India - Madhya Pradesh Urban Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 11447 PROJECT COMPLETION REPORT INDIA MADHYA PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2329-IN) DECEMBER 21, 1992 Infrastructure Operations Division Country Department II South Asia Regional Office 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 Equivalents Currency Name = Rupee (Rs) US$1.0 = Rs 9.5 (At Appraisal, 1983) US$1.0 - Rs 25.6 (At Closing, 1991) Fiscal Year April 1 - March 31 Abbreviations DHE Department of Housing and Environment, Madhya Pradesh DLSG Department of Local Self-Government, Madhya Pradesh DUP Directorate of Urban Projects, Madhya Pradesh GOI Government of India GOMP Government of Madhya Pradesh HUDCO Housing and Urban Development Corporation, Limited, India MC Municipal Corporation MOF Ministry of Finance, GOI MOUD Ministry of Urban Development, GOI; formerly Ministry of Works and Housing (MOWH) MP Madhya Pradesh State MPHB Madhya Pradesh Housing Board MPSCIB Madhya Pradesh Slum Clearance and Improvement Board MPTCPD Town and Country Planning Department NBO National Building Organization, India SADA Special Area Development Authority SAR Staff Appraisal Report (no. 4359-IN)  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation December 21, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on India Madhya Pradesh Urban Development Proiect (Loan 2329-IN) Attached is a copy of the report entitled "India - Madhya Pradesh Urban Development Project (Loan 2329-IN)" prepared by the South Asia Regional Office with Part II contributed by the Borrower. The project exceeded its main physical targets. However, its objectives in other areas--such as policy reforms, land acquisition, and cost recovery--all proved too ambitious. Accordingly, while the project outcome is rated as satisfactory, its sustainability is rated as marginal. The main lesson is that organizational arrangements for project preparation and implementation should closely match institutional goals and that urban projects should incorporate well defined action plans with respect to institutional development objectives to be agreed upon with relevant state and project authorities. The project will be audited together with other completed urban operations in India. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their officiat duties. Its contents may not otherwise be disclosed without Wortd Bank authorization.  I  FOR OFICIAL USE ONLY PROJECT COMPLETION REPORT INDIA MADHYA PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2329-IN) TABLE OF CONTENTS Page Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evaluation Summary .................... ii PART I : PROJECT REVIEW FROM THE BANK'S PERSPECTIVE A. Project Identity .1 B. Background .1 C. Project Objectives and Description . . . . . . . . . . . . . . 2 D. Project Design and Organization . . . . . . . . . . . . . . . . 2 E. Project Implementation. 4 F. Project Results and Sustainability . . . . . . . . . . . . . . 6 G. Bank, Borrower, and Consultant Performance . . . . . . . . . . 7 H. Project Documentation and Data ............... . 9 PART II PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . .10 PART III STATISTICAL INFORMATION (TABLES) 1. Related Projects . . . . . . . . . . . . . . . . . . .15 2. Project timetable ..16 3. Cumulative Loan Disbursement ..16 4. Project implementation: Time Schedule . . . . . . . . .17 5. Project Costs and Financing A. Project Costs .18 B. Project Financing .18 6. Project Results A. Physical Indicators .19 B. Economic Impact .19 C. Financial Impact .19 Dl. Studies for Local and State Agencies . . . . . . . . . . . 20 D2. Technical Assistance for HUDCO . . . . . . . . . . . . . . 21 7. Status of Covenants ..22 8. Use of Bank Resources A. Staff Input . . . . . . . . . . . . . . . . . . . . . . . . 23 B. Missions .23 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.   i PROJECT COMPLETION REPORT INDIA MADHYA PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2329-IN) PREFACE 1. This is the Project Completion Report (PCR) for the Madhya Pradesh Urban Development Project, for which Loan 2329-IN in the amount of US$24.1 million was approved on July 19, 1983. The loan was closed on June 30, 1991, two years behind schedule. On November 1, 1989, US$6 million was canceled as a result of project restructuring. In addition, the final undisbursed balance of additional US$5.6 million was canceled as of July 3, 1991. In total, US$12.5 million, or 52% of the original loan amount was disbursed. 2. This PCR was jointly prepared by the Infrastructure Operations Division, Country Department II, South Asia Regional Office (Preface, Evaluation Summary, Parts I and III), and the Borrower (Part II). 3. Preparation of this PCR was started during the Bank's final supervision mission in April 1991, and is based, inter alia, on the Staff Appraisal Report; the Loan and Project Agreements; supervision reports; correspondence between the Bank and the Borrower; and internal Bank memoranda.  I  ii PROJECT COMPLETION REPORT INDIA MADHYA PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2329-IN) EVALUATION SUMMARY 1. Objectives. Immediate objectives of the project were (a) to reduce the deficit in urban shelter and services in Madhya Pradesh and (b) to introduce new planning and implementation strategies for shelter projects. Broader objectives were (a) to improve municipal management and resource mobilization and (b) to strengthen state as well as national level agencies responsible for urban sector investments. This project was a distinct example of the Bank's attempt at "learning by doing", being the first to support state-wide (rather than single city) urban development project in India and to involve central agencies, in particular the Housing and Urban Development Corporation (HUDCO), as sector intermediaries. 2. ImDlementation Experience. Major physical investment components were carried out adequately, but other components fell short of targets as the wide scope and ambitious aims of the project were not matched by the commitment and capacity of the local institutions. Institutional weaknesses and land acquisition problems had been recognized as main risks at the outset. However, measures designed to deal with them proved insufficient, and most of the project investment could not be started for almost two years after effectiveness. After the delay, however, area development and slum upgrading schemes, accounting for about three quarters of the total estimated project cost, were carried out at acceptable speed and quality. Cost recovery for area development has been satisfactory, but only a small part of the slum upgrading costs has been recovered. About 10% of the total project investment was allocated for low-cost sanitation, municipal maintenance and solid waste management. They entailed at least as difficult institutional issues as the main shelter components, but did not receive adequate attention either during preparation or implementation, and as a result, fell short of the targets. 