) 100% of foreign expenditures for directly imported plant and equipment, and 100% of local expenditures (ex-factory) for locally manufactured plant and equipment, procured through international competitive bidding; (b) 55% of expenditures for plant, equipment, and vehicles procured through local competitive bidding or prudent shopping; (c) 55% of expenditures on contracts for civil works; (d) 70% of expenditures on loans made for home construction or improvement, for sewer connections, or for small industry construction; and (e) 100% of expenditures for technical assistance and training. Disbursements against expenditures made in respect of shelter, sewer connection, or small industry loans would be made on the basis of certified statements of expenditure. Disbursement requests for all other items would be fully documented. Benefits and Risks 65. The principal benefits of the proposed project would be to redirect a significant proportion of public investment in shelter and infrastructure in Kanpur toward low-cost, replicable programs which would benefit low-income groups, to expand the capacity of local and State-level institutions to plan for urban growth and manage urban services, and to introduce the concept of full cost recovery by supporting affordable responses to the needs of low-income households. It is hoped that, through the involvement of State-level institutions, the experiences in Kanpur will serve as an example for cities throughout Uttar Pradesh. 66. The sites and services developments would serve 14,800 households, 74% of whom would fall below the estimated urban poverty level, providing them with shelter, basic services, primary and secondary education, and health care. The average per-household cost of the land and services provided would be Rs 10,850 (US$1,360 equivalent). The economic rate of return of the sites and services component is estimated at 18%. This estimate is based only on the estimated increase in rental value of the developed land and structures to be con- structed, and does not take into account the significant health and education benefits likely to be realized. The slum upgrading program would provide basic  -25- infrastructure and sanitation to approximately 20,000 households, 87Z of wh-iom fall below the urban poverty threshold and many of whom have at present no access to even the most rudimentary sanitary facilities. The average per-household cost of the services provided would be Rs 3,900 (US$490 equiv- alent) and the estimated economic rate of return of the program is 26%, once again based only on the forecast increase in rental value created by the proposed infrastructure investments. The supporting investments in off-site trunk and branch infrastructure (water supply, sewerage, and drainage) serving slum areas would benefit a much wider population of approximately 200,000 people, as significant benefits would accrue to households outside the slum areas selected for full-scale upgrading under the project. The solid waste management program to be undertaken would result in much-improved environmental conditions, and thereby significantly reduced health risks, for an estimated 100,000 households in the central core of the city. And finally, traffic management and maintenance investments