Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 47572-IN .

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 96.6 MILLION (US$150 MILLION EQUIVALENT)

TO THE

REPUBLIC OF INDIA

FOR AN

ANDHRA PRADESH RURAL WATER SUPPLY & SANITATION PROJECT

August 25,2009

Sustainable Development Unit India Country Management Unit South Asia Regional Office

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

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CURRENCY EQUIVALENTS (Exchange Rate Effective July 30,2009)

Currency Unit = Indian Rupees (INR) US$1 = INR48

SDR 1 = USD$1.55 FISCAL YEAR

April 1 - March 31

AE AG APWALT ARCS ARWSP

AUWSP

BA BRO CAD CAG

CAP CAS

CCDU

CE DALY

DAO DAP DDOs DPP DPR

DRC DSR DWSC DWSM EA ECOP EDS EE

D-PSU

EMF ERR

ABBREVIATIONS AND ACRONYMS

Assistant Engineer Auditor General Andhra Pradesh Water, Land and Trees Audit Reports Compliance System Accelerated Rural Water Supply Program, GO1 Accelerated Urban Water Supply Program, GO1 Beneficiary Assessment Budget Release Order Cash Against Documents Comptroller and Auditor General o f India Community Action Plan Country Assistance Strategy

Communication and Capacity Development Unit Chief Engineer Disability Adjusted L i fe Year

Divisional Accounts Officer Devolution Action Plan Drawing and Disbursing Officers District Poverty Initiatives Project Design Project Report District Project Support Unit District Review Committee Detailed Scheme Report District Water and Sanitation Committee District Water and Sanitation Mission Environmental Assessment Environmental Codes o f Practice Environmental Data Sheet Executive Engineer

Environment Management Framework Economic Rate of Return

FC FM FMM GIS GLSR

GoAP

GO

GO1

GP GP-WSC

HUDCO

I A IBRD

ICB IDA

IEC

IUFRs LCS LOC LPCD MDGs M&E MOU MP MP-wsc

MV M V S

Fully Covered Financial Management Financial Management Manual Geographic Information System Ground Level Service Reservoir

Government of Andhra Pradesh

Government Order

Government o f India

Gram Panchayat Gram Panchayat Water and Sanitation Committee Housing and Urban Development Corporation Implementing Agencies International Bank for Reconstruction and Development International Competitive Bidding International Development Association

Information, Education and Communication Interim Un-audited Financial Reports Least Cost Selection Letter of Credit Liters Per Capita Daily Millennium Development Goals Monitoring and Evaluation Memorandum o f Understanding Mandal Parishad Mandal Parishad Water and Sanitation Committee Multi Village Multi Village Schemes

FOR OFFICIAL USE ONLY

M V S - wsc NABARD

NC NCB NGO NGP N S S OED OHSR O&M OM PAPS

Multi Village Scheme Water Supply and Sanitation Committee National Bank for Agriculture and Rural Development Not Covered National Competitive Bidding Non Governmental Organization Nirmal Gram Puruskar No Safe Source Operations Evaluation Department Overhead Service Reservoir Operation & Maintenance Operations Manual Project Affected Persons

PA0 Pay and Accounts Officer PC Partially Covered PESA PIE Principal Implementing Entity PIP Project Implementation Plan PMGY Pradhan Mantri Gramodaya Yojana

'Panchayat Extension to Scheduled Areas

PRED PRIS PSU QCBS RAP ROG RPF RTI RWSS RWSSD

SA sc SE SHGs S H P

Panchayati Raj Engineering Department Panchayati Raj Institutions Project Support Unit Quality and Cost Based Selection Resettlement Action Plan Redressal o f Grievances Resettlement Policy Framework Right to Information Rural Water Supply and Sanitation Rural Water Supply and Sanitation Department Stakeholders Analysis Scheduled Caste Superintendent Engineer Sel f Help Groups Sanitation and Hygiene Promotion

Country Director: Sector Director

Sector Manager: Task Team Leader:

S I L

SIS

SLC so SPSU SRP

sss ST svs SWAP SWOT

SWSM TDP TOR TSC TSP vwsc

WDI wsc WSM wss YLD ZP

Specific Investment Loan

Sector Information System

Scheme Level Committee Support Organizations State Project Support Unit Sector Reform Project

Single Source Selection Scheduled Tribes Single Village Scheme Sector-wide Approach Strength Weakness Opportunities and Threat State Water and Sanitation Mission Tribal Development Plan Terms of Reference Total Sanitation Campaign Technical Service Provider Village Water and Sanitation Committee Women Development Initiative Water and Sanitation Committee Water and Sanitation Mission Water Supply and Sanitation Year Lost Due Zila Parishad

Isabel M. Guerrero Roberto Zagha John H. Stein Junaid K. Ahmad Smita Misra

This document has a restricted 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.