3. Of the technical assistance and training components under the project, about a third (in terms of cost) was designated for the state agencies and the remainder for the central agencies. Implementing agencies of the state carried out most of their technical assistance components and utilized the results to strengthen institutional capacity, particularly in areas directly related to the main physical components such as planning, financial management and supervision of projects. However, studies aimed at broader policy and institutional reforms, regarding municipal management and land and housing development, have not been carried out with clear focus nor followed up effectively. Such reforms would have required: commitment and involvement by higher levels of government than the institutional structure established for the project; and a clearer and more detailed definition of elements and steps leading  iii to the reforms than was apparently possible with the state of knowledge at the time of project design. Little of the technical assistance for the central agencies was ever carried out for lack of commitment by the central government agencies. The project intermediaries performed well as channels of project funds but made little technical or managerial contribution. 4. Results. The project helped provide better shelter and services for more than 80,000 households, exceeding the main physical targets. New planning and implementation strategies introduced for area development and slum upgrading schemes met initial resistance but eventually have been well accepted by the implementing agencies and are being adopted for similar projects in the state. Implementation management capabilities have also been strengthened considerably during the project. However, only a groundwork was laid during the project for recovery of slum upgrading costs, and low-cost sanitation (latrines) remains unpopular among agencies and users. Little progress has been made toward broader and fundamental reforms of sector policies and institutions. Mainly because of the devaluation of the Rupee, only about half of the loan was disbursed. 5. Sustainabilitv. Under the shelter components, the project created durable physical assets and also a model for efficient delivery of shelter and supporting services. Sustainability of the low-cost sanitation and municipal maintenance facilities is questionable given the continuing weakness of the overall municipal management systems. Small steps made during the project toward broad policy and institutional reform could provide a useful basis for necessary sector development in the state, if such efforts are continued. 6. Findinas and lessons learned. Among the wealth of lessons and insights gained from this experimental project, the following appear the most important: (a) Organizational arrangements for project preparation and implementation should closely match project objectives, especially institutional development goals. They should include agencies that have authorities and capacities to carry out necessary actions in a coordinated framework; (b) Sound feasibility studies and detailed designs are critical not only for physical components but also for institutional development efforts. Specific terms of reference and action plans should be agreed upon with relevant authorities, most critically with the state government in the case of urban management issues. These should be adapted to the existing practices and broader institutional context. Even so, reforms affecting institutional mandates (of housing authorities, e.g.) and income redistribution (e.g. cost recovery) are likely to be difficult; (c) The project proved HUDCO to be an efficient funding channel, but provided weak evidence of its function as a sector intermediary.  PROJECT COMPLETION REPORT INDIA MADHYA PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2329-IN) PART I : PROJECT REVIEW FROM THE BANK'S PERSPECTIVE A. Prolect Identity Project Name: Madhya Pradesh Urban Development Project Loan Number: 2329-IN RVP Unit: Country Department II, South Asia Regional Office Country: India Sector: Infrastructure Subsector: Urban Development B. Background 1. Sector Development Obiectives. In order to help raise the level of urban services in India, especially for the lower income groups, the Bank Group has been pursuing a sector development strategy aiming at: (i) efficient resource use through new design and implementation methods; (ii) increased resource mobilization including more cost recovery from beneficiaries; (iii) a gradual transfer of responsibility for shelter and service provision from the public to the private sector, with the public sector focusing on land and infrastructure provision; and (iv) enhanced capacity of sector management institutions. These objectives have been pursued consistently through the Bank Group operations from the late 1970s to date, except small changes in relative emphasis and specific targets, and now are embraced as part of GOI's new urban development strategy. 2. Policy Context. The project was formulated at the time when the objectives and strategy for Bank assistance to India's urban sector, begun ten years earlier, were being redefined, and represented an important part of the process of "learning by doing." Until the early 1980s Bank Group's urban sector operations in India were confined to three metropolitan areas (Bombay, Calcutta, Madras). With the Sixth Five-Year Plan (1980-85), the Government of India (GOI) began to emphasize the development of small and medium-sized towns which as a whole were growing more rapidly than the metropolitan areas. The state of Madhya Pradesh provided a good model for the new policy emphasis as it had a large number of medium-sized cities whose populations as well as deficiencies in urban services and shelter were growing fast. Also from the Bank's point of view, the state provided a new multi-city framework where it can introduce and experiment with mechanisms to manage the growing portfolio of the urban projects in India and to expand their impacts beyond single metropolitan areas.  