Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 47448-IN

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR64.60 MILLION (US$lOO MILLION EQUIVALENT)

TO THE

REPUBLIC OF INDIA

FOR A

SECOND MADHYA PRADESH DISTRICT POVERTY INITIATIVES PROJECT (MPDPIP-11)

June 3,2009

Sustainable Development Department Agriculture and Rural Development Unit India Country Management Unit South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS (Exchange Rate Effective May 3 1,2009)

Currency Unit = Indian Rupees Rs47.18 = US$1 US$1.55 = SDRl

ADB BPL cs CIG COM DPSU DPM EA EFC EMF ERR GAF

GAAP

Go1 GoMP ILP LIF M&E MP

FISCAL YEAR July 1 - June 30

ABBREVIATIONS AND ACRONYMS

Asian Development Bank Below Poverty Line Country Strategy Common Interest Groups Community Operations Manual District Project Support Unit District Project Manager Environmental Assessment Employment Facilitation Centers Environmental Management Framework Economic Rate o f Return Governance and Accountability Framework Governance and Accountability Action Plan Government o f India Government o f Madhya Pradesh Integrated Livelihood Program Livelihood Investment Fund Monitoring and Evaluation Madhya Pradesh

MPDPIP

MPSPAI

MTR NABARD

NCHSR

PIP PFT PPP PO RGM ST sc SHG TDP uc VDC ZPDPIS

Madhya Pradesh District Poverty Initiatives Project Madhya Pradesh Society for Poverty Alleviation Initiatives Mid-Term Review National Bank for Agriculture and Rural Development National Center for Human Settlement and Environment Project Implementation Plan Project Facilitation Teams Public-Private Partnerships Producer Organization Rajiv Gandhi Missions Schedule Tribe Schedule Caste Self-Help Groups Tribal Development Plan Utilization Certificate Village Development Committees Zilla Parishad District Poverty Initiatives Sub-Committees

Vice President: Isabel M. Guerrero

Sector Director John Henry Stein

Nathan M. Belete

Country Director: Roberto Zagha

Sector Manager: Gajanand Pathmanathan Task Team Leader:

.. 11

FOR OFFICIAL USE ONLY

INDIA Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

CONTENTS Page

A . STRATEGIC CONTEXT AND RATIONALE ................................................................. 3

Country and sector issues .................................................................................................... 3 Rationale for Bank involvement ......................................................................................... 4

Higher level objectives to which the project contributes .................................................... 5

1 . 2 . 3 .

B . PROJECT DESCRIPTION ................................................................................................. 5 Lending instrument ............................................................................................................. 5 1 .

2 . 3 . 4 . 5 .

Project development objective and key indicators .............................................................. 5 Project components ............................................................................................................. 6

Lessons learned and reflected in the project design ............................................................ 7 Alternatives considered and reasons for rejection .............................................................. 8

C . IMPLEMENTATION .......................................................................................................... 9 1 . 2 . 3 . 4 . Sustainability ..................................................................................................................... 11 5 . Critical risks and possible controversial aspects ............................................................... 11 6 . Loadcredit conditions and covenants ............................................................................... 13

Partnership arrangements (if applicable) ............................................................................ 9

Monitoring and evaluation o f outcomeshesults ................................................................ 10 Institutional and implementation arrangements .................................................................. 9

. . .

D . APPRAISAL SUMMARY ................................................................................................. 13 Economic and financial analyses ...................................................................................... 13

3 . Fiduciary ........................................................................................................................... 14

4 . Social ................................................................................................................................. 16 5 . Environment ...................................................................................................................... 17

6 . Safeguard policies ............................................................................................................. 20

7 . Policy Exceptions and Readiness.. .................................................................................... 20

1 . 2 . Technical ........................................................................................................................... 14

distribution and may be used by recipients only in the performance o f their off icial duties . I t s contents may not be otherwise disclosed without Wor ld Bank authorization .

Annex 1: Country and Sector o r Program Background ......................................................... 22

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 25

Annex 3: Results Framework and Monitoring ........................................................................ 26

Annex 4: Detailed Project Description ...................................................................................... 31

Annex 5: Project Costs ............................................................................................................... 42

Annex 6: Implementation Arrangements ................................................................................. 43

Annex 7: Access to Finance ........................................................................................................ 53

Annex 8: Financial Management and Disbursement Arrangements ..................................... 59

Annex 9: Procurement Arrangements ...................................................................................... 70

Annex 10: Economic and Financial Analysis ........................................................................... 84

Annex 11: Safeguard Policy Issues ............................................................................................ 87

Annex 12: Governance Management Framework ................................................................. 103

Annex 13: Project Preparation and Supervision ................................................................... 114

Annex 14: Documents in the Project File ............................................................................... 116

Annex 15: Statement o f Loans and Credits. ........................................................................... 117

Annex 16: Country at a Glance ............................................................................................... 121

Annex 17: Map (IBRD 30986R) .............................................................................................. 123

iv

INDIA

Total:

Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

PROJECT APPRAISAL DOCUMENT

SOUTH ASIA

SASDA

109.41 0.59 110.00

Date: June 3,2009 Country Director: Roberto Zagha Sector Manager: Gajanand Pathmanathan

Team Leader: Nathan M. Belete Sectors: General agriculture, fishing and forestry sector (70%); Agricultural marketing and trade (30%) Themes: Other rural development (P);Other environment and natural resources management (S);Participation and civic engagement (S) Environmental screening category: B - Partial Assessment

Project ID: P102331

Lending Instrument: Specific Investment Loan

[ ] Loan [XI Credit [ ] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 100.00 (equivalent) Proposed terms: Standard Credit o f thirty five (35) years, including ten (10) years grace period

(IDA)

Borrower: Department o f Economic Affairs Ministry o f Finance, Government o f India, New Delhi, India Responsible Agency: State Project Support Unit, Panchayat and Rural Development Department Government o f Madhya Pradesh Paryawaran Parisar, EPCO, E-5 Arera Colony Bhopal, Madhya Pradesh, India 4620 16 Tel: 91-755-2420093 Fax: 91-755-2426252

1

Project implementation period: Start July 1,2009 Expected effectiveness date: July 1 , 2009 Expected closing date: December 31,2014 Does the project depart from the CAS in content or other significant respects? Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D 7. Have these been approved by Bank management? I s approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Ref: PAD C 5.

End: June 30,2014

[ ]Yes [XINO

[XIYes [ ] N o

[X ]Yes [ ] N o [ ]Yes [XINO

[XIYes [ ] N o .I

[XIYes [ ] N o Does the project meet the Regional criteria for readiness for implementation? Ref: PAD D 7.

.I

Project development objective Re$ PAD B 2, TechnicalAnnex 3 To improve the capacity and opportunities for the targeted rural poor to achieve sustainable livelihoods. Project description Re$ PAD B 3, Technical Annex 4. The project has four components: Component 1: Social Empowerment and Institution Building: The objective o f this component i s to empower the poor by helping to organize themselves into S e l f Help Groups (SHGs) and federate into higher levels o f institutions such as Village Development Committees (VDCs), cluster-level organizations and producer collectives. Component 2: Livelihoods Investment Support: To develop the capacity o f SHGs to start livelihoods initiatives and to strengthen their business operations through producer based federations, companies, and cooperatives. Component 3: Employment Promotion Support: To enable the project beneficiaries to capture new employment opportunities arising out o f the overall growth o f the Indian economy through the establishment o f a structured mechanism for skill development and job creation. Component 4: Project Implementation Support: To facilitate various governance, implementation, coordination, learning and quality enhancement efforts in the project. Which safeguard policies are triggered, if any? Re$ PAD D 6., Technical Annex 10 Environmental Assessment (OP/BP 4.0 1); Forests (OP/BP 4.36); Natural Habitats (OP/BP 4.04); Pest Management (OP 4.09); and Indigenous Peoples (OP/BP 4.10) Significant, non-standard conditions, if any, for: Re$ PAD C 6. Board presentation: None Loadcredit effectiveness: Standard Covenants applicable to project implementation:

0

0 Anti-Corruption Guidelines and GAAP 0

0

0 Financial management 0 Procurement

Institutional arrangements at the state, district, and block levels

Livelihood support activities in accordance with the PIP Project monitoring, reporting, and evaluation

2

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

1. Madhya Pradesh (MP) i s the second largest state o f India in terms o f geographical size. As recorded in the 2001 census, over 60 mi l l ion people reside in the state, o f which 16 mi l l ion s t i l l l ive below the poverty line'. Per capita income in 2003-04 was a mere Rs. 8,284, or almost $0.75 cents per day. M P has shown a very l ow annual compounded rate o f income growth o f only 4.5% between 1993-94 and 2003-04 as against the national average o f 6.2%, and i t s compounded annual per capita growth rate for the same period stands at 2.3% (national average 4.4%). The state has the third highest incidence o f poverty and the lowest rate o f poverty reduction among the major states o f India. More than half o f i t s children are underweight (55%, all-India 47%) and the infant mortality rate o f '88/1000' i s among the highest (the all-India rate i s 68/1000). In terms o f social indicators, the most recent National Human Development Report prepared by UNDP ranks M P very high on gender disparity (25th among 32 states).

2. In many ways, M P characterizes the typical set o f institutional and development problems faced by the poorest regions o f India. As a result o f surplus labor, M P has a large subsistent agricultural sector that co-exists with a small modern industrial sector that i s localized in specific cities, namely Indore. The organized industry employs only 6% o f the total workforce.

3. Agriculture employs nearly 72% o f all workers, although it only contributes 33% to the state domestic product. Poverty levels in the rural areas have seen a gradual decline from 37.1% in 1993-94 to 28.3 % in 2003 - 2004, however, agriculture productivity and income are far below the national average. The income per hectare for M P in 2002 was Rs.7,010 (all-India Rs. 11,876) and per capita landholding i s small (1.2 ha). Farming i s mostly rain-fed (75% o f the net sown area with l o w cropping intensity o f 135%), and hence risk prone (more than 40% o f the districts have been affected with either excess or less o f rains in the last 10 years except 2001-02). In addition, the absence o f producer organizations, inadequate delivery o f credit and inputs, underdeveloped value chains and ineffective agriculture research and extension constrain the sustainable growth o f agriculture. As a result, the real per capita rural net-domestic product has remained stagnant over the years and per capita food production has declined. This raises concerns o f food security and the quality o f employment in the farming sector.

4. Successive state level governments over the past two decades have proactively attempted to address the problems o f rural poverty, l ow agricultural productivity, and social exclusion through a variety o f policies and programs. More recently, GoMP has embarked on two major instruments o f policy reform for poverty reduction -Self Help Group (SHG) Development Policy, and Employability Oriented Training Policy. Under the SHG Development Policy, activity-based federations o f SHGs are to be promoted and receive operational support and financial assistance for working capital, infrastructure development, quality control and brand development. Financial assistance to SHGs i s even more important in the current environment wherein the impact o f the global financial crisis i s already being felt by the Indian financial sector, despite its relative resilience to external shocks. Foreign portfolio and debt financing i s

Some estimates show 44 '70, while the state o f nutritional poverty estimates show a still higher proportion. Poverty Index in National HDR I

ranked MP 23rd out o f 32 states. 3

drying up and there have been domestic liquidity pressures. This could lead to commercial banks becoming conservative and not funding the credit needs o f SHGs, which in any case i s already very l o w (less than 0.50 percent o f total rural credit in the State). Under the Employability Oriented Training Policy the GoMP supports skill training for unemployed youth.

5. These initiatives point towards a sustained commitment by the state government, irrespective o f the political party in power, towards programs for rural poverty reduction. The state also has a fairly efficient administrative structure for delivery o f such programs and an administrative ethos built around development which has proved important in a state like Madhya Pradesh where the role o f the private sector in economic development has been far less than in other more developed states. Financial institutions including National Bank for Agriculture and Rural Development (NABARD) and Small Industries Development Bank o f India (SIDBI) as well as private sector banks are making an effort to enhance credit flows to the rural sector, but have not been able to make any substantive impact in agriculture and rural credit. Only about 6 % o f the state's GDP i s allocated to rural development.

2. Rationale for Bank involvement

6. The Bank has been supporting a limited number o f poverty reduction projects in Madhya Pradesh over the last decade, namely the Madhya Pradesh District Poverty Initiatives Project (MPDPIP) focusing on the livelihood needs o f the rural poor and the M P Water Sector Restructuring project that addresses surface water irrigation. The first MPDPIP project covered over 2,900 villages spread over 14 districts (out o f a total o f 48 districts). Through a systematic process o f wealth ranking, it has covered 300,000 poor rural households, organizing them into over 52,000 Common Interest Groups (CIGs), providing them with financial and technical assistance so as to improve their organizational capacity and maximize the utility o f their productive assets.

7. A recently conducted impact evaluation o f the DPIP project showed that the project achieved significant results against the dimensions o f enhanced livelihoods, reduced vulnerability, and social empowerment. These results include:

0

65% increase in annual household income o f project participating families; 149% increase in value o f agricultural production; 27% increase in irrigated land for project fami l ies investing in agricultural activities; reduced distress migration from 30% to 14% from project villages; 44% o f participating households have started household level savings; and

8. The other positive lessons from implementation o f the MPDPIP include women's participation in household decision making, attendance in Gram Sabha meetings enhanced substantially, excellent targeting o f the intended poor, particularly women and lower caste households, empowered community groups, which are now sustainable through federating into producer companies/cooperatives, and leveraging resources directly through business linkages with public and private sectors.

9. In this context, the Government has approached the Bank to continue support through a follow-on project which will scale-up the successful results from the first MPDPIP. This i s proposed to be done by adopting the methodologies and certain design features o f the MPDPIP,

4

including: a participatory wealth ranking process to identify the very poor in rural areas; the formation o f groups at the neighborhood level to take-up economic activities; and the federation o f such groups and linking them to the private sector to reap the benefits o f sustained markets.

10. The GoMP has shown a strong commitment to adopt and scale-up the success o f the MPDPIP through a series o f decisions at the state level that include: a) the adoption o f a state rural development policy; b) the key design elements o f community empowerment components, such as SHG formation and enhanced skill development for the rural poor; c) continued operations o f the State-level autonomous Society called the M P Society for Poverty Alleviation Initiatives as a special vehicle for implementing the proposed project; and d) appointment o f the MPDPIP Project Director as Project Coordinator and expanding the state-level team o f development professionals for the proposed program.

3. Higher level objectives to which the project contributes

1 1. The project directly supports the GoMP’s Eleventh Five Year Plan in reducing poverty through effective implementation o f various government schemes and externally assisted projects. The GoMP aims at reducing the poverty rate to 25% by the end o f 2012.

12. The proposed project i s wel l aligned with the current Country Strategy (CAS) which seeks to scale-up improvement o f rural livelihoods using a community empowerment approach. I t i s also in l ine with the strategy adopted under the CAS that seeks to enhance the involvement o f the World Bank in those states o f India where the incidence o f poverty, both in terms o f absolute number o f people and percentage o f population, i s high.

13. The project will support the MDGs in the following key areas: (i) improving incomes o f the poorest - reducing the proportion o f the people living on less than $1 a day (Goal 1 , Target 1); (ii) promoting gender equality and empowering women (Goal 3, Target 4); and (iii) development and implementation o f strategies for decent and productive work for youth (Goal 8, Target 4 5).

B. PROJECT DESCRIPTION

1. Lending instrument

14. A Specific Investment Loan (SIL) has been selected for the project and the implementation period i s expected to be five years.

2. Project development objective and key indicators

15. The development objective for the proposed project would be to improve the capacity and opportunities for the targeted rural poor to achieve sustainable livelihoods. This will be achieved by enhanced participation by the rural poor in economic activities, skill enhancement for taking- up higher value employment, and increased income among project target households through an increased asset base and market linkages. The key outcome indicators to assess achievement o f the PDO will be the following:

5

a) at least 60% o f the graded2 SHG members report a minimum o f 20% increase in household

b) at least 60% o f the graded SHGs are viable and sustainable3 income (at constant prices); and

3. Project components

16. Experience from the previous project showed that a family can overcome absolute poverty by equipping a member with ski l ls and job creation in the urban sector. To ensure that such opportunities are fully available to the rural poor, a separate component for ‘employment promotion support’ has therefore been added to the project. In line with the policy o f strengthening governance within the project design and project management, several new elements have been included in the design and management o f community level institutions and project management structures and processes.

17. The overall design o f the project and the specific components within it has drawn on both the positive and negative lessons from the MPDPIP implemented over the last seven years and the design o f the second generation livelihood projects currently being implemented in India. To strengthen social empowerment o f the poor, the project design has moved towards a Se l f Help Group (SHG) approach, which i s now standardized in al l the livelihood projects in India. This will enhance the sustainability and longer term financial viability o f the community institutions at the village level. The investments made at the community level by the previous project were limited to only directly financing assets purchased at the household level. This resulted in difficulties for community groups to access finance for upstream investments that could integrate value chains and link them up with market players in the private sector. Additional provisions have been made to overcome this shortcoming experienced in the previous project.

18. The project will comprise the following four components: i) Social Empowerment and Institution Building; ii) Livelihoods Investment Support; iii) Employment Promotion Support; and iv) Project Implementation Support. The key features o f each component are provided below (see Annex 4 for more details):

19. Component 1: Social Empowerment and Institution Building (US$27.43 million): The objective o f this component i s to empower the poor by helping to organize themselves into SHGs and federate into higher levels o f institutions such as Village Development Committees (VDCs), cluster-level organizations and producer collectives. The VDCs will also have separate subcommittees to address issues o f social accountability, community procurement and fiduciary norms. In addition, it will promote the development o f the poor’s capacity and sk i l ls based on the principles o f self-help to enable them to initiate common livelihood activities. The component will consist o f the following two sub-components: (i) Support to Project Facilitation Teams (PFTs) and (ii) Community Mobilization and Institution Building.

2 graded in accordance with the Grading Tool outlined in Annex 7 to the PAD as well as the PIP. SHGs will be graded for savings habit (Le., regular savings at the fortnightly meetings receiving full 10 marks), inter-loaning to members within the SHG, repayment of loans by members (full 10 marks for on-time repayment), booWrecord keeping and attendance at the SHG meetings. Only groups receiving satisfactory grading (detailed in Annex - 7) will receive livelihood assistance from the project through VDC.

3 generally active, financially viable and having a governance structure that ensures independence and operational sustainability 6

20. Component 2: Livelihoods Investment Support (US$66.67 million): The objective of this component i s to develop the capacity o f SHGs to start livelihood initiatives, and to strengthen their business operations through producer based federations. Mechanisms to identify and support innovative approaches to help the rural poor to organize themselves around livelihood based businesses will also be supported in this component. In addition, the component will facilitate and promote People-Private sector Partnerships (PPP) through facilitating linkages with commercial banks and the private business sector. This component has four sub- components: (i) Rural Productivity Development; (ii) Value Chain Development; (iii) Innovation Support Fund; and (iv) Public-Private Partnership Development

21. Component 3: Employment Promotion Support (US$6.34 million): The objective o f this component i s to enable the project beneficiaries to capture new employment opportunities arising out o f the overall growth o f the Indian economy through the establishment o f a structured mechanism for skill development and job creation. I t will consist o f the following three sub- components: (i) Employment Facilitation Centers (EFCs)); (ii) Skill Training and Placement; and (iii) Placement Facilitation Services.

22. Component 4: Project Implementation Support (US$9.55 million): The component will facilitate various governance, implementation, coordination, learning and quality enhancement efforts in the project. It will consist o f the following four sub-components: (i) Governance Management; (ii) Project Management; (iii) Monitoring and Evaluation; and (iv) Technical Assistance.

4. Lessons learned and reflected in the project design

23. The project incorporated in i t s design the following key lessons learned from MPDPIP, other livelihoods projects in India and elsewhere supported by the Bank (including Andhra Pradesh District Poverty Initiatives Project, AP Rural Poverty Reduction project, and Rajasthan District Poverty Initiatives Project, and Bihar Rural Livelihoods Project), as well as Government programs, such as (SGSY) and IEG reviews o f similar projects in India.

24. Project Development Objectives aligned to needs of the poor and interventions focused on demand based livelihood requirements of poor households. The IEG review of a similar project in India has pointed to the need o f close alignment between project objectives, components and activities. This has been reflected in the project design by incorporating the successful lessons o f the first phase into specific components and sub-components o f the project.

25. Poverty targeting through a combination of participatory methods and village assembly 's (gram panchayat) endorsement is effective and raises transparency. Participatory wealth ranking has proved an effective and equitable tool to identify the poor and improve the government's Below Poverty Line (BPL) l is t . Similarly, a public review and approval o f the wealth ranking-based l i s t at the Gram Sabha level can minimize future conflicts and controversy.

26. I n order to address and improve livelihoods of the poor, promoting and strengthening their own institutions is essential. Direct and intensive support to the groups o f the poor in the process o f their livelihoods augmentation i s more effective than assistance through existing village institutions. This i s because main concerns and mandate o f the village institutions are in

7

the public domain, whereas livelihoods-oriented interventions focus on a household’s own assets and capacity. Sometimes unequal and divided village societies could also impede the poor’s gaining voice in the public arena and risk elite capture o f project benefits.

27. Intensive and continuous facilitation is essential for successful social mobilization and capacity building of the poor. The process o f group formation, t rust and capacity building o f the poor requires handholding support by external facilitators, tailored to the specific needs o f each group at different stages o f development. The project follows the successful experience o f MPDPIP, in which specialized units o f facilitators provided high quality support to the groups.

28. Social mobilization and capacity building for the sake of social action alone is not enough to empower the poor. Group formation and capacity development need to help materialize the poor’s aspirations for tangible income opportunities, made available through creation o f assets at the household level and linkages to a wider market.

29. I n order to access promising markets, small groups need to federate and operate at a higher level. Lack o f access to different kinds o f markets i s a major reason for the rural poor to continue to remain in poverty. To overcome this constraint, federation o f small groups into such entities as producer companies i s necessary if the full benefits o f the productive assets o f the poor are to be realized in a sustainable manner for enhancing income flows. Such integration at a higher level i s also essential to achieve scale. Through federation, small group members can also access a variety o f services, such as supply o f high quality seeds, which make their assets more productive.

30. Private sector participation is important for sustainable livelihoods of the poor. Drawing on MPDPIP’s successful lessons o f developing producer companies with sustainable private sector market linkages, the proposed project will support technical assistance for major livelihood activities through strategic public-private partnerships. These sector support organizations will provide technical know-how, critical market linkages, and capacity building support to community organizations mobilized and formed through the project.

3 1. A competitive recruitment system and merit-based human resource development strategy ensures high quality performance and commitment by project stafl Competitive recruitment and selection o f staff from both the open market and the government system creates a culture o f high standard performance and commitment in the project management units.

5. Alternatives considered and reasons for rejection

32. The GoMP had initially requested the World Bank to focus a substantial part o f i t s financial support to the critical community mobilization, empowerment and institutional capacity building aspects o f I L P for which resources are not easily available with the State, but essential for the success o f the program. However, given the limitation o f IDA funding and the potential challenges associated with the management and implementation o f the ILP, the proposed project will focus on scaling- up within the existing 14 districts, while the GoMP i s considering extending the experiences o f the MPDPIP to i t s similar programs in the remaining districts not covered by the project through i t s own financial resources.

Integration wi th the State’s proposed Integrated Livelihood Program (ILP).

8

33. The f i rst phase supported Common Interest Groups (CIGs) which were formed and operated around a common livelihood activity. From a sustainability point o f view and in light o f opportunities opened for SHGs under Government schemes, a decision was made to broaden the groups’ agenda and mandate, and to support their capacity development along a standard SHG model.

Exclusively supporting business dimensions of groups of the poor.

34. Inclusion of village infiastructure. Infrastructure at the village level, such as community buildings, roads and check-dams, was initially considered to be supported by the project. Although positive impacts o f such investments on poverty reduction are doubtless, it was rejected on the ground that this project design should be kept simple and not overburden the community mobilization and implementation processes. Also adequate government finances from different programs exist for such investments in infrastructure.

3 5. Governance and Accountability. From the governance and anti-corruption perspective, the MPDPIP did not experience any significant negative experiences in so far as procurement or financial management i s concerned. In terms o f general governance related risks, the main concern o f elite capture and political interference was largely mitigated by the strong community-based decision making processes and activities being largely poverty centric. However there have been some instances o f procedural lapses at the community organizational level (CIG and higher level organizations), although these lapses have been not very serious and are not considered to be systematic failure^.^

C. IMPLEMENTATION

1. Partnership arrangements (if applicable)

36. N o t applicable.

2. Institutional and implementation arrangements

37. The project will continue to be implemented in the same 14 districts as per the f i rst phase, however, the activities will be expanded to about 5000 villages (including the 2900 villages supported under the f i rst phase). The estimated number o f total beneficiary households i s expected to be 300,000.

38. Governance and oversight. The Madhya Pradesh Society for Poverty Alleviation Initiatives (MP-SPAI) i s a Society registered under the M P Society Registration Act of 1973 by the Government o f Madhya Pradesh for the implementation o f the f i rst phase project. This Society will continue to be the apex body responsible for coordinating and implementing the MPDPIP-I1 at the state level. The MP-SPA1 has two major constituents namely i) the General Body and ii) the Executive Committee. The Chief Minister i s the Chairman o f the General Body and the Minister o f Panchayat Raj and Rural Development i s Vice-chairman and i s primarily responsible for general oversight. The Executive Committee i s chaired by the Chief Secretary

Adapted from Understanding Governance and Accountability Risks, Review o f GAC Risks in Livelihood Projects - Andhra Pradesh, Madhya Pradesh and Bihar, by Adam Smith International, for the World Bank, New Delhi, July, 2008

9

(Chairman) o f the State and i s essentially responsible for oversight o f project implementation. Members o f the Executive Committee are drawn from various government departments which will ensure close coordination between the project and other programs o f the GoMP.

39. At the district level, a District Poverty Initiatives Subcommittee (ZPDPIS) o f the Zilla Panchayat (Zilla Panchayat Subcommittee) will be responsible for reviewing and monitoring project implementation. The ZPDPIS has important monitoring and evaluation functions, as well as decision-making responsibilities regarding district level issues, capacity building activities, and assessing village performance in targeting the poor (see tables in Annex 6 for additional detail). The District Poverty Initiatives Subcommittee (ZPDPIS), which includes members from various departments and programs o f the GoMP , will ensure close coordination between various other developmental programs being implemented in the district so that synergies available are utilized to enhance the overall impact o f the proposed project.

40. Project management. The State Project Support Unit (SPSU), established within the Madhya Pradesh Society for Poverty Alleviation Initiatives (MP-SPAI), will have the overall responsibility for management and implementation o f the project. The SPSU will be headed by a Project Coordinator who would be operationally and managerially responsible for the organizational structure established at the state, district and lower levels for the implementation o f the project. The Project Coordinator will be supported by a team o f state-level specialists and managers for different functions, including: component coordinators, M&E, financial management, procurement, human resource development and personnel, project administration, communications, among other specialists.

41. In each project District, a District Project Support Unit (DPSU) will be responsible for the implementation o f the project. The DPSU will be headed by District Project Manager (DPM), who will be assisted by a team o f project coordinators responsible for specific themes and functions such as social mobilization, agriculture, microfinance, gender, and market linkages. At the sub-district level the primary institutional arrangement will be the Project Facilitation Teams (PFTs). A PFT will consist o f five team members, each having a specialized function. One o f the experts will act as Coordinator and take the overall management and coordination responsibility o f the unit. PFT members would be selected competitively and will either be government staff on deputation or recruited from the market.

3. Monitor ing and evaluation of outcomedresults

42. Monitoring and learning activities o f the proposed project will be undertaken by experienced and trained staff drawn largely from the MPDPIP that will staff the project implementation units at different levels - namely that o f the PFTs at sub-district level, DPSU at district level and SPSU at the central level. The project will also ensure the establishment of a comprehensive audit mechanism for fiduciary management at al l levels, and relevant project staff will be trained accordingly.

43. The project will emphasize participatory monitoring and evaluation to ensure the involvement o f local communities from the outset and to include their feedback on project activities and processes. A community-based process monitoring system will be established at the village level for sharing o f all project-related information and generation o f information for

10

process and results monitoring. Social audits (third party monitoring) will be undertaken to provide external verification.

44. The Management Information Systems (MIS) utilized during the f i rst phase will be upgraded substantially to ensure accurate and on-time project monitoring and provide easy access to information on funds flow, implementation progress, processes, quality and performance o f community institutions. This information will be made available through a user- friendly project website, accessible to al l key stakeholders. The project will utilize these and other sources o f information (i.e. thematic studies, GIs, etc) to reliably inform stakeholders and management and to enable them to undertake evidence-based decision-making and mid-term corrections as needed.

45. The project has undertaken a comprehensive baseline survey as part o f the project preparation and will commission qualified agencies to undertake a mid-term review and end-of- project impact assessment.

4. Sustainability

46. Institutional Sustainability: The MP-SPA1 will serve to ensure that the institutional and implementation frameworks supported under the project will continue and strengthen. Community organizations created under the project will be monitored and assisted until they become self-managed, self-reliant and sustainable institutions. Various linkages and partnerships with interested actors in the private sector would augment their business foundation and sustainability. The project will also support technical assistance to state financed poverty alleviation programs in areas such as design and implementation o f institutional, financial and monitoring mechanisms. This would primarily be in the form o f consulting services and/or human resource support under the ‘project implementation support’ component. This request shows the desire o f the GoMP to learn from the MPDPIP’s proven methodology and mainstream this into the state government systems.