INDIA Andhra Pradesh Rural Water Supply & Sanitation Project

CONTENTS Page

STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 Country and sector issues .................................................................................................... 1

Rationale for Bank involvement ......................................................................................... 3 Higher level objectives to which the project contributes .................................................... 4

PROJECT DESCRIPTION ................................................................................................. 4 Lending instrument ............................................................................................................. 4 Program Objective and Phases ............................................................................................ 4

A . 1 . 2 . 3 .

B . 1 . 2 . 3 . 4 . 5 . 6 .

Project Development Objective, Key Indicators, Policy and Institutional Aspects ........... 4

Project Components ............................................................................................................ 7

Lessons learned and reflected in the project design ............................................................ 8

Alternatives considered and reasons for rejection .............................................................. 9

C . IMPLEMENTATION ........................................................................................................ 10 1 . 2 . 3 . 4 . 5 . 6 . 7 . 8 .

Partnership arrangements (if applicable) ................................................................. :. ....... 10

District Institutional Framework and Implementation Arrangements .............................. 10

District Program Implementation Activities ..................................................................... 11

Monitoring and Evaluation o f Outcomes / Results ........................................................... 12

Governance and Accountability Action Plan .................................................................... 13

Sustainability ..................................................................................................................... 14

Critical risks and possible controversial aspects ............................................................... 15

Loadcredit conditions and covenants ............................................................................... 16

. . .

D . APPRAISAL SUMMARY ................................................................................................. 17 1 . Economic and financial analyses ...................................................................................... 17

2 . Technical ........................................................................................................................... 17

3 . Fiduciary ........................................................................................................................... 18

4 . Social ................................................................................................................................. 19

5 . Environment ...................................................................................................................... 20

6 . Safeguard Policies ............................................................................................................. 21

7 . Policy Exceptions and Readiness : None .......................................................................... 21

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

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ............. 26

Annex 3: Results Framework and Monitoring .................................................................... 27

Annex 4: Detailed Project Description ................................................................................. 33

Annex 5: Project Costs ........................................................................................................... 36

Annex 6: Implementation Arrangements ............................................................................. 39

Annex 7: Financial Management and Disbursement Arrangements ................................ 46

Annex 8: Procurement Arrangements ................................................................................. 53

Annex 9: Economic and Financial Analysis ......................................................................... 60

Annex 10: Safeguard Policy Issues ....................................................................................... 64

Annex 11: Project Preparation and SupelYision ................................................................. 73

Annex 12: Documents in the Project File ............................................................................. 74

Annex 13: Statement of Loans and Credits ......................................................................... 75

Annex 14: Country at a Glance ............................................................................................. 79

Annex 15: Map showing Project Districts ........................................................................... 81

mIA AND= PRADESH RURAL WATER SUPPLY & SANITATION PROJECT

PROJECT APPRAISAL DOCUMENT SOUTH ASIA

SASDU I Date: 25 August, 2009 Team Leader: Smita Misra

Sectors: Water supply (50%); Sanitation (50%) Themes: Rural services and infrastructure (P) Environmental screening category: Partial Assessment

Country Director: Roberto Zagha Sector ManagerDirector: Junaid K. Ahmad Project ID: P101650

Lending Instrument: Specific Investment Loan

For Loans/Credits/Others: Total Bank financing (US$m.): SDR 96.6 mill ion (US$ 150 mill ion equivalent)

Borrower: Department o f Economic Affairs Ministry o f Finance, North Block New Delhi India 110001 Tel: 23092059 Fax: 23092244

Responsible Agency: Rural Water Supply and Sanitation Department Govt. o f Andhra Pradesh L Block, 8 Floor Secretariat, Hyderabad Andhra Pradesh 500022, India Tel: 040-23454670

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Does the project depart from the CAS in content or other significant respects?Ref PAD A .2 [ No