2 C. Proiect Obiectives and Description 3. Proiect oblectives. (a) To reduce the serious deficit in urban shelter and services in ten cities through area development and slum upgrading; (b) to demonstrate new planning and implementation strategies (e.g efficient land use planning and improved cost recovery); (c) to improve urban management and resource mobilization and strengthen state-level agencies active in the urban sector; (d) to improve the capacities of national level institutions to prepare, appraise, supervise and evaluate this type of project. 4. Proiect Components. (a) Area Development: about 18,500 serviced plots with shelter loans and community facilities in up to ten cities, including medium-sized towns identified during the project implementation ("Subproject"); (b) Slum Upgrading: upgrading of 75 slums with provision of tenure, services, home improvement loans and community facilities; (c) Low-Cost Sanitation: loans for installation of individual pour-flush latrines, including demonstration units; (e) Off-site Infrastructure: a bypass road in Bhilai providing access to project sites; (f) Municipal Maintenance and Solid Waste Management: equipment procurement and management improvement for maintenance of roads, drains and sewers, solid waste collection, maintenance workshops and depots; (g) Technical Assistance to: state agencies including the Housing Board, Town and Country Planning Department, Municipal Corporations, Development Authorities, and the Directorate of Urban Administration; HUDCO, and through it, to its borrowers; and other central agencies including Ministry of Urban Development and agencies under it. D. Proiect Design and Organization 5. The project was timely and relevant as it recognized and addressed key emerging issues of urban development in the state of Madhya Pradesh as well as in India as a whole, and as it helped define the urban sector strategy of the Bank and GOI, which remain largely relevant to date. It involved an unprecedented range of issues, components, and project locations, matched by an array of innovative features, both physical and institutional. It incorporated design features relatively new in India, for integrated area development and slum  3 upgrading, cost recovery, and low-cost sanitation. It also introduced new institutional arrangements, involving not only a large number of local agencies but also key sector agencies at the national level. Specifically, it identified as the core intermediary the Housing and Urban Development Corporation, Ltd. (HUDCO), an autonomous GOI undertaking which by then had become the primary financial channel for urban development ("Housing and Urban Development Corporation: Its Potential Role in World Bank Assisted Projects," Report No. 3830-IN, dated April 1982). By involving the central agencies in the project implementation and strengthening their capacity, the project attempted to prepare them for similar but enhanced roles in the future, helping to manage the growing portfolio of Bank-financed urban projects in India and to maximize its national policy impact. 6. Given the project's scope and emphases, its success depended critically on the institutional arrangements and commitment were. Recognizing the institutional weakness as the primary risk, the Bank invested considerable resources for preparatory studies, designed an elaborate institutional arrangement, and allocated 13% of the total project investment, or 27% of the loan, to technical assistance and training. These provisions, however, turned out to be ineffective due to deficiencies both in design and implementation. HUDCO, the central element of the project organization, performed well as the funding channel. However, it failed to fulfill the full intermediation role as envisaged, including supervision and technical assistance, due to a lack of commitment and an adequate management structure. Even if it had played its role substantially better, it is doubtful whether the project could have been carried out as envisaged by the SAR in full; the project would have needed a strong, well-focused implementation organization at the state level. In the state, however, many local and state-level agencies carried out fragments of the project without clear organizational focus. Of the dozen or so agencies involved in the project, the Madhya Pradesh Housing Board (MPHB) was the only state-level agency directly responsible for a substantial and specific part of the project. It was also responsible for channeling project funds at the state level. By default, therefore, MPHB acted as the main anchor for the entire project, supporting the Directorate of Urban Projects (DUP), an ad hoc agency set up by the MP Department of Housing and Environment (DHE) to coordinate the project with insufficient authority and staff. While these two agencies carried out their functions adequately, they did not have the scope and level of authority necessary to carry out the full range of project activities, especially concerning policy reforms. 7. In short, the project organization lacked relevant authority, capacity and focus. Technical assistance to shore up organizational capacity was not carried out as planned for want of commitment and defined terms of reference. Even if it were, it would have been insufficient and too late to be effective. In retrospect, the Bank overestimated the capacity and commitment of local institutions involved, particularly with regard to policy and institutional reforms, and underestimated the importance of the state government in urban management, apparently reflecting the Bank's lack of experience with sector institutions at state and national levels at the time. It is difficult to conclude from the experience of this project whether the shortcomings of the project can be attributed to the design and institutional details or to the project's essential features - scope, complexity, institutional development goals, and involvement of national intermediaries. It is clear, however, that  4 the project's aims and attempted innovations remain attractive today, yet attaining them would require much more intensive preparation and supervision efforts than have been invested under this project. E. Proiect Implementation 8. The project started slowly after it became effective in late 1983, was restructured modestly in 1989, and closed in June 1991, two years behind schedule. Of the original loan amount of US$24.1 million, US$6 million was canceled at the time of restructuring, and an undisbursed balance of US$5.6 million was canceled at closing. The main reason for the disbursement shortfall (48%) was the fast devaluation of Rupee, from Rs 9.5 per US$ in 1983 to Rs 25.6 in 1991. Non-performance of technical assistance for central agencies was also partly responsible. The project implementation was an experience of learning and development for all parties involved. While certain common themes such as the institutional arrangement elaborated in Section D above can be found, the accomplishments and difficulties varied for the many disparate components of the project and provide important lessons concerning diverse issues, as discussed in turn below. 