47. Economic Sustainabilitv: The project will help the poor and their business organizations to form an asset base for continuous productive use - these assets will be legally owned by the groups and wil l aim to strengthen the performance o f their livelihoods activities and income streams in the long run. The project, through various support mechanisms, such as becoming franchisees o f insurance companies and agricultural input suppliers, will also help SHGs and federations become viable and attractive organizations, so that they can gain access to capital as and when needed.

5. Critical risks and possible controversial aspects

48. In Annex 12, the Governance and Accountability Framework provides detailed analysis o f the issues related to the overall governance and accountability aspects o f the proposed project design. It draws upon the design elements and examines the vulnerability areas and related risk rating for certain critical process within the project design. It summarizes the key vulnerability areas with al l substantial and some moderate risk rating for specific traceable actions to be initiated with milestones and timeline in the Governance and Accountability Action Plan.

11

49. corresponding ratings:

The f o l l o w i n g i s table summarizes the Project’s cr i t ical risks, mitigation measures, and

Risks

To project development object

Demand-driven approach may hold back promising economic activities and trap the poor in a l imited set o f low-return operations.

To component results There i s no long history o f extensive social capital building, such as the women’s SHG movement and other social movements for uplifting backward classes in the state. This may slow down the process o f community institution building in the project.

Seed grant from the project to SHGs i s not sufficient to implement livelihood plans.

Lack o f strong financial market linkages.

Governance and anti- corruption.

Overall risk rating N - Negligible, L - Low, h!

Risk Mitigation measures

es Innovation support fund enables pioneer activities not directly demanded by the poor to demonstrate tangible outcomes. Various linkages flexibly facilitated by the project teams and service providers would effectively increase community groups’ exposure to new business potentials and encourage their exploration o f emerging opportunities.

To ensure that robust community level institutions are built it i s proposed that a properly sequenced graduation process i s built in the design o f the project so that institution building precedes investment funds being provided to communities. For this, adequate investment i s proposed in human resource development, training and capacity building o f project staff to carry out social mobilization.

The project will encourage SHGs to access external sources, including funding from Government schemes and bank credit. The project wi l l also support capital formation o f VDCs in order to respond to members’ financial needs through rotation o f initial capital investments. The outreach o f commercial banks in M P i s very limited; moreover, it does not have the presence o f any major microfinance institution leading to dependence on tied-sales and informal credit providers (incl. money lenders) which are unfavorable to the poor and also the major cause o f rural indebtedness (interest rate o f 5 - 10% per month). To mitigate this weakness, the project will facilitate access to financing and the establishment o f up-front linkages with financial intermediaries. A comprehensive G A A P has been prepared for the project which provides mitigation measures for the communities, project office, and Bank team to utilize. The project undertakes vigorous information dissemination activities to increase transparency, including publication o f key project-related information on the web.

- Medium, S - Substantial, and H - High risks

Risk Rating with

M

L

M

M

M

M

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6. Loadcredit conditions and covenants

50. Standard IDA credit conditions will be applied for the proposed project and the legal covenants applicable to project implementation include the following:

Institutional arrangements at the state, district, and block levels

Livelihood support activities in accordance with the PIP Project monitoring, reporting, and evaluation

0

Anti-Corruption Guidelines and GAAP

0

Financial management Procurement

D. APPRAISAL SUMMARY

1. Economic and financial analyses

5 1. Economic Analysis: The project addresses improvements in rural livelihoods in M P in a holistic manner with an integrated set o f interventions under individual components and activities being mutually re-enforcing. The main project benefits will be derived from ( 1) increased agricultural productivity; (2) diversification and increase o f income sources of households engaged in livelihoods activities; (3) improved market integration; (4) sustainable business institutions owned by the rural poor; and (5) viable new linkages for j ob and self employment. However, apart from those generated under Component I1 (Livelihoods Investment Support), the benefits are mainly related to social, institutional, capacity building and human resource development, which are mostly long term and not easily quantifiable. The Livelihoods Investment Support Component, accounting for some 60% o f the total project cost, is designed to support demand driven productive livelihood activities including food security and other income generation activities. Even with those directly quantifiable benefits generated under this component, ex-ante cost-benefit analysis and rate o f return calculations are difficult to prepare due to i t s demand driven nature.

52. Although the MPDPIP-I1 will focus on scaling-up successful activities implemented within the 14 districts targeted under the first phase, the beneficiaries will ultimately determine the scope and m i x o f the investments. As communities learn and feel more empowered in the course o f project implementation, these may differ from the original demand assessment or what they implemented under the first phase. Nevertheless, the ex-post economic analysis o f community investment subproject o f the MPDPIP could serve as an indication o f the economic viability for the Livelihoods Investment Support Component. The aggregated Economic Rate o f Return (ERR) for 323 sub-projects (including apportioned training and project management costs) implemented under the f i rst phase was estimated at 42%5.

53. Financial analysis: Based on the results o f the ex post financial analysis for MPDPIP prepared by National Center for Human Settlement and Environment (NCHSR), the average Internal Rate o f Return (IRR) by 6 categories o f sub-projects, which are most likely to be implemented under the livelihoods investment component o f MPDPIP-11, range between 52%

Detailed assumptions and calculations are contained in the ICR o f the MPDPIP. 5

13

(livestock) and irrigation farming (99%). It should be noted that as financial indicators are based on complete costs and benefits o f the investment, the actual net benefit for the beneficiaries would be even higher since major part o f the investments would be provided as grant to the beneficiaries. The methodology used to analyze the financial returns o f these subprojects will be adopted as part o f the appraisal process by the DPSUs and SPSU to select financially viable activities to be hnded under livelihoods investment support component.

54. Fiscal Impact; The government financial contribution to this project i s only to cover around 35% o f the incremental operating costs (mainly project staff and seconded government staff salaries) which i s expected to be approximately US$lO.OO million over the five years. This is only a fraction o f the total state government budget outlay. In fact, the State government has not only fully allocated counterpart funding, but also pre-financed from the state budget al l project activities prior to project effectiveness. The project i s expected to generate the positive fiscal impact from expanded corporate tax bases in commercial farming and value chain development, and increased personal income tax returns from youth employment and other job opportunities generated by the project. N o increases in recurrent expenditures o f state government are expected during the post-project period and any recurrent expenditure o f sub- projects would be met by community contributions.

2. Technical

55. In recent years, the World Bank has promoted livelihood projects in several states throughout India. They have demonstrated that community-driven development approaches are viable and effective options for catalyzing socio-economic change at the grassroots level and stimulating the rural economy.

56. The first phase o f the project addressed needs o f the vulnerable by organizing them into Common Interest Groups (CIG) built around a common activity. The project provided funds to their activities based on the sub-proposals and thereafter the CIGs federated and were organized into producer organizations. On the basis o f the experience in phase 1 , the MPDPIP-I1 needs to continue to address issues o f low income and lack o f integration with markets, as well as devise strategies to take the pressure o f f land dependency (72 YO of workforce depends on land). The project will also need to diversify the rural livelihoods portfolio to further minimize vulnerability. As such, the project will adopt a strategy to include investments in processes that build the “voice” (empowerment) o f the rural poor, and simultaneously build access to productive assets and thereby provide a platform for scaling-up o f livelihoods activities. I t ’ s also envisaged that the scale o f the activities will enable the poor to negotiate and bargain with market actors for better economic gains and subsequently, negotiate with service providers (government, private sector, civi l society) for better service delivery.

3. Fiduciary

57. Financial Management: As the proposed Project will be implemented by the MPSPAI, the entity responsible for the implementation o f phase I, the assessment o f the adequacy o f the financial management arrangements for the proposed project i s essentially based on the experiences o f the f i rst phase. In phase I, although the audit observations included internal control weaknesses, there were no major accountability issues or audit disallowances. One o f the

14

key internal control weaknesses in the first phase was delay in submission o f Utilization Certificates (UCs) for community grants made by the project as there were no specific incentiveddisincentives for timely submission or non-submission. To address this problem in the proposed project, release o f funds to VDCs will be conditional to submission o f UCs for the earlier tranches. UCs for the final tranche will have to be submitted by the VDCs within three months o f fund utilization. This i s provided in the formats for MoUs with VDCs & the COM.

58. The accounting software used in MPDPIP was developed in-house and rather rudimentary. Therefore for the MPDPIP-11, an o f f the shel f standard accounting software with required functionalities i s being procured for project accounting. Also in phase I, beneficiary tracking at the DPSU level was managed manually however, considering the wider coverage in phase I1 and consequently larger number o f beneficiaries in each district, beneficiary tracking will be computerized through an MIS system. Thus appropriate steps are being taken to address weaknesses in the project design and internal control weakness encountered in Phase I.

59. Therefore the financial management arrangements will be adequate to account for and report sources and uses o f project resources and meet IDA'S fiduciary requirements subject to compliance with the agreed financial management framework detailed in Annex 8.

60. In summary, the financial management framework includes the financial and administrative rules o f MPSPAI, the project Financial Management Manual (FMM), the Community Operational Manual (COM) together with the M O U / Agreements with the SHG, VDCs and Producer Organizations These will lay down the overall internal control framework for the Project. The SPSU will contract a qualified chartered accountant (CA) to provide technical assistance to the finance wing o f SPSU. Apart from this there will be appropriate staff to handle finance functions at the State, district and block level. The accounting at the project level will be carried out using an o f f the shelf accounting package. The design o f the chart o f accounts will allow the project expenditures to be classified by project components /sub- components/activities and generate periodic financial reports both for the various stakeholders.

61. Procurement6: The MPDPIP-I1 draws from the strengths and lessons learned from MPDPIP which had achieved over 95% targets in physical and financial targets for procurement within the time period. An external post review o f all goods and service contracts issued by state project office in 2007 had concluded that the systems and processes were followed in most cases except for a few minor deviations l ike inconsistency in time given for bidding, inadequate information kept in files etc. A post review o f selected C D D sub projects undertaken in 2008 by the Bank have also found that (i) PFTs, DPSU and SPSU carried a facilitative role in the formation o f CIGs, procurement management and oversight; (ii) in community procurement, the CIG structure, i t s formation within close-nit social groups, and laid down processes are adequate to meet the procurement and project objectives; (iii) MIS established by the state unit i s capable o f capturing key details about CIGs, activities, fund management, etc. and (iv) about 90% of

Procurement o f a l l goods, works and services wil l be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004, revised October, 2006 (Procurement Guidelines); and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October, 2006 (Consultancy Guidelines) and the agreed procedures described in the Legal Agreements.

15

assets were verified as available and performing triangulating the findings from economic analysis that rates o f return o f the investment i s comparably high in the project.

62. The project would be implemented according to norms, rules and procedures outlined in the Project Implementation Plan (PIP) and Community Operational Manual (COM). Procurement at al l stages will be as detailed in the Procurement Manual. These documents lay out roles and responsibilities o f different stakeholders and provide details o f project processes and the project cycle. Learning from the implementation o f MPDPIP was incorporated while developing the procurement strategy, disclosure arrangements etc. as part o f project preparation. The PIP and C O M will be subject to periodic reviews conducted joint ly by GoMP and IDA, with stakeholder participation to address any constraints to the successful implementation o f the project.

63. The project has proposed guidelines for community procurement in the PIP and Procurement Manual (as a separate booklet), as stated above, to enable procurement under the livelihood investment fund. The project has also made provision for procurement at the state and district level and such procurement shall fol low Bank’s Guidelines and procedures as defined in the Procurement Manual finalized and as agreed with the World Bank. Considering the residual risks in a decentralized project procurement, a number o f measures involving capacity building, disclosure and complaint redressal are proposed in Annex 9, including a detailed description of project procurement arrangements.

4. Social

64. The first phase o f the MPDPIP reached out to a l i t t le over 325,000 poor and ultra poor families. The objectives were to enhance their incomes, ensure livelihood security and overall well being through specifically designed, implemented and monitored processes o f community mobilization, formation and capacity building o f community associations around enterprises as well as the facilitating institutions at al l levels starting from the grassroots to the state level. The project interventions enabled the poor to acquire assets and shift from ad-hoc wage employment to more secured sel f employment. Moreover, the project facilitated and helped women in enhancing their capabilities and resources to manage their businesses in the VDCs in every project village. About 95% o f the VDCs under the f i rst phase were headed by women and around 80% o f VDCs have al l women in their executive committees. The lessons learned under the f i rst phase, in addition to the Social Assessment, Tribal Development and Gender Integration Frameworks developed during project preparation will further ensure a focus on social inclusion, equity and social empowerment o f the disadvantaged and marginalized sections o f society in the project areas.

65. The social assessment, commissioned by the SPSU, highlights the grassroots level socio- political issues such as (a) social exclusion - deprivation o f the Scheduled Castes (SCs) and Schedule Tribals (ST) from access to basic civic services, participation in decision making processes in democratic institutions and (b) gender discrimination - the SC and ST women in particular are further discriminated and deprived from their basic entitlements and from participation in decision making processes at familyihousehold and community levels. The situation i s aggravated by the many ineffective and inefficient public institutions primarily at the village and block levels.

16

66. The social assessment recommends that the proposed project focus on social empowerment and institution building mainly through: community mobilization, enhanced and strengthened participation o f such communities in decision making processes and enabling them to leverage maximum benefits by forming and federating the SHGs, and exploiting the economic opportunities for better and sustainable livelihoods and well-being. Furthermore, the targeting strategy o f the project i s appropriately informed by the social assessment and i t s experiences and learning from the Phase 1. In so doing, the project will target the Below the Poverty Line (BPL) families which would be reconfirmed through the Wealth Ranking exercises to be carried out at the village level.

67. The project would have specific interventions with enhanced intensity to develop and/or strengthen formation o f SHGs among the STs in specific areas o f the project and target women SHGs across the 14 project districts. For this, the PFTs, VDCs and the SPSU will be appropriately oriented and trained to include and engage the poor from the SCs, STs as well as women in the various project activities. Such inclusion will aim to enable and empower them to take decisions, access their entitlements and exploit opportunities for their sustainable livelihoods and well being. The project will also have a significant impact on empowerment o f women in the project districts, since it provides institutional strengthening support to SHGs; women-based groups; federations, and learns from other women’s empowerment initiatives in the state.

68. The Project will facilitate ‘social audits’ at the village, block and/or district levels on a sample basis at least once before the Mid-Term Review and again before project completion. The social audit will be coordinated by an independent c iv i l society organization with adequate experience in the field. In addition, the SPSU will conduct a process review o f the Tribal Development Framework and the Gender Integration Framework at the end o f the f i rs t year o f the project.

69. Roles and responsibilities for ensuring the effective implementation o f the Tribal Development Framework and the Gender Integration Framework at the state, district, sub-district and village levels for both project management as well as community institutions have been detailed out in the Project Implementation Plan (PIP). The capacity building strategy detailed out in the PIP involves provision o f training and learning by exposure and cross-learning opportunities for the community institutions (VDCs, POs) and project staff at a l l levels (State and District Project Support Units, Project Facilitating Teams).

5. Environment’

70. The experience o f the f i rst phase o f the MPDPIP has been that while more than 70% o f the sub-projects were natural resource based, the environmental r isks involved have been low in view o f the small scale o f the individual activities. Two external audits o f the environmental performance o f the f i rst MPDPIP were conducted during the project duration. The overall rating given for environmental management in the f i rs t MPDPIP was ‘satisfactory’. In addition, both the

77 Environmental screening category: B - Partial Assessment

17

audits pointed out certain impacts/issues that need to be addressed. While these are site-specific and do not reflect the situation in the entire project area, they are useful to build necessary safeguards for the MPDPIP-11. These observations/issues, which were reviewed for the development o f the Environmental Management Framework (EMF) for the MPDPIP-I1 are:

Changes in cropping practices: Introduction o f n e w crops may replace some existing crops leading to certain undesirable impacts (for example, reduced availability o f crop residues for fodder). Mono cropping may also lead to deterioration o f soil productivity and increase susceptibility to pests. Introduction o f high yielding varieties o f crops may result in replacement o f native varieties. Hence, technical support to avoid any long term environmental impacts i s needed. Also, multi/mixed cropping should be promoted. Water conservation: Sinking o f tube-wells must be supported only in areas where ground water table i s not at critically l ow levels. Renovation o f old stop dams and wells, check dams, roof top rain water harvesting, etc., needs to be supported. Introduction o f tube well irrigation may also replace traditional water harvesting practices. Hence, technical support provided to SHG members must also focus on retaining relevant traditional practices. Large numbers were constructed under the MPDPIP and have yielded very good results. Mult iple check dams/ stop dams/ anicuts on a single stream, while yielding positive results, may affect downstream flows and lead to disputes over water sharing. Hence, detailed technical assessment and consultation with downstream communities i s necessary. Environmentally proactive initiatives: sub-projects like whole village sanitation, stop dams with boulder check dams for reducing soil erosion, field bunding, plantation on barren land, bio-gas, etc. are some o f the environment-friendly projects taken up under the MPDPIP. These should be substantially scaled up. Livestock management: The project needs to focus on sound animal management (housing, ventilation, drainage o f wastes, stall-feeding). Support for implementation o f mitigation measures: In al l the sub-projects, about 10- 20% o f the total cost should be set aside to fund the implementation o f mitigation measures. Human Resources: The lack o f an exclusive cell/individual focusing on the EMF at the state level has affected i t s implementation. There i s a need to appoint senior staff exclusively to supervise the implementation o f the EMF at the state level. Training: To improve the capacity and capability o f the project staff as well as the community institutions, special emphasis should be given for capacity building and training on environmental management aspects.

71, In order to ensure that the environment i s not compromised in the process o f livelihood generation and to contribute to the ecological sustainability o f the supported livelihoods, an Environmental Management Framework (EMF) has been developed for the project. The framework approach has been adopted so that the environmental aspects can be addressed with clarity and simplicity for the range o f livelihood activities that could be proposed by the communities and supported by the project. The State Project Support Unit (SPSU) has carried out the Environment Analysis (EA) identifying key issues for the project and prepared an Environmental Management Framework (EMF). The EMF consists o f protocols for environment screening and environment assessment o f subprojects, arrangements for training and capacity

18

building, and guidelines for periodic environmental monitoring and audit. In view o f the learning from the f i rst MPDPIP, the EMF for the MPDPIP-I1 has incorporated the following features:

a) Detailed Technical Environmental Guidelines (TEGs) specifying impact and mitigation measures for various l ikely livelihood activities including agriculture, water resource management, and livestock management.

b) Study on district-specific proactive environmental interventions that can be taken up in each o f the project districts.

c) Clear institutional arrangements for implementation o f the EMF specifying roles and responsibilities at the state, district and block levels. A state level position has been created exclusively for attending to the implementation o f the EMF.

d) A detailed plan for capacity building o f both project staff and community institution members.

Public Consultations

72. Following the drafting o f the EMF, two consultation workshops (one regional and one state level) were organized to invite the inputs o f the stakeholders to the draft EMF document. The EMF was suitably revised following the consultation processes.

Environmental Issues and Mitigation Measures

73. Forests and Protected Areas: Degradation o f forests and protected areas may occur due to unsustainable extraction o f non-timber forest produce, unregulated open grazing o f livestock, construction activity, etc. Mitigation measures include not supporting activities that are not permissible in forests and in protected areas, ensuring that requisite permissions are taken for proposed livelihood activities, ensuring sustainable use o f forest resources (capacity building, regulations, etc.).

74. Agriculture: The issues include unplanned use o f chemical fertilizers and increased use o f hazardous chemical pesticides leading to soil degradation, pollution and impact on human and environmental health. The mitigation measures include technical support for fertilizer planning and integrated pest management with safer pesticides.

75. Water resources: Promoting tube-well irrigation may lead to overexploitation o f groundwater in semi-critical, critical and overexploited basins. Mitigation measures include ensuring that a minimum distance o f 200 meters i s maintained between adjacent tube-wells, taking requisite permissions for digging irrigation tube-wells in critical and overexploited basins and promoting adoption o f conservation measures (rain water harvesting, eflicient irrigation, etc.).

76. Livestock: Unregulated open grazing may lead to land degradation. Mitigation measures include ensuring that livestock population i s within carrying capacity o f the village grazing resources, rotational grazing, pasture development, fodder cultivation, stall feeding, etc.

77. Management Issues: While the individual impacts o f several small livelihood activities on the local natural resources may be small, the cumulative negative impact i s relevant.

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Assessment o f cumulative impacts needs to be done at the village level and the identified mitigation measures implemented.

Involuntary Resettlement (OPBP 4.12) Safety o f Dams (OPBP 4.37)

78. There may be poor compliance with environmental safeguard requirements. Mitigation measures include clear institutional arrangements and capacity building at al l levels for project staff and community institutions.

X X

6.

7.

79.

Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OPBP 7.60)

Safeguard policies

X X

Policy Exceptions and Readiness

As requested during the Appraisal Decision meeting, a detailed review o f the project design, including documentation, was undertaken by the South Asia Finance and Private Sector Development team to ensure that the proposed project was in compliance with OP8.30. The review found the proposed MDPIP-I1 was in compliance with the principles o f OP8.30 on condition that certain clarifications were made to the PAD, which were since made and cleared. The review found that the proposed project focused on the sustainability o f institutions as well as the sustainability o f participants’ economic activities, and that the economic justification i s clear, and it i s a cost-effective way o f reducing poverty o f the poorest in Madhya Pradesh. The review report further stated that ‘the project design recognizes that in order to deliver sustainable financial services to such poor communities, the village institutions being set up must be transparent, accountable and given capacity building in areas like record, book keeping, management, conflict resolution, etc. It also stresses the fact that for long term sustainable access to financial services for the poor, the project will facilitate access to financing and will establish up-front linkages with financial intermediaries.”

80. Special authorization from the Regional Vice President under OP6.00/BP 6.00 Annex A i s being sought with respect to the expenditure eligibility for financing food, education, health needs and retiring high-cost debts. OP 6.00 recognizes that while some expenditure may not, in and o f themselves, be productive, they may be deemed productive if they are a necessary part o f a larger project that i s designed to improve productivity. Given that the proposed project funds may finance retiring o f high cost debt, food, education and health needs, which proposed expenditures trigger special authorization arrangements under OP 6.00, Annex A, we request your special authorization to finance these activities. Similar special authorization was provided previously for the Orissa Livelihoods Project and the Bihar Rural Livelihoods Project.

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81. The proposed project i s ready for implementation as al l project documentation (Le. PIP and related manuals), including the comprehensive Governance Management Framework, have been completed in accordance with Bank guidelines and procedures. In addition, all core operational and financial positions have already been staffed and the GoMP has allocated adequate budgetary provision for activity commencement. Finally, a comprehensive Baseline Survey has been undertaken and will enable the proposed project to track achievements over time in income, use o f credit, savings, village participation in group activities, among other things.

82. which a waiver has been approved by the South Asia Regional Vice President.

The proposed project complies with al l Bank policies with the exception o f OP6.00, for

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Annex 1: Country and Sector o r Program Background INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

State Background

83. Madhya Pradesh (MP) i s the second largest state o f India in terms o f geographical size. As recorded in the 2001 census, over 60 mi l l ion people reside in the state, o f which 16 mi l l ion s t i l l l ive below the poverty line’. Per capita income in 2003-04 was a mere Rs. 8,284, or almost $0.75 cents per day. M P has shown a very low annual compounded rate o f income growth o f only 4.5% between 1993-94 and 2003-04 as against the national average o f 6.2%, and i t s compounded annual per capita growth rate for the same period stands at 2.3% (national average 4.4%). The state has the third highest incidence o f poverty and the lowest rate o f poverty reduction among the major states o f India.

100 90 80 70 60 50 40 30 20 10 0

I 1980-81 to 1982-83 1990-91 to 1992-93 2001-02 to 2003-04 I

84. The figure above shows the Per Capita State Domestic Product (SDP) in M P as a Percentage of the Indian Average. This shows a constant increase in the gap between M P and the rest o f India over the 1980s and the 1990s, and this trend appears to be continuing even in the current decade. Rural poverty in Madhya Pradesh involves complex issues o f lack o f productive assets, poor access, vulnerability to shocks, and weak institutional mechanisms. Lack o f income as well as lack o f capabilities both together defines the poverty condition in MP. Additionally one mi l l ion new persons are seeking employment every year, as the estimates from population growth and census worker participation rate indicates that 1 out o f every 5 able bodied laborer migrates for seasonal employment.

85. More than hal f o f its children are underweight (55%, all-India 47%) and the infant mortality rate o f ‘88/1000’ i s among the highest (the all-India rate i s 68/1000). In terms o f social indicators, the most recent National Human Development Report prepared by UNDP ranks MP very high on gender disparity (25th among 32 states).

Some estimates show 44 %, while the state o f nutritional poverty estimates show a st i l l higher proportion. Poverty Index in 8

National HDR ranked Mp 23rd out o f 32 states. 22

Agriculture sector

86. In many ways, M P characterizes the typical set o f institutional and development problems faced by the poorest regions o f India. As a result o f surplus labor, M P has a large subsistent agricultural sector that co-exists with a small modern industrial sector that i s localized in specific cities, namely Indore. The organized industry employs only 6% o f the total workforce.

87. Agriculture employs nearly 72% o f al l workers, although it only contributes 33% to the state domestic product. Poverty levels in the rural areas have seen a gradual decline from 37.1% in 1993-94 to 28.3 % in 2003-2004. However, agriculture productivity and income are far below the national average. Income per hectare for M P in 2002 was Rs.7,010 (all-India Rs. 1 1,876) and per capita landholding i s small (1.2 ha). Farming i s mostly rain-fed (75% o f the net sown area with l o w cropping intensity o f 135%), and hence risk prone (more than 40% o f the districts have been affected with either excess or less o f rains in the last 10 years except 2001-02). In addition, absence o f producer organizations, inadequate delivery o f credit and inputs, underdeveloped value chains and ineffective agriculture research and extension constrain sustained growth o f agriculture. As a result, real per capita rural net-domestic product has remained stagnant over the years and per capita food production has declined. It raises concerns o f food security and quality o f employment in the farm sector.

88. Migration; One mi l l ion new persons are seeking employment every year, as the estimates from population growth and census worker participation rate indicate. One out o f every five able-bodied men migrates for seasonal employment.

89. Rural infrastructure has been extremely poor and not seen much improvement over the last two decades. M P ranks among the worst states in the index o f social and economic infrastructure. In the Tenth Plan document it i s listed marginally above Rajasthan and below Uttar Pradesh, Bihar, Orissa and Assam. Underdeveloped social capital due to the absence o f any major social movement historically in the state also shows the need for intensive social mobilization o f the poor to break out o f feudal patronage systems s t i l l prevailing in the state. Rural poverty in M P thus involves a complex set o f issues.

Government actions

90. Successive state level governments over the past two decades have proactively attempted to address the problems o f rural poverty, l o w agricultural productivity, and social exclusion through a variety o f policies and programs. More recently, GoMP has embarked on two major instruments o f policy reform for poverty reduction, namely the Se l f Help Group (SHG) Development Policy and the Employability Oriented Training Policy. Under the SHG Development Policy, activity-based federations o f SHGs are to be promoted and receive operational support and financial assistance for working capital, infrastructure development, quality control and brand development. Under the Employability Oriented Training Policy the GOUP supports skill training for unemployed youth.

91. The above initiatives point towards a sustained commitment by the state government, irrespective o f the political party in power, towards programs for rural poverty reduction. The state also has a fairly efficient administrative structure for delivery o f such programs and an

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administrative ethos built around development. This has proven essential in a state like Madhya Pradesh where the role o f the private sector in economic development has been far less than in other progressive states. Yet the state’s share i s l ow in external assistance and the Centrally Sponsored Schemes (CSSs). The Tenth Plan document shows that in 1999-2001, Madhya Pradesh ranked 30th among 35 states on per capita plan outlays. Financial institutions including National Bank for Agriculture and Rural Development (NABARD) and Small Industries Development Bank o f India (SIDBI) as well as private sector banks are making an effort to enhance credit flows to the rural sector,, but have not been able to make a substantial impact in agriculture and rural credit. Only about 6 % o f the state’s GDP i s allocated to rural development.

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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

Sector Issue Project

Bank Financed

Poverty Reduction and livelihoods

Social and Gender Specific Programs

Bank Financed Agriculture, Irrigation Other Donor Agencies DFID

IFAD

Andhra Pradesh District Poverty Initiatives Project (Cr.3430-IN)

Rajasthan District Poverty Initiatives Project (Cr.3339 - IN)

Orissa Rural Livelihoods project (P093478)

Chhattisgarh District Poverty Initiatives Project (Cr. 3749-IN)

Andhra Pradesh Rural Poverty Reduction Project (Cr.3732-IN)

Sr i Lanka Community Development and Livelihood Project (H0780-LK)

Tamil Nadu Empowerment and Poverty Reduction Project (Cr. 3 1806-IN)

Rural Women’s Development and Empowerment Project (Cr. 2942-IN) Closed Orissa Water Resources Consolidation Proiect (P010529) Closed 913012004

Rural Livelihoods Programs in Andhra Pradesh, Madhya Pradesh, Orissa, West Bengal, Chhattisgarh, Gujarat, Himachal Pradesh, Karnataka and Rajasthan

Orissa Tribal Empowerment and Livelihoods Program

Moderately Satisfactory. 9

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Latest Supervision ISR Ratings (bank-financed I Implementation Progress

S

S

N A

MS9

S

S

S

S

OED Assessme

S

- ejects only) Development Objective

S

S

NA

MS

S

S

S

S

of Outcome

Annex 3: Results Framework and Monitoring INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

Results Framework

Improved capacity and opportunities for the targeted rural poor to achieve sustainable livelihoods.