would improve capacity utilization in existing service systems, potentially benefitting the entire population of the city. 67. The primary risk to the project relates to land acquisition for the slum improvement program. At present, 28 slum areas housing approximately 8,700 households, equivalent to the first two years' work on the component, are already in the possession of the Government. Of the remaining 61 slum areas to be acquired, notification of the intent to acquire has been published in respect of 40 areas and will be published shortly in respect of the remaining 21. However, the acquisition of these areas is being carried out under an acquisition act never before applied in the State. As a result, litigation over the compensation formula is likely, and thus the final cost of acquisition will not be known for some time. Straightforward application of the compensa- tion formula specified in the Act (100 times monthly property rental value) would result in an average cost of acquisition of Rs 20/m . In view of2 increases which may arise out of litigation, an average cost of Rs 31/m has been used in calculating the costs and thus the affordability of the planned service program to potential beneficiaries. If the average costs of acquisi- tion substantially exceed this figure, a range of options will be considered, including deletion of the more expensive slum areas (with possible substitution by other slums on public lands), further reduction of infrastructure standards, or subsidies against the cost of the land. 68. The second main risk relates to the capacity of the principal implementing agency. For KDA, the project would involve a significant increase over current expenditure levels. However, the bulk of the expenditure would be carried out under relatively few contracts, which represents a major advance in terms of ease of administration over the current practice, which has favored multiple small contracts. This factor, coupled with the assistance of a tech- nical consultant experienced in contract administration (see para 61 above) and KDA's ability to draw additional staff, as needed, on secondment from a centralized pool, should guard against significant implementation delays.  -26- PART V - LEGAL INSTRUMENTS AND AUTHORITY 69. The draft Development Credit Agreement between India and the Associa- tion, the draft Project Agreement between the Association and the State of Uttar Pradesh, and the Recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 70. Special conditions of the Project are listed in Section III of Annex III. 71. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 72. I recommend that the Executive Directors approve the proposed credit. A.W. Clausen President September 30, 1981  ANNEX I Page 1 of 5 TABLE 3A INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVRAGES LAND AREA (THOUSAND Sq. KM.) MOST RECENT ESTIMATE- TOTAL 3281.6 MOST RECENT LOW INCOME MIDDLE INCOME AGRICULTURAL 1809.5 1960 /b 1970 /b ESTIMATE /b ASIA 6 PACIFIC ASIA 6 PACIFIC FNP PER CAPITA (US$) 60.0 100.0 190.0 232.3 1136.1 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 111.1 152.5 241.8 499.4 1150.6 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (THOUS.) 