9. Area Development, or sites and services, was the major component accounting for more than half of the total project cost (including the "Subprojects" identified later). The SAR correctly identified land acquisition as a major risk, but expected that the project could proceed at a reasonable speed, as some of the sites would be worked on while others were being acquired. In fact, however, most land acquisition was stalled, delaying the start-up of most of the sites by about two years and two of the sites by about four years. Even at the project closing, parts of two sites were still under dispute. However, MPHB obviously learned the lesson and secured all land for the Subprojects before their implementation started in 1987. The quality of construction management also was problematic at the start, but improved gradually in the course of the project implementation. As a result, the Subprojects and expanded area development schemes added as part of project restructuring were essentially completed within the remaining two or three years, compared with about five years for the original schemes. However, the implementing agencies remain primarily interested in construction of public housing; they showed little interest or skill in selling plots, especially without building houses on them, in managing shelter loans, or getting other agencies to provide necessary utilities in time. 10. Slum Upgradinx was implemented well in most cases thanks largely to dedicated municipal officers who worked closely with the affected communities, though contractual disputes or municipal government instability caused serious interruptions in a few cases. In contrast to the good physical progress, however, cost recovery has been minimal in all but one city, and is likely to fall much short of the original target of recovering 75% of total cost. For much of the project period, lack of cost recovery was attributed mainly to a GOMP act of 1984 which legalized occupancy rights ("patta") of squatters on public land, emasculating the plan to recover costs in return for tenure. Much effort was directed toward undoing the effect of the Act by another legislative action. As a result, the Slum Improvement Act was amended in 1988 to allow improvement charges to be levied on certain upgraded slums. Nevertheless, a detailed  5 analysis by a mission in 1988 showed that the impact of the Patta Act had been overestimated: the Act extended free patta only to a small plot for each family, which amounted to less than half of the slum land area. Accordingly, a new strategy was devised to recover most of the cost from those occupying relatively large plots who were presumably more able and willing to pay for the property rights. A plan of action based on the new strategy and the new legal provision were carried out, but very slowly in most cities. It appears that the main factor for the slow cost recovery all along has been the reluctance of the municipal authorities to recover any cost, in the face of resistance of the communities, especially in view of a parallel GOI program in the same localities which did not require any cost recovery. The resistance by the beneficiaries may partly be attributed to the lack of their involvement in design or execution of the slum upgrading. Although the project provided for training of community workers to assist in low-income settlement programs, community involvement was not explicitly planned or attempted in a systematic fashion. 11. Low-cost Sanitation (LCS), specifically double-pit pour-flush latrine technology, was promoted both for area development schemes as well as for existing houses throughout the involved municipalities. Despite the success of the technology in other parts of the country, however, this component could not overcome technical difficulties and cultural and institutional resistance in MP. Soil conditions in some localities made the typical double-pit latrine ineffective, and its modification too expensive. Cultural bias prompted many occupants of new plots provided with the double-pit latrines under the area development schemes to construct alternative latrines. It might have been possible to overcome these problems through education and technical adaptations. However, most implementing agencies were themselves resistant to the new technology, and the Technology Advisory Group of the Water Supply and Sanitation Decade Program, the main advocacy group asked to help during the project, was not able to provide sufficient support. City-wide LCS programs were even more difficult to implement as the municipalities lacked the administrative capacity and as the full repayment requirement at commercial interest rates added to the users' resistance and administrative complications. 12. Municipal Maintenance and Solid Waste Management components were not closely integrated with the rest of the project either in design or implementation. The Directorate of Urban Administration, which would have been the most closely associated with the components, was not assigned any specific role under the project. As a result, MPHB and DUP played the main role in coordinating equipment selection and procurement with limited participation of beneficiary municipalities. Studies to define equipment needed as well as related managerial and financial improvements were marred by poor administration and were not followed up in any meaningful fashion, putting the efficacy of the equipment procured in doubt. 