Does the project require any exceptions from Bank policies? [ ]Yes [XINO

I s approval for any policy exception sought from the Board? [ ]Yes [X ]No Does the project include any critical risks rated “substantial” or “high”? Re$ PAD C.5 [X ]Yes [ ] No

[XIYes [ ]No Does the project meet the Regional criteria for readiness for implementation? Ref PAD c. 2 Project development objective: To assist GoAP in improving rural water supply and sanitation services through progressive decentralization, community participation and enhanced accountability. Ref PAD B.3

Have these been approved by Bank management? [ ]Yes [ IN0

Project description [one-sentence summary of each component] Ref PAD B.4; Technical Annex 4

Component A (US$12m): This component will support the building of institutional capacity for implementing, managing and sustaining the project activities, along with sector development studies to inform policy decisions.

Component B (US$153.5m): This component will support improvements in water supply and sanitation services in the project habitations through new infrastructure or rehabilitating and augmenting existing schemes, integrated with source strengthening measures and sanitation programs. The project aims to cover about 2600 habitations across 6 districts.

Component C (US$ 14.5 m): This component supports the setting-up and operationalizing the Project Support Unit for implementing the project, including the establishment of the Monitoring and Evaluation System and Sector Information System.

Which safeguard policies are triggered, if any? Re$ PAD D. 6; Technical Annex10 OP 4.0 1 Environmental Assessment OP 4.12 Involuntary Resettlement OP 4.10 Indigenous People‘ OP 4.36 Forests Significant, non-standard conditions, if any, for: Re$ PAD C.6 Board presentation: None Loadcredit effectiveness: None

Covenants applicable to proiect implementation: (i) At MTR stage (3 1 St May 20 12): o Independent assessment of the District Program and decentralized institutional arrangements to

provide mid-course recommendations. o Beneficiary assessment o f WSS service delivery improvements for completed schemes. (ii) By November 30,2014: o Independent assessment of the achievements of the District Program. o Beneficiary assessment of WSS service delivery improvements for completed schemes.

.. 11

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and Sector Issues

1. National Issues: India spends about U S $ l billion annually through various programs to improve access to drinking water and sanitation facilities in the rural areas. Although there has been significant progress in increasing “access” to a basic minimum o f 40 liters per capita per day to more than 96% o f i ts rural population, India has yet to achieve operational and financial sustainability o f these services. Key issues include:

o Reliability of Services. Many rural habitations have declining service’ standards and coverage, slipping to “not covered” or “partially covered” status, mainly due to sources going dry, or systems working below capacity due to poor operation and maintenance (O&M).

o Financial Sustainability of Services. Rural schemes continue to survive on large operating subsidies provided by the States, mainly due to low O&M cost recovery through user charges.

o Environmental Sustainability of Services. Depleting groundwater table and deteriorating water quality are threatening source sustainability.

o Affordability of Services. Due to inadequate O&M resulting in partially functioning or defunct schemes, the rural communities bear huge coping costs and revert to conventional substitutes that are often unsafe.

o Sanitation Coverage and Demand. Although expenditure on toilet construction has increased, the toilet use and demand i s low, with a lack o f understanding by rural households on the linkages between sanitation, hygiene practices and related diseases. To address these issues, the Go1 has scaled-up the Total Sanitation Campaign with financial incentives for ‘open defecation free’ villages.

o Decentralization Process. Whi le the 73‘d Constitutional Amendment directs service provision to be decentralized to local governments (Panchayati Raj Institutions - PRIs), most o f the work o f designing, implementing and operating water supply schemes continues with the state engineering agencies through ‘supply-driven’ approaches. Involvement o f Panchayati Raj Institutions (PRIs) and beneficiary groups i s limited.

o Institutional Roles and Responsibilities. Limited implementation o f the 73‘d Constitutional Amendment leads to lack o f institutional clarity with multiple agencies being involved in the different aspects o f policy-making, regulation and service delivery.

o Monitoring and Evaluation Systems. Monitoring systems focus on ‘infrastructure creation’, rather than ‘provision o f services’, with most data on the number o f schemes and expenditures, and less information on the quantity, quality and availability o f water distributed.

In summary, the challenge facing India is not to increase access to infrastructure to almost 100% of the population, but to increase access to reliable, sustainable and affordable services.