434850.0 547569.0 659217.0 URBAN POPULATION (PERCENT OF TOTAL) 17.9 19.7 22.0 17.3 40.8 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 974.7 STATIONARY POPULATION (MILLIONS) 1621.0 YEAR STATIONARY POPULATION IS REACHED 2115 POPULATION DENSITY PER SQ. KM. 132.3 166.6 200.5 153.6 373.1 PER SQ. KM. AGRICULTURAL LAND 246.7 308.0 355.8 360.3 2382.8 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 40.1 42.4 41.1 37.4 39.8 15-64 YRS. 56.8 54.7 56.0 59.2 56.7 65 YRS. AND ABOVE 3.1 2.9 2.9 3.5 3.5 PCPULATION GROWTH RATE (PERCENT) TOTAL 1.8 2.3 2.1 2.1 2.3 URBAN 2.5 3.3 3.3 3.4 3.8 CRUDE BIRTH RATE (PER THOUSAND) 44.2 40.3 34.0 27.7 29.7 CRUDE DEATH RATE (PER THOUSAND) 22.7 17.4 13.5 10.2 7.5 GROSS REPRODUCTION RATE 3.1 2.8 2.3 2.5 1.9 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) 64.0 3782.0 5619.0 USERS (PERCENT OF MARRIED WOMEN) .. 12.0 22.6 20.4 44.1 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 98.0 102.0 93.0 107.1 123.7 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 93.0 92.0 91.0 98.6 112.6 PROTEINS (GRAMS PER DAY) 52.0 51.0 50.0 56.9 62.5 OF WHICH ANIMAL AND PULSE 17.0 15.0 13.0 14.2 19.7 CHILD (AGES 1-4) MORTALITY RATE 27.1 20.4 14.8 14.6 4.8 IHEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 42.2 47.5 51.9 57.7 64.0 INFANT MORTALITY RATE (PER THOUSAND) .. 134.0 125.0 89.1 50.2 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL 17.0 33.0 30.1 45.9 URBAN .. 60.0 83.0 65.8 68.0 RURAL .. 6.0 20.0 20.1 34.4 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 19.0 20.0 17.6 53.4 URBAN .. 85.0 87.0 71.0 71.0 RURAL .. 1.0 2.0 4.8 42.4 POPULATION PER PHYSICIAN 4850.4/c 4889.0 3617.4 3857.7 4428.7 POPULATION PER NURSING PERSON 9630.d7O 8296.5 6429.4 6411.8 2229.7 POPULATION PER HOSPITAL BED TOTAL 2149.0/d 1612.9 1311.1 1132.8 588.5 URBAN .. .. 363.5 322.3 579.6 RURAL .. .. 10429.1 5600.5 1138.5 ADMISSIONS PER HOSPITAL BED .. .. HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.2 5.6 5.2 URBAN 5.2 5.6 4.8 RURAL 5.2 5.6 5.3 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.6 2.8 URBAN 2.6 2.8 RURAL 2.6 2.8 ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. .. URBAN .. .. .. RURAL .. .. ..  ANNEX I Page 2 of 5 TABLE 3A INDIA - SOCIAL INDICATORS DATA SHEET INDIA REFERENCE GROUPS (WEIGHTED AVEAGES - MOST RECENT ESTIMATE)- MOST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b ASIA & PACIFIC ASIA & PACIFIC EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 61.0 73.0 79.0 85.9 99.8 MALE 80.0 90.0 94.0 94.4 100.6 FEM4ALE 40.0 56.0 63.0 64.5 98.8 SECONDARY: TOTAL 20.0 26.0 28.0 38.0/aa 53.5 MALE 30.0 36.0 37.0 34.6laa 58.4 FEtlALE 10.0 15.0 18.0 18.0/aa 48.6 VOCATIONAL ENROL. (Z OF SECONDARY) 8.0 1.0 1.0 3.8 21.1 PUPIL-TEACHER RATIO PRIM1ARY 29.0 41.0 41.0 32.8 34.2 SECONDARY 16.0 21.0 ,, 19.9 31.7 ADULT LITERACY RATE (PERCENT) 28.0 33.4 36.0 52.8 86.5 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 0.7 1.1 1.3 1.7 12.7 RADJO RECEIVERS PER THOUSAND POPULATION 4.9 21.5 32.5 35.3 174.1 TV RECEIVERS PER THOUSAND POPULATION 0.0 0.0 1.0 3.7 50.