13. Technical Assistance and Training (TA) in technical subjects directly related to the main physical components were carried out generally in line with the plan and led to financial management improvement of MPHB and several Development Authorities. In general, however, training needs were not defined before the project start and the Ministry of Urban Development (MOUD) failed to carry out the planned study of training needs. As a result, training programs were conceived and implemented in an unsystematic fashion, and it is difficult  6 to judge their relevance or effect. In fact, none of the TA that was to be carried out by MOUD and agencies under it was carried out, due to the lack of commitment and concrete proposal by MOUD and the refusal of the Ministry of Finance to honor the project agreement to provide the loan proceeds as grant for the central TA. The same refusal applied to TA for HUDCO. When the project was restructured in 1989, it was agreed that the central TA should be canceled except a provision to reimburse the expenditures that had already been made by HUDCO. Studies aimed at institutional and policy changes in Madhya Pradesh were carried out but were not managed or followed up adequately due to the lack of relevant organizational framework as described in paras 6 and 12 above. F. Proiect Results and Sustainability 14. Targets for the main physical components, area development and slum upgrading, have been exceeded: 24,500 serviced sites and core houses have been built, compared with 22,750 planned originally; and 408 ha of slum areas were improved benefitting 57,000 households, compared with 220 ha and 37,000 households. In addition, the bypass road in Bhilai (off-site infrastructure), though yet to be paved, is already being used heavily. Benefits of slum upgrading have been immediate and visible, and residents have already made substantial investment to improve housing and other facilities, as foreseen as a major benefit to follow the neighborhood upgrading. These benefits are likely to be sustained and expanded as economic situation of the slum dwellers improve gradually. Due to the scarcity of rental market in the slums concerned, reliable data is not available to improve on the SAR estimate of the economic rate of return (19Z based on implicit rental values). On the other hand, the lack of cost recovery limits the replicability of the program and could jeopardize maintenance of common facilities. 15. By the project closing, about a third of the plots and core houses built under the area development component were occupied. Experience with similar projects in India suggests that it could take up to ten years, depending upon location, for the project sites to be fully occupied. Market values of the plots were being formed and yet to be stabilized at the time of project closing, the values ranging up to seven times the level required for full cost recovery. Assuming the plots will be settled in with an average waiting period of five years and their prices will settle around three times the cost level on average, the ERR would be about 21%, compared with the original estimate of 14%. Although the quality of maintenance of the area-wide infrastructure would be limited by the capacity of the implementing agencies and the municipalities, individual plots are expected to be well maintained and further developed by owner- occupiers. 16. Other physical components, low-cost sanitation and municipal maintenance, accomplished less than the original target and the sustainability is in doubt. Many of the double-pit latrines installed under area development and slum upgrading components are not used, and the usage could decline further without strong educational efforts. Equipment procured to help improve municipal maintenance and solid waste management could soon fall into disuse, given the continuing financial and management weaknesses of the municipalities.  7 17. The project introduced a new model of shelter project design and implementation, both for area development and slum upgrading. Many of the design features such as reduced shelter and infrastructure standards, efficient layout of clusters and roads, and integrated facilities planning have come to be appreciated and adopted widely by the sector agencies, although they still consider some of the infrastructure standards too low to accommodate future demands. Technical and financial management of the works has also been improved. However, little more than the first step was taken toward fundamental reform goals, especially those involving institutional interests and behavior. The agencies responsible for area development remain interested mainly in physical construction, and have shown little interest or skill in other functions, including sale of the completed plots, especially those without built structures, and loan and settlement management. A study to identify regulatory impediments to housing development and necessary reforms to correct them was carried out inadequately. Nevertheless, the Bank's consistent policy dialogues at the central and state levels in relation to the many urban projects proceeding at the same time appear to have contributed to GOMP's housing policy of 1988 that incorporated several of the sector reform aims of the project. However, findings of the study on municipal management were put to little use as the relevant state-level agencies which had the sufficient authority did not participate in the studies or their follow-up. 18. In short, while the project made a substantial and tangible contribution to alleviating immediate deficiencies in urban housing and technical capacity of the sector agencies in the state, it contributed little to policy and institutional improvements with far-reaching and long-term implications for sector development. Judging from the standard that the project set for itself, therefore, the project may be considered to have failed in an important aspect. Nevertheless, one wonders if the project's scope and aims as they were designed were feasible. Rather, the accomplishment under the shelter components and the lessons learned regarding the issues and institutions involved may be considered a successful outcome, especially given the modest resources invested and the Bank's unfamiliarity with the relevant issues at the time of the project preparation. In order to move toward the ultimate, institutional aim of the project, GOI, GOMP, HUDCO, and the Bank would need to build upon the project's achievements and lessons. G. Performance of Bank. Borrower, and