Component 1 : Self-Help Groups mobilized and strengthened

Component 2: Livelihood opportunities for targeted households improved

Component 3 : Access to employment opportunities in the project villages increased Component 4: Effective project management structure for coordination, learning and quality enhancement established

. At least 60% o f the graded'" SHG members report a minimum o f 20% increase in household income (at constant prices)

viable and sustainable" At least 60% o f the graded SHGs are

1.1 At least 60% o f targeted poor households'* are members o f Project- supported SHGs

First Grading

villages manage ._ Project finds

1.2 At least 80% o f the SHGs have passed

1.3 At least 90% o f the VDCs in the project

efficiently'' 2.1 At least 80% o f the graded SHG

members have accessed credit from the V D C

~ustainable '~ 2.2 At least 15 POs are viable and

3.1 At least 20,000 jobs are offered to job seekers from the project villages through project mobilization

- 4. Project management has satisfactorily

addressed statutory audit findings according to agreed MP-DPIP business standards

4.2 Project management takes and records all necessary actions related to findings o f regular M. E and L

At MTR, the overall strategy will be reviewed against the PDO indicators and baseline. Interventions and funds will be re-aligned according to the findings regarding project performance

Use of Intermediate Outcome Monitoring

Under-achievement in the indicators, if any, would be analyzed for improving community mobilization and capacity building strategy.

Under-achievement in the indicators, if any, would be analyzed for improving livelihood planning o f SHGs and business planning o f the producer companies. Under-achievement in the indicators, if any, would be analyzed for improving the project's employment creation strategies Experiences and learning from the project are factored into management decision-making for improving f i ture project performance

SHGs which have attained minimum performance standards specified by MPDPIP-11's 2"d stage Grading Tool, as detailed in Project Implementation Plan, Chapter 14. Sustainability i s defined as being active (e.g. regular attendance at meetings), financially viable (e.g. taking and repaying loans) and having a governance structure that ensures independence, representativeness and operational sustainability - measures o f these are detailed in PIP, Chapter 14). Includes below poverty line (BPL) households and others identified by the Project's wealth ranking methodology.

10

l3 Includes transferring funds to SHGs as per MPDPIP's business standards l4 Sustainability defined as being active, financially viable and having a good governance structure.

26

reports that it receives in a timely manner, as per MP-DPP business

4.3 All the complaints received by the Complaints Handling unit in the SPSU have been addressed, according to agreed

Arrangements for Results Monitoring

92. MPDPIP, with the following additiondchanges:

The Project’s Management Information System will build on the MIS established in the

where the first project tracked the formation and development o f Common Interest Groups, the MPDPIP-I1 will track that o f the SHGs to be formed under this project; the previous MIS worked with Excel spreadsheets, whereas the second Project will have a full MIS which i s fully computerized down to the PFT level; the first project tracked mainly outputs (such as number o f groups formed), while the emphasis on the second project will extend to tracking outcomes and intermediate outcomes (such as measures o f capacity improvement and sustainability, including the SHG’s progress in attaining the proposed Project’s two grading levels system to determine maturity o f the groups which are triggers for phased development activities); the f i rst project did not cover the activities o f VDCs, which are new to the second Project. The new MIS will track V D C formation, and efficiency o f management and transfer o f Project funds to the SHGs according to the Project’s business standards; and additional items that the MIS would track include monitoring the performance o f the Producer Organizations to help ensure their viability, progress in addressing audit issues queries, and o f complaints.

90. Monitoring and learning activities o f the project will be managed by dedicated specialists in the different project implementation units. The computerized financial management and Management Information Systems (MIS) described above will help ensure close and on-time monitoring o f funds flow, implementation progress, processes, quality and performance on community institutions. A comprehensive Baseline Survey has already been conducted and will enable the Project to track changes over time in incomes, use o f credit, savings, villager participation in group activities, etc. The project will also commission a mid-term review and impact assessment to assess progress on these results.

Data collection and information sharing

93. All information related to the project will be made available through a functioning project website, accessible to all key stakeholders. The project will also ensure the establishment o f a comprehensive audit mechanism for fiduciary management at al l levels, and relevant project staff will be trained accordingly. A community based process monitoring system will be established and displayed at the village level for sharing o f al l project related information at the Gram Sabha level. The MIS will regularly transmit information on progress, process and results

27

to the SPSU, DPSUs and PFTs, to enable continuous or periodic assessment, reflection and refinement o f Project activities. M&E findings will be used to influence Project implementation as follows:

a

a

a

a

92.

teams at all levels (state, district and village) wil l review Progress o f input and output achievement against project targets, and will report to the PC regarding corrective actions, if any, to be taken. This will keep implementation on track or justify any amendments o f plans, if needed; teams at al l levels will review Process monitoring information to assess the effectiveness and quality o f processes and discuss with the PC about corrective actions to be taken, as needed; VDCs and SHGs will also use process monitoring results to self-assess their progress, performance and effectiveness in achieving their objectives, qualify for project support and achieve greater sustainability o f their operations; and the PC and DPSUs will use the information from Results monitoring and thematic studies to assess the status o f project deliverables and effect, at least quarterly, and ensure project accountability for results.

In terms o f readiness for implementation, the SPSU’s core M&E staff (a senior M&E Coordinator, a Communications Officer and an MIS specialist are already in place). They will be supplemented by consultants who have been budgeted for. At the district level, the MEL Coordinators and the PFTs at cluster level wil l be recruited shortly Funds has been budgeted for personnel including consultancies for studies as wel l as hardware (computers, etc).

Governance and Accountability Action Plan

94. A Governance and Accountability Action Plan (GAAP) has been prepared to ensure: (1) transparency and adequate disclosure with regards to project fund use and business processes; (2) proper and speedy response to grievances related to project implementation in compliance with rules and regulations; and (3) information dissemination targeting relevant Government agencies, as well as general public, in accordance with the project requirements and in conformity with the Right to Information Act (2005). During regular supervision and the MTR, the performance o f the SPSU in meeting the GAAP requirements will be reviewed.

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Annex 4: Detailed Project Description INDIA: Second M a d h y a Pradesh District Poverty Initiatives Project (MPDPIP-II)

Project Design

95. The overall design o f the project and the specific components within it have drawn on both the positive and negative lessons from the MPDPIP implemented over the last seven years as well as the design of second generation livelihood projects being implemented in India. To strengthen social empowerment of the poor the project design has adopted the Se l f Help Group (SHG) approach, which i s now standardized in al l the livelihood projects in India. Similarly the savings and inter-loaning component (which was not part of the earlier CIG model), will enhance the sustainability and longer term financial viability o f the community institutions at the village level. The investments made at the community level by the previous project were limited to only directly financing assets purchased at the household level. This resulted in difficulties in accessing finance by community groups for upstream investments to integrate value chains and link up with market players in the private sector. Additional provisions have been made to overcome this shortcoming of the previous project.

96. Experiments in the previous project showed that absolute poverty can be overcome by a family through equipping a member with ski l ls and job creation in the urban sector. A separate component for employment promotion support has therefore been added to the project to ensure that such opportunities are fully available to the rural poor. In line with the policy of strengthening governance within the project design and project management, several new elements such as a community managed Social Audit Committee (to monitor the end use o f money), Procurement Committee, Loan Recovery Committee, have been included in the design and management o f community level institutions and project management structures and processes.

Project Area and Scope

97. There are a total o f 50 districts in the State o f Madhya Pradesh. The first phase o f the MPDPIP was implemented in about 2900 villages of 14 districts, while the second phase project proposes to utilize an extension approach and implement i t s activities in about 5000 villages (including those supported in first phase). The estimated BPL population in the proposed project area i s around 500,000 households, of which the proposed project intends to target 300,000.

Project Targets

98. The project will target a l l the poor households in the project area. A systematic wealth ranking exercise, to be conducted at the beginning of the community mobilization process in each village, will define the selection of households for project support, and will be matched with the existing GoMP’s Below Poverty Line (BPL) list. Those identified as poor will be included in the modified BPL list, if they meet the criteria for inclusion. The project beneficiary l i s t in each village will include all the BPL families and those additionally identified as poor, if any, in the wealth ranking exercise. This l i s t will be presented to the Gram Sabha for i ts endorsement.

99. It i s estimated that the project will cover approximately 300,000 rural poor families through direct project support by helping to organize them into SHGs in the selected project

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villages. The 300,000 nuclear families covered in the first phase project wi l l continue to be given capacity and institution building support so that they also become part o f sustainable community organizations (Le., SHGs and Federation o f SHGs). All the SHGs wi l l receive financial support for rural productivity investment purposes. A total o f 30,000 SHGs federated into at least 4,500 Village Development Committees (VDCs) are proposed to be promoted (Table 4.1) under the MPDPIP-11. These wi l l be further federated into a) cluster- level organizations, termed Community Financial Organizations, to facilitate access to financial services including credit, insurance and remittance services; and b) about 25 producer organizations that are activity based business entities. The project also proposes to facilitate 20,000 rural youth drawn from the identified poor families for skill building and job placement.

Project Phasing

100. In the first year, the project wi l l focus on establishing systems and processes to achieve intensive coverage of project area and ensuring proper capacity & institution building. The strategy includes exposure visits for SHG members & community leaders as well as project staff to learn good practices on various facets o f the project including social mobilization, capacity & institution building and use o f resources by similar projects both within and outside the State.

101. SHG formation wil l be completed by the 4th year and the formation o f 4,500 VDCs (federation o f SHGs at the village-level) wi l l also be completed by the end o f 4" year. Identification and training o f various resource persons (incl. PFT staff, and Village Resource Persons) wi l l be completed during the 1'' and 2"d years.

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Project Phasing Strategy

5‘h 1* 20a 3* 4th Year Year Year Year Year Activity Total

Village Entry I 1,500 I 2,000 I 1,500 I - I - I 5,000 I Establishment of PFTs

SHG Formation (new )

150 150

3,000 5,000 7,000 5,000 20,000

2,000 Restructuring o f CIGs to SHGs 5,000 3,000 10,000

VDC Formation Producer Organizations Establishment of Ajeevika Kendra Skills Up-grading and Training (number o f persons)

*existing

1,500 2,000 1,000 4,500

25* 25

300 200 100 600

3,000 6,000 6,000 5,000 20,000

Project Approach

3,000 Placement Facilitation (number o f persons)

102. The project will promote a community institutional model which builds on the success o f the first phase (MPDPIP), while taking into consideration experiences and lessons learned from other rural livelihoods projects supported by the Bank. The basic unit o f the community-based institutional model will be the Self-Help Group (SHG) which are small groups o f poor, formed on the basis of similar gender, social affinity and common livelihoods, in each village. Each SHG will have 10 -15 members. The project will provide intensive, hand-holding support to the SHGs in order to help them become vibrant, s e l f managed and sustainable organizations, founded on the principles o f mutual trust and self-help among the members. Each SHG will follow a clearly laid-out sequential path of gradual development that will include responsible management o f group funds through savings and inter-lending. At different stages of project support, each SHG’s capacity will be rigorously assessed and rated against certain milestones.

6,000 6,000 5,000 20,000

103. When at least three SHGs are formed in a given village, they will be federated into a Village Development Committee (VDC). The Village Development Committee i s the village level federation of the SHGs. VDC will serve as the forum for al l the SHG members, but its initial focus will be to cater to the members’ microfinance needs. Al l the SHG members will be the members o f the general body of VDC. The VDC will be the second tier of community institution to be built within the proposed project. In the first general body meeting of the VDC, the executive committee will be established. The executive committee will have 10-15 members with sufficient women participation. The office bearers (chairperson, vice chairperson, two bank signatories) of the VDC shall be elected among from the executive committee members. The VDC will be registered with the PFT. The elections to it shall be held every three years. The Village Resource Person (VRP) in the village will serve as an ex- officio secretary o f the executive committee. The VDC will decide the group savings and member fees and then open its own bank account. The main tasks of VDC will include:

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0 approval o f seed loan/livelihood loan; 0 resource allocation; 0 managing SHGs’ financial assistance; 0

0

0

assessing and approving SHGs Livelihood Plans; facilitating SHG-Bank linkages with commercial banks; and monitoring the implementation o f livelihoods plans.

104. In addition to the above activities, the VDC wi l l also be catalyst for raising various social issues o f non inclusion o f the poor, gender participation, establishing norms for social accountability, and conflict resolution within and across SHGs.

105. The social capital developed and strengthened through the above process o f formation and capacity building o f SHGs and VDCs wi l l serve as the foundation and building block for planning and implementing o f common livelihoods activities. As demonstrated in the first phase, viable business activities wil l be identified and linked with a wider market to provide the poor with sustainable opportunities for increasing their household incomes. The project wi l l also facilitate SHGs to federate into higher level business entities such as producer companies/cooperatives to access higher levels in a particular sectoral value chain and take advantage o f economies o f scale.

Roles and Responsibilities of Community Institutions

Community Level

Organization Sel f Help Groups

Village Development Committee (VDCS)

Key Functions

Will be based on activity but initially will be doing thrift and revolving their internal savings for providing credit to each other.

Will provide the SHGs technical assistance for SHG-Livelihood Plan Facilitate access to financial and technical resources from the

Membership & Office Bearers

Membership: MenlWomen from poor and disadvantaged households will be mobilised to form afinity and activity groups known as SHGs. The group membership will be of minimum 10 households.

Office Bearers: A President, a secretary, and two bank signatories.

Membership: Minimum ofThree (3) SHGs forms a VDC. If in a village 3 SHGs cannot be formed then it can join nearby VDC.

Supporting Functionaries

Community Animator, Para- Worker, Book keeper.

VRP Auditor

Project Inputs

These groups will be provided with support in developing group norms, financial management capacity, development of solidarity and aceess skills, credit and services from a variety o f service providers. These SHGs will be provided with support to be federated into Village Development Committees (VDCs) and will be hrther progressed into the Producer Organisations. These VDC will be the main receipents o f the project resources (Seed Grant). The VDC will be

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Community Level

Organization

Community Financial Organizations

Producer’s, Organizations

Key Functions

project, financial institutions. Take-up specific social and economic activities requiring collective action. Provide VDC with technical assistance, capacity building and facilitate convergence between CBOs and different agencies o f development like local governments and line agencies.

Arrange bulk finance for theVDC from commercial banks and support formation and promotion o f livelihood based organizations and activities requiring linkages with commercial sector organizations. Facilitate access to a broad range of financial services particularly credit, insurance, and remittances services. Purchase or procurement of inputs for production

Local processing and storing o f inputs and outputs

Marketing and selling o f produce

Develop commercial and direct relationships with private, cooperative and public sector agencies.

Membership & Office Bearers

Office Bearers: President, Secretary and two bank signatories.

Membership: Al l the SHG members (300-350 SHG, when more than 600 SHGs, 2 Federations) OfficeBearers: President, Vice-president, Secretary and Two Bank Signatories.

Membership: Members will come from different SHGs and will receive technical and financial support in areas o f input and output procurement, extension services, technical assistance services and marketing services.

Office Bearers: Board o f Directors.

Supporting Functionaries

CEO 2 Functional Coordinators Accountant Book Keeper

CEO, Production Managers, Accountant and Marketing Officer

Project Inputs

faciliated to evolve into Micro Finace Institutions at Block Level.

The project will promote livelihood based activity groups and federations o f members who have similar livelihoods in sectors such as dairy, agriculture, fisheries, handloom etc.

106. The above-mentioned institutional model will also be used to create a pool of community-based service providers in the areas o f technical extension and identification of youth for skill training. These service providers in turn will be linked to the private sector for providing inputs, marketing outputs and job creation in urban areas for the youth drawn from poor households. The service providers will be supported for their roles through training and capacity building by the project, but operate as village-level entrepreneurs. The institutional building process i s shown diagrammatically in Figure 4.1 below

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Figure 4.1: Community Institutional Building Process

c Identificatmn & Assessment o f existing SHGs & Formation of New SHGs

4

c Transfer of financial assistance to VDC

Transfer ofseed Loan to SHGs and formulation of SHG LP

c Firstgradingassessment o f SHGs 1

c Grading of VDC

I Assessment of SHG-LP by VDC I 1

Transfer offinancial assistance to VDC I

1 Transfer of Livelihood Loan to SHG I c

I Second grading assessment o f SHGs

4 Formation of Higher Level Federation

Project Components

Component 1: Social Empowerment and Institution Building (US$27.43 million)

107. The objective o f this component i s to empower the poor by helping to: organize themselves into SHGs and federate into higher levels o f institutions such as VDCs, cluster- level organizations and producer collectives; develop their own capacity and ski l ls based on the principles o f self-help; and become capable to initiate common livelihoods activities. The component consists o f the following two sub-components:

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I. I Support to Project Facilitation Teams (PFTs)

108. This sub-component wi l l support establishment and operations o f the field based project facilitation unit called Project Facilitation Teams (PFTs). The PFTs wi l l provide support to the initial social mobilization and wealth ranking processes in the villages and subsequently intensive, hand-holding support to SHGsNDCs throughout the process o f the latter’s formation and capacity building. The project wi l l eventually engage about 150 PFTs each comprising five specialists (see Table 6.2, Annex 6 for composition). One PFT wil l be in charge o f about 30-40 villages and support all the SHGs in each village. The project wi l l also provide training to PFT staff the orientation training at the beginning, and annual subject matter trainings in subsequent years. In addition, exposure trips wi l l be organized to enable PFTs to share experiences to further enhance their ski l ls and capabilities.

1.2 Community Mobilization and Institution Building

109. This sub-component wi l l support community level activities related to the formation and institution building o f SHGsNDCs. The process starts with village entry level activities (situation analysis and wealth ranking) facilitated by the PFT, and wi l l follow seven sequential steps corresponding to the lifecycle o f a SHG: (1) pre-formation; (2) concept seeding; (3) formation; (4) strengthening (includes VDC formation); (5) bank linkages; (6) livelihood implementation; and (7) graduation. At each stage, moving to the next i s conditional on the group’s completing required actions. At certain critical stages, the PFT wil l apply appropriate indicators, such as members’ attendance in group meetings, regularity of group savings, fund management including inter-loaning and repayment o f group loans, and record keeping including transparency to assess the group’s maturity (‘milestones’). PFT wi l l guide the process, closely monitor each SHG’s performances and fine-tune i ts support with the capacity status o f the group. The Community Operation Manual provides a detailed description o f the process, as well as milestones and methods for capacity assessment. Existing SHGs created under various Government schemes, by NGOs, and other organizations wi l l also be brought into the project fold subsequent to an assessment by the PFT. It i s envisaged that in each village 5 - 10 SHGs wi l l be registered under the project and receive i ts support.

110. The SHGs formed in each village wi l l be further federated into VDCs. VDCs are the second tier o f community institution to be built within the project. Each VDC wi l l have as i t s members all the SHG members in the village and wi l l be managed by an elected body drawn from the SHGs. The initial role o f the VDC wil l be to act as an intermediary organization for the channeling o f project funds i.e., seed money for productivity enhancement to the SHGs. It wi l l also take up issues o f common concern to the membership o f the SHGs in a village, such as common social issues and conflict resolution amongst and within SHGs. The formation and strengthening o f VDCs wi l l be initiated once at least three SHGs are formed in a village. The VDCs wi l l also have separate subcommittees to address issues o f social accountability, community procurement and fiduciary norms.

1 11. This component wi l l also support training and part o f operational cost o f village level service providers who wi l l provide assistance to SHGs and VDCs. Few types o f community level experts are envisaged like Village Resource Persons (VRPs), Para-workers, community Animators, SHG-Bookkeepers. VRPs and SHG Bookkeepers wi l l primarily help VDCs and SHGs keep accounts. Community Animators mobilize new SHGs as the project expands, and

37

strengthen weak SHGs. Given the significance o f financial management within the SHGs and VDCs, the VRPs services in ensuring social and financial accountability wi l l be critical, given the initial low capacity o f the poor. VRPs wi l l be jointly selected by the PFTs and SHGs from within a cluster o f villages, and receive training from the project in various functions. Para- workers are village-level technicians whose ski l ls and knowledge can be tapped by SHGs when they implement livelihood plans in different sectors. They would include para- veterinarians, experienced farmers, and construction foremen. The para-workers wi l l provide services, on a fee, to SHG members when and as requested by them. The project wi l l provide training to the para-workers to help them further develop their technical capacity as well as better serve the needs o f the poor clients.

Component 2: Livelihoods Investment Support (US66.67 million)

112. The objective o f this component i s to develop the capacity o f SHGs to start livelihoods initiatives, and to strengthen their business operations through producer based federations, companies, and cooperatives. Mechanisms to identify and support innovative approaches to help the rural poor to organize themselves around livelihood based businesses wi l l also be supported in this component. In addition, the component wi l l facilitate and promote people- private sector partnerships (PPP) through facilitating linkages with commercial banks and the private business sector. This component wi l l have four sub-components.

2. I Rural Productivity Development

113. Under this sub-component, SHGs wi l l receive a loan through VDCs when they reach a certain level o f maturity, as measured by a predefined milestone in the PIP. The seed grant for rural productivity development to the VDC i s envisaged as a method o f capitalizing the poor who constitute the primary membership o f the SHGs. The use o f this grant wi l l be demand driven (Le. decision on use wi l l be made by the SHGs) and constitute an integral part of the overall SHG Livelihood Plan (SHG-LP) prepared by each SHG for their common livelihood. The seed grant may be used by the SHG also as a leveraging amount (margin money) needed to draw in further funds from the banking system or other government sources.

2.2 Value Chain Development

114. This sub-component wi l l support SHGs engaged in the common livelihoods activity to form a federation i.e., producer organization to leverage on economies o f scale to access wider markets and make collective investments in value addition. A federation wil l start with mature SHGs and in a size that i s economically viable. An established federation would later invite other SHG members from the area to join as the groups’ capacities and interests grow. Such livelihoods federations wil l legally take the form o f either Producer Companies or Cooperative Societies, depending on which Act the federation wi l l be registered with. The individual SHGs engaged in specific livelihoods wi l l become shareholders or cooperative members under the livelihood federation. The project wi l l provide a one-time grant in the form o f working capital to each federation upon approval o f i t s business plan. The federation wi l l use the grant money to raise additional funding from commercial banks on commercial terms. The one time grant i s required to demonstrate the business model o f the producer company and in the process increase the risk appetite o f the commercial banks and other financial institutions that are reluctant to provide a line o f credit to the federations based on their business plan. The grant can be seen as supporting the “proof-of-concept”. The project wi l l also finance a) the initial expenses associated with the formulation and registration o f the

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federations as per GoMP’s SHG Promotion Policy (2007); and b) enable federations to acquire facilities, equipments and other assets required to operate the business by providing financial resources.

2.3 Innovation Support Fund

115. The project wi l l support innovative pilot activities that have potential for scaling-up and replication. Over the period o f implementation in the project many opportunities typically present themselves that have the potential for being integrated into the project. Key activities that could be supported include the piloting o f innovative approaches for building business based federations o f the rural poor, new methods o f linking up the poor to modern markets, organizing o f forums and platforms that promote innovations and market linkages with new partnerships.

2.4 Public-Private Partnership Development

116. This subcomponent wi l l support activities and services that improve the quality of service provision by private, public sector, and civil society service providers. The subcomponent wil l support technical assistance for major livelihood activities such as agriculture and 1ivestocWdairy through strategic public-private partnerships through contracted services with research organizations, private sector, and technically competent civil society organizations. These sector support organizations wil l provide technical know- how, critical market linkages, and capacity building support to community organizations mobilized and formed by the project. The specific activities under such outsourced technical assistance would include a) capacity building o f SHG Federations and MFIs in microfinance management and bank linkage, b) technical know-how and linkage building for value chain investments, c) technical training systems development in agriculture/dairy/handicraft sectors for community organizations and para-workers, and d) establishing market linkages for sustainable buyback o f producer organization products.

Component 3: Employment Promotion Support (US$6.34 million)

117. The objective o f this component i s to enable the project beneficiaries to capture new employment opportunities arising out o f the overall growth o f the Indian economy, through the establishment o f a structured mechanism for skill development and job creation. I t wi l l consist o f the following sub-components:

3. I Employment Facilitation Centers

1 18. The project wi l l support the establishment and operations o f Employment Facilitation Centers (EFCs), or Ajeevika Kendra, which mediate between job seekers in project villages and potential employers. One EFC would typically cover two or more Gram Panchayats. A total o f about 600 EFCs wi l l be established in the project districts. Each EFC wi l l be physically located in the Gram Panchayat office, and have one facilitator (Ajeevika Mitra), who wi l l carry out the following tasks (a)mobilize, sensitize and register educated/uneducated, as well as skilled/unskilled job-seekers from the identified poor families, (b) issue identity card to each registered job-seeker, (c) maintain the records, and share the data with the District Employment Exchanges (DEE) for suitable training and placement, (d) provide post placement services, such as facilitating the migrants’ communications with family members, and assisting the newly recruited to move to their

39

workplace, and (d) ensure social security benefits with the provision o f insurance schemes, and support the newly employed when they require services related to microfinance and remittance.

3.2 Skill Training and Placement

119. The project wi l l provide short duration vocational training opportunities to the unemployed population, particularly the youth drawn from poor households, in the project area. The trainings, which wi l l cover such ski l ls that are required by growing service and industry sectors o f the wider economy, wi l l be conducted by selected professional institutions, which wi l l also be responsible for finding employers for the trainees.

3.3 Placement Facilitation Services

120. The purpose o f training i s for job creation for the youth. Hence the project wi l l facilitate through various mechanisms, such as accreditation, and partnerships with industry bodies job placement for the trained youth. Activities such as organization o f district and state level job fairs wi l l be executed by the project. In addition, post-placement surveys wi l l be conducted to determine post placement needs o f the migrants and tailor make the trainings and services required by such segments o f the target group.

Component 4: Project Implementation Support (US$9.55 million)

12 1. The component wi l l facilitate various governance, implementation, coordination, learning and quality enhancement efforts in the project. It comprises the following four sub- components:

4. I Governance Management

122. This sub-component wi l l support various measures related to the overall governance o f the project to ensure: (1) transparency with regards to project fund use and business processes; (2) proper and speedy response to grievances related to project implementation in compliance with rules and regulations; and (3) information dissemination targeting relevant Government agencies, as well as general public, in accordance with the project requirements and in conformity with the Right to Information Act (2005). A governance and accountability action plan (GAAP) has been prepared that provides the basic framework for all the actions required.

123. All information related to the project wi l l be made available through a functioning project website. The project wi l l also ensure the establishment o f a comprehensive audit mechanism for fiduciary management at all levels (i.e. state to the community). A community based process monitoring system wil l be established for the display and sharing o f a l l project related information at the Gram Sabha level.

4.2 Project Management

124. The objective o f this sub-component would be to establish an efficient, effective and responsive management system, including the institutional arrangements (detailed out in Annex 6 ) to implement the project.

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4.3 Monitoring and Evaluation

125. This sub-component will support project monitoring and learning activities, including baseline studies, mid-term review, and impact studies. Computerized financial management and management information systems will be established at SPSU, DPSUs, and PFTs to ensure close monitoring o f fund flow and implementation progress

4.4 Technical Assistance

126. The sub-component will provide specific TA to the GoMP to enhance the effectiveness and efficiency o f the implementation of their programs related to rural development that are being implemented state wide. The TA will support capacity building for strengthening state systems of management o f rural development programs, selected training and exposure visits o f officials responsible for such programs, and preparation of new guidelines and manuals that enhance the effectiveness of such programs.

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Annex 5: Project Costs INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

Local Foreign Total

$million $million $million Project Cost By Component and/or Activity us us us

1. Social Empowerment and Institutional Building 24.00 0.37 24.37 2. Livelihoods Investment Support 60.28 60.28 3. Employment Promotion Support 5.62 0.06 5.68 4. Project Implementation Support 8.33 0.15 8.48 Total Baseline Cost 98.23 0.58 98.81 Physical Contingencies - Price Contingencies 11.18 0.01 11.19

Total Project Costs' 109.41 0.59 110.00 Interest during construction Front-end Fee Total Financing Required

'The 'Total Project Cost' includes IDA financing o f equivalent US100 million and counterpart financing o f US$10 million. Identifiable taxes and duties are US$0.12 million (only imposed on the goods and equipment), and the total project cost, net o f taxes, i s US$109.88 million. Therefore, the share o f tax in the project cost i s 0.1%.

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Annex 6: Implementation Arrangements INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

Project Governance and Oversight

127. A key strength for the implementation of the previous project (MPDPIP) was the implementation arrangements and qualified personnel. To capitalize on this strength, the institutional structure and key human resources for this project have been retained as in the previous project. This includes the implementation o f the project through the same autonomous Societal structure established for the previous project; the establishment o f district units and project facilitation teams at the field level; and the same strong coordination with other development departments o f the GoMP through membership o f senior officials o f these departments into the governance structure o f the society responsible for implementation o f the project. The teams at the state and field levels have been strengthened through the addition o f certain specialists such as in environment management and microfinance as these were identified as weak areas in the previous project.