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 11.0 16.0 16.9 14.6 106.8 CINEMA ANNUAL ATTENDANCE PER CAPITA 4.0 6.3 3.8 3.4 4.3 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 189761.4 220670.5 256699.4 FEMALE (PERCENT) 31.2 32.4 31.9 29.3 37.4 AGRICULTURE (PERCENT) 74.0 74.0 71.0 69.8 50.2 INDUSTRY (PERCENT) 11.0 11.0 11.0 14.1 21.9 PARTICIPATION RATE (PERCENT) TOTAL 43.6 40.3 38.9 39.7 40.2 MALE 58.0 52.6 51.3 51.5 49.8 FEMALE 28.2 27.1 25.7 23.3 31.1 ECONOMIC DEPENDENCY RATIO 1.0 1.1 1.1 1.1 1.1 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGhEST 5 PERCENT OF HOUSEHOLDS 26.1 26.3/e 22.2 HIGHEST 20 PERCENT OF HOUSEHOLDS 51.7 48.9/e 49.4 LOWEST 20 PERCENT OF HOUSEHOLDS 4.1 6.7Te 7.0 LOWEST 40 PERCENT OF HOUSEHOLDS 13.6 17.2Te 16.2 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 132.0 134.1 248.6 RURAL .. .. 114.0 111.6 193.7 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URbAN .. .. .. .. 249.8 RURAL .. .. .. .. 234.3 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 40.3 41.7 21.2 RURAL ' ' 50.7 51.7 32.2 Not available Not applicable. NOTES Ja The group averages for each indicator are population-weighted arithmetic means. Coverage of countries amcng the indicators depends on availability of data and is not uniform. /aa China included in total only. /b Unless Itherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1976 and 1979. /c 1962; /d 1958; /e 1964-65. May, 1981  ANNEX I Page 3 of 5 DtFylOlhS oP SOCIAL INIICATORO .ho .......c. .ray too JIt)o eectctyi o f the n-hj -t c-unr cod l2lIa.o.ttn gruI lbaeca rgeaeaaiim hntettet ta inhrnton igro dt th"nI ao ecypuah n'agte nt.toIen :. nI H Seth ndEta' I t.ed I.ho.. otf -bot n.ontlnyichcoonr'aaItanott handat d.ottha onl I_o - Ince tttoeaeltot'a on thledmaosdpdeniba ilbit odaa acdncotttion. ntio nottononoan tnrlelntoah te Pt.ldtrccaoht hecnnten htintonl., onoonparttnbeaace o ntetadcancnot atlcanotthoctttthyad-eleonn .troupe.ll! -l1i1.l !ATli. 'thotc. a....n.) S'e"atcyrmnloltd-tta ra .odn.a.-PyIa InIoa -chl-Tt -locacaco eCnclnaa cclndooeohtedoaittehther.otntseabeochd T-olayt in o' f-an oenntt 1-ht oi to-hAno - 91-nh ha:li9h n atn etr otpreetyeafdb hsee h..at- byda lIii n 99ot, cdIolaasn oea ldafe ate.)wihofrO-eteeo feheptala dtode by thd -e nbeof bade. N -e -d ......oT itiec_)toao-st- I c oi nc,chy and iiih -d-000..0101.:~ _" amend coononien . 19h. 1970, acd hill daa, the bonne70ld foeenottetdoal parpeses ncdeletion yeeircttocn Anernee comber of nercoes nor roes- Intel. arbee. and roral - toorega Ode-li..dh..pi,,, ,, 1 locol. andfecolo lon ronootaon nootiloning at 7.0 yenta Cite raco Canceottnal deellAge n.th leottit _-y-On il_tg q-arte- roteo ft lecoity nte-loc hone t fce i-oe.lnnteoa- eol-lia c of tct.1el,dnar e nrir delitceeeeyenitcelye. dfen..tll fltcocioictenccco ly11,1 ltolcdotielnlancctgynnnoantannn.l.A .ld, J&-- -- b ..Idi andfeto It ci-iyret00n io rC--eto pponycti- 1..- .:Ad.jos 98 .lftd . tnotet Pl-iattbe - .1ldp 1 hc -ttcnono rura lattIIoOo-po l pplaoc-toa nc noeohn?tnrcnbole ocl,mlean telt-ilne onl,eiean eml th ...nc..nt .ia .c ..eoi--edeo iro he-a-d lyotieogntnetanre cccotnnfllgecthptetleectprcntgs fnepoio no] to nccncnct . Ty. on ochiocad cal yften fnntii inc eatn bunco to petnany7 chcol dt ..y I Liotoo 9 ....c..oply taiitde1oyt.d.e.. o.ed.. -l ont -nnedont-itniclhf noncodyouc- ne- oalnteontlnin tdcEnnro ncyRaiosn ee ricte fiiitclt. ontheaunlhi. oocccnne -doolooeifatlllyncntc'-lac..