Consultants 19. Bank Performance. The Bank can be credited for the thorough background investigation, close consultation with and hands-on assistance to local officials, especially to introduce new approaches to housing and urban development design and implementation. These, however, were still insufficient for the ambitious scope and aims of the project, though the scope was somewhat reduced from the state's original proposal. In particular, the preparation fell short of defining specific terms of reference for various technical assistance, institutional arrangement and steps to carry out these as well as cost recovery. Instead, it put more responsibility on national agencies than they were capable of handling. During implementation, once it became clear that the national intermediaries could not carry out their supervision roles as expected, the Bank had to fill the gap with the help of DUP, both with limited resources. It is arguable whether the Bank made the right decision when it chose to narrow the  8 focus of supervision under the circumstances, to concentrate on the main shelter components and a few studies at the state level, giving up on the aim of strengthening national intermediaries. Although the areas the Bank focused its attention on yielded tangible and adequate results, it is difficult to say if some progress could have been made toward the aims abandoned mid-course. It is clear, however, that these aims remain attractive today, yet similarly ambitious and innovative features would require much more intensive preparation and supervision efforts than were given this project. 20. Borrower Performance. Performance of the implementing agencies of the state improved progressively over the course of the implementation and was in general adequate. MPHB and Development Authorities carried out their area development components adequately. Although land acquisition and plot allocation were problematic, they were also improved noticeably. Further, MPHB channeled the project funds satisfactorily and carried out additional coordination responsibilities reasonably, filling some of the gap left by national agencies, within the bounds of its own mandate and interest. DHE, and especially DUP, performed the coordinating tasks which were left to them unexpectedly by the failure of national agencies competently. Municipal authorities, particularly in two of the cities, carried out slum upgrading with impressive dedication and skills, but most showed little commitment to cost recovery or wide institutional improvement. The main problem that plagued the performance of these otherwise well-performing agencies was lack of continuity in staffing, partly related to political changes. Little participation was seen by three agencies which were explicitly included as part of the project organization: the Town and Country Planning Department, the Directorate of Urban Administration, and the Slum Clearance Board. 21. HUDCO performed well as a financial intermediary, freeing the project of counterpart funding problems (but at the cost of high interest, according to GOMP). However, it fulfilled little else of its role expected as the main intermediary for the project. Its supervision was intermittent and perfunctory, its assistance in preparation and appraisal of subprojects was technically inadequate, its own studies and training programs were unsystematic, and it provided little support for policy-related studies and follow-up actions. These failures can be attributed to a lack of capacity and commitment and, according to HUDCO, the lack of incentive as the loan simply replaced other institutional credit allocation for it instead of adding to its resources. The Ministry of Finance did not abide by the project agreement by refusing to make the loan proceeds available to HUDCO and MOUD as technical assistance grants. This was partly because MOUD failed to formulate any concrete proposal and pursue the grant allocated to it. 22. Prolect Relationship. The relationship between the Bank and state implementing agencies were close and in general cooperative, although frictions arose mainly over the Bank's attempt to limit the extent of house construction by the implementing agencies on serviced sites, to enforce procurement guidelines strictly, and to have costs recovered as agreed. Although the project design envisaged unusually close working relationship between the Bank and the national agencies, the relationship soon reverted to an usual one limited to formal wrap- up meetings and communications.  9 23. Performance of Consultants, Contractors and Suppliers can be considered, in short, typical in the sense that most fulfilled their contracts adequately with a few inadequate and exceptional ones. On the other hand, management of contracts by the implementing agencies was plagued with problems, especially in the early phase of the project: reluctance to engage consultants; improper bidding procedures; vague terms of reference and lax contract supervision; and delayed payments. Consultant services represented critical elements in carrying out three of the project components. In one, financial management improvement for several implementing agencies, the consultant services were satisfactory and led to effective implementation. In the second, GOMP's insistence on improper sole sourcing of solid waste management study led to non- financing of the study by the Bank, inadequate results, an additional study, and the eventual delay in equipment procurement. On the third, the consultant failed to deliver relevant studies on regulatory impediments in housing sector in time, contributing to the failure in this critical policy reform agenda. H. Project Documentation and Data 24. The legal agreements and the SAR were comprehensive and clear of main thrusts of the project, and provided a useful reference for the project implementation in general. The main weakness of SAR was its failure to define detailed terms of reference or implementation arrangements for the technical assistance component. Another feature of SAR that created problems, related mainly to the borrower's internal procedures, was the cost tables that specified Rupee amounts by detailed components and year, which limited flexibility. Most of the data necessary to prepare this PCR were readily available from the Bank archives and the borrower. It is, however, difficult to relate project expenditures to disbursement of funds from various sources (the Bank, GOMP, and HUDCO) as the accounts of the three intervening levels (GOI, HUDCO, and MPHB) are not coordinated in terms of timing or format.  