State Level

128. The Madhya Pradesh Society for Poverty Alleviation Initiatives (MP-SPAI), a Society registered under the M.P. Society Registration Act o f 1973 by the Government o f Madhya Pradesh, was formed for implementing the Madhya Pradesh District Poverty Initiative Project (MPDPIP). It wi l l continue to be the apex body responsible for coordinating and implementing the second phase (MPDPIP-11) of the project at the state level. The MP-SPA1 has two major constituents, namely the General Body and Executive Committee:

a) The General Body i s chaired by the Chief Minister and Vice-chaired by the Minister o f Panchayat Raj and Rural Development. Members o f the General Body o f the society are the Chief Secretary, the Finance Secretary, Development Commissioner, Secretary Rural Development, Mission Coordinator and Principal Secretaries/ Secretaries o f other concerned departments. The Project Coordinator i s the Convener. Members o f the General Body o f the State society also include district representatives and representatives o f non-government organizations; and

b) The Chief Secretary o f the State chairs the Executive Committee o f the Society, while the Project Coordinator i s the convener. The Executive Committee members are drawn from various government departments which wi l l ensure close coordination between the project and other programs of the GoMP. Principal Secretaries from different departments are members o f the Executive Committee. The Governing Body and Executive Committee o f the MP-SPA1 wi l l provide guidance and advice to the MPDPIP-I1 in aspects o f planning and implementation. The chairing o f the governance structures o f the society by the Chief Minister and Chief Secretary signifies a critical role for MP-SPA1 in poverty alleviation in the state.

District Level

129. At the district level, a District Poverty Initiatives Subcommittee (ZPDPIS) o f the Zilla Panchayat (Zilla Panchayat Subcommittee) in each of the 14 project districts i s responsible for reviewing and monitoring o f the project. The ZPDPIS i s headed by the Zilla Panchayat Chairman and has 15 members including CEO (ex-officio), 2 ZP members, 2 Janpad Adhyakshas by rotation (from the Janpads under the project), 2 GP members by rotation, 2 PFTs by rotation, and 2 VDC representatives, with District Project Manager-DPIP-I1 as

43

Convener. The ZPDPIS has important monitoring and evaluation functions, as well as decision-making responsibilities regarding district level issues, capacity building activities, and assessing village performance in targeting the poor. The District Poverty Initiatives Subcommittee (ZPDPIS), which includes members from various departments and programs of the GoMP, wi l l ensure close coordination between various other developmental programs being implemented in the district with the project, so that synergies available are utilized to enhance the overall impact o f the project.

130. and the roles and responsibilities of the different governance committees.

Table 6.1 gives the composition of the project governance and oversight committees

Table 6.1: Composition of Project Oversight Committees

Committees 44 Membership

General Body 0 Chief Minister, GoMP (President) 0 Minister, PRD (Vice President) 0 Chief Secretary GoMP 0 Principle secretary/secretary o f different

departments 0 Mission Coordinator Rajiv Gandhi Missions 0 Commissioner Institutional Finance

All Directors o f Rajiv Gandhi Missions Project Coordinator DPP (Member Secretary)

0 Three Nominated Members from NGOs 0 Three Nominated members o f project non-

officials.

Executive Committee Chief Secretary GoMP (Chairperson) Development Commissioner (Vice Chairperson) . Principle secretaryhecretary Agriculture . Mission Coordinator Rajiv Gandhi Missions . Secretary to Chief Minister . Principal secretary /secretary Women & Child development . Commissioner institutional finance . Secretary Rural Development . All Directors o f Rajiv Gandhi Missions . Project Coordinator MPDPIP (Member Secretary) . Two Nominated Members from NGOs & Special invitees.

Roles and Responsibilities

0 Providing overall policy guidance and direction to the project

0 Approving all annual plans 0 Representing the project at the

state government level 0 Undertaking advocacy to ensure

pro-poor policies are issued by the Government

0 Formulating policy regarding reducing poverty and enhancement o f livelihoods o f the poor

guidance to program implementation

0 Providing strategic support and

. Monitoring project implementation and achievement o f performance indicators

government departments and agencies . Approving overall Human Resource policies . Redefining and reformulating project strategies based on emergent experience from project implementation

. Coordinating with different

44

Committees & Membership

Zilla Panchayat Subcommittee D Zilla Panchayat Adhyaksha (Chairperson) D Two Zilla Panchayat members o f areas covered

* Two Janpad Panchayat members o f areas

0 CEO Zilla Panchayat (Nodal Officer) 0 NGO representatives implementing project.

Two (2) representatives each o f VDC & SHG. Two (2) representatives from PFTS.

in DPIP.

covered in DPIP

District Project Manager DPIP (Member Secretarv’l

Roles and Responsibilities

1 Providing strategic support and guidance to program implementation

1 Review performance 1 Coordinating with different

government departments and agencies and representing the project at the District level

Project Management

131. The project’s institutional arrangements are designed to provide support at the community or village level, and at the level o f blocks, districts and at the level o f the State. The primary agency responsible for the project’s implementation i s the Madhya Pradesh Society for Poverty Alleviation Initiatives (MP-SPAI). The project wi l l operate in about 5000 villages o f the existing 53 blocks o f 14 districts o f the project.

132. State-Level. The State Project Support Unit (SPSU), established within the Madhya Pradesh Society for Poverty Alleviation Initiatives (MP-SPAI), wi l l have the overall responsibility for management and implementation o f the project. The SPSU under the MP- SPAI would be operationally headed by the Project Coordinator who would also be operationally and managerially in charge o f the organization structure established at the district and lower levels for implementing the project. Project Coordinator wi l l be supported by a team o f state-level specialists and managers for different functions. The specialists wi l l be responsible for supporting and building up the project in key areas such as agriculture, youth for development, market linkages, environmental monitoring and sustainability, prioritizing gender and special disadvantaged groups. In addition, project management functions such as M&E, financial management, procurement management, human resource development and personnel, project administration, communications and other functions would have dedicated specialists responsible for these functions. The key functions o f the SPSU would be as follows:

a) Implement the policies outlined by the MP SPAI b) Recruit, orient and train the project staff. c) Establish a platform for information exchange within the project. d) Guide the Districts to work in accordance with the spirit and principles of MPDPIP. e) Ensure speedy arrangement and disbursement of funds. f ) Monitor the work being done in the field g) Establish norms for partnership with NGOs and other agencies. h) Ensure timely reporting o f state level activities. i) Coordinating with WB, GO1 and GoMP for smooth functioning o f the Project. j) Grievance and Redressal

133. District-Level. In each project District, a District Project Support Unit (DPSU) wi l l be responsible for the implementation of the project. The DPSU wi l l be headed by District

45

Project Manager (DPM), who wi l l be assisted by a team o f 9 project staff at full strength responsible for specific themes and functions such as social mobilization, agriculture, microfinance, gender, and market linkages, as well as for fiduciary and M&E functions. The key functions o f the DPSU would be as follows:

Prepare annual district plan Guide the PFTs to work in accordance with the spirit and principles of MPDPIP Facilitate the coordination of the PFTs with relevant SSOs Facilitate the team building process o f PFTs and help PFTs resolve intra-PFT conflicts and issues Timely release of grant to VDCs and producer organizations Support for formation o f producer organizations Support to PFT for selection of VRPs Coordinating with local authorities and banks Support to PFT in the relevant subjects like livestock development, business development for higher level linkages Monitor the work being done in the field Maintenance o f records and MIS Arrangement and sensitization for job fairs Ensure speedy disbursement o f funds, both for village level implementation, as well as for administrative purposes Ensure training to VRP and Ajeevika Mitra Ensure timely reporting o f district level activities Grievance and Redressal

Sub-District Level. At the sub-district level the primary institutional arrangement wi l l be the Project Facilitation Teams (PFTs). There wi l l be a total o f about 150 PFTs created, each covering about 30- 40 villages. A PFT would consist o f five team members, each having a specialized function. One o f the experts wi l l act as Coordinator and take the overall management and coordination responsibility o f the unit. PFT members would be selected competitively and wi l l either be government staff on deputation or recruited from the market. The mandate o f the PFTs wil l be to facilitate the whole project implementation process cycle at village and village-cluster levels, including village PRAY social mobilization, and formation o f groups and federations. In addition the PFTs wi l l assist the groups to establish linkages with banks for financing and market linkages for input supply and output marketing. The key functions o f the PFTs would be as follows:

Village entry and mobilization in villages. Support for Updating BPL l i s t with wealth ranking list. Identification of existing SHGs in the village. Sensitization for formation o f SHGs Gradation of SHGs Support the SHGs to develop SHG-LP. Support for formation of VDCs Strengthening of SHGs and VDCs ,Facilitation and support to SHGs for implementation of activities Identification and selection o f V R P s Facilitation to VDC for identification o f Para -workers. Identification & Establishment o f EFC Identification & selection o f Ajeevika Mitra. Facilitation and support for skill mapping o f jobseekers.

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Maintaining databank o f job seekers and employers. Arrangement and sensitization for job fairs. Sensitization o f Primary Producers for federating in a Producer Organizations. Support o f formation o f producer organizations. Ensure timely reporting o f PFT level activities. Coordinating with local authorities and banks. Marketing and linkage support to the community. Maintenance o f records and MIS Grievance and redressal

135. transferred to the CFO.

Once the CFOPO i s formed, the activities, hnctions and staff o f the PFT will be

136. The following provides a detailed summary o f the institutional structure and arrangements: a) Table 6.2 provides the composition o f the proposed Project Implementation Structure and b) Figure 6.1 provides the organogram o f the overall institutional framework for project oversight, management and implementation.

Table 6.2: Composition of Project Management Units

State Project Support Unit

16 persons ( S P W

1. Project Coordinator 2. Administration

Coordinator 3. Community

Development Coordinator 4. Livelihood Investment

Coordinator 5. Employment Program

Coordinator 6. Gender and Social

Coordinator 7. Environment Coordinator 8. Monitoring and

Evaluation Coordinator 9. Finance Controller 1 0. Procurement Coordinator 1 1. Communications

Coordinator 12. Microfinance

Coordinator 13. Agriculture Coordinator 14. Livestock Coordinator 15. Business Development

Coordinator 16. MIS Coordinator

* As per requirement (civil/agricull

District Project Support Unit (DPSU) 10 persons

1. District Project Manager 2. Monitoring and

Evaluations Coordinator 3. Livelihoods Investment

Coordinator 4. Employment Program

Coordinator 5. Marketing and Business

Development Coordinator 6. Agriculture Coordinator 7. Livestock Coordinator 8. Microfinance Coordinator 9. Finance Manager 10. MIS Coordinator

eiLivestock or any other)

Project Facilitation Team

5 persons (PFV

1 .PFT Coordinator (chosen among the experts)

2.Technical Experts (3)* 3.Social Expert 4.Microfinance Expert

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Figure 6.1 Project Implementation Organogram

Component

I -

Service Provider Tasks Community Animator Support SHGs in initial stage

Service Providers

1

2

137. Although not part o f the formal project management and organization structure, the project will engage various organizations and individuals who wil l provide inputs in support o f project implementation. Table 6.4 below l is ts key service providers and their main tasks:

Para- workers Support SHGs in technical fields Village Resource Persons Support VDC in bookkeeping and accounting

SHG-Bookkeeper Support SHGs in bookkeeping and accounting Sector Support Organizations Help SHGs in the process o f establishing a

federation; support the federation at initial

(VRPs)

EFC Facilitator (Ajeeviku Mitru) Vocational Training Institutions

Provide various support to job-seekers from project villages Provide vocational training to selected job- seekers and assist their placement

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Human Resource Strategy

Programs Participants Key Contents

138. The successful implementation and achievement of the objectives o f the proposed project needs competent, dedicated and motivated human resources. For this purpose, a comprehensive HR Manual has been developed that outlines the overall human resources strategy for the project. T h i s manual sets out the following: a) Process o f recruitment; b) Compensation package, incentives and reward; c) Staff contract policy; d) Training and Capacity Building; e) Performance appraisal system; f ) Disciplinary control system; and g) Grievance Redressal Mechanism.

Tools

139. To coordinate and execute the HRD related policies for the MPDPIP-11, there wil l be a dedicated Administrative Coordinator (AC) at the State Unit level. A Human Resource Development core committee (consisting o f project coordinator and other officers from state unit) wil l meet as and when required to look into the HRD issues such as effective implementation o f the HR manual, contractual agreements, renewal o f contracts.

Orientation/ Induction Programs

140. Recruitment o f Staff for management and supporting implementation of MPDPIP-11: The project intends to build a team of the best available human resources in the development sector, and in addition to the continuation o f experienced and capable staff o f DPIP-1 the project wi l l recruit staff from various government departments and the open market. A well established set of psychometric and other tests for recruitment and selection criteria has been developed in a manual designed in phase1 .

Newly recruited Project Project principles, community Training on COM, Management Staff (State, manual, Participatory Field placement/ District and PFT team methodologies, village immersion

141. Developing Learning Mechanisms in the Project: The following i s proposed for developing a systematic learning and capacity building mechanism for al l stakeholders. The project wi l l ensure a comprehensive induction process for all those joining the project - aimed at bringing in fresh and innovative ideas from the new recruits. An induction process wil l lay the foundation for staff to share the organizational vision and inculcate a sense o f ownership for the project. The project wi l l also meet the capacity needs o f project management and facilitating agencies like the State Unit, District Unit and PFTs. The capacity building activities have been designed to build the capacities o f various service providers’, specialized agencies and internal teams would be engaged to impart training.

142. The learning experience of the first phase wil l continue to be an important part o f the HR development strategy. Promoting cross-learning within the organization through scheduled staff meetings at all levels, encouraging informal project related discussions among staff, writing case studies o f best practices in the project, documenting learning and disseminating them in different project forums, and establishing a structured system for information dissemination wil l be undertaken. In this regard, Table 6.5 provides an outline of the capacity building plan for development of human resources under the proposed project.

Table 6.5: Capacity Building Plan

Sensitization Community,PFT and Innovative project approaches Workshops, Programs I district level stakeholders. I and Key Project principles campaigns I

49

Awareness Programs

Thematic Performance Training Programs

S k i l l Building Programs

members)

Empanelled appraisers outsourced technical service providers, resource agencies, partners, and bankers. Specialists in district unit,

External Resource Persons, Project StaR Ajeevika Mitras.

SHG formation Livelihood plan process, Key Project Principles, project institutional model, project processes

Social mobilization, livelihood planning, marketing, micro finance, institution building, entrepreneurship, procurement, accounts, monitoring

Accounting and monitoring, planning, community monitoring and reporting, conflict resolution, joint appraisal mechanisms, negotiation skills, operation maintenance,Leadership and managerial sk i l ls .

programs

Workshops and Field visits.

Separate modules on each thematic areas, experiential learning, thematic workshops and discussion forums. On the j ob training, field based training

Community Institutions and Community Institution Building Process

Community Institutions

143. The institutional arrangements to be built by the project at the community and village level are designed to enable the poor to form their membership organizations and subsequently federate themselves at higher levels for undertaking various functions in a s e l f sustainable manner. Such federating structures wi l l enable the poor to achieve both economies o f scale and greater voice in negotiating better services for themselves. The graduating process o f building such vertically integrated community structures wi l l include the following:

144. Self Help Groups: SHGs are the base o f the community institutional pyramid. SHGs are the village-level groups of the poor. The SHGs promoted by the project follow the standard SHG parameters of forming around some affinity and mutual trust basis, same gender (Le. men or women), regular savings, and inter-loaning initially for small consumption needs. Livelihoods experience o f various livelihood projects supported show that the SHGs start o f f by engaging in savings and credit work through rotating their own money, but then start to engage in specific pre-agreed livelihood activities. One SHG wil l have a minimum of 10 members. New groups as well as existing groups would be brought under the Project and graded based on criteria set out. These groups wi l l be provided support in developing group norms, financial management capacity, and development of solidarity and access skills, credit and services from a variety o f service providers. SHGs would be organized to work on a common livelihood activity. The livelihood activity i s selected based on beneficiaries’ assessment o f market opportunities, natural resources, and their own ski l ls and aspirations.

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145. Village Development Committees: i s a federation o f SHGs within a village. A VDC wil l be formed by SHGs in a particular village when they become fbnctional. Main tasks of VDC include: resource allocation; managing SHGs’ seed grants; assessing SHGs Livelihood Plans; facilitating SHG-Bank linkages with commercial banks; and monitoring the implementation o f livelihoods plans. In the non-economic sphere it includes raising various social issues o f non inclusion o f the poor, gender participation, establishing norms for social accountability, and conflict resolution within and across SHGs.

146. Community Financial Organizations: The formation o f federations o f 30 - 40 VDCs, typically formed at the level at which the PFTs operate, wi l l be supported under the project. This organization i s primarily responsible for facilitating access to a broad range of financial services particularly credit, insurance, and remittances services. Since VDCs are too small a unit and the producer organizations are primarily activity-based it i s essential to have a structure with critical scale which could facilitate access to financial services and hence the need for cluster-level organization.

147. Producer Organizations: Following the principle o f aggregation, where there emerges a natural clustering o f SHGs around a single sectoral livelihood activity, a federation o f such members would be formed into a producer organization (Producer Company/Cooperative Society) at the level o f a natural economic cluster, so that benefits from aggregated linkage to the market can be achieved. Hence the catchments area o f such producer organizations wi l l be much larger than a single village. Individual SHGs and/or their members wi l l be share holders of such producer organizations. Such producer organizations wi l l essentially be community owned business entities who wi l l undertake various activities such as bulk purchases o f inputs and delivery to individual members, marketing o f produce, grading and quality control and first level processing through value chain investments and linkage to markets. The federations wi l l also provide a comprehensive package o f economic and technical services to a l l SHG members in a particular livelihood activity. The benefits to individual members o f such producer organizations wi l l be both through sharing o f profits and lower cost inputs and services due to aggregation. Some o f these activities may be decentralized to the village level depending on the specific business needs and maturity o f the institution building process.

Community Mobilization and Institution Building Process

148. The project has a clearly laid-out sequence o f activities that wi l l guide implementation at the village and community level. This i s detailed out in the Community Operation Manual (COM) prepared for the project. A summary i s provided below.

SHG and VDC Formation and Capacity Building

149. Pre-formation: In this initial stage, PFT tries to know and understand about the villages by PRA and situation analysis. PFT members introduce themselves to villagers and build their trust. Prospective project beneficiaries are identified by wealth ranking exercise. PFT wi l l assess the capacity o f existing SHGs, and ascertain at which stage they are. PFT wil l mobilize other beneficiaries who are not in SHGs to form SHGs.

150. Concept Seeding: Prospective group members and the community as a whole are exposed to the concept o f SHG and i ts value in improving livelihoods. Affinity and common activity are the guiding principles for group formation.

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151. Formation: Project beneficiaries form SHGs after agreeing with the concept and principles. They wi l l decide the group name, open a bank account and elect office bearers (president, secretary, and two bank signatories). SHGs start regular meetings, and carry out routine internal savings and credit transactions. SHGs wi l l select community bookkeepers from the village to engage them in bookkeeping duties. Accordingly, the SHG wi l l be registered by the PFT.

152. Strengthening: After about one month or 2-3 meetings o f a SHG, the PFT wi l l ensure that the SHG i s conducting regular meetings, savings, has a bank account, etc. These groups wi l l be treated as functional groups and entitled to become the member o f VDC and receive the seed loan. A minimum o f three functional groups wil l form the VDC. A l l the SHG members wi l l be the members o f the general body o f the VDC. The VDC wi l l be managed through an elected executive committee through representation from member SHGs on a rotational basis. The VDC after opening the bank account wi l l be entitled for the seed grant from the project. The PFT wi l l support individual groups for systematic livelihood planning. At this stage, SHG members wil l be required to plan for livelihood enhancement activities and formulate a SHG Livelihood Plan. This Plan wi l l be hnded from the project and external sources

153. Bank linkages: After about six months o f the SHG formation, the SHG wi l l be graded (first grading) as per Annex 7. Simultaneously, the VDC wil l also be assessed during this period to determine if they are capable to handle larger funds. The SHG Livelihood Plan wi l l be approved by the VDC. Once the Plan i s accepted, and SHG i s qualified, the livelihood grant to the VDC, as per demand o f SHG, wi l l be released to the bank account o f the VDC. The PFT wi l l also support and facilitate the SHG to mobilize funds from commercial banks and other sources.

154. Once the SHG receive funds, they wi l l start their livelihood activities. The SHG wil l also be motivated to become a member of, or form the, producer organization.

Livelihood Implementation:

155. Graduation: In this stage, SHGs wi l l federate themselves into a producer organization to facilitate linkage with value chain and CFO (community financial organization).

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Annex 7: Access to Financial Services

INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-II)

Backgroundhntroduction

156. In India, the rural poor face severe difficulties accessing savings and credit from the formal sector (Figure- 1). Some 87 percent o f the poorest households’ surveyed (including marginal farmers) do not have access to credit, and 71 percent do not have access to savings from a formal source.15 As a result the rural poor are dependent on informal sources particularly money lenders, who charge usury rates (i.e., in excess o f 5 percent per month) to meet both unforeseen expenditure/ contingencies as well as to make investments in their respective livelihoods thus pushing the poor into abject poverty.

Figure - 1: Low access to finance

100% 1 87% 80%

5 60% 40% 2

20% 0%

*

2

N o credit account N o savings account

j 0 Marginal Farmers

Source: Priya Basu (2003)

157. Access to financial services for the rural poor in Madhya Pradesh i s substantially poor Le., less than the National average (Table - 7.1). It i s estimated (less than 10 percent) that a very small proportion o f BPL population in Madhya Pradesh currently have access to some form o f formal financial services i.e., savings and credit and a s t i l l smaller number o f people have access to insurance and other risk management products.16 Between 1997-98 and 2006- 07, about 71000 SHGs (or an estimated 920,000 members) have received cumulative bank loan o f US$12.5 mill ion (uveruge per head credit ofUS313.6). In addition, 47 NGOs have disbursed credit o f US$l88,000 to 6290 SHGs in 20 districts (Table 7.2). SHG - Bank linkage, a primary source o f financing from formal financial institutions, i s very poor weak to non-existent in Madhya Pradesh (Table 7.3)

Priya Basu (20031, “Improving access to finance for India’s rural poor”, World Bank Publication, Washington DC l6 “ State Focus Paper 2006-07” by NABARD and “Vision Microfinance 2012 - Madhya Pradesh” by ACCESS Development Services

15

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Table 7.1: Access to financial services by Poor in MP

Items Current Status

Population Number o f poor No o f poor fami l ies (5 per family) No o f loan accounts under priority sector N o o f microfinance clients o f banks (Le., SHG members) N o o f microfinance clients o f M F I s

Table 7.2: Bank Linkage performance in MP

bank loans (Le., linked to Banks) (as

65.60 24.53 4.90 2.62 0.90

0.07

. .

on March 2007) % o f SHGs received bank loans

o f SHGs receiving REPEAT I 4 5 % I 17.5%

LOANS Cumulative loans received by SHGs (between 1997-98 and 2006-07 Average loan per head

Table 7.3: Potential Linked Credit Plan (PLP) for the State of Madhya PraL-sh

US$12.5 mil l ion

US$13.6

Sector YO Share 1,279.02 49%

Allied Activities 523.18 20% 1,802.20 69%

217.14 OPS SHGs

585.81 22% 12.54 0.50%

158. In the 14 project districts, about 12000 SHGs have received cumulative bank loan o f US$2.7 mil l ion between 2002-03 and 2006-07. Whereas, during the commensurate period CIGs promoted by MPDPIP were able to raise bank loans to the tune US$12.5 million.

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Experience and Learning from MPDPIP:

159. The success o f the MPDPIP have been in the a) creation o f assets by the poor; b) positive & high returns on investments (IRR as high as 200 percent in some cases and an average o f >50 percent); c) linkages to markets; and d) building a cadre o f trained resource persons at the Village level (VRPs) and Cluster level (Le., PFTs).

160. The inability o f CIG members to raise loans for subsequent investments and also the poor leverage ratio which challenged the ability o f the program to sustain beyond the project financing phase. CIGs inability to raise loans neither for expanding/growing their existing business nor for financing the working capital needs. Over the last 7-years CIG members were able to raise about US$12.5 million via loans from bank as against a total investment by the project in excess of US$lOO million (Le,, leverage ratio o f less than 0.13). Compare this to the SHGs in Andhra Pradesh:

More than 7 - 8 million NEW and CREDIT worthy clients have been brought into the formal financial system. A substantial number o f them have their own independent bank accounts for the first time. Lending portfolio to the rural poor has increased from less than US$25 million in FY 2000 to more than US$1.3 billion in F Y 2008, with cumulative investments by commercial banks and other financial institutions well in excess o f US$3 billion. Leverage ratio i s in excess o f 15 (Le., for every $ o f investment by the project the SHGs were able to raise US$15 from the formal financial institutions) over the commensurate period (i.e., 2000 to 2008). Also, simultaneously contributing to increasing the profitability and viability o f various rural bank branches o f commercial banks.

The bottom-line i s the project finding has been smoothly replaced by the ability of to raise investment from commercial banks and other financial institutions to sustain

their livelihoods and consumption needs.

162. Hence there i s a need for rethinking on how to engage with formal financial institutions and develop credit worthy & bankable clients. The MPDPIP-I1 project proposes to address the gap in access to financial services by way of:

a) changing the design from a CIG based model to an SHG based approach. This i s being done for the simple reason that banks and other financial institutions are comfortable and have the experience o f doing business with SHGs. CIG as a concept though not new has not been adopted by the banks;

b) investing in building people's institution and human social capitalI7 Le., SHGs'* and Federation o f SHGs @ Village and Cluster level (figure - 7.2) ; and

c) promoting thrift-based groups and promoting financial d i~cipl ine'~; and

Human social capital includes a cadre o f bookkeepers and para-professionals at the village-level, and

S e l f help groups (SHGs) consist o f a group of 10 - 15 members, whereby every member o f the group saves regularly and the savings i s subsequently loaned out to each member on a rotating basis.

Financial discipline i s promoted by way o f promoting regular savings by members of the SHG, inter-loaning amongst the members o f the group, ensuring on-time repayment, and maintaining good records or book-keeping o f the financial transactions.

rofessional staff as part o f the project facilitation team which operate at the cluster level.

19

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d) providing seed capital grant to the Federation of SHGs at the Village-level to promote risk taking by members of the SHG by way o f facilitating investments in income generating activities (IGAs).

Micro Fnance h c t i o n s - sourcing bulk financing from banks & other l ir lauia: k i s t i t u l i ~ ~ ~ ~

Facilitat? SHG -Bank llnkage Gnvernmrp fimr-inn< -Snr i* l

T M ar.d credit a c t i v i t i e s Household inveslment plaqs or livelihood plans members per 10-15

SH G

Description and Design

163. the Village and Cluster level.

Investing in institution and capacity building of the SHGs and Federation of SHGs at

a. Selfhelp group (SHG) - i s the base o f the pyramid wherein members of the SHG meet at regular interval (weekly/ fortnightly/monthly) and engage in regular/"compulsory" savings and inter-loaning Le., thrift and credit activities. Via this process the SHGs develop the ability to work and trust each other, address the financial and social needs o f the members via collective efforts, and develop financial disciplines o f savings, borrowings and timely loan repayment. Please refer to SHG manual for details.

b. Village Development Committee (VDC) - i s a federation of SHGs at a village level. All members of the SHG are also members of VDC. VDCs are tasked with specific roles which include - governance role Le., ensuring that SHGs adopt the financial discipline and management practices (incl. book keeping); evaluating the livelihood plans prepared by the SHGs; and facilitating fimdinghvestment needs o f SHGs (incl. SHG-Bank linkage). The seed capital to SHGs for livelihood investments or IGAs i s also channeled through the VDC. Please refer to VDC manual for details (NOTE: All membedgroup savings are retained within the SHGs and do not get transferred to the VDC).

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Figure - 7.3: The virtuous financial cycle

Savings Repayment

SHG

c. Cluster-level organization, i s a federation o f VDCs at the PFT-level or federation o f 30 - 40 VDCs. The Cluster-level organization provides an economy o f scale (membership o f about 3000 - 4000 SHG members) which could be leveraged. The Cluster-level organization wil l be a “legally” or “formally” registered” body so that it could enter into contracts and/or MoUs with formal financial institutions to facilitate access to finance and financial services for i t s members. The cluster-level organization wi l l primarily play a facilitator role i.e.:

source bulWwholesale funds from financial institutions including commercial banks on behalf o f VDCs and SHGs; access to insurance products, including undertaking insurance service functions such as claims documentation and settlement; and remittance services, given that substantial number o f members from SHG households migrate in search o f jobs/employment

164. Project funds in support o f livelihoods/income generating activities wi l l directly flow to the VDCs as a grant. The VDCs in turn wi l l revolve these funds amongst i ts SHGs in the form o f a loan Le., charging a modest interest. The SHGs in-turn wi l l on-loan the money to its members comparable to commercial interest rates i.e., those charged by the Bank. The objective o f the developing a revolving fund i s TWO-FOLD: a) to ensure sustainability post project Le., by the time the project funding comes to closure the VDCs and SHGs would have generated substantial amount o f own corpus to be in a position to provide repeat financing to i ts respective members*’; and b) the VDCs and SHGs wi l l be able to raise additional funds by leveraging their respective corpus (incl. savings and interest income from on-lending activity).