2. GO1 Programs and 1lth Five Year Plan: Go1 recognizes the need to improve functionality and sustainability o f schemes and has launched significant sector reforms since 1999. While two major ‘demand responsive’ reform programs, the Sector Reform Project (SRP)

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and the Swajaldhara Program were launched in the early 2000 for decentralizing service delivery, these have yet to be scaled-up and reform policies to be fully adopted. Establishing the necessary institutional arrangements, building capacity and bridging financing gaps in scaling-up are the major challenges. Recognizing the continuous slippages o f ‘fully covered’ habitations to ‘partial’ or ‘not covered’ status, the Eleventh Five Year Plan (2007-08 to 2011-12) gives due emphasis on conjunctive use o f groundwater, surface water and rainwater harvesting systems, with decentralized approaches and community participation. It provides flexibility to the State to adopt Swajaldhara principles under the on-going Go1 Accelerated Rural Water Supply Program (ARWSP). The Plan targets clean drinking water for all by 2009 and no slipped back habitations by the end o f the Eleventh Plan.

3. sustainability issues:

Key Sector Issues in AP: The AP RWSS situation i s marked by low coverage and

Coverage and sustainability issues. Based on the 2008 habitation survey, about 46 percent o f the habitations in AP’ are “Fully Covered” (FC)’with access to a water source able to yield 40 liters per capita daily (lpcd), located within a radius o f 1.6 kilometer from the center of the village and within an elevation o f 100 meters from the village. The FC status thus s t i l l implies that many households have to travel long distances to fetch water. In addition, 40 percent o f the habitations are ‘Partially Covered’ (PC) with access to a source that does not meet the above criteria and 13 percent habitations are either ‘Not Covered’ (NC) or do not have access to a “safe source” o f water supply. About 75 percent o f the rural water schemes are dependent on groundwater sources and nearly half o f these schemes currently tap “over- exploited, critical and semi-critical” aquifers. Nearly 3 percent o f the habitations rely on water sources with excess fluoride and/or salinity. About 30 percent habitations (or 11 million people) rely mostly on hand pumps, 60 percent (33 million people) on Single Village Schemes (SVSs) and 10 percent (1 1 million people) on Multi Village Schemes (MVSs).

Access to infrastructure does not guarantee access to service. Inadequate operation and maintenance (O&M) due to shortage o f funds and technical expertise i s resulting in a periodic slippage o f FC habitations to PC and N C categories. About 20 percent schemes are not fully operational and require rehabilitation or augmentation. About 54 percent rural households have individual toilets, but only 30 percent o f these households make use o f the toilets. More than 80 percent rural households continue with open defecation practices.

Overlapping roles and responsibilities. The earlier Panchayati Raj Engineering Department (PRED) has been responsible for planning, designing and implementing SVSs and MVSs; carrying out O&M o f common facilities o f MVSs; as well as sector planning and policy formulation. The GoAP has recently bifurcated the Panchayati Raj Engineering Department (PRED) into two dedicated Departments: (a) RWSS Department, mainly to focus and expand RWSS coverage across the State; and (b) Panchayati Raj Department to strengthen and build capacity with the PRIs for decentralizing key functions.

Institutional framework in transition. The GoAP has established the State Water & Sanitation Mission (SWSM) for policy formulation and planning along with the District Water & Sanitation Missions (DWSMs) in all districts for implementing the centrally sponsored Sector Reform Project (SRP), Swajaldhara Program and the Total Sanitation Campaign (TSC). These three demand driven and decentralized programs represent about 10

’ Andhra Pradesh has a rural population o f 55 mil l ion out o f 70 mil l ion total population.

2

percent o f the total RWSS funds available in recent years in AP. Building on the success o f these Sector Reform and Swajaldhara pilots, the GoAP is keen to gradually decentralize service delivery, while building capacity with the PRIs. A significant step recently taken by the GoAP is the devolution o f O & M responsibility o f SVS and MVS to the PRIs.

4. AP RWSS Vision and Medium Term Sector Program: The sector vision o f GoAP is to improve rural water and sanitation services with increased decentralization, community participation and enhanced accountability at al l levels. The proposed Medium Term Sector Program (2009-10 to 2013-14) at an estimated cost o f U S $904m envisages full coverage to the ‘Not Coveredl N o Safe Source’ villages, with at least 40 lpcd o f water supply, improved household sanitation and hygiene practices, and increased wastewater collection and disposal systems.