10 PROJECT COMPLETION REPORT INDIA MADHYA PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2329-IN) PART II : PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE 1. Lessons Learned The project greatly helped in setting out (among implementing agencies) appreciation for an improved project design and implementation culture involving understanding needs of beneficiaries, effective exploitation of topographical features, soil conditions, in evolving design of layout simultaneously with services network to achieve cost effective utility services systems, and evolving planning and design norms to match the affordability levels, optimization of land efficiency etc. along with improved construction management techniques. The project has been effectively targeted towards urban poor, which has substantially strengthened the government managed housing programs to make the housing units to be made available in installments, within their affordable means. The agencies have learned to design the schemes achieving full cost recovery, with more than 2/5th of the beneficiaries belonging to poorest of the poor. Facilitator's role of government for providing shelter is better understood through implementation of core housing approach and concepts of incremental growth concept in dwelling unit designs, against housing scheme in its complete shape. Optimization of project resources and benefits sharing among large number of beneficiaries is now better understood by the project team. The project implementation has helped the agencies to learn the art of enlarging the scope of resource mobilization and beneficiaries coverage with use of minimum public resources. Project agency staff got better exposure to urban development management issues through implementation of MPUDP in the area of (a) site selection and project appraisal, (b) developing project design culture, (c) optimizing project cost economics, (d) tendering process, (e) better appreciation and use of construction management techniques, (f) developing skills of quality supervision, (g) marketing of houses sites/shelter units, (h) appreciation for reducing procedural delays, (i) appreciation for evolving systems to reduce the duration of project implementation and speedy site occupancy, (j) appreciation for evolving cost effective designs, (k) optimizing on cost of land development as well as cost of building. However, the traditional project management culture, which is presently unconcerned with performance approach, could not bring in expected levels of improvement in practicing the new ideas in the area of planning, design, construction and management approaches and marketing of sites and shelter  11 units effectively. It is also realized that lack of effective communication between site staff, contractors team, senior level supervisors official, led to inordinate delays. Traditional culture of working with least number of project drawings also adversely affected the quality of work, its speed as well as executing design ideas effectively. Frequent change of person el of project implementation agency worked against the (culturisation] of improved project implementation systems. This needs to be looked into to achieve effective results. In order to achieve more effective results, there is a need to bring in (a) freedom of decision making among site staff for taking corrective steps, (b) setting up a effective communication system among project design staff, site engineers and estate management officials, (c) needed improvement in tender preparation and tendering process, (d) use of modern project management tools and equipment, (e) continuous monitoring and evaluations of project implementation, (f) establishing a project management culture open to absorbing established new cost effective technologies akin to local conditions. Although the need for evolving efficient planning norms have been appreciated at all levels yet in evolving effective and affordable planning norms the project has gone too far in reducing the road standards. In anxiety of adopting affordable norms, the criteria of road width-length relationship and its trip catchment zone have been overlooked. In Ujjain central road link meant to serve more than 10,000 families as well as traffic from adjacent areas is only 3 meters wide inclusive of surface drains. Similar is the case in Raipur scheme where central spine of about 1 km length linking 3 slices is only 6 meters wide. Access standards adopted for urban poor housing also needs to be carefully evaluated, taking cognizance of likely mode in use by the urban poor vis-a-vis size of city, length of work trips involved. Single tender approach for each site/slice has been found to be successful which resulted in absence of contractual problems involving site construction and development works under components like Area Development, Slum Upgrading, Sanitation in 10 project cities covered under the programs. 2. Areas for Improvement - Setting out beneficiaries identification process and its appropriate timing, with an objective of achieving faster occupancy as well as cash in-flow. Assessment of better understanding of affordability levels of EWS/LIG categories. Way to reduce the damage done to the infrastructure assets created, due to building construction phase of the project by the beneficiaries have to be evolved. [Upgradable] infrastructure approach may be resorted. Provision for operational and maintenance cost during the building construction phase of the project is also called for.  12 Appropriating properly the market rates of the developed sites and developed plot rate being charged to the beneficiary of different income levels. Economic criteria adopted for beneficiaries selection have been difficult to implement particularly in EWS/LIG category, who formed the major content of the target group addressed under the project. This resulted in poor performance in beneficiaries selection allocation/shelter loan activities. This needs to be reviewed. The beneficiaries could be given freedom to choose the plot/Core house/dwelling unit as per their need. There exists a need for giving adequate time for identification of site, project formulation and preparing planning and design brief for each scheme. The project design details and working drawings should be furnished well in advance before