165. Project funds in support o f livelihoods/income generating activities wil l flow to the VDCs and subsequently to SHGs in at least two tranches and against pre-agreed set of triggers/indicators (See Figure 7.4 below). The reasoning behind the proposed arrangements are as follows:

2o Cluster level organization Will be registered either as a SECTION 25 company per Companies Act or else as a Society under the Madhya Pradesh Societies Act 1960. The Project team will weigh the pros & cons o f both these options prior to finalizing the legal form o f the cluster-level organization. 2’ In MPDPIP the money was given as a grant to the beneficiaries, as a result on completion o f the project the members found it difficult or impossible to raise additional money to support the working capital needs for ongoing livelihood activities and also were constrained to grow their livelihoods in absence o f new funds. MPDPIP-I1 proposes to address this gap by developing sustainable financing model.

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a) Ensure institutions are ready to handle the money flowing through them Le., institutional preparedness.

b) Adherence to minimum financial management standards incl. financiakredit discipline.

c) Incentivizing good performance as against promoting a culture o f entitlement d) Providing funding reflecting the maturity o f households and SHGs thinkindplans

on livelihood opportunity.

SHG Formed

Figure 7.4: Fund Flow and Triggers

YIG is registered

Estimated Time Perbd Stage Activitles/Triggers

1 Functional SHG lnthe ZndMonth

I VDC formation

+l Seed Grant of

lnthe 3'd Month

WGBankaccount isopen,atleast2 meetings, regular raving, attendance & proper record keeping

At least three functional SHGs in the village

1. Demand of seed loan from Livelihood investment Functional SHGs Support Funds toVDC 2. VDC preparednerr-incl.-

bankalc., book keeper (I) and =count b o o k inplace.

End of 61h Month WGconrideredar matureSHG -f irs grading

In the 7@ Month Livelihood Grant(s) of Livelihood Investment

Support funds released to VDCs

Formation of Hi&er- gth to 12Ih Month

1. Submission of livelihood plans b y WGs to VDC and VDCapproval ofthe livelihood plans.

2. Demandfrom mature SHGs as per iiieiihood plan.

3. VDC rating 4. SHG bank linkage

facilitated 5. Identification and staffing

of para-pmfessional completed.

End of 121h Month c RatingofSHGs done by the P F T r -Secondgrading

166. Funding to cluster-level organization limited to capacity building, start-up costs related to setting-up o f office, and working capital for 12-months.The cluster level organizations are required to generate their own revenue by delivering service to VDCs and SHGs. The cluster level organization per se wi l l not be involved in on-lending activity BUT wil l mobilize funds on behalf o f i t s members Le., VDCs and SHGs. The management & governance o f cluster level organization wi l l be similar to that o f Producer Company Le., governance hnctions wi l l rest SHG members and management functions wi l l be handled by a professional team.

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Annex 8: Financial Management and Disbursement Arrangements

INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

Summary Financial Management Assessment

167. The financial management arrangements o f the proposed Project will be adequate to account for and report sources and uses o f project resources and meet IDA’S fiduciary requirements subject to compliance with the financial management framework detailed in this Annex. The assessment on the adequacy o f financial management arrangements for the proposed project i s essentially based on the learning from the earlier Project. All audit reports for the f i rst phase have been received. In phase I, although the audit observations included internal control weaknesses, there were no major accountability issues or audit disallowances. One o f the key internal control weaknesses in the f i rst phase was delay in submission o f utilization certificates for community grants made by the Project as there were no specific incentiveddisincentives for timely submission or non-submission. To address this problem in phase 11, release o f funds to VDCs i s conditional to submission of UCs for the earlier tranches. UCs for final tranche will have to be submitted by the VDCs within three months o f fund utilization. This i s being laid down in the MOUs with VDCs & the COM.

Fund Flow Arrangement

168. The funds f low arrangements are captured in the figure below:

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Implementation Arrangements

169. Successive studies o f the Public Financial Management and Accountability (PFMA) Systems at the sub-national levels in India have shown that rural local government institutions like DRDAs and PRIs lack capacity including financial management capacity. In the project context this has been mitigated by having a separate legal entity, namely the Madhya Pradesh Society for Poverty Alleviation Initiatives (MPSPAI) as the apex body for coordinating and implementing the Project. MPDPIP I was implemented by the same Society. MPSPAI will have a State Project Support Unit (SPSU), 14 District Project Support Units (DPSUs) and 150 Project Facilitation Teams (PFTs) at the block level. The SPSU will undertake the overall responsibility for management and implementation o f the Project

Table 3: Project Components, Spending Units & Accounting Framework

Component

1. Social Empower- ment and hstitution Building

Sub-Total 1

2. Livelihoods Lnvestment support

Sub- components

support to Project Facilitation Teams

Community Mobilization and Institution Building

Rural Productivity Development

Estima- ted

costs

27.43

Spend- ing

Unith

DPSU & PFT

SPSU & DPSU

DPSU

Nature of transaction

Release o f funds as advances from SPSU to DPSU and from DPSU to PFTs based on their respective budget based demands.

Basis o f fund release to DPSU same as above. Expenditure could be either at SPSU or DPSU or PFT level.

Release o f funds as advances from SPSU to DPSU. Funds released by DPSU to VDC as grants for on- lending to SHGs

Releases at all levels based on predetermined indicators detailed in the Financial

Accounting in Project Books of Accounts

Yes, at PFT Level. Salaries to be paid and accounted at DPSU level.

Yes

Yes, funds released to VDCs accounted for as grants in DPSU’s books. Funds on-lent by VDC to SHGs not accounted for by the Project.

Means of Verification

Monthly financial statements from PFTs consolidated with that o f DPSUs, internal and external audits, M&E

Monthly expenditure statements o f SPSU/DPSU, internal and external audits, M&E

Monthly Expenditure Statements submitted by DPSU to SPSU, UCs submitted by VDCs

Verification o f books o f account maintained by VDCs, Internal Audit & External

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Component

Sub-Total 2

3. Employ- ment Promotion support

Sub- components

Value Chain Development

Innovation Support Fund

Partnership Development

Employment Facilitation Centers

Skil l up grading and Training

Placement

Estima- ted

costs

66.67

Spend- ing

Unit/s

Producer Organiza

tions

SPSU/ DPSU and/or PFT

SPSU

DPSU

SPSU & DPSU

SPSU

Nature of transaction

Management Manual & COM. A maximum o f INR 15000 can be released to each SHG member.

Release to Producer Organizations by SPSU/DPSU based on predetermined indicators detailed in the Financial Management Manual.

Expenditure could be either at SPSU/DPSU or PFTs

SPSU wil l implement this through a selected service provider

Expenditure could be either at SPSU or DPSU level.

Accounting in Project Books of Accounts

This i s accounted for by the VDCs as part o f their loan portfolio management.

Yes, at Producer Organi- zations

Yes, at respective levels

Yes at SPSU

Yes at DPSU

Yes at respective levels

Yes at SPSU

Means of Verification

audit on test check basis. Implementation at SHG level will be verified through external and internal audit on test check basis, social audits including asset verification & M&E Quarterly unaudited financial statements f rom Producer Organizations to DPSU, Internal and External Audit, M&E

Monthly financial statements o f respective spending units, quarterly progress reports, Internal and External Audits, M&E Monthly financial statements o f SPSU, Internal and External Audit. M&E

Monthly financial statements by DPSU, Internal & External Audits, M&E

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Component l- Nature of transaction

Implementati on Support

Accounting in Project

Facilitation Services.

Project SPSU/ Management

Governance Management

Monitoring and Evaluation

SPSU

SPSU

Technical I I SPSU Assistance

9.55 I 110.00 I

Books of Accounts +

Salaries and operational expenses

Yes

Yes

Means of Verification

Monthly financial statements Internal & External Audits,

Country Issues

170. discussed below:.

Generic country level issues and specific resolutions under the project are

Country issue with respect to non-availability of timey project Jinancial statements does not apply: The MPSPAI i s a registered society under the M P Societies Registration Act, 1973 and the rules framed there-under require the Society to prepare and f i le annual audited financial statements with the Registrar o f Societies. MPSPAI has agreed to procure a standard o f f the shelf accounting software which will be used for project accounting at SPSU & DPSUs. Quality and timeliness of audit reports: The project financial statements will be audited by an independent firm o f Chartered Accountants appointed as per selection criteria agreed with IDA. The audit will be conducted in accordance with the TOR agreed with IDA and documented in the Project Financial Management Manual to be adopted by MPSPAI. Timely flow of funds fFom Government of MP to the State Society: No such problem was faced in Phase I, however, this will be addressed by a legal covenant requiring that the GoMP provide funds on a timely basis to the MPSPAI based on i t s requirement o f funds. Weak Internal Control Framework: A Financial Management Manual (finalized in consultation with the Bank) and a Community Operations Manual (draft reviewed by the Bank) lays down the financial and operational controls including readiness filters/indicators to be fulfilled for transfer o f funds to VDCs, SHGs and Producer Groups/Federations. Service standards have been laid down in the Financial Management Manual for time taken for approval at each level as well as for transfer o f funds after approval. Standard timelines have also been laid

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down for payment o f invoices submitted by external vendors on delivery o f goods and services as per agreed standards. This apart, independent quarterly Internal Audit, Social Audits at the V D C & SHG levels and a comprehensive M&E system will strengthen the internal control framework.

Planning & Budgeting:

171. The project’s planning process will follow a bottom up approach i.e. it will grow out o f SHG livelihood plans and will get consolidated at the respective V D C level. Based on such appraised plans each VDCs will seek financing from the project (DPSU). The annual work plan o f each DPSU wil l be determined by the quantum o f such plans, activities to be implemented by the Producer Organizations, PFTS (for operational costs) and the DPSU’s own expenditure. These will eventually be consolidated with the work plan o f SPSU at the State level to get the Annual Work Plan o f the Project. The project planning process will be dovetailed into the budgeting cycle o f the Government o f Madhya Pradesh (GoMP) and will be completed in l ine with the state’s annual budget process Le. by February each year. The project will be budgeted as a separate l ine item in the State’s budget. GoMP will include the project budget in the State’s budget estimates and obtain sanctions f rom the State Legislative Assembly. Once sanctioned GoMP will provide grants-in-aid based on periodic demands from the SPSU within the overall limit o f the sanctioned budget

Accounting Policies, Procedures and Systems:

172. The SPSU, DPSUs and PFTs will maintain their accounts on cash basis following the double entry principle o f accounting. The project will use a standard o f f the shelf accounting package in the SPSU and 14 DPSUs. Installation and ro l l out o f the software and training will be undertaken through retroactive financing and completed by June 2009. 150 PFTs will maintain manual accounts as the expenditure at th is level will be minimal and therefore installation o f hardware and software at al l 150 PFTs will not prove to be cost-effective. PFTs will maintain manual accounts in pre-approved formats and send monthly accounts to DPSUs. DPSUs will incorporate the accounts the PFTs working under them into their own accounts through journal entries.

173. A Financial Management Manual (FMM) has been developed for the project which details the financial management processes such as, budgeting, funds flow, internal control framework, accounting, financial reporting and audit arrangements o f the project. The Community Operations Manual (COM) lays down the fiduciary arrangements at the level o f community institutions. The FM Manual has been finalized in consultation with the Bank. Key issues that have been addressed in the design o f the accounting policies and procedures are:

a) The SPSU, 14 DPSUs about 150 PFTs will be the primary accounting centers under the project. Producer Organizations will also be treated as accounting centers for the Project.

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Funds released to VDCs will be accounted for as grants (expenditures) in the Project Accounts (books o f DPSU). VDCs will maintain accounts for the funds received from the project for onward lending to SHGs. VDCs will maintain books for managing their loan portfolio, but books o f accounts maintained by VDCs will not form part o f the project accounts. The Producer Organizations will be required to maintain proper books o f accounts, prepare financial statements, and get them audited in accordance with the provisions o f the Act under which they are registered. Funds released to them will be accounted for as advances until they submit periodical expenditure statements to the Project. All funds released to the DPSUs and PFTs will be treated as inter unit transfers until expenditures are incurred at these levels. Other fund releases to NGOs, service providers including training and capacity building agencies will be based on terms and conditions o f the respective contracts.

Finance Staffing, Training and Capacity Building:

174. management functions under the proposed project i s given below.

The Staffing Structure at State, District and PFT level for performing financial

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1 PFT

PROJECT DISTRICT PR3JECT COORDINATOR MANAGER COORDINATOR

FINANCE MANAGER

FINANCE ASSISTANT

f FINANCE CONTROLLER

FINANCE k S I S T A N T

I ACCOUNTANT I 1

175. The Finance function in the SPSU will be lead by the Finance Controller who i s an officer from the State Financial Services. The Controller will be assisted by a team o f three people including a chartered accountant (Financial Management Specialist). All these positions are a continuation from MP-DPIP I except for the Chartered Accountant who was hired on a part-time basis in the first phase. In phase I1 the SPSU will hire a qualified chartered accountant (CA) with at least five year’s experience to provide technical assistance to the finance wing o f SPSU. The TOR o f the C A has been agreed with the Bank. S h e i s expected to be on board by August 2009. The finance functions in the DPSUs will be lead by a Finance Manager who will either be an officer from the State Financial Services or commerce graduate hired on a contract basis with a minimum experience o f five years. He/she will be assisted by a Finance Assistant, a commerce graduate hired on a contract basis having at least three years experience and computer literate. Each PFT will have a Finance Assistant having the same qualification as the Finance Assistant in DPSU.

176. All Finance staff o f the SPSU and the DPSU and PFT Staff for the districts having interventions in the f i rst year o f implementation should be on board by effectiveness. Experience with C D D projects indicate the need for high level o f investments in building the capacity o f village book keepers, with clear definitions in the

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roles and responsibilities o f master trainers. This will be a challenge in M P too given the low literacy level and the fact that the project i s working amongst the poorest o f the poor. At the community level Village Resource Persons (VRPs)/ book keepers will be trained to assist the VDCs and SHGs. A standard menu o f training modules for each level o f village institution will be developed (based on the requirements laid down in COM) and this training will be carried out as part o f the capacity building plan at different points in the project cycle. This will include standard training modules/ handbook for SHG and VDCs as well as more detailed modules for the trainers.

Internal Control Framework

177. For the state, district and block level un i ts the applicable framework would be the delegation o f financial and administrative powers and payment responsibilities as documented in the Finance Management Manual and Administrative Rules o f MPSPAI. These will be reviewed regularly to ensure that these remain valid and adequate during project implementation. Some o f the other key control parameters are as follows:

a) Every accounting centre should open a bank account in the name o f the Project. Each bank account should have at least two signatories.

b) Each project accounting unit will close the books within a specified number of days at the end o f each month, reconcile balances with the banks and forward the same to the SPSU for consolidation. The SPSU will be responsible for qualitative and timeliness aspects o f financial reporting.

c) MoUs will be signed between the project and VDCsProducer Organizations - setting out the obligations, milestones etc. Similarly MOUs will also be signed between SHGs and VDCs. Formats for MOUs are documented in the COM.

d) At the SHG, V D C and Producer Organizations levels recording o f al l financial decisions in the minute books, public display o f financial information, access to books and records to al l members and social audit procedures will ensure that transparency and oversight functions are maintained.

e) Financial controls for the Project including readiness filters/indicators to be hlfil led for release o f funds at each level are documented in the FM Manual.

f) Operational controls at the level o f community Institutions (VDCs, SHGs and Producer Organizations) are documented in the COM. Formats for books o f accounts to be maintained by VDCs are documented in the C O M

g) The Project will have a strong MIS and M&E system.

Audit Arrangements

178. External Audit: The external audit o f the project will be carried out by a private firm o f chartered accountants appointed with the approval o f the Executive Committee o f MPSPAI chaired by the Chief Secretary o f the State and having Principal Secretary Finance as one o f the members. The firm would be appointed based on a competitive process and meet selection criteria agreed with the IDA. The TOR for audit has been agreed with IDA and documented in the FM Manual. The annual audit report will consist o f annual financial statements, (ii) audit opinion, and (iii) management letter highlighting weaknesses, if any, not affecting audit opinion but significant enough to be reported to

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Implementing Agency

MP-SPA1 DEA / GO1

179. Internal Audit: The project will appoint, within 6 months o f effectiveness, independent f irm(s) for carrying out internal audit o f the project. Internal audit will also cover VDCs and SHGs, Initially the sample size will be high; thereafter based on the experience and developmenthatisfactory progress o f community oversight institutions, the frequency and sample size would be reviewed. The TOR for Internal Audit has been agreed with IDA and documented in the FM Manual. The firm would be appointed based on a competitive process and meet selection criteria agreed with IDA

Audit Auditors

Project Audit Private Chartered Accountants Special Account Comptroller & Auditor General o f India

180. auditors and ensure timely resolution o f audit observations by project management.

The Executive Committee o f MPSPAI will consider key issues pointed out by the

Oversight at Community Level

181. At the village level: A social audit will be undertaken by the Community to monitor the utilization o f funds; operational efficiency and accountability. A process of building transparency will be encouraged by development o f monthly summary reports with cash and stock (where applicable), which would be displayed on the notice board of the VDC/CFO:

a) Books o f accounts for loan portfolio will be maintained on a regular basis by the VDCs. All key financial and physical information will be displayed at a prominent location or at the V D C Office.

b) A Social Audit Committee will be elected at the V D C level which will verify the use o f loans at the SHG level through asset verification.

Public Disclosure

182. Necessary financial information including funds released to SHGs, VDCs and Producer Organizations and annual report for the program which will include physical and financial information will be made available in public domain through the project website

Interim Unaudited Financial Reports (IUFRs)

183. Each accounting centre will compile financial information provided by the constituents in agreed formats designed to provide an audit trail. The summarized unaudited interim financial reports will be submitted to IDA on a quarterly basis within 45 days o f the end o f the quarter. The reporting formats (IUFRs) will be agreed upon and included in the FM Manual.

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Disbursement Arrangements

184. The disbursement would be based on quarterly Interim Unaudited Financial Reports in formats agreed with IDA. Based on the projected forecasts and satisfactory IUFRs funds would be released on quarterly basis. IDA will finance 91% o f the Project expenditures under a single disbursement category comprising Goods, works, consultants’ services, Investment Support (Community Grants), and Incremental Operating Costs for the Project.

Significant Risks and Mitigation Measures

185. The below table summarizes the key risks for financial management:

Risk

Inherent Risk State Level

Project level

Capacity

Risk Mitigating Measures incorporated

into project Design

Risk associated with weak governance and lack o f oversight and regulatory framework for Societies in India.

Risks associated with management o f a CDD project o f this nature with a highly decentralized structure, with funds flowing to an estimated number o f 30,000 SHGs.

Weak capacity o f V D C to manage loan portfolio

Risk Rating after considering mitigation measures

The same Society has implemented MPDPIP I and has reasonably good track record. Institutional and governance arrangements have been framed and documented. These define the responsibilities o f the various committees tasked with the oversight functions o f the Society which include the State level Governing Body chaired by the Chief Minister o f the State and the Executive Committee chaired by the Chief Secretary. Both Committees are represented by State level bureaucrats. This apart the Zi l la Panchayat sub-committee will also have an oversight role. The society model provides flexibil i ty and autonomy in engaging suitably qualified staff to manage the Project. The rules o f the game, implementation processes, roles and responsibilities o f the various staff have been determined and documented. The project design incorporates adequate MIS, M&E and audit arrangements to identify implementation weaknesses and take corrective measures in a timely manner. An appropriate framework for grading o f VDCs have been developed and documented in the COM. For the VDCs to access start up funds under the project, they will need to achieve a qualifying grade based on predefined parameters demonstrating adequate capacity to account and manage the funds. Capacity building measures incorporated in

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Risk

Control Risk Funds Flow

Internal control

U s e o f funds by SHGs

Risk Mitigating Measures incorporated

into project Design

Timely flow of funds to VDCs, SHGs and Producer Organizations; Timely flow o f funds from GoMP to MPSPAI

Weak internal control framework particularly at the lower levels.

Funds not used for Livelihood Plans at the SHG Level.

Overall project risk his refers to the Govt. o f India. While a CFAA has not bet

Risk Rating after considering mitigation measures

project design. Oversight arrangements in the form of M&E, Social Audit, Internal Audit to identify lapses and take corrective measures

Service standards have been laid down in the FMM and COM in terms o f timelines for release of funds to VDC and SHGs and Producer Organizations once the readiness filters are fulfilled. With regards to timely flow o f funds from GoMP to the State Society, no such problem was faced in Phase I. However this will be addressed by a legal covenant requiring the GoMP to provide funds timely basis to the MP- SPA1 based on i t s requirement o f funds. The internal control processes have been documented in the draft FM Manual (for the project) and COM. Fund release to SHGsNDCsProducer organizations will be linked to compliance with predetermined indicators/ readiness fi l ters Internal audit system will cover SPSU, DPSU VDCs, SHGs and Producer Organizations and sample o f SHGs also. Project design also provides for social Audit at the SHG levels. These will help early identification of control lapses. SHG MOU lays down the framework for use o f livelihood plans as well as remedies available to the VDC in case o f non-compliance. A range o f social audit tools will also be used to monitor use o f funds for intended purposes at the SHG level, including continuous monitoring by PFTs.

S I

carried out in India. this i s based on the literature survey and other studies such as the study on PFMA in CSS and other state level SFAA’s carried out by the Bank.

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Annex 9: Procurement Arrangements INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

A. General

186. Procurement o f al l goods, works and services will be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004, revised October, 2006 (Procurement Guidelines); and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, revised October, 2006 (Consultancy Guidelines) and the agreed procedures described in the Legal Agreements.

187. For procurement under the project, the project authorities, State Project Support Unit (SPSU) under the M P Poverty Alleviation Initiatives Society have developed a Procurement Manual. This Manual, has been reviewed and found acceptable to the Bank, and will be disseminated to al l agencies engaged in the implementation o f the Project and al l procurement under the project will be carried out following the agreed procedures as per the provisions o f this Manual. The requirement to fol low Bank's Procurement and Consultancy Guidelines are clearly stipulated in the Manual.

188. There are four components o f the project namely (i) Social Empowerment and Institution Building, (ii) Livelihoods Investment Fund, (iii) Employment Promotion Support and (iv) Project Implementation Support. A brief overview o f the various items and services to be procured under these components are described below:

1 Component -~ Empowerment-

and Institution Building

I __ Livelihoods Investment Support

Major Procurement Activities and Items Goods and Equipment for establishment o f about 150 P r o j e c t Facilitation Teams

- On lending o f up to Rs. 150,000 for livelihood activities to each o f the estimated 24,000 SHGs to be supported under the project. Each SHG to be formed with a minimum o f 10 members and the amount to be released through the V D C in multiple tranches based on grading received at various intervals.

Facilities and equipment to be procured by Producer Organizations under Value Chain Development fund

Procurement o f items, equipment and facilities by PO/Project Authorities under Innovations Development Fund

Technical Services contracts to be outsourced by Project Authorities under partnership development fund - --

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Component --I Major Procurement Activities and Items -- Employment Promotion and support

I ____I

Project Implementation support

_____ i. Init ial set up expenditures for establishing about 600 Employment Facilitation Centers (EFCs called Aj eevika Kendra) including costs related to non recurring set up items

ii. Hiring o f professional training institutions for vocational training for employment generation and placement services by Project Authorities

- i. Office equipment including IT/MIS equipment (desktop and laptop computers, printers, servers, software, GIS packages, scanners, UPS, photocopiers, fax machines, LAN, WAN, etc.) communication aids such as multimedia projectors, Audio visual equipment, digital and video cameras, mobile un i t s

ii. Vehicles and Vehicle Hire

iii. Miscellaneous field equipment and apparatus

iv. Proprietary Software, Journals, Publications, Training manuals

v. Consultancy services for various studies, monitoring and evaluation, impact assessments, audits and post review o f procurement activities at community level, MIS package development and maintenance, etc.

189. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, if any applicable, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

a) Procurement under the Component Social Empowerment and Institution Building and Livelihoods Investment Support:

190. The project will be implemented in 14 districts and over i t s duration would assist approximately 30,000 Se l f Help Groups. The project aims to build and strengthen affinity based and livelihoods based self-managed institutions o f the poor including Self Help Groups (SHGs), Village Development Committee (VDC), Cluster Federations and Producer Organizations (POs). Each SHG will represent a minimum o f 10 households listed in the Below Poverty Line (BPL) category in the village. Based on s e l f and external assessment o f these SHGs formed in terms o f regular meeting, attendance, savings, inter

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loaning, timely repayment, books and account keeping, SHGs will be graded and federated as VDC. Such qualified SHGs will receive the loan o f Rs. 150,000 in multiple tranche each for about 30,000 SHGs for facilities and equipment; infrastructure and federation purposes l ike licenses, certification, etc. SHGs will receive the funds as a repayable loan from VDC. The use o f this fund will be demand driven and SHG can provide loans to individual members for financing investment priorities. The fund available at V D C shall be treated as a revolving fund. The SHG will make repayment to the V D C as per the agreed M O U . It wil l maintain i t s regular books o f accounts that shall be audited annually by a Chartered Accountant.

19 1. Procurement at the community based Producer Organization level, federated from SHGs, using the Project funds for common goods and services, if any, would be o f very small value and shall be guided by “Community Participation in Procurement” as detailed in Para 3.17 o f the Procurement Guidelines. In order that the procurement i s guided by and meets the basic principles o f efficiency, equal opportunity, cost-effectiveness and transparency o f the process, the simplified and flexible procedures, corresponding simplified bidding and contract formats and safeguards applicable (social audit etc.) i s detailed in chapters 7 and 8 o f the Procurement Manual prepared by SPSU and agreed with the Bank

192. Procurement by members o f the SHG i s expected to be on prudence since this will amount to using the proceeds o f a loan on which the beneficiary will also pay interest. This coupled with the fact that the outcome o f the procurement i s for a private income/asset generation for livelihoods purpose o f the borrower, it i s in the borrower’s interest to ensure that procurement i s carried out following the most economical and efficient manner and considering value for money. However, to ensure that the SHG members know o f the best practices for prudent procurement and procurement i s also done efficiently and transparently, a method o f Social Audit by a Committee and public disclosure has been incorporated in the COM. This will essentially mean that arrangements for the mandatory formation and prudent functioning o f a Social Audit mechanism in the village to ensure that the proceeds from the loan taken by an individual i s resulting in the intended purposes for which it i s taken. As an ample safeguard, it will also be ensured that the procurement decisions taken are openly shared in the SHG meetings and recorded, allowing all access to the documents. It i s envisaged that, for many items individuals procure from the loan, adequate market may not be available for seeking multiple quotations etc. In such cases, evidence should be available in the records o f social audit committees that market search was undertaken and best value for money was ensured from the supply source. This requirement will be met during the appraisal o f Livelihood Plans by V D C where they will compare unit rates o f items against the Rate banks prepared and maintained by PFTs/DPSUs.

b.) Procurement under other components and by designated entities

193. Procurement under Employment Generation Support and Project management support components will be undertaken principally by SPSU and to some limited

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delegated extent by DPSUs and PFTs. Detailed procedures that will be followed will be as under:

Works: There may be requirements to award contracts for small c iv i l works at SPSUI DPSU levels such as refurbishing o f offices at the state, district and PFT levels and for pi lot initiatives for innovation fund, mostly small value contracts. These works may be procured following agreed procedures hereunder in this Annex and documents agreed to be used as applicable to the method of procurement. When following the N C B method, bids will be invited using updated N C B model document as agreed between GOI- Task Force and the Bank for use in India and as modified from time to time.

Goods: These contracts may be awarded following the agreed procedures hereunder in this Annex and documents agreed to be used as applicable to the method o f procurement. When following the N C B method, bids will be invited using updated N C B model document as agreed between GOII Task Force and the Bank for use in India.

Hiring of Consultancies and traininghnstitutional capacity building activities: The project involves substantial efforts for capacity building o f SHGs and their federations, other villageIcluster level institutions, cooperatives and community members etc. enabling them to function as efficient, accountable, transparent and self-managed institutions. Training o f beneficiaries on vocations for skill development and for capacity building o f state and district level teams would also be provided under the project. Technical assistance services would be obtained mostly from service providers with domain specialization in livelihoods. In addition, services o f f i r m s or individual consultants would be needed for other assignments that include baseline survey, monitoring and learning, environmental assessment, consultancies for developing training modules, issue based awareness campaigns etc. Services o f certain specialized agencies to act as service providers or for partnership arrangements to promote or enhance livelihoods activities shall be obtained through methods agreed to and following agreed procedures as given under section C.

.

The bidding documents for Works and Goods procurement shall be drafted following the Bank’s Standard Bidding Documents and shall be agreed to with the Bank, before issuing the same for invitation o f bids. For I C B contracts on& Bank’s Standard Bidding Documents (SBDs) will used.

195. to be acceptable to the Bank:

The following conditions must be met in order for the bidding process under N C B

a) Only the model bidding documents for N C B agreed with the GO1 Task Force and as amended from time to time], shall be used for bidding.

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Invitations to bid shall be advertised in at least one widely circulated national daily newspaper, at least 30 days prior to the deadline for the submission o f bids.

No special preference will be accorded to any bidder either for price or for other terms and conditions when competing with foreign bidders, state-owned enterprises, small-scale enterprises or enterprises from any given State.

Except with the prior concurrence o f the Bank, there shall be no negotiation of price with the bidders, even with the lowest evaluated bidder.