5. The GoAP i s committed to strengthening the three tier PRIs (State, District and Village) for devolution o f funds, functions and functionaries, with the district ZP (Zila Parishad) taking up responsibility for the district program. The success o f Swajaldhara Program in five districts and state-wide Total Sanitation Campaign (TSC) has created demand for PRVcommunity driven programs. Various policy measures have been taken to devolve responsibilities o f O&M to the PRIs including a GO issued in 2007, along with outsourcing O&M o f MVSs on a pilot basis. The Self Help Groups (SHGs) initiated under various programs are also promoting sanitation activities for achieving ‘open defecation free’ villages. As an enabler, GoAP has created a dedicated new department in 2007 headed by a Minister exclusively for RWSS. However, primarily due to lack o f capacity within the PRIs, the RWSSD continues to play a significant role in construction o f SVSs and MVSs, and operation and maintenance o f M V S s . The proposed World Bank assisted Project will support the participating districts and the Gram Panchayats (GPs) to build capacity and move forward with decentralized service delivery responsibilities.

2. Rationale for Bank involvement

6. The main reasons for the Bank to support the proposed project are: (i) to assist the GoAP in building capacity and pursuing i t s own goal o f increasing decentralized service delivery systems in the RWSS sector; (ii) to scale-up the demand responsive approach with policy principles that are consistent with the GOI’s Swajaldhara reform program and the recent National Rural Drinking Water Program; and (iii) to build o n the experience accumulated in designing and implementing RWSS projects supported by the Bank in India (Kerala, Karnataka, Maharashtra, Uttaranchal, Punjab) and other parts o f the world.

7. The project supports the implementation o f the World Bank India FY09-12 Country Assistance Strategy (CAS), especially the pillars related to ‘increasing the effectiveness o f service delivery’, and ‘ensuring development i s sustainable’. The project is fully consistent with the CAS focus on the creation o f governance and institutional arrangements that promote an enabling environment (including demand side accountability mechanisms such as beneficiary and civ i l society involvement), strengthening capacity for publicly-provided services, and enhancing private sector participation. This implies working on systems and the “how” o f good service delivery - not helping to fix the pipes but the institutions that should be fixing the pipes.

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3. Higher level objectives to which the project contributes

8. The project will help GoAP in achieving i t s broader goal o f improving health and hygiene practices in rural communities. The Bank’s CAS for India strives to scale up the impact o f Bank operations and help India move closer to achieving the millennium development goals (MDGs). The proposed project, through improvements in RWSS service delivery and sustainability o f assets, will contribute to achieving goal seven o f the MDGs on sustainable access to safe drinking water and basic sanitation. The outcomes resulting from the project, including improved health and hygiene practices and women’s increased participation in rural communities, would also contribute to achieving other MDGs related to gender equality and reduction o f disease and child mortality.

B. PROJECT DESCRIPTION

1. Lending instrument

9. The lending instrument is ’a Specific Investment Loan (SIL).

2. Program Objective and Phases

10. N o t Applicable

3. Project Development Objective, Key Indicators, Policy and Institutional Aspects

11. The project development objective is to assist GoAP in improving rural water supply and sanitation services through progressive decentralization, community participation and enhanced accountability. The key project outcomes include: (i) increasing the number o f people with access to improved water supply services; (ii) increasing the number o f people with access to piped water supply throughout the year; (iii) increasing the number o f people adopting improved hygiene and sanitation practices; and (iv) improvements in cost recovery (contributions to capital and O&M cost) and collection efficiency.

12. The project will support RWSS programs in six districts in AP. The districts have been selected through transparent criteria, with priority for taking up the ‘not covered’, ‘no safe- source’, and tribal habitations. The participating districts will sign an agreement with the RWSSD for adopting common program and policies across the district, including consistent safeguards (environment and social) policies. The Project includes a Tribal Development Plan aimed at covering 400 tribal habitations in the needy Mandals (blocks) o f the Fifth Schedule Areas o f the State. The project i s expected to directly benefit at least 2.1 mi l l ion rural populations, with improvements in sanitation and hygiene practices in about 30 % o f the rural villages. A follow-on Phase I1 can be considered under the ‘additional financing’ terms and conditions o f the World Bank.