the scheme is floated for tendering. The project planning and design details should also be discussed from time to time among all the project staff and related with site works being carried out, to take corrective steps well in advance. Implementation schedule be drawn in consultation with site engineers, contractor and the project designers. Shelter loan component of the project failed for reasons of (a) delayed decision on increasing the loan value (b) meager loan amount in case of EWS category (c) delay in beneficiaries selection (d) procedural delays (e) poor marketing strategy and estate management set-up (f) delayed allocation and possession granting process (g) non-implementation of technical assistance program and guidance to the beneficiaries at due to paucity of staff at site. Slum upgrading program created a desirable impact in improving the living conditions of slum families. In Raipur region the slum improvement program preempted large number of families to improve their shelter, as well as raised level of community participation in maintenance and up-keep of their surroundings. Effective cooperation and adjustment was also seen in reshaping their plots to achieve better circulation for the slum basties (=slums). Individual sanitation programs have particularly not been successful, in such basties where space was available nearby for open defecation. This program, however, could have yielded more success with community organization input and effective beneficiaries participation. Pour flush sanitation units in Raipur, Ujjain and Dewas were found unacceptable to the beneficiaries. This is partly due to poor knowledge among the users about the technology involved. This solution also demanded both side sullage drains to serve waste disposal from kitchen/bath as well as rain water disposal, whereas project design provided only one side drain. 3 meter width of streets could not support both side drains, street lights, etc. and as such have proved to be sub- standard in layouts which were not designed on cluster approach. This solution was considered to be cost effective and least maintenance cost solution, which has resulted just the opposite.  13 There is a need to organize post evaluation assessment of use of public and semi-public open space system, adopted in various housing layouts. Alternative designs adopted in different cities need to be assessed objectively to make a judgement on how beneficiaries have responded to the different layout designs adopted under the project. Land availability at suitable location to suit the target group is a key input for success of any urban development program. Government policies, legal acts, and procedure of land acquisition are posing serious problems for timely land supply. Government policies need to be recast so as to facilitate easy supply of land. Nothing much has happened effectively in this regard, so far. Major changes are called for to generate systems in which role of private sectors land owners, community groups becomes effective. Project implementation created a good project management and monitoring system, which has proved to be a relatively successful strategy in achieving and overall control of project implementation information system. Such an effort needs to be expanded at the state level for their normal urban and infrastructure development investment program. 3. Bank's Performance Bank officials have been visiting regularly throughout the phase of detailed project formulation and project execution. The frequency timing and duration of fielding missions has been found to be adequate. The mission's Aide Memoires have been found to be effective management tools, for DUP as well as Bank officials to achieve project results. Project team officials' interaction with Bank mission teams during the project implementation period has been effective and useful. The Bank responses to the communication by the project management unit (DUP) have been very quick which helped in taking faster decisions in various matters involving Bank's approval. Technical input of experts from the Bank side has been adequate and timely.  14 PROJECT COMPLETION REPORT INDIA MADHYA PRADESH URBAN DEVELOPMENT PROJECT (LOAN 2329-IN) PART III : STATISTICAL INFORMATION  15 Table 1. Related Prolects (Multi-component Urban Development Projects in India with Focus on Shelter) Loan/Credit and Amount Approval - Closing Proiect Title (US$ Million) (Bank Fiscal Year) First Calcutta Urban Cr. 427-IN: US$35.0 1973-79 Development First Madras Urban Cr. 687-IN: US$24.0 1977-83 Development Second Calcutta Urban Cr. 756-IN: US$87.0 1977-84 Development Second Madras Urban Cr. 1082-IN: US$42.0 1980-88 Development K a n p u r U r b a n Cr. 1185-IN: US$25.0 1982-87 Development Third Calcutta Urban Cr. 1369-IN: US$147.0 1983-92 Development B o m b a y U r b a n Cr. 1544-IN: US$138.0 1985 (on-going) Development Uttar Pradesh Urban Cr. 1780-IN: US$130.0 1987 (on-going) Development Ln. 2797-IN: US$20.0 Tamil Nadu Urban Cr. 1923-IN: US$300.2 1988 (on-going) Development  16 Table 2. Prolect Timetable DATES ITEM PLANNED REVISED ACTUAL Identification (EPS) Jan/Feb '81 --- Mar 81 Preparation May/Sep 81 ------- Jun 81 - May 82 Appraisal Mission June 82 Sep 82 Nov-Dec 82 Loan Negotiations July 82 Apr 83 May 83 Board Approval Dec 82 Jun 83 June 28, 83 Loan Signature Dec 82 July 19, 83 Loan Effectiveness Oct 19 83 Nov 21, 83 Jan 16, 84 Loan Closing June 30,89 June 30, 90 June 30, 91 Loan Completion ------- ------- July 3. 91 Table 3. Cumulative Loan Disbursement (US$ Thousand) Original Revised Actual Z Z (SAR) (3/89) of of Up to Estimate Estimate Original Revised June 30, 1984 700 60 9% Dec. 31, 1984 1,800 60 3% June 30, 1985 3,700 516 14% Dec. 31, 1985 6,100 928 15% June 30, 1986 8,900 1,633 18% Dec. 31, 1986 11,900 2,121 18Z June 30, 1987 14,900 3,926 26% Dec. 31, 1987 17,900 4,904 27% June 30, 1988 20,500 10,206 50% Dec. 31, 1988 22,700 10,206 45% June 30, 1989 24,100 10,206 42% Dec. 31, 1989 24,100 12,385 10,206 42% 82% June 30, 1990 24,100 14,410 10,826 45% 75% Dec. 31, 1990 24,100 15,401 11,362 47% 74% June 30, 1991 24,100 15,401 11,668 48% 76% Dec. 31, 1991 24,100 15,401 12,457 52% 81%  17 Table 4. Project Implementation Time Schedule Component/ Calendar Years Actvity 1983 1 1984 1985 1986 1 1987 11988 1 189 1990 1991 AREA DEVELOPMENT Land Acquisition - ------ Civil Works -----------_ I ~~~~+ + ++++-+ +++ | Plot Allocation _ _____ +++ ADDITIONAL AREA DEV" MENT IN MED UM TO NS (S4