Extension o f bid validity shall not be allowed without the prior concurrence of the Bank (a) for the f i rst request for extension if it i s longer than four weeks; and (b) for al l subsequent requests for extension irrespective o f the period (such concurrence wil l be considered by Bank only in cases o f Force Majeure and circumstances beyond the control o f the Purchaser / Employer).

Re-bidding shall not be carried out without the prior concurrence o f the Bank. The system o f rejecting bids outside a pre-determined margin or “bracket” o f prices shall not be used in the project.

Rate contracts entered into by Directorate General o f Supplies & Disposals will not be acceptable as a substitute for N C B procedures. Such contracts will be acceptable however for any procurement under Shopping procedures.

Two or three envelop system will not be used.

Assessment o f the agencies’ capacity to implement procurement

MPDPIP-I1 draws from the strengths and lessons learned from MPDPIP and the procurement regime in the erstwhile project has developed adequate systems and processes within al l levels to meet Bank requirements in this regard. The project had achieved over 95% targets in physical and financial targets within the time period. Procurement in the SPSU was looked after by the Financial Advisor with support of dedicated Procurement assistants. An external post review o f al l goods and service contracts issued by SPSU in 2007 had concluded that the systems and processes were followed in most cases except for a few minor deviations in inconsistency in time given for bidding, inadequate information kept in f i les etc. A post review o f selected C D D sub projects undertaken in 2008 by the Bank have also found that:

a) PFTs, DPSU and SPSU carried a facilitative role in the formation o f CIGs and implementation support including the procurement management and oversight;

b) at grassroots CDD level, the CIG structure, i t s formation within close-nit social groups, and laid down processes are adequate to meet the procurement and project objectives. The characteristic o f forming CIGs based on affinity and livelihoods needs, ensured that the procurement process akin to that o f private procurement,

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where the beneficiary i s directly impacted by the outcome o f decisions, thus incentivizing efficiency and economy in procurement actions;

c) MIS established by the state unit is capable o f capturing key details about CIGs, activities, fund management, etc.; and

d) about 90% o f assets were verified as available and performing, among the rest, majority had wear and tear issues given the long project period. This provided further fiduciary assurance about a procurement system that i s sound and meeting the intended objectives.

197. In order to ensure adequate fiduciary control and oversight over the procurement activities, the Project proposes al l procurement other than the community based activities to be carried out mainly by the State Project Support Unit (SPSU). The DPSUs and PFTs will have limited delegation o f procurement responsibilities for localized services and items for i t s own operations. The SPSU has a Procurement Coordinator in place that was associated with procurement in the MPDPIP-I and has adequate knowledge o f IDA procurement procedures.

198. At state level, the Project also proposes to set up a State Procurement Committee headed by the State Project Coordinator to evaluate and finalize the procurement process and procedures followed where the value o f procurement i s more than Rs 50,000. Based on the assessment o f previous project implementation and the actions proposed above, it i s assessed that the project has appropriate procurement capacity to handle the project procurement.

Perceived R i s k s and Mitigation Measures:

199. The main procurement r isks that can be perceived at this stage, based on the general public financial management in the country and state and the assessment carried out, are that (i) procurement o f Goods, Works and Consultant Services at state and district levels has normal fiduciary risks o f transparency and fairness, ( ii) inabilities to plan the procurement at community level SHGs and POs, their capacity in developing right specifications, identifying right market, their ability to influence the market in receiving appropriate pricing and delivery commitments, etc. (iii) misuse and wastage in decentralized procurement undertaken by POs due to limited supervision and oversight capacity within the project; (iv) inadequate record keeping; (v) absence o f an operating Grievance/Complaint monitoring system and lack o f appropriate dispute resolution procedures and lack o f established system o f public disclosure o f information on procurement actions. Some o f the specific measures proposed are detailed below, followed by a chart depicting the risk mitigation measures during the project in table 9.1.

200. Social Audit Mechanism: As part o f the overall monitoring, the project has in- built social accountability measures which include social audit, disclosure and approval o f plans and progress at the village level. At the village level, social audit will be undertaken by the Community to monitor the utilization o f funds; and operational efficiency and accountability. A Social Audit Committee will be elected at the VDC level which will verify the use o f loans by individual SHG members. A process o f building

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transparency will be encouraged by development o f monthly summary report with cash and stock (where applicable), which would be displayed in the notice board o f the V D C office. At the community-level, locally appropriate disclosure processes and transparency mechanisms l i ke wall writing, village notice board, and translation o f materials are planned and elaborated in PIP and COM.

Date Due for completion of

Action

201. Rate Banks: To further support the procurement by POs, DPSU and PFTs to undertake periodic market survey and provide standard specifications and indicative price ranges for the common user items to be purchased. A compilation o f possible livelihoods activities wil l be undertaken under the guidance o f SPSU in the project for identifying items that can be included in the Rate/Item Banks. The PFT will collect market price for the goods, works and services to be procured by the Community Institutions under approved by DPSU. The rate bank will be periodically updated (preferably in every 6 months) or there i s a sudden change in the market rates. The Item/Rate Bank i s expected to be the guide at community level for ensuring the local suppliers provide quality products and at prices within comparable ranges, especially when a competitive selection i s not possible.

Status as provided by the State Project Support Unit (SPSU)

202. Grievance Redressal and Complaints Handling Arrangements: The Grievance redressal and complaints handling arrangements will include procedures for user’s access to register complaints which will be published and notified through various mediums. A dedicated telephone at State Office, Computerized system for filing complaints by anyone, investigation by sub committee and reporting to High Level State Committee for fol low up, actions and responding to the complainant. Complaints will be segregated in order o f gravity and senior officers may be asked to process serious cases and report in given timeframe. During supervision mission regular review o f progress in handling complaints will be undertaken. All Guidelines and documentation including bidding instructions will carry the details o f Complaints management system. The project will be subject to al l provisions as outlined in the RTI Act.

Table 9. 1: Procurement Risk Mitigation Action Plan

Description of Mitigation Action

Ensuring an efficient, transparent and fair procurement regime in the project

throughout project

implementation

Capacity created in MPDPIP state and district levels will continue to be engaged in procurement. Dedicated Procurement Unit being created in SPMU with Procurement Officer and Assistants.

Guidelines. Manuals and SBDs are developed and used at al l levels

Training programs will be organized for orienting the staf f responsible for procurement

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Description of Mitigation Action

~ - _ l - I x

C D D Procurement meets i ts objectives and i s managed and supervised adequately to ensure value for money, transparency and fair opportunities for all

Adequate information i s maintained at a l l levels on procurement processes and outcome

Date Due for completion of

Action

l-._l________ throughout

project implementation

-lll_

A Grievance/ Complaints Management System in established and managed

Status as provided by the State Project Support Unit (SPSU)

~ ~ _ _ _ _ - _ _ - - X I

All tender notices and Contract award details wi l l be published in the project website

Procurement Post Review o f 10% o f all contracts audited by Internal Auditors. In a year, 20% o f the project would be covered by Internal audit and over the project duration all entities would have been reviewed at least once. Social Audit and Procurement Committee to ensure soundness o f the process and disclosure requirements among the community

Post review and Verification o f Physical assets by the internal auditors.

Rate Banks: D P M U and PFTs to undertake periodic market survey and provide standard specifications and indicative price ranges for the common user items to be purchased by the community for reference.

Mandatory Capacity BuildinglTraining o f at least 2 representatives o f the Producer Organization (PO) prior to undertaking any procurement action In general, the contract f i le will contain a l l records pertaining to the contract pre- award and post award.

- Such records will be maintained up to 5 years from the date o f end o f the project.

- A more detailed records keeping and maintenance manual wi l l be developed, if necessary using expertise procured under the project funding, which will provide support to develop an electronic filing system also, if considered appropriate All Tenders and Contract Award Notices wi l l be displayed on the project Website. Award notices wi l l be published on the website on a quarterly basis.

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Description of Mitigation Action

Date Due for completion of

Action

Status as provided by the State Project Support Unit (SPSU)

Dedicated telephone and Online Computerized system for filing complaints by anyone, investigation by sub committee and reporting to High Level State Committee for follow up, actions and responding to the complainant

Al l Guidelines and documentation including bidding instructions will carry the details of Complaints management system

C. Methods o f Procurement

203. procurement under the project.

The following methods and value thresholds o f procurement shall be used for

Table 9.2 Civil Works

Civil Works

Value* (threshold) per contract

a) Civil works estimated to cost more than US$ lO million

b) Civil works estimated to cost more than US$30,000 and less than or equal to US$lO million

c) Civil works estimated to cost the equivalent o f US$30,000

Procurement Method

International Competitive Bidding (ICB)

National Competitive Bidding (NCB)

Shopping (at least three quotations from qualified contractors)

Contracts Subject to Prior Review I Post Review

Prior review by the Bank

First two works contract under NCB regardless o f value and al l subsequent contracts costing more than US$500,000 equivalent each will be prior reviewed by the Bank Al l other contracts by post review

Post review on&

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Table 9.3 Goods

Expenditure Value* (threshold) Category per contract

Goods/ Equipment/ Machines

Procurement Contracts Subject to Prior Method Review 1 Post Review

Goods/ Equipment/ Machines

Expenditure Value * (threshold) Procurement ContraCts Subject to Prior Category per contract Method Review / Post Review

Equipment/ Materials/ Tools

Equipment and Tools

Value* (threshold) per contract

Contracts estimated to cost more than US$300,000

Contracts estimated to cost more than US$30,000 and <US$300,000

Contracts estimated to cost less than or equal to US$30,000

Proprietary items estimated to cost less than or equal to US$5,000

Procurement Method

International Competitive Bidding (ICB)

National Competitive Bidding (NCB)

Shopping (includes issue o f supply orders under DGS&D rate contracts)

Direct Contracting

Contracts Subject to Prior Review / Post

Review Prior review by the Bank

First two contracts under N C B regardless o f value and al l subsequent contracts costing more than US$200,000 equivalent each will be prior reviewed by the Bank . All other contracts by post review

Post Review only

Post Review only

Table 9.4 Furniture

Furniture Contracts estimated to cost less than or equal to US$ 30,000

Shopping (includes issue of supply orders under DGS&D rate contracts)

Post Review only

Table 9.5 Books and Learning Resources

Books, Periodicals, Proprietary Software, Learning Resources and Educational Materials

Contracts estimated to cost us$10,000

Direct Contracting Post Review only

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Table 9.6 Vehicles

Expenditure Value* (threshold) Procurement Category per contract Method

Contracts Subject to Prior Review I Post Review

Vehicles

Expenditure Value* (threshold) Category per contract

Contracts estimated to cost US$ 30,000 equivalent or less

Procurement Contracts Subject to Pdor Method Review I Post Review

Shopping (includes issue of

supply orders under DGS&D rate

contracts)

Small items like Stationary,

Hand Tools, Measuring

Equipment etc.

Post Review only

Contracts estimated Direct Contracting Post Review only to cost US$ 500 per contract

Table 9.7 Small Items

Table 9.8 Services

Services

Research and evaluation contracts, professional services, training, workshops & fellowships etc.

Value* (threshold) per contract

More than US$ 200,000

Contracts estimated to cost more than US$ 20,000 and less than or equal to us$200,000 equivalent

Contracts estimated to cost more than US$ 10,000 and less than or equal to US$ 20,000 equivalent

Less than or equal to US$ 10,000 equivalent

Procurement Method

Quality and Cost Based Selection

International Shortlist

(QCBS -

Quality- and Cost-Based Selection

(QCBS)/Consultant Qualification

(CQS) /Least Cost Method ( L O . Short list may

comprise entirely o f national

consultants

Quality Based Selection

(QBS)/Consultant Qualification

Contracts Subject to Prior Review I Post Review

Prior Review by the bank.

Prior Review by the bank.

Prior Review by the bank.

Prior Review for Single Source only.

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Expenditure Category

Value* (threshold) Procurement Contracts Subject to Prior per contract Method Review / Post Review

WQS)

Table 9.9 COMMUNITY PROCUREMENT

Single source /

of firms/ Hiring of

- individuals

Post Review for LCS and Least Cost selection individuals.

Procurement PO Methods

2.GOODS

US$30,000 per contract

cost up to

cost up to US$l,OOO per contract

cost up to US$30,000 per contract

3. SERVICES Cost below US$5,000 per contract

PO (i) By producer organizations themselves or (ii)by a local contractor selected through shopping after inviting minimum three quotations in response to written invitation with a minimum o f 15 days notice period),

PO

PO

PO

Through shopping (after inviting minimum three quotations in response to written invitation)

In exceptional situations, where (i) an adequate market to seek 3 quotations i s not available in the location where the PO i s located and

In case o f individuals as per section V o f Banks guidelines for selection o f consultants and through single source method for technical service provider.

(For Individual Consultants, advertisement i s not required and Consultants do not need to submit proposals. Consultants shall be selected through comparisons o f qualification o f at least three candidates among those who have expressed interest in the assignment or have been approached directly by the borrower.

Individuals considered for comparison o f qualifications shall meet the minimum relevant qualifications and those selected to be employed by the borrower shall be the best qualified and shall be fully qualified for carrying the assignment .Capability i s judged on the basis o f background,

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Procurement

If any service provider i s hired through single source, the same should be justified and approved by Procurement Committee o f the DPSU.

PO Methods

experience and appropriate knowledge o f local conditions

Notes: 1.

2.

3.

A l l contracts awarded on direct contracting method exceeding U S $1000, if not part o f an agreed procurement plan, wi l l need prior agreement with the bank. A l l contracts not covered under prior review wi l l be subject to post review awardreview during supervision missions/review by consultants to be appointed by the Bank. The thresholds wi l l be periodically reviewed and revised as needed during project implementation based on forthcoming actions and client capacity.

D. Review Requirements

204. Post Review: 10% sample o f all contracts issued annually by Project offices at state and district level will be subjected to post review by Bank staff or appointed consultants. For post review o f contracts issued at PFT and PO level, Bank retains the right for 10% sample post review or base the review on Secondary Literature o f Internal and External Monitoring/Impact Assessment referring to C D D activities in the project. As part o f the progress report documentation for Supervision Missions, project will mandatorily share reports o f al l Process Monitoring, Statutory Audit and Impact Assessment studies, M I S Reports, Report o f the Internal Audit covering procurement.

E. Procurement Plan

205. As stated above, a plan for procurement at the V D C and/or PO level cannot be prepared, considering the demand driven approach to the procurement, if any, by the entities. For central level procurement, a l i s t o f project procurement requirements and a draft procurement plan for the initial 18 months has been prepared and agreed. The plan was reviewed during negotiations and the final plan, incorporating comments provided and describing the procurement actions and basis for the methods to be applied to procurement to be carried out at the central level has been agreed during negotiations. The agreed plan will be available in the project website and in Bank’s external website. Annual Procurement Plans shall be prepared at the beginning o f each year to reflect the actual project implementation needs for that year and shall be reviewed and agreed by the Bank. The Procurement Plan will be updated in agreement with the Bank, as required, to reflect the actual project implementation needs and improvements in institutional capacity.

F. Frequency o f Procurement Supervision

206. Given the large volumes, geographical spread and general risks involved, supervision missions, at least twice a year i s recommended. In addition to supervisions missions, the Bank will also carry out an annual ex-post review o f procurement that falls under the prior review threshold.

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G. Details o f the Procurement Arrangements Involving International Competition

207. Goods and Works: Due to the relatively small value o f almost all contracts that would be procured under the project, procurement i s expected to be through NCB or lesser procedures, and currently no International Competitive Bidding (ICB) i s envisaged.

208. Consultancy Services: The shortlist for consultancies estimated to cost US$ 500,000 or less may comprise o f entirely national consultants in terms o f Para 2.7 o f the Consultancy Guidelines.

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Annex 10: Economic and Financial Analysis INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

Economic Analysis

209. The development objective for the proposed project would be to empower the rural poor by improving their capacities and opportunities for a sustainable livelihood. This will be achieved by the enhanced participation o f the rural poor in economic activities; skill enhancement for taking-up higher value employment; and increased income among project target households through assets and market linkages.

210. The project addresses improvements in rural livelihoods in M P in a holistic way with an integrated set o f interventions under individual components and activities being mutually re-enforcing. The main project benefits will be derived from (1) increased agricultural productivity; (2) diversification and increase o f income sources o f households engaged in livelihoods activities; (3) improved market integration; (4) sustainable business institutions owned by the rural poor; and (5) viable new linkages for job and self employment. However, apart from those generated under Component I1 (Livelihoods Investment Support), the benefits are mainly related to social, institutional, capacity building and human resource development, which are mostly long term and not easily quantifiable.

2 1 1. The Livelihoods Investment Support Component, accounting for some 60% o f the total project cost, i s designed to support demand driven productive livelihood activities including food security and other income generation activities. Even with those directly quantifiable benefits generated under this component, ex-ante cost-benefit analysis and rate o f return calculations are difficult to prepare due to i t s demand driven nature. Though DPIP-I1 will focus on scaling-up within the existing 14 districts successful activities under Phase I, the beneficiaries wil l ultimately determine the scope and m i x o f the investments and -- as communities learn and feel more empowered in the course o f project implementation -- these may differ from the original demand assessment or what they implemented during Phase I o f the project.

2 12. Nevertheless, the ex post economic analysis o f community investment subproject o f DPIP-I could serve as an indication o f the economic viability for livelihoods investment support component. The analysis was prepared by National Center for Human Settlement and Environment (NCHSE). This ex-post analysis was thorough in geographical coverage (323 sub-projects in al l 14 project districts) and methodologically sounds (with random sampling by major activities). The aggregated ERR for 323 subprojects (including apportioned training and project management costs) was estimated at 42%22.

2 13. Furthermore, given participatory process in the sub-project selection, the poor groups will choose the best projects for themselves, which are l ikely to be the ones with

** Detailed assumptions and calculations are contained in the DPIP-I ICR

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the highest economic return. Experiences from DPIP-I and other livelihoods projects in India have shown that demand driven projects, involving beneficiary contributions, are usually economically viable and cost-efficient. This process will also be complemented by the transparency and good governance to be introduced in the project, which will enable communities and villages to learn from each other with regard to cost estimation and technology adoption.

Category o f sub project Number o f IRR range sub-projects across districts

1 Irrigation 50 14.67 - 373.83 ( Y O )

214. project implementation following the methodology adopted for the Phase I project.

An ex post economic analysis will be conducted upon the completion o f the

Average IRR (YO)

98.60

Financial analysis

215. Based on the results o f the ex post financial analysis for DPIP-I prepared by National Center for Human Settlement and Environment (NCHSE), the averaged I R R s by 6 categories o f sub-projects, which are most likely to be implemented under the livelihoods investment component o f DPIP-I1 , range between 52% (livestock) and irrigation farming (99%). The IRR by sub-project category summary table is reproduced below with detailed calculations are available on file.

216. I t should be noted that as financial indicators are based on complete costs and benefits o f the investment, the actual rates o f return for the beneficiaries would be even higher since major part o f the investments were provided as grant to the beneficiaries.

217. The methodology used to analyze the financial returns o f these subprojects will be adopted as part o f the appraisal process by DPSUs and SPSU to select financially viable activities to be funded under livelihoods investment support component.

Fiscal Impact

218. The government financial contribution to this project i s only to cover around 35% o f the incremental operating costs (mainly project staff and seconded government staff salaries) which i s expected to be approximately US$lO.OO million over the five years.

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This i s only a fraction o f the total state government budget outlay. In fact, the State government has not only fully allocated counterpart funding, but also pre-financed from state budget the whole project activities prior to the project effectiveness. The project i s expected to generate the positive fiscal impact from expanded corporate tax bases in commercial farming and value chain development, and increased personal income tax returns from youth employment and other j ob opportunities generated by the project. No increases in recurrent expenditures o f state government are ixpected during the post- project period. All the recurrent expenditures o f sub-projects would be met by community contributions.

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Annex 11: Safeguard Policy Issues INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

Environmental Safeguards

219. In order to ensure that the environment i s not compromised in the process o f livelihood generation and to contribute to the ecological sustainability o f the supported livelihoods, an Environmental Management Framework (EMF) has been developed for the project. The framework approach has been adopted so that the environmental aspects can be addressed with clarity and simplicity for the range o f livelihood activities that could be potentially proposed by the communities and supported by the DPIP 11. The State Project Support Unit (SPSU), MPDPIP has carried out the Environment Analysis (EA) identifying key issues for the project and prepared an Environmental Management Framework (EMF). The methodology comprised Collection and collation o f secondary data, analysis o f policy and legal framework and field visits. Following the drafting o f the EMF, a state level and a regional level consultation workshop were organized to invite the inputs o f the stakeholders to the draft EMF document. The EMF was suitably revised following the consultation processes.

Review o f Experience of EMF Implementation in Phase I

220. The implementation o f the EMF in the MPDPIP brought forth several lessons/issues that were recognized as important for the MPDPIP-11. These lessons were captured in 2 external audits conducted during the implementation o f the MPDPIP: i) mid-term audit conducted 2004 by Malaviya National Institute o f Technology, Jaipur; and ii) a, final audit conducted in 2007 by JP Associates, New Delhi.

221. The overall rating given for environmental management in MPDPIP was 'satisfactory'. In addition, both the audits pointed out certain impacts/issues that need to be addressed. While these are site-specific and do not reflect the situation in the entire MPDPIP project area, they are useful to build necessary safeguards for MPDPIP-11. These observations/issues which were reviewed for the development o f the EMF for MPDPIP-I1 are summarized below.

222. Mid-term Audit: a) Changes in cropping practices: Introduction o f new crops may replace some

existing crops (for example soya replaces wheat, rice and gram). This may lead to certain undesirable impacts. For instance, Soya crop does not leave any residual vegetation which can be used as animal feed (unlike the earlier crops o f gram and wheat). Mono cropping may also lead to deterioration o f soil productivity and increase susceptibility to pests. Thus multi/mixed cropping should be promoted.

b) Loss o f traditional water harvesting practices: Introduction o f tube well irrigation may replace traditional water harvesting practices such as Med Bandi. Technical support provided to SHG members must also focus on retaining relevant traditional practices.

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Loss o f native crop varieties: Introduction o f high yielding varieties o f crops may result in replacement o f native varieties. As the high yielding varieties differ in their demand for water, etc., technical support to avoid any long term environmental impacts i s needed. Sustainability o f water conservation initiatives: Large numbers o f check dams, stop dams, and/or anicuts have been constructed under the MPDPIP-I and have yielded very good results. However, series o f such dams on a single stream may affect downstream flows and lead to disputes over water sharing. Hence, detailed technical assessment and consultation with downstream communities i s necessary. Environmentally proactive initiatives: Sub-projects like whole village sanitation, stop dams with boulder check dams for reducing soil erosion, field bunding, plantation on barren land, bio-gas for entire locality etc. are some of the environment-friendly projects taken up under the MPDPIP I. Training: The environmental component in district level training programs needs to be strengthened.

Final Audit: Water conservation: Sinking o f tube-wells must be supported only in areas where ground water table i s not at critically l ow levels. Renovation o f old stop dams, check dams, etc., needs to be supported. O ld dry wells can be converted into recharge pits. Roof top rain water harvesting need to be supported. Livestock management: The project needs to focus on sound animal management (housing, ventilation, drainage o f wastes, stall feeding). Support for implementation o f mitigation measures: In all the sub-projects, about 10-20% o f the total cost should be set aside to fund the implementation o f mitigation measures. Environmentally Proactive Initiatives: Sub-projects l ike vermicomposting, NADEP composting, bio-gas, etc., which have been implemented in the project should be substantially scaled up. Human Resources: The lack o f an exclusive cellhndividual focusing on the EMF at the state level has affected i t s implementation. There i s a need to appoint senior staff exclusively to supervise the implementation o f the EMF at the state level. Training: To improve the capacity and capability o f the project staff as wel l as the community institutions, special emphasis should be given for capacity building and training on environmental management aspects.

Additional observations: a) An external agency EPCO (Environment Planning and Coordination

Organization, an autonomous institution o f the Government o f Madhya Pradesh) was appointed as the 'Environment Agency' for the MPDPIP to provide technical support (design o f environmental assessment procedures and tools, training, and periodic monitoring o f field implementation). While the expertise o f EPCO has led to the development o f technically sound procedures and tools for environmental assessment, it did lead to weakening o f ownership

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for the EMF implementation in the project. b) Stronger institutional arrangements with a focus on internalizing the EMF

implementation are needed for the second phase o f the MPDPIP.

225. following features:

In view o f the above observations, the EMF for MPDPIP-I1 has incorporated the

a) Detailed Technical Environmental Guidelines (TEGs) specifying impact and mitigation measures for various likely livelihood activities including agriculture, water resource management, and livestock management.

b) Study on district-specific proactive environmental interventions that can be taken up in each o f the project districts.

c) Clear institutional arrangements for implementation o f the EMF specifying roles and responsibilities at the state, district and block levels. A state level position has been created exclusively for attending to the implementation of the EMF.

d) Rather than rely on an external agency, the focus is on internal capacity building to handle both the design and the implementation o f the EMF.

e) A detailed plan for capacity building o f both project staff and community institution members.

Environmental Management Framework

226. The key environmental issues and recommended mitigation measures are summarized below:

I Environmental Issues I Mitigation Measures I Sector mecific Forests and Protected Areas23: I All the forest related activities in this project

~ Degradation o f forests and protected are expected to be small, l ow impact and non- areas due to unsustainable extraction o f ' intrusive in nature. The EMF integrates al l non-timber forest produce, unregulated relevant forest and wildlife laws/regulations open grazing o f livestock, construction , o f the Governments o f India and Madhya o f structures, etc. Pradesh. Environmental screening

' procedures will clearly l i s t activities that are not permissible in forests and in protected

1 areas. I Environmental assessment procedures for ~ activities involving use o f forest resources ~ will include measures for ensuring that (a) requisite permissions are taken, and, (b)

I sustainable use i s practiced. ' Capacity building o f community para

I

23

more than 20% o f their area under forest cover. The 14 project districts are home to 16 protected areas including 3 National Parks and 13 Wildlife Sanctuaries.

Seven o f the 14 project districts (Raisan, Sagar, Damoh, Shivpuri, Panna, Narsinghpur and Sidhi) have

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I Environmental Issues I Mitigation Measures I

fertilizer^^^, Increased use o f hazardous chemical pesticides (classes Ia, Ib and I1 o f the WHO'S Recommended

workers in sustainable extraction o f non-

livestock, etc.

1 I timber forest produce, stall feeding o f

agriculture activities include measures for ensuring technical support for fertilizer planning and integrated pest management

leading to soil degradation, pollution and impact on human and environmental health. Water resources2s : Overexploitation o f groundwater in semi-critical, critical and overexploited basins.

'

Livestock: Land degradation due to open grazing.

General

Environmental assessment procedures for activities involving tube-wells wi l l include measures to ensure that (a) requisite permissions are taken for digging irrigation tube-wells in semi-critical basins and (b) suitable mitigation measures (maintaining safe distance between wells, rain water harvesting, efficient irrigation, etc.) are incorporated Assessment o f livestock carrying capacity o f the village grazing resources (pastures, waste lands) and implementation o f identified mitigation measures (rotational grazing, pasture development, fodder cultivation, stall feeding, etc.)

Cumulative negative impact o f several small SHG livelihood activities on the local natural resources Poor compliance with environmental safeguard requirements

Assessment o f cumulative impacts at the ~ 1 village level and implementation o f identified ,

~ mitigation measures

' Clearly defined institutional arrangements for ' EMF implementation and capacity building ~ at all levels for project staff and community l institutions

I

24 Five o f the 14 project districts (Narsingpur, Damoh, Chattarpur, Rewa and Sidhi) are classified as having soils poor in Nitrogen and Phosphorus nutrients 25

exploited ground water status One project district - Shajapur - has 8 blocks classified as having semi-critical, critical and over-

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Environmental Assessment25

227. Environmental assessment i s viewed as an integral part o f the appraisal process o f both the Se l f Help Group (SHG) Livelihood Plans and the Producer Organization (PO) Business Plans. All SHG Livelihood Plans and PO Business Plans first go through a Screening process. The screening involves (a) checking that the activity i s permissible (as per the legal and regulatory requirements o f the project) and, (b) determining the level o f environmental assessment that the SHG Livelihood Plan or PO Business Plan requires based on the level o f expected impacts. SHG Livelihood Plans would be classified as either 'low' category (basic environmental assessment required) or 'medium' category (detailed environmental assessment required). It i s expected that most SHG Livelihood Plans would be in the 'low' category. PO Business Plans would be classified as either 'medium' category (detailed environmental assessment required) or 'high' category (detailed environmental assessment by an external technical agency required). It i s expected that most PO Business Plans would be in the 'medium' category. The SHG conducts the screening and environmental assessment o f the Livelihood Plan with support o f PFT.

228. The Livelihood Plan i s sent along with the Environmental Actions Agreement Form (EAAF) through the PFT to DPSU. The DPSU will review the EAAF and send i t s recommendation to the VDC. The VDC will review the EAAF (and the DPSU's recommendations) and provide environmental approval to the SHG Livelihood Plan. The screening and environmental assessment o f PO Business Plans i s done by the District Environment Coordinator o f the District Project Support Unit and the PO i s facilitated to fill the EAAF. The SPSU will review the EAAF and give environmental approval o f the PO Business Plans. The EMF provides for a Screening Tool, detailed sector-specific Technical Environmental Guidelines (TEGs) to aid in the assessment o f SHG Livelihood Plans (for both 'low' and 'medium' categories) and PO Business Plans (for the 'medium' category) as well as E M F formats. The assessment process ensures that appropriate mitigation measures are identified and are integrated in the design and implementation plans o f both the SHG Livelihood Plans and the PO Business Plans.