- isod ,ctool -rot ancd faecle oynda hc;aodn thoion t i ,lle~~ 'I-. fo tonntbhd.ee.apcllciynreO yote l'e-1dnoonatt oeal lopoatoc_t---t nh.otldodnId. I _I ....I-' ' lyl, "I- e Pe jjn i-ca le cacf c he tqtc hlroa fluIereo Lttoa d tent lernn- el _ e tcndec -ffeat0 cal nattI c 1.tetl -a,L-2.h, 19- ad h 11r) dnta Ioc-cdoocfncctI.Ityocrnol ,-c other ynCinotohn tcn--n IIdynd nro2t.ani- itrlIcA-ecnda iniccntloulo Icloodptrettot ecdann-oYeatc.t--d_o ocly, 1h1, 191 cod 17d dot - n'tnl-ttncrc conI-cc iern. andenoundnit-Tefl otodont ontlled I noctoni ho... ooelrrst - Ct 7dhn y0-lh-nonl o-nihno-aty Cl)- nidtn and ..edr aoi te lhinteac rocaith year eonit e 17-i th-1 anI97- latco 1on 960-t, 19th0 D aod 197 1-9 nocenor orn(yn ahoad-pclanOe"tr - Pa,ene ai oncu hee Mypelate 0o 191,970, and 11979 dcna. T-nilotany ct0tole Crudeloathhatn ion ccoena) Ahoal deoh pnriua doe(0daartde14L y-)ettotn orltto 011 nypon of otN.ionr for adi yoylaior.c 19 t0 . 1970, cod 1 979 dan- endettrn1erLi citoye cooan of nedoOatbot not -odnI o-l Croon lecrodocfco taco- Inacot coin hoc ofdaoohteeo --oe tal hant In- lIcen eanin to ootnoerandin yent nhnngnna o o ot Il t cnn 1950a60y loan-n,eon acegr9 ndn7 t 90,_9f on 97.nat v eocrtt- Oho-th..An l.c....caing... ofd tnb-conl elr ndre- ...on. of lieic -a thboom plnn J--nen .nna p..... Ire h-einchd poultin; enos. c con i ornr C,onDe.f cncd-ra<t ago)l-nA c..rel oneIh eat h;n--tdntfoid-olen-eterrcCtilto oentu otholAi ll> Shout nel acne o- r oil- ao-ne 196dt 197entndta 9e let........ .uaiof'ei genera. ct.IeI eannyt- e'',aii - I'pnlldnca C_e - A111se '1--ed~~~~~~~~~~~~ye ico'o Orcndotonl t eod ic ec.. ral. reit.ti- iconn_idr he,0 li -i_i ......li -AiOii ~ to- - ho'dol' ci Onf- aptn tlat four tin be no.....l lidec rd rdoinpa aie39h-1li ldnfecolocol Cneahna n_oao o Cet o ea-an nth ohno Irdtlno i odteoitcn rdcInecoe ee n edadnno d unn b nr,ldddgoeitln tdiaottsa onunelendayncnhaeo. Ceratdlnlncoca ptr.tryg ,dn(... ntona--ndo ieocotIo i pm day. icootable nonrilat tunonoan Aosotit needonnoon, inponte tent_nercnyarlily c 19t_i 1911Inod 1979 data FODAnopeURIte.adcino ictc.htepitonldocalfd.edo Pnltiencdail) If Pnif p--te l-tt cc tincnen cI toallhk.arr Inq.eoctFtle Tur n odnncnltnt. and ieae0 cc d. e -t pilton .tqor-- leC__eAt..o IpecoA Yote-oceI ortt - Bn-td y d hunting el fIllnneetocedh P-h,-itmend ,en y-tfi-ogltel need dfo feedu a -d TiaI- ot necan 7e ycc-t i-aitrfne i-hI- 191 cd 1979- data. -centeid ifnca9 ; 9h1-hO 1970, aned 1971 i dt..i9.h_ond 1979 data. nspI p-fodoerdpny- -etohlncl1961 d65 7o19 nrdonhno.n-otooItyab nnnF ooononh da...cl,nole-tdi-npel--oe-lnd-g coloePt-en ton ni calorties othfho rOI pr-nidr lee nileo ...nnefnnaga - of .totl,rine . nd-ilsa-e reuan_ of -idg-.eynlne dilcannAeoflbmn lctlrl npndnodll__neiohoi_tlen--nd 110.9A,odh7dca Thoonnitoedo toy7totyotocnta unial rocin 0 ofacttd Pedie aid, I rnnd_ hibt11Ic theqcinA-ootA tf, lpnde'tcie fatio of, ocoltonodet and .i. nod. toot Iod dochenn IAt-0 -97an 197 dta tt1 tihe '1g Iot icn,a_ % -ton -.nc ni eltcd bc, ooo FAO on pr doy;'i" I9_1-i,1971and 197 dora ctcnmw,10?h'i(nld Chod -lne -i Ite c ot(e h ad) .1- hIco Idaf pan f ihotndi Penen ,t ..po-. ty, -3 coon SIc In -fn. c t.ol3-R'otc'n n _0cdeaeor nt loft 1a970, - 19t7171 d n- 197 data. 7f hnhido.t an nrthlyhf, 1971d 197 d ote and-ahoct-dhe onf-erotod oitooontdenniebaotcon lnlocniiernallotoht(ecnnitoonodl-Acnoulioithtclolnntnocden nnyrer tntlc.andchnnlorePoanec IrconcLentO Ilty erntco