Supervision, Monitoring and Audit:

229. Environmental supervision: A sample o f 10% o f VDCs and 100% o f POs will be visited at six-monthly intervals by a team from the District Project Support Unit (DPSU) (for supervision o f both VDCs and POs) and from the State Project Support Unit (SPSU) (for supervision o f POs) to check if all safeguard requirements are met and to identify any issues that need to be addressed. The EMF includes details o f the sampling procedure, guidelines for conducting the supervision, format o f the supervision report, etc.

230. Environmental monitoring: Once every year, the State Project Support Unit (SPSU) will prepare a report o f the environmental situation in the state including data and

environmental screening category B (partial assessment) 25

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analysis o f relevant parameters such as status o f groundwater basins as we l l as a listing o f relevant new legislation and regulations that have a bearing on the environmental performance o f the project. The EMF will be suitably revised annually on the basis o f this document by the SPSU.

231. Environmental audit: An external agency will be appointed by the SPSU to undertake an independent audit o f the environmental performance o f the project. Two such audits will be conducted during the project duration. In addition, the SPSU will conduct a process review o f the environment management framework at the end o f the f i rst year o f the project. The EMF presents details o f sampling and a l i s t o f performance indicators to be used in the audit.

Institutional Arrangements and Capacity Building:

232. out at state, district and village levels.

Roles and responsibilities for ensuring EMF implementation have been detailed

Level

State

District

Sub-District

Village

Institution : Functionary

State Project Support Unit (SPSU): State Environment Coordinator (exclusive responsibility)

District Project Support Unit (DPSU): District Environment Coordinator (additional responsibility)

Project Facilitating Team (PFT): Coordinator Village Development Community

Key Responsibility

0 Overall responsibility o f implementation o f EMF 0 Ensure allocation o f required human resources at all levels for

EMF implementation 0 Ensure that all legal and regulatory requirements are satisfied 0 Ensure that environmental assessment i s an integral part of

appraisal o f SHG Livelihood Plans and PO Business Plans 0 Provide environmental approval o f PO Business Plans 0 Ensure regular updating and availability o f TEGs to all

project functionaries and community institution partners 0 Report to the World Bank on EMF progress as part o f regular

project reporting requirements o f DPIP I1 0 Overall responsibility o f implementation o f EMF in district 0 Liaison with line departments at the district level for securing

support for EMF implementation 0 Ensure that environmental assessment i s done as part o f

appraisal o f SHG Livelihood Plans in the district 0 Conduct the environmental assessment o f PO Business Plans

in the district (including facilitating the PO in identification o f suitable mitigation measures and filling the E M F )

0 Ensure capacity building on the EMF in the district 0 Report to the State Environment Coordinator on EMF

progress 0 Facilitate environmental assessment o f the SHG Livelihood

Plans by the SHG 0 Ensure training o f VDCs, para-workers, etc., on

environmental assessment and management 0 Provide environmental approval o f the SHG Livelihood Plans

and ensure implementation o f necessary mitigation measures

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Level

Sub-village I Members

Institution : Key Responsibility Functionary

(VDC): Executive Committee Self Help Group: 0 Conduct screening and environmental assessment o f SHG

Federation Producer Organization (PO): Chief Executive Officer

I

Livelihood Plan with support from PFT (including identification o f suitable mitigation measures and filling the EAAF)

0 Implementation of necessary mitigation measures to contribute to environmental sustainability o f the livelihood activity

0 Ensure that the activities o f the PO satisfy al l legal and regulatory requirements specified in the EMF

0 Identify suitable mitigation measures and fill in the EAAF with support from the District Environment Coordinator

0 Implementation o f mitigation measures to contribute to environmental sustainability o f the livelihood activity

233. The capacity building strategy involves provision o f relevant training on the EMF to community institutions (VDCs, POs) and project staff at al l levels (State and District Project Support Units). Training on environmental safeguards and assessment procedures wi l l be part o f all training programs for SHGs on preparation o f Livelihood Plans, for VDCs on appraisal o f SHG Livelihood Plans, and for POs. The training will be conducted by the District Environment Coordinator with support from external resource agencies. Skill based training on environmental management for para-workers on themes such as soil testing, non-chemical pest management, sustainable NTFP extraction, etc., i s also planned. Also, training on the environmental assessment procedures w i l l be part o f - all orientatiodinduction programs conducted for newly recruited project management staff (at state, district and PFT levels); all awareness programs conducted for empanelled appraisers, outsourced technical service providers, resource agencies; etc. There wi l l be four training modules as below:

a) T1, Training on the Environmental Management Framework: for the Civil Engineer at the PFT level and Agriculture Coordinator at the DPSU level (key environmental personnel).

b) T2. Training on Environmental Appraisal and Management: for the VDCs, Para-workers, and Producer Organizations.

c) T3. Environmental Awareness and Sensitization: for all SPSU, DPSU and PFT staff, and Community partners.

d) T4. Thematic Training: for SHGs, Para-workers and other beneficiaries on demand.

234. Budget; It i s estimated that the Environment Management Framework (EMF) wi l l require a budget o f approximately US$200,000 (exclusive o f staff professional costs) that has been exclusively earmarked for i t s implementation.

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Performance Indicators

235. A set o f 10 performance indicators have been developed to enable capturing the environmental performance o f the project. These indicators will be integrated into the project MIS so that regular and periodic information is gathered by the PFTs and sent to the SPSU through the DPSU.

Environmental Outcomes: Percentage o f SHGs adopting improved agriculture practices / technologies (integrated or non-chemical pest management; integrated nutrient management; etc.) to the total numbers o f SHGs who have taken loan for improved agriculture. Percentage o f tubewells supported by the project adopting water conservation measures and safeguard measures (recharge, harvesting, drip/sprinkler irrigation, irrigation scheduling, distance from nearest tube well, copy o f permit for digging up a tube well if required etc.) to the total number o f tubewells supported by the project. Percentage o f livestock activity supported by the project adopting environmental safeguard measures (hygiene in shed, rotational grazing and harvesting, fodder cultivation, stall feeding etc.) to the total number o f livestock activity supported by the project. Number o f SHG that are successfully operating environmentally proactive activities (for example, biogas, non-chemical pest management, sustainable NTFP extraction, etc.) as a percentage o f total SHGs involved in environmentally proactive activities.

Institutional Arrangements and Capacity Building: a) Districts with staff to anchor responsibility o f EMF as a percentage o f total

districts. b) Project staff at state, district and PFT levels trained in EMF as a percentage o f

total staff and relevant levels. c) Percentages o f SHGs, para-workers, VDC Executive Committee members who

have received training on EMF.

Processes: a) Number o f SHG Livelihood Plans and PO Business Plans that have gone through

the specified environmental assessment process and have integrated the relevant mitigation measures as a percentage o f total livelihood plans and business plans.

b) Number o f SHG activities and PO activities visited for supervision o f field implementation o f EMF by the District and State Project Support Units as against the targets specified in the EMF.

c) Number o f external audits conducted as against the target number o f audits specified in the EMF.

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Social Assessment

236. In the MPDPIP, the GoMP commissioned an inclusive and participatory social assessment in the project area which recommended putting in place a Women and Tribal Development Strategy and Plan. Furthermore, the project ensured participation and inclusion o f the vulnerable (women, SCs and the STs) through specific ‘geographic targeting’ by identifying blocks having l o w ranking against eleven weighted poverty indicators; findings and recommendations o f the social assessment; and, district and state level consultations with stakeholders including the communities. The project activities were decided recognizing that women’s opportunities are highly differentiated by the social andor ethnic facts and that al l interventions focusing on them need to address their household and community circumstances too. The project promoted and strengthened Common Interest Groups (CIGs) with a minimum o f 30% participation by women as the core vehicle for development with a specific focus on livelihood security. The CIGs became vehicles for social and political empowerment particularly for women from disadvantaged sections (SCs and STs) o f society. The Project encouraged proactive participation o f non-governmental organizations (NGOs) in community mobilization and in providing feedback on key 1earningAessons during implementation o f various activities.

237. As ‘key learning’ from the f i rst phase, the proposed project will invest more in inclusion o f the STs and building capacity o f community institutions to monitor activities, inputs and performance. Specifically, the Project in the proposed phase would be promoting and strengthening a livelihood strategy aligned with the tribal culture and the available forests and land contexts. I t will, further, respond to the immense importance o f Non-Timber forest produce (NTFP) in the lives o f the tribals, especially the landless tribals and the policy issues involved in ensuring their rights over natural resources. The project shall be investing in creating employability skills, opportunistic migration and developing sustainable harvesting mechanisms and value addition through market and enterprise development for the STs in the intervention areas. Furthermore, the Project will facilitate social audit(s) by community groups to monitor a) the utilization o f funds; b) procurement o f goods and services; and c) financial efficiency and accountability.

238. Indigenous Peoples (OP/BP. 4.10): As per the 2001 Census, Madhya Pradesh has a population o f almost 12 mi l l ion STs, which i s roughly 20.27% o f the State’s total population (three significant Primitive Tribal Groups, as defined by the GoI, Baiga, Bhariya and Sahariya, inhabit the state). The state has constituted 11 agencies to work for the welfare and development o f the STs. Under the IRDP, the state has 26 large and medium programs, 30 MADA pockets and 6 small circles. The state has 89 ST Development Blocks covering the total tribal population.

239. The districts selected under DPIP in Madhya Pradesh fall outside the concentrated tribal areas o f the state. Proportion o f tribals in the total population o f the districts i s less than 15 percent with the exception o f one district Sidhi where this i s 30 percent (Refer Table 2 on page for district wise details). Even so the number and status o f tribal as

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among the poorest in these districts warrants specific attention to aspects o f their participation and intended benefits from the DPIP. Deliberate, strategic measures and protective regimes have to combine with relevant programs in order to ensure that benefits actually accrue to vulnerable sections such as the tribal communities. District level social assessments carried out under DPIP have taken note o f the presence o f the tribal community as amongst the poorest communities in these districts. The social assessment undertaken in the districts have analyzed the special predicament o f these communities and possibilities o f interventions in their favor.

240. Thus in accordance with the Bank policy on indigenous (tribal) people outlined in its operational directive OP/BP 4.10 on indigenous people, the project has prepared a Tribal Development Plan (TDP) that ensures that the tribal communities participate in the project, are involved in decision making, and derive full benefits from project interventions. The TDP i s based on information acquired through participatory social assessment commissioned by the project and consultations with key stakeholders at al l levels.

Tribal Development Plan (TDP)

241. The objective o f the TDP under the proposed project would be to ensure empowerment o f the poor ST communities and improve their livelihoods through enhanced participation and proactive engagement in al l the components o f the projects. The proposed project would lay emphasis on (a) developing and strengthening SHGs among tribal communities and ensuring their appropriate and adequate representation in the federations o f the SHGs formed through project interventions; (b) strengthening access to institutions - both private and public; and, (c) developing I E C materials and events that would be sensitive and meaningful for the tribal communities. The project investments will promote due respect to the dignity, entitlements and cultural uniqueness o f the tribal community including the primitive tribal groups (PTGs).

242. Scope: Although al l the blocks are to be covered in this phase, however the DPSU will in accordance with the project objectives, prioritize pockets o f tribal concentration for sequencing coverage and outreach.

243. captured in the table below:

Kev Elements o f Tribal Stratew: The Key Elements o f the Tribal Plan have been

244. Preference in selection o f blocks - In the second phase o f DPIP, the project aims to cover al l the villages o f the 14 districts o f phase -I. To achieve the project objective of reaching the poorest, it i s therefore important to put in place a mechanism for prioritizing work in poorer tribal blocks. The project will put in place a composite index for prioritizing the block selection process.

245. Higher investment in infrastructure in deprived areas - The extent o f deprivation or family deficit influencing the ability to come out o f the vicious cycle, being a criterion,

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the project shall take up a differential limit o f investment for tribal families or tribal pockets where exclusion i s identified.

246. Contribution for tribal fami l ies - The learning from Phase I indicates that cash contribution was a major deterrent to participation o f indigenous peoples. In this phase, the project shall adopt a mobilization strategy wherein the community i t se l f shall fix the criteria for contribution by indigenous peoples this gives them the flexibility o f less contribution as per the capacities o f the members and an option o f contribution in kind can also be offered.

247. Tribal oriented Livelihood Promotion Strategy to Focus on Land and Forests - More o f land and forest oriented livelihood promotion strategy, which utilizes their inherent attachment to these, and builds upon it rather than a completely alien set of activities, would be the primary strategy. Considering the immense importance o f N o n Timber Forest Produce (NTFP) in the lives o f the tribals, especially the landless tribals, and the policy issues involved in ensuring the rights o f the tribals over the resource, the various issues involved in NTFP development need to be addressed. For example:

0 sustainable harvesting mechanisms; and the issue o f NTFP Conservation & Augmentation;

value addition, marketing and enterprise development

248. In each o f the tribal areas, NTFP groupdassociations - including JFM committees and Village Forest Protection Committees - will be linked to the VDCs, or formed where needed. They would also be trained as the key unit for other diversification and development initiatives to take off. Close cooperation and joint project initiatives need to be put in place between the Forest Department and this project will have to be given a priority for addressing issues o f NTFP trade, control and value addition. Where present, forest management committees will be inducted into the project’s natural resource management framework. On the basis o f the Environment Management Framework o f MPDPIP-I1 the institutions l ike SHG and V D C shall be capacitated in this area. I t i s imperative therefore; that the present project revisits these marginalized communities through: a) Holistic Natural Resource Based Livelihood Approach and b) An Institutional Development & Local Governance perspective which builds from existing traditional cultural practices and has the ability to converge with project initiatives. ,

249. The second aspect o f the tribal livelihoods plan will ensure that tribal livelihoods to be supported through value chain analysis and asset creation for producer companies or SHG federations, through the prioritization o f tribal livelihood activities (for example non-timber forest produce) in blocks where population i s higher than 30%. In other areas, value chain analysis will prioritize the inclusion o f tribals in value chain activities. In addition, innovative approaches ensuring gainful involvement o f the communities will be achieved through the Employability skill training component o f the project.

250. Institutional Strengthening & Development As DPIP Phase I1 will have a strategy focusing upon SHG formation and strengthening, as part o f the mobilization process, tribal communities will be provided information, rules, and non-negotiable, through

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appropriate channels/medium about the program. Further, tribal communities will be encouraged to be part o f the SHGs and will receive additional training on key issues including: concept o f saving, book keeping, and meeting. This in turn shall answer the problem o f indebtedness faced by the poor and the ultra poor and especially tribal. The SHG-VDC-CFO institutional arrangement provides access to the timely credit with due respect to the member.

251. In areas where there are concentrated tribal populations, SHGs o f tribal communities will be promoted and nurtured. In areas o f mixed populations, efforts will be made to mobilize tribal communities along with the other l e f t out poor in the village into SHGs. The Project Facilitation Team and the Animators facilitating this process will have and or will be capacitated with the requisite ski l ls and expertise to work with Tribal communities.

252. Tribal Service Providers: The project shall promote capacity building o f indigenous peoples to take on the roles o f service providers, supervisors etc.

253. Focus on Employability Sk i l ls and Support for opportunistic migration: L o w agriculture productivity and l o w level o f literacy, forces the tribal population to look for jobs in urban areas, the project focuses on employability skill training and post placement support.

254. Legal Advisor: The project shall make a provision for hiring a legal advisor as per the tribal concentrated as and when required areas to address and advise upon the legal compliances.

Key Safeguard Measures as Part of Project Cycle

initial meeting Tribal

important posts on 10 member executive.

position o f the president o f

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Gender Action Plan (GAP)

255. The SHG movement has universally now been acknowledged to be a good instrument to act as the preparation ground for women’s empowerment. Experiences on a large scale in many projects, have widely acknowledged this. In Madhya Pradesh the SHG movement has not really taken off. There have been projects aimed at enhancing women’s status and well-being, but in the absence o f an integrated approach o f looking at women’s situation, the efforts remained limited till group formation and strengthening. Addressing the core issue o f enhancing women’s economic status and thereby making a dent in their position in the family i s required. Integrating social mobilization efforts with ensuring access to productive assets and thus earnings i s the key cornerstone o f this strategy.

256. The participation o f women would be the key factor in implementing the Social Inclusion especially in Gender Action Plan. Poor men and women would be sensitized for enhancing the women’s participation in community affairs. The strategy would be to promote women’s active involvement in the process o f development and their effective participation in decision making. All project functionaries would be sensitized on gender issues. The key areas in ensuring gender equality in the project intervention could be through following:

257. To ensure outreach to the rural poor women residing in the remotest o f the intervention village the process begins form the recruitment and selection o f female employees at the PFT, DPSU and the SPSU level by giving preference. This further includes provision for safe and secure working environment for the female employees by developing a healthy work culture. And also provision for mobil i ty and transport facility to be arranged by the project.

258. Creation of a pool of women development $eld workers: The project shall give preference to female candidates while selecting Village Resource Person and Para workers.

259. Orientation: Once the PFTs and DPSUs are in place with the women members, the orientation programs would get started. Apart from other things the teams shall be taken on exposure vis i ts to places where some good work has been done with women. A Gender sensitization module too shall be included in the orientation program.

260. Intensive capacity building and awareness: This i s the most critical area o f the project. The task o f Capacity building will be done at two levels - one at the level o f the PFTs and the DPSUs and second at the level o f the rural women. In the initial months the focus will be on group formation. In order to ensure proper targeting the PFT members as well as the district functionaries shall develop group formation and Socio-political analysis skills as well as an ability to watch closely the dynamics their presence i s generating in the village community. This process i s l ikely to go on simultaneously during the entry point activities and SHG formation. Then while facilitating the group in the livelihood activity the project staff shall emphasis upon proper implementation o f the

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livelihood plan that shall be ensured through capacity building at every step o f implementation o f the livelihood activity.

261. Selection of activities where women have an advantage: The project has an enormous coverage o f villages in the 14 districts this indicates that the project shall work closely with the local administration. Looking at the governmental setup o f the project staff a village level convergence i s strongly recommended. The project cannot work in isolation as women are largely affected by social arrangements in the village. And looking at the livelihood generation motive o f the project it might be more effective if the social environment could be positively activated for the female beneficiaries. Therefore the SHGs and, especially the VDCs, shall be sensitized upon the social issues. And the project might as well facilitate convergence with other health, TSC, NRHM, PRI, Anganwaari and educational schemes o f the government. The Village Development Committees formed under the MPDPIP-I did it quite successfully and have emerged as strong voice for the voiceless poor women.

262. Selection of women in community institution 's governance structures: The project foresees that saving and credit i s a more popular activity among women. The SHGs and the VDCs to be formed under MPDPIP-I1 shall only begin around the premise o f microfinance. Beginning with SHGs may lead to developing a financial discipline in the members. The Village Development Committees shall cater to the more intensive microfinance management woven with social empowerment o f the women. The project shall strictly monitor the number o f women SHGs and in the VDCs a majority o f members will be women. The women shall play a vital role in building the social capital in the village through these committees.

263. Access and control of assets by women: The women residing in the rural largely misses the rights and ownership o f assets. This i s identified as the one o f the factors responsible for oppressions faced by them in the society. The project offers an opportunity where the poor and the ultra poor also has an opportunity to create productive assets, here the project ensures that the asset i s registered under woman name where she becomes the sole or at least joint owner o f that asset.

264. Institutional support for effective participation: The PRA found that only men were the members o f the agriculture credit society and that bankers preferred to have men as the kisan credit card (KCC) holders. Women are having no linkages with banks especially in the poor and the ultra poor. The MPDPIP -11 therefore shall positively activate the role o f the bankers by constantly involving them in the development interventions and create more favorable conditions for the women and their institutions in financial transaction with the banks.

265. Livelihood enhancement: The project does not want to promote a savings and credit SHG only. But taking learning's from the various SHG programs and the MPDPIP- I experience the project carefully weaves the livelihood enhancement with in the SHG concept. The DPIP-I has given many such examples where women based livelihood groups and their federations have been extremely successful in strengthening the

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economic conditions o f them and their families. The project shall strategize upon the pre tested interventions l ike - poultry, dairy, goat rearing, glass beads, carpet, jute and bamboo craft etc have proven i t s grounds with women.

Operational Arrangements for Inclusion o f Women

266. Staffing: For implementing the GAP, the project will have a Gender & Social Coordinator anchoring this aspect under the project at the SPSU in coordination with the Livelihoods Coordinator (In charge Gender Coordinator). All PFT members, VRPs and paraworkers will be sensitized on Gender issues and the PFT members will undergo a comprehensive training to implement the GAP.

Key Indicators on Inclusion of Women

Start up activity

Awareness building and communication

Institution formation

Mobilization, Institutional strengthening & Representation Livelihood Investment Plan and consolidation Skill training for rural youth Grievance Redressal Monitoring and Learning

Indicators Habitation and Village baseline data o f women Present socio-economic status (group inclusion, links to federation etc) Development of IEC materials Coverage o f IEC campaign Awareness levels among poor and ultra poor groups with focus on women Graduation criteria publicly verified in General Body meeting o f VDC Recruitment o f women PFT members and women as VRP and Para workers Train PFT members VRPs and Para workers on gender issues Women SHG groups formed (at least 50% in the-blockl district) Number o f poor and ultra poor (including women) in existing SHGs Number o f poor and ultra poor (including women) in new SHGs Number o f women federations. Number of women members in federations Number o f Livelihood Investment Plan approved of women SHGs Number o f women SHG Livelihood plan financed by seed capital Funding flows to livelihood activities o f women Number o f women families benefiting from job training

Number o f grievance from women submitted and time taken to resolve.

Number o f al l exclusive women SHGs, Number o f women in Executive Committees o f the VDC (60% minimum) Number o f women Livelihood Investment plan financed by seed capital Number o f loans financed to women by SHGs / VDC/ MFF Number o f loans successfully recovered from the women. Number o f women share holders or members in the SHG federations. Innovation fund extended to al l exclusive women development plan No o f SHG federations like VDC or Producers organization formed with representation from women members. Check on Distress Migration in ST and SC families

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Supervision and Learning

267. Supervision: A sample o f 10% o f VDCs and 25% o f POs will be visited at six- monthly intervals by a team from the District Project Support Unit (DPSU) (for supervision o f both VDCs and POs) and from the State Project Support Unit (SPSU) (for supervision o f POs) to check if al l social safeguard requirements (specifically the TDP) and the GAP are met and to identify any issues that need to be addressed. The Tribal Development and Gender Integration Framework include roles and responsibilities at state, district, sub-district and village levels for their implementation and guidelines for monitoring performance indicators have been integrated with the overall project indicators for monitoring and evaluation.

268. Learning: The project will develop a Learning Culture within DPIP during the current phase and promote periodic reviews and reflections at al l levels including various stakeholders to the extent possible. A core team o f experienced persons from government and the c iv i l society would be created at the State level to provide overall guidance and facilitate learning processes

Public Consultation and Disclosure

269. Disclosure requirements were fulfilled by organizing a series o f disclosure workshops in the state o f Madhya Pradesh (one State level and two regional workshops) with key stakeholders - various interest groups, c iv i l society organizations, media as well as the government. Further, key safeguards documents were translated into local languages and sent to concerned block offices for further dissemination in the project areashillages. These reports have also been made available on-line. Minutes and further details o f these disclosure meetings have been documented as part o f the final drafts o f the safeguard documents. Free and informed consent was taken from all participating stake ho 1 der s .

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Annex 12: Governance Management Framework INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

270. The Governance Management Framework (GMF) builds upon existing governance and accountability elements that are already integrated into the design o f the project. The GMF i s constructed around five key principles, which are:

a.

b.

C.

d.

e.

271.

Institutionalizing governance and accountability polices and systems that will govern project implementation; Reducing complexities related to institutional arrangements for overall management, monitoring and implementation o f project; Developing simple guideline and procedures that the project will be using for implementing the project activities; Deployment o f competent human resources for implementation o f project activities; and Ensuring creation o f strong and independent community level institutional structures that will be essential for project sustainability.

In addition to the above outlined principles, there are certain key design features that are unique to CDD type Rural Livelihoods Projects, which need to be kept in perspective for developing and operationalizing the GMF. These key design features are:

a. The powers vested in the communities set the rural livelihood projects apart from other Bank projects involving delivery o f services or infrastructure by state to citizens.

b. Community empowerment and community level institutions building i s at the core o f the project and applies to about 80% o f the project funds, i s the f i rst and most powerful good governance measure in the project.

c. The primary challenge o f the proposed GMF in the project i s to support communities in adhering to the good governance practices included in the Project Implementation Plan and Community Operational Manual (COM).

d. The project will be implemented by a P I U which i s registered as a Society, with clear bye-laws, rules, regulations and governance structure.

272. As the rural community will be at the cutting edge for most actions for the project, quality o f facilitation by the project and capacity at the community levels will be the driving force for delivering not only on project outcomes but also in enhancing good governance practices.

273. In various sections o f the PAD and operational manuals there are well articulated and clear sections on the policy environment within which the project will be operational, the institutional structure for decision making and delivery o f project activities, framework on recruitment o f project staff, a separate manual on procurement & financial management, and a detailed C O M that lays out the entire implementation processes and procedures that the community will be using to implement project activities at their level.

274. related vulnerability was done which i s presented below.

Based on the above understanding a detailed analysis on the key risk areas and

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275. After reviewing the overall design o f the project, PIP, COM and consultation with the project team, the following Governance and Accountability Action Plan (GAAP) i s prepared for implementation by the project. Project implementation has various intrinsic risks; the project has identified some o f the major risks that can have an adverse bearing on the success o f the project.

276. The GAAP basically summarizes the key risk areas that are rated as substantial and some risks that are rated as moderate for specific actions that needs to taken proactively by the project in order to deliver on establishing good governance practices. The l i s t below i s not necessarily comprehensive one and it is very likely that some more may be encountered during the project implementation stage.

277. (GAAP) to address the identified risks as per the table below:

Accordingly, the project has come up with a Governance and Accountability Action Plan

Governance and Accountabil i tv Act ion Plan

Issues Identified For Monitoring

Un-availability o f competent human resource from the market.

Elite members putting pressure on decision making o f SHG & V D C functioning.

Delay in recruitment, induction and placement o f Staff

Proposed Mitigation Measures

The project has developed a Human Resource Strategy that includes provisions to attract the best possible human resource available f rom the market, specifically on salary packages and compensations that are competitively matched with similar projects and development organizations. Also, other non-financial incentives are included in the strategy. As part o f the overall monitoring, the project has in- built social accountability measures which include social audit, disclosure and approval at the general body level.

The project will also institutionalize a process monitoring systems, which periodically will conduct process checks and report on the same.

The project has put in place a plan for systematic and timely recruitment o f staff using retroactive financine before

Specific Milestones

Human Resource Policy and HR Management Manual finalized and approved by the GoMP.

Separate Manual on Social Accountability Developed and Ready for Implementation.

Process Monitoring System with implementation plan finalized.

Based on the HR Policy and HR Management Manual. HR

BY When

Negotiations

June 2009

Negotiations

110

Issues Identified F o r Monitoring

Implementation o f transparency and disclosure measures.

Deficient Grievance Redressal and complaints handling system.

Risk Rating: Moderate

Proposed Mitigation Measures

negotiations.

An induction and placement plan i s in place for immediate establishment of district and sub-district offices.

A website i s designed for the project to disseminate information,

A proactive public disclosure system will be developed during the initiation stage of the project and al l information will be available to the public on demand.

The project will be subject to al l provisions as outlined in the RTI Act.

At the community level locally appropriate disclosure processes and transparency mechanisms like wall writing, local information nodes and translation o f materials are planned and elaborated in PIP and COM.

Al l Tenders and Contract Award Notices will be displayed on the project Website. Award notices will be published on the website on a quarterly basis. The procedures for user’s access to register complaints will be published and notified through various mediums.

Dedicated telephone and computerized system for filing complaints by anyone, investigation by sub committee and reporting to High Level State Committee for follow UD.

Specific Milestones

Recruitment Plan i s prepared.

Recruitment o f staff completed.

Staff Induction plan prepared and i s implemented. Updating o f current website completed.

P I 0 appointed to address RTI related issues.

COM with transparency and accountability sections finalized.

Training* and awareness building at community level undertaken.

User’s access to register complaints published and notified.

Dedicated telephone installed

Computerized system i s established.

BY When

Negotiations (*continuous)

June 2009

111

Issues Identified For Monitoring

Lack o f capacity at VDC level to account project funds and manage the loan revolving fund

Risk Rating: Moderate

Intentional manipulation o f SHG or VDC ratings to have quick access to Seed Funds and Livelihoods Investment Support Funds.

Risk Rating: Moderate

Proposed Mitigation Measures

actions and responding to the complainant.

Complaints will be segregated in order o f gravity and senior officers may be asked to process serious cases and report in given timeframe. During supervision mission regular review o f progress in handling complaints will be undertaken.

Commissioning o f computerized system for a data base on complaint received and action taken.

Al l Guidelines and documentation including bidding instructions will carry the details o f Complaints management system. VDC’s preparedness to receive funds will be rated based on achievement o f certain milestones such as Bank Acc., bookkeepers and account books in place for management o f project funds.

Independent appraisal teams will send periodically to re-check a sample o f SHGs and VDCs that have accessed Seed Funds and Livelihoods Investment Support Funds.

Tools like appraisal by peer groups between villages will be used address such practices.

Specific Milestones

Supervision missions reviews complaints.

Computerized system for data base functional.

VDC’s trained and are aware about milestones for funds access

Training module on Book Keeping and Accounts Developed

Book Keeper’s training conducted Independent Appraisal Teams Commissioned

Peer groups formed and assessments initiated.*

BY When

Continuous

June 2009 (*continuous)

112

278. I t i s important to note that the above presented GAAP i s a live action plan and i s not a one time plan; it will be monitored and reviewed periodically. Based on the implementation stages of the project, different action points will be included in the GAAP in consultation with the project team.

279. The implementation o f GAAP will be under the overall supervision and over-sight of the Project Coordinator at the State Level. Similarly at the District Level and sub-District level the District Project Manager and the PFT Coordinator will be accountable for implementation o f GAAP activities, respectively. In addition, the project will have various dedicated officers for various action points as indicated in the GAAP above. The implementation structure i s elaborated in Annex 6. In addition, the project will appointhorninate one person as Project Information Officer (mandatory under RTI, Act) and one Grievance Handling Officer, who will be responsible for handling the Grievance Handling System.

280. Monitoring the GAAP: The milestones and timeline indicated in the GAAP above will be monitored by the Bank Task Team on a regular basis during supervision mission or through interim missions. Earlier identified key areas or evolving issues related to governance, if needed, will be taken up as focus issues for further diagnosis under the process monitoring system or through administration o f an independent external evaluation. These systems will not only look at issues from the project perspective but will assess the issues holistically involving all stakeholders, including the Bank.

281. During supervision missions, Bank team along with project will jointly agree on the governance related issues that needs further analysis and develop a clear Terms o f Reference for initiating independent external evaluations, if needed and mutually agreed. The will be done on a regular basis depending on the gravity o f issues and frequency o f these external evaluations will be decided accordingly.

282. Communication: Strategic communication on governance practices and related issues i s critical for sustaining governance related outcomes. The PIP has an elaborate chapter on communications and that explains all communications aspects o f the project.

283. However, for governance related issues there project will proactively update information (in a timely manner) in the project website, develop and circulate periodicals on good governance practices and actively involve media to disseminating information about the project. For this purpose the project will have a dedicated staff as Communication Officer.

284. Cost for implementation o f GAAP: The costs for governance related activities are integrated across the various project activities o f the different components. In addition, approximately US$ 0.12 mil l ion has been specifically allocated under the project costs for the mainstreaming o f various activities as outlined in the GAAP under the Program Management Component.

113

Annex 13: Project Preparation and Supervision INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

Juan Carlos Alvarez Vijaysekar Kalavakonda Kalyani Kandula Vibhuti Narang Khanna Kalesh Kumar Priti Kumar

Planned Actual PCN review 02/2 8/200 8 06/10/2008

203490 Senior Counsel LEGES 183209 Senior Insurance Specialist FPDSN 303861 Consultant - Env. Safeguards SASDN 304408 Team Assistant SASDO 3273 16 Sr. Procurement Specialist SARPS 2 1023 1 Senior Environmental SDecialist SASDN

Initial PID to PIC 06/27/2008 07/0 8/2 00 8 Initial I S D S to PIC 06/27/2008 07/09/2008 Appraisal 10/30/2008 01/20/2009 Negotiations 12/15/2008 06/02/2009 Board/RVP approval 02/26/2009 Planned date o f effectiveness 03/01/2009 Planned date o f mid-term review 12/01/2011 Planned closing date 12/31/2014

Xueming Liu Elliot Mghenyi Shankar Narayanan Thao L e Nguyen Martien Van NieuwkooD

285. Bank staff and consultants who have and/or are working on the project include:

Economist - FAO/CP 3 161 00 Agricultural Economist - YP SASDA 201 919 Sr. Social Development Specialist SASDS 01 6934 Senior Finance Officer LOAFC 84783 Program Coordinator AFTAR

114

286.

287.

288.

The funds expended to date on project preparation are estimated as follows: Bank resources: US$200,000

Total: US$298,000 Trust funds and FAO: US$98,000

The estimated approval and supervision costs: Remaining costs to approval: US$50,000 Estimated annual supervision cost: US$120,000

The overall supervision strategy for MPDPIP-I1 project will draw heavily from the lessons learned from the India health sector DIR report and best practice in supervising C D D and livelihoods project’s in other countries. The project will use a combination o f project monitoring tools and systems developed to ensure depth in supervision, reduce corruption and strengthen governance, physical supervision by Bank teams with expert staff, third-party monitors, a complaints handling mechanism and physical, financial and technical audit.

289. Key lessons from the DIR incorporated in the supervision strategy are: (a) the need for comprehensive site visitdphysical verification by Bank-managed teams; (b) independent verification o f project activities; (c) fol low up on detailed fiduciary issues highlighted in aide- memoires; (d) strengthening o f prior and post-reviews o f contract procurement to highlight fiduciary red flags such as collusion and price-fixing; (e) verifying authenticity o f bidders; (f) reconciling payments with contracts; and (g) supervising large numbers o f decentralized low- value procurement. Supervision teams will also consist o f fiduciary @rocurement/FM) specialists who will visit the project.

290. The project will also have an in-built social accountability mechanism at the level of Community Institutions. (SHG, VDC) which will emphasize transparency and local level accountability in terms o f decision making and grievance redressal. Issues that cannot be dealt with at the community level will be referred to the projects Grievance Redressal Center within the SPSU.

115

Annex 14: Documents in the Project Fi le INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

1. Project Implementation Plan, Community Operations Manuals prepared by MP SPSU; 2. Baseline survey (carried out by MP DPIP SPSU) 3. Ex-post Economic analysis (2008) Prepared by MP DPIP; 4. Social assessment, Tribal Development Plan and Gender Action Plan (Commissioned by

the M P DPIP SPSU); 5. Environmental Management Framework prepared by M P SPSU; 6. MP DPIP I1 Project Concept Note, Project Information Document and Integrated

Safeguards Data Sheet; 7. Governance and Accountability Framework and Governance and Accountability Action

Plan; 8. Risk mitigation matrix and Supervision Strategy; 9. Implementation Completion Report for the f i rs t MP DPIP.

116

Annex 15: Statement o f Loans and Credits

INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

Difference between expected and actual

disbursements Original Amount in US$ Millions

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd

PO93478 2009 PO96023 2009 PO94360 2009 PI00735 2009

PI01653 2008 PI02547 2008 PI02737 2008 PO95114 2008 PO78538 2007

PO78539 2007 PO90768 2007 PO90764 2007 PO90592 2007 PO90585 2007 PO83187 2007 PO75174 2007 PO75060 2007 PO96019 2007 PI02768 2007 PO99047 2007 PI00789 2007

PO71160 2007 PO86414 2006 PO92735 2006 PO93720 2006 PO78832 2006 PO79675 2006 PO79708 2006 PO83780 2006 PO86518 2005 PO73370 2005

PO73651 2005 PO84632 2005 PO84792 2005 PO84790 2005 PO75058 2005 PO77977 2005 PO77856 2005

Orissa Rural Livelihoods Project Orissa State Roads National VBD Control&Polio Eradication Orissa Community Tank Management Project Power System Development Project I V Elementary Education (SSA 11) Bihar DPL Rampur Hydropower Project Third National HIV/AIDS Control Project TB I1 T N I A M W A R M Bihar Rural Livelihoods Project Punjab Rural Water Supply & Sanitation Punjab State Roads Project Uttaranchal RWSS AP DPL I11 RCH I1 HP State Roads Project Stren India's Rural Credit Coops Vocational Training India AP Community Tank Management Project Kamataka Health Systems Power System Development Project III NAIP Mid-Himalayan (HP) Watersheds Kamataka Panchayats Strengthening Proj Kam Municipal Reform TN Empwr & Pov Reduction TN Urban Ill SME Financing & Development Madhya Pradesh Water Sector Restructurin DISEASE SURVEILLANCE Hydrology I1

Assam Agric Competitiveness W A R WSIP TN HEALTH SYSTEMS Rural Roads Project

0.00 82.40 250.00 0.00

0.00 521.00 56.00 56.00

1,000.00 0.00 0.00 600.00

150.00 75.00 400.00 0.00

0.00 250.00

0.00 170.00 335.00 150.00

0.00 63.00 0.00 154.00

250.00 0.00 0.00 120.00

150.00 75.00 0.00 360.00

220.00 0.00 300.00 300.00

0.00 280.00 94.50 94.50

0.00 141.83 400.00 0.00

0.00 200.00 0.00 60.00 0.00 120.00

216.00 0.00 0.00 120.00

300.00 0.00 520.00 0.00 394.02 0.00

0.00 68.00 104.98 0.00

0.00 154.00 325.00 0.00

0.00 110.83 99.50 300.00

Lucknow-Muzaffarpur National Highway 620.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 72.67 0.00 250.00 0.00 479.73 0.00 103.80

0.00 753.31 0.00 354.45 0.00 112.02 0.00 318.30 0.00 196.46

0.00 112.22 0.00 425.10 0.00 58.09 0.00 138.18 0.00 143.81 0.00 108.28 0.00 76.02 0.00 218.20 0.00 195.63 0.00 285.19 0.00 210.43 0.00 175.06

0.00 81.60 0.00 28.96 0.00 173.67 0.00 33.00 0.00 79.92 0.00 176.47 0.00 83.21 0.00 199.87 0.00 400.00 0.00 309.34

0.00 52.55 0.00 86.14 0.00 91.64 0.00 246.64

20.06 41.54 0.00 111.18

-3.09 0.00

11.67 -2.83

77.48 2.47

111.10 2.63

106.73

-15.56 97.86 3.06

79.68 -16.29 46.30

-77.33 59.87 22.41

113.58 -4.31 19.38

-15.69 -131.04

59.87 2.61

-33.93 68.81 26.91

100.62 0.00

217.91

43.83 72.36 69.56

139.30 48.25 63.86

0.00 248.00 81.33

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00

0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 41.74

0.00 0.00

23.86 0.00 0.00

117

PO94513 2005 PO73776 2004 PO50655 2004

PO78550 2004 PO82510 2004 PO71272 2003 PO67606 2003 PO50649 2003 PO73094 2003 PO76467 2003 PO72539 2002 PO71033 2002 PO69889 2002 PO40610 2002 PO50668 2002

PO50653 2002 PO50647 2002

lndia Tsunami ERC ALLAHABAD BYPASS RAJASTHAN HEALTH SYSTEMS

DEVELOPMENT Uttar Wtrshed Karnataka UWS Improvement Project AP RURAL POV REDUCTION UP ROADS Th' ROADS AP Comm Forest Mgmt Chatt DRPP KERALA STATE TRANSPORT KARN Tank Mgmt MIZORAM ROADS RAJ WSRP MUMBAl URBAN TRANSPORT PROJECT KARNATAKA RWSS I1 UP WSRP

0.00 240.00

0.00

0.00 39.50

0.00 488.00 348.00

0.00 0.00

255.00 32.00 0.00 0.00

463.00

0.00

465.00 0.00

0.00 0.00 89.00 0.00

69.62 0.00 0.00 0.00

215.03 0.00 0.00 0.00 0.00 0.00

108.00 0.00 112.56 0.00

0.00 0.00 130.90 0.00 78.00 0.00

140.00 0.00 79.00 0.00

151.60 0.00

0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00

0.00

0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00

20.06 0.00

25.07 0.00

25.84 0.00

15.04 40.1 1

390.45 25.16 38.80

34.95 7.58

26.19 105.29 64.96 19.89 49.62 93.72

109.06 15.99 42.58

257.95

16.98 73.38

388.18 23.56 32.52

1.23 7.58

-58.48 105.29 63.29 0.16

56.50 93.72 51.30

-13.12 30.05

245.85

5.17 85.16

0.00 0.00 0.00

0.00 1.73 0.00

0.00 0.00 0.00 0.00 0.00

-5.74 0.00 0.00

99.43

0.00 0.00 0.00 149.20 0.00 0.00

Total: 8,050.50 6,413.47 0.00 0.00 146.18 8,603.23 2,567.33 161.02

INDIA STATEMENT OF IFC's

Held and Disbursed Portfolio In Millions o f US Dollars

Com m itted Disbursed

IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2005 2006 2005 2005 2002 2003 2005 2006 2003 2004 2001 2003 2001 2005 1984 2003 2006 1990

ADPCL AHEL AP Paper Mills APIDC Biotech ATL ATL ATL Atul Ltd BHF BILT BTVL Balrampur Basix Ltd. Bharat Biotech Bihar Sponge CCIL CCIL CESC

39.50 0.00 35.00 0.00 13.81 1.00 9.39 16.77 10.30 0.00 0.43 10.52 0.00 0.00 5.70 1.50 7.00 4.61

7.00 5.08 5.00 4.00 0.00 0.00 0.00 0.00 0.00 0.00 3.98 0.00 0.98 0.00 0.00 0.00 2.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

10.30 15.00 0.00 0.00 0.00 4.50 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 9.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

12.40 0.00

0.00 0.00

25.00 0.00

13.81 0.68 0.00 0.00

10.30 0.00 0.43

10.52 0.00 0.00 5.70 0.59 7.00 4.61

0.00

5.08 5.00 2.01 0.00 0.00 0.00 0.00 0.00 0.00 3.98 0.00 0.98 0.00 0.00 0.00 2.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

10.30 15.00 0.00 0.00 0.00 3.30 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 9.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

12.40 0.00

118

1992 2004 2004 2002 2005 2006 2003 2005 2006 2005 2003 2006 2001 2006 1994 2003 1998 2006 1998 2005

2006 2006 1996 2001 2006 2005 2005 2003 2006 2006 2002 2003 2001

1996 1999 2000

2003 2004 2003 2001 1997 2006 2004 2004 1995 2004

CESC CGL CMScomputers COSMO COSMO Chennai Water DQEL DSCL DSCL Dabur Dewan Federal Bank GTF Fact GTF Fact GVK HDFC IAAF I A L IDFC IDFC IHDC IHDC Indecomm India Direct Fnd Indian Seamless JK Paper K Mahindra INDIA KPIT L&T LGB Lok Fund MMFSL MSSL MahInfra Montaivo Moser Baer Moser Baer Moser Baer Nevis NewPath NewPath Niko Resources Orchid Owens Corning PSL Limited Powerlinks RAK India Rain Calcining Rain Calcining

6.55 14.38 0.00 2.50 0.00 24.78 0.00 30.00 15.00 0.00 8.68 0.00 0.00 0.00 0.00 100.00

0.00 0.00 0.00 50.00 6.94 7.90 0.00

0.00 6.00 15.00 22.00 11.00 50.00 14.21 0.00 7.89 0.00 0.00 0.00 0.00 0.00 12.75 0.00 0.00 0.00 24.44 0.00 5.92 15.00 72.98 20.00 0.00 10.00

0.00 0.00

10.00 0.00

3.73 0.00 1.50 0.00 0.00

14.09 0.00

28.06 1.20 0.00 4.83 0.00 0.47 9.79

10.82 0.00 0.00 0.00 2.51 1.10 0.00 1.62 0.00 2.50 0.00 4.82 2.00 0.00 2.29

10.00 3.00 0.82 8.74

10.54 4.00 9.31 2.79 0.00 0.73 0.00 4.74 0.00 0.00 2.29 0.00

0.00 0.00 2.50 0.00

0.00 0.00

1.50 0.00 0.00 0.00 0.00 0.00 0.00

0.99 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.51 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

14.59 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00

100.00 0.00 0.00 0.00

100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

6.55 7.38 0.00 2.50 0.00 0.00 0.00

30.00 0.00 0.00 8.68 0.00 0.00 0.00 0.00

100.00

0.00 0.00 0.00

50.00 0.00 0.00 0.00

0.00 6.00 0.00

22.00 8.00

50.00 0.00 0.00 7.89 0.00 0.00

0.00 0.00 0.00

12.75 0.00 0.00 0.00

24.44 0.00 5.92 0.00

64.16 20.00

0.00 10.00

0.00 0.00 0.00 0.00

3.73 0.00 1.50 0.00

0.00 14.09 0.00

23.99 1.20 0.00 4.83 0.00 0.30 7.70

10.82 0.00 0.00 0.00 2.57 0.66 0.00 7.38 0.00 2.50 0.00 4.82 0.00 0.00 2.20 0.79 1.08 0.82 8.74

10.54 4.00 8.31 2.49 0.00 0.73 0.00 4.54 0.00 0.00 2.29 0.00

0.00 0.00 0.00 0.00 0.00 0.00 1.50 0.00 0.00 0.00 0.00 0.00 0.00 0.99 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 7.51 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

14.59 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00

100.00 0.00 0.00 0.00

100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

119

2005 2005 2001 1997 2000 1995 2004 200 1 2003 2004 2000 2002 1998 2005 2004 1996 2005 2002 2001 2005 1991 1991 2006

Ramky Ruchi Soya SBI SREI SREI Sara Fund SeaLion Spryance Spryance Sundaram Finance Sundaram Home Sundaram Home TCW/ICICI TISCO UPL United Riceland United Riceland Usha Martin Vysya Bank Vysya Bank w I V Walden-Mgt India iLabs Fund II

3.14 0.00 50.00 3.21 6.50 0.00 4.40 0.00 0.00 42.93 0.00 6.71 0.00

100.00 15.45 5.63 8.50 0.00 0.00 0.00

0.00 0.00 0.00

10.28 9.21 0.00 0.00 0.00 3.43 0.00 1.86 0.93 0.00 2.18 0.00 0.80

0.00 0.00 0.00 0.00 0.72 3.66 3.51 0.37 0.01

20.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

300.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00

0.00 0.00 0.00 3.21 6.50 0.00 4.40 0.00 0.00

42.93 0.00 6.71 0.00 0.00

15.45 5.63 5.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 6.11 0.00 0.00 0.00 3.43 0.00 1.86 0.93 0.00 2.18 0.00 0.80 0.00 0.00 0.00 0.00 0.72 3.66 3.51 0.37 0.01 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total oortfolio: 956.52 249.41 42.30 536.35 604.74 175.91 38.60 236.35

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

2004 CGL 0.01 0.00 0.00 0.00 2000 APCL 0.01 0.00 0.00 0.00 2006 Atul Ltd 0.00 0.01 0.00 0.00 2001 Vysya Bank 0.00 0.00 0.00 0.00 2006 Federal Bank 0.01 0.00 0.00 0.00 2001 GI Wind Farms 0.01 0.00 0.00 0.00 2004 Ocean Sparkle 0.00 0.00 0.00 0.00 2005 Allain Duhangan 0.00 0.00 0.00 0.00

Total pending commitment: 0.04 0.01 0.00 0.00

120

Annex 16: Country at a Glance INDIA: Second Madhya Pradesh District Poverty Initiatives Project (MPDPIP-11)

POVERTY and SOCIAL

2007

GNI per capita (Atlas method, US$) GNi (Atlas method, US$ billions)

Average annual growth, 2001-07

Population (Yd 14 Laborforce (%I 16

M o s t recent estlmate (latest year avallable, 2001-07)

Poverty (%of population below national po vertyline) Urban population (%oftotalpopulation) 29

lndla

1123.3 950

1069.4

P 0 pulat io n, m id-year (miilio ns)

Life expectancyat birth (pars) 64 Infant mortality(per IOOOiive births) 57 Child malnutrition (%of children under5) Access to an improved water source (%ofpopulation)

Gross primary enro Ilm ent (%of sc hoo I-age po pulatio n)

44 89

Literacy (%ofpopulation age 89 61 m

Male 1% Female 0 9

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1987 1997

GDP (US$ billions) 2760 40.9 Gross capital formationlGDP 22.0 23.9

Gross domestic SavingslGDP 20.6 22.6 Gross national savingslGDP 20.9 24.7

Current account balancelGOP -19 -14 Interest payments/GDP 0.7 11 Total debVGDP 20.1 23.0 Total debt serviceie-ports 29.7 216 Present value of debt/GDP Present value of debt/exports

Exports of goods and SewiceslGDP 5.7 D.8

1987-97 1997-07 2006 (average annualgrowth) GDP 5.5 6.9 9.7

Exports Of goods and SeNiCeS 115 15.4 8.9 GDP per capita 3.5 5.3 8.2

LO we;- South mlddle-

Asia Income

1520 880

I339

16 2.1

29 64 62 41 87 58 D8

04 m

2006

98.3 36.0 22.1 33.0 35.3

-11 0.7

13.7 7.5

t2.7 48.5

3,437 1867

6,465

11 15

42 69 41 25 68 89

1t2 0 9

m

2007

1,7710 38.2 213 35.1 37.2

-2.1

2007 2007-11

9.0 8.5 7.7 7.2 7.5 D.8

Ievelopment dlamond'

Life expectancy

GNI Gross

capita enrollment per primary

1

Access to improvedwatersource

1 India LOW~-middia-income g m u ~

iconomlc ratlos' 1 Trade

Indebtedness

.---India

STRUCTURE o f the ECONOMY

(%of GDPJ Agncuiture Industry

services

Househo Id final consumption expenditure General gov't final consumption expenditure Imports of goods andservices

M anufactunng

(average annuaigrowth) Agnculture Industry

M anufactunng SeNiCeS

Household final consumption expenditure General gov't final consumption expenditure Gross capital formation Imports of goods andsewices

1987 1997

294 261 263 268 6 4 8 4

443 471

671 660

71 121 123 n 4

1987-97 1997-07

3.5 2.7 6.3 7.2 6.6 6.8 6.8 8.5

5.5 5.8 4.2 3.9

12.3 W.8 6.8 no

2006 2007

183 778 293 294 6 3 8 4 524 528

567 546 D3 D l 251 244

2006 2007

3.8 4.5 11.0 8.5 12.0 8.8 ni 11.8

0.3 7.3 6.2 5.5 Y.3 0.3

24.5 7.7

Growth o f capl ta l and GDP (%)

" T 1

---Exports &Inports

Note 2007dataare preiiminaryestimates This table was producedfrom the Development Economics LOB database 'Thediamonds showfour key indicators in thecountry(in b0ld)compared withitf income-group average If dataare missing thediamondwll

be incomplete

121

India

P R I C E S and G O V E R N M E N T F I N A N C E 1987 1997 2006 2007

Domestic prices (%changeJ Consumer pnces Implicit GDP deflator

Government finance (%of GDP, includes current grants) Current revenue Current budget balance Overall surDlus/deficit

7 6 7 0 9 3 6 5

6.7 5 3 5 6 4.3

8 4 0 4 -27 -35 -92 -8 3

20.6 22.4 -4.4 -16 -6.5 -5.6

02 03 04 05 06 07

GDPdeflator -CPI

T R A D E

(US$ mi//tons) Total exports (fob)

M anne products Ores and minerals Manufactures

Total imports (cir) Food Fuel and energy Capital goods

Export pnce index(2000=00) Import pnce index (2000-00) Terms of trade (200O=WOJ

1987 1997

9,644 35,680 411 1207

600 1,061 8,85 26,547

8 . 8 9 51,187 1141 1483

3.118 6,64 5,064 9,796

113 16 16 11) 97 x36

2006 2007

128.063 146,632 1,744

7,033 82,818 91657 81,254 238,296

3,291 57,074 52,944 71311

export and import levels ( U S $ m i l v

13oo.000 1 I

B A L A N C E O f P A Y M E N T S

(US$ millions) Evo r t s of goods and services Imports of goods and services Resource balance

Net income Net current transfers

Current account balance

Financing items (net) Changes in net reserves

M e m o : Reserves including goid (US$ millions) Conversion rate (DEC, loca//US$)

1987 1997

6 , 2 6 45,1)9 22,839 59,297 -6,623 -14.188

-1,337 -3,521 2,698 11,630

-5,262 -5,879

4,526 9,772 736 -3.893

2006 2007

204,264 246,071 235,625 297,009

-31361 30,l76

-6,573 27,941 30,06

-9,993 -24,406

46.599 44,282 -36.606 -8,674

/Current account balance t o GDP (Oh)

I s 1

6,223 29,367 '(30 372

86.71) 218,562 45.2 40.3

E X T E R N A L D E B T and R E S O U R C E FLOWS

(US$ millions) Totai debt outstanding and disbursed

1987

55.570 IBRD 4.709 IDA 11615

Total debt service 5,666 IBRD 806 IDA 6 6

Compositionof net resourcefiows Official grants 531 Official creditors 2,498 Private creditors 2,677

Portfolio equity(net inflows) 0 Foreigndirect investment (net inflows) 2 9

World Bank program Commitments 3,504 Disbursements 2.29 Principal repayments 499 Net flows 1,7% Interest payments 476 Net transfers 1.238

1997

94.30 8,138

0,912

12,413 1,4x) 381

2006 2007

153,075 6.07 7,040

24,059 26,5t2

0.879 597 739 841 915

/ C o m p o s i t i o n o f 2006 debt (US$ mill.]

i G H.971 A 6'm

549 -406 1,089 3,577 2.556

673 2 144

B 097 0 453 9 549

2,306 1,372 1.070 302 72 1

- 4 8

1226 3.04 1,767 1905 942 1089 645 8 6 496 566 349 251

I A - I B R D E - Bilaterd B - IDA D - Mher mltilaterd F . Private

! C . I M F G - Short-ten

Note This tablewas producedfrom the Deveiopment Economics LDB database. 9/24/08

122

JhabuaJhabua

UjjainUjjainRatlamRatlam

DewasDewas

DharDhar

MandsaurMandsaur

SehoreSehore

RajgarhRajgarh

ShajapurShajapur

GunaGuna

VidishaVidisha

RaisenRaisen

KhargonKhargon KhandwaKhandwa

BetulBetulChhindwaraChhindwara SeoniSeoni

NarsimhapurNarsimhapur

HoshangabadHoshangabad

SagarSagar DamohDamoh

JabalpurJabalpur

MandlaMandla

BalaghatBalaghat

ShahdolShahdol

SidhiSidhi

RewaRewaSatnaSatnaPannaPanna

ChhatarpurChhatarpurTikamgarhTikamgarh

ShivpuriShivpuri

DatiaDatia

GwaliorGwalior

MorenaMorena BhindBhind

ShyopurShyopur

KatniKatni

UmariaUmaria

DindoriDindori

HardaHarda

BarwaniBarwani

NimachNimach

BHOPALBHOPALCH

HATARPU

R

CHHATA

RPUR

TIKAMGARH

TIKAMGARH

BARWANIBARWANI

BHOPALBHOPAL

NIMACHNIMACHMA

NDSA

UR

MAND

SAUR

RATLA

MRA

TLAM

UJJAINUJJAIN

JHABUAJHABUA

DHARDHAR

INDOREINDOREDEWASDEWAS

SHAJAPURSHAJAPUR RAJGARHRAJGARHVIDISHAVIDISHA

WESTWESTNIMARNIMAR

(KHARGON)(KHARGON)

EASTEASTNIMARNIMAR

(KHANDWA)(KHANDWA)

HARDAHARDA

BETULBETUL

SEHORESEHORE

HOSHANGABADHOSHANGABAD

CHHINDWARACHHINDWARA SEONISEONI

BALAGHATBALAGHAT

MANDLAMANDLA

NARSINGHPURNARSINGHPURRAISENRAISEN

SAGARSAGAR DAMOHDAMOH

JABALP

UR

JABALP

UR

SHAHDOLSHAHDOL

DINDORIDINDORI

UMARIAUMARIA

KATNIKATNI

PANNAPANNA

SATNASATNA REWAREWA

SIDHISIDHI

GUNAGUNA

SHIVPURISHIVPURI

DATIADATIAGWALIORGWALIORSHYOPURSHYOPUR

MORENAMORENA

BHINDBHIND

Jhabua

UjjainRatlam

Dewas

Dhar

Mandsaur

Sehore

Rajgarh

Shajapur

Guna

Vidisha

Raisen

Khargon Khandwa

BetulChhindwara Seoni

Narsimhapur

Hoshangabad

Sagar Damoh

Jabalpur

Mandla

Balaghat

Shahdol

Sidhi

RewaSatnaPanna

ChhatarpurTikamgarh

Shivpuri

Datia

Gwalior

Morena Bhind

Shyopur

Katni

Umaria

Dindori

Harda

Barwani

Nimach

BHOPAL

Indore

CHHATA

RPUR

TIKAMGARH

BARWANIBHOPAL

NIMACHMA

NDSA

UR

RATLA

M

UJJAIN

JHABUA

DHAR

INDOREDEWAS

SHAJAPUR RAJGARHVIDISHA

WESTNIMAR

(KHARGON)

EASTNIMAR

(KHANDWA)

HARDA

BETUL

SEHORE

HOSHANGABAD

CHHINDWARA SEONI

BALAGHAT

MANDLA

NARSINGHPURRAISEN

SAGAR DAMOH

JABALP

UR

SHAHDOL

DINDORI

UMARIA

KATNI

PANNA

SATNA REWA

SIDHI

GUNA

SHIVPURI

DATIAGWALIORSHYOPUR

MORENABHIND

Arabian

SeaThis map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

IBRD 30986R

FEBRUA

RY 2009

INDIASTATE OF MADHYA PRADESH

SECOND MADHYA PRADESH DISTRICTPOVERTY INITIATIVES PROJECT

PROJECT DISTRICTS

DISTRICT CAPITALS

STATE CAPITAL

DISTRICT BOUNDARIES

STATE BOUNDARIES

INTERNATIONAL BOUNDARY