4

Policy and Institutional Aspects

13. The project wi l l finance RWSS programs in those districts that commit upfront and adopt the following district-wide principles:

(i) Progressive Decentralization: The participating districts wi l l scale up the policies and institutional arrangements based on the Swajaldhara principles. The District Water and Sanitation Mission (DWSM) established under the Zila Parishad (ZP-district PRI) wi l l be responsible for the district RWSS program and policy, with the District Water and Sanitation Committee (DWSC) as i t s executive arm for implementing the program. The RWSSD Divisions, under a service contract agreement, will provide technical support to the DWSC for designing and implementing the schemes. The following are the main devolved responsibilities (details in Project Implementation Plan):

o New Single Village Schemes: The GP, through i t s sub-committee the GP Water Supply and Sanitation Committee (GP-WSC), will actively participate in the planning, designing and implementation o f the SVS and the intra-village facilities o f the MVS. The community participation will be strengthened with inclusion o f women Se l f Help Groups in the GP-WSC. The GP-WSC wi l l endorse and sign-off the final scheme design and payments made during scheme implementation stage. The tariff- setting and O&M o f the scheme will be the responsibility o f the concerned GP.

o New Multi Village Scheme: The RWSSD Divisions wi l l assist the DWSCs to form Multi Village Water Supply and Sanitation Committees (MVS-WSCs) comprising Chairpersons o f the participating GPs. RWSSD will then support the DWSC in planning, designing and implementation o f the MVS, in participation with the MVS- WSC. The RWSSD Division will take endorsement and sign-off from the MVS- WSC during each stage o f scheme planning, design and implementation. The O&M o f the common facilities (bulk water supply) for the M V S will be the responsibility o f the MVS-WSC. A single contract for designing, building and operating the M V S i s encouraged. The commercial orientation o f all schemes will be improved through performance improvement plans, contractual agreements for construction and maintenance, billing and collection o f user charges, bulk water metering, etc.

o Existing SVS and MVS: The district program will support the rehabilitation and augmentation o f existing schemes under common program and policies throughout the district.

5

(ii) District-wide Program and Planning: The DWSC under the District Collector will be responsible for implementing the district program and policies. The D W S C will take into consideration the district demand and priorities, and technical feasibility and sustainability requirements. Planning and prioritization o f water supply schemes will be based on demand for SVS from GP (bottom-up) and reconciled with proposals identified by the D W S C for M V S (top- down). Sanitation programs will be specially designed, taking into consideration the need for I E C and hygiene promotion activities. Capacity will be built with the D W S C for implementing the district program.

(iii) Community Participation: The project supports community participation at a l l stages o f the scheme cycle, with the GP- WSC ensuring representation from the participating habitations. The existing Self Help Groups, which are powerful and well-established women groups under various on-going programs in AP, will help the GP-WSC in reaching out to the communities.

(iv) Improved Accountability: Accountability will be enhanced through a clear separation o f Governance and Operational Aspects, with clear mandates and relationship structures between the various sector agencies, institutions and stakeholders. At the state level, the SWSM will be responsible for overall RWSS policy formulation and budget allocation. At the district level, the D W S M will be responsible for the RWSS program and policies, which will be implemented through the DWSC. The RWSSD Divisions will enter into a service contract agreement with the DWSC to provide technical support for designing and implementing the schemes. For SVS, the GP-WSC will endorse and sign o f f the scheme design and the payments made during implementation stage, and will be responsible for O & M o f the scheme. For M V S , the MVS- WSC will endorse and sign-off the M V S scheme design and payments made during implementation stage, and will be responsible for the O&M o f the M V S common facilities. The O&M service performance criteria will be agreed and monitored for al l schemes. The use o f robust and transparent procurement and financial processes along with technical and social audits will enhance accountability. The RWSSD Divisions will be responsible for the technical quality o f the district sub-projects. The State level PSU will carry out the independent quality checks and beneficiary assessments.

(v) Improved Financial Sustainability: The participating districts will adopt district-wide policies o n capital cost contributions and O & M cost recovery based o n agreed affordability criteria2. The capital cost contributions will be applicable to al l new schemes, while O & M cost recovery will be applicable for a l l schemes (existing and new). The fol lowing are the guiding principles:

o Contributions to Capital Cost: The GP will contribute towards the cost o f al l new investments (amount not to exceed 10% o f capital cost or Rs 500 per household, whichever is lower), through beneficiary household contributions. The community contribution for the Scheduled Caste (SC) / Scheduled Tribe (ST)/ B P L households will be on a concessional basis (amount not to exceed 5% o f capital cost or Rs 250 per household, whichever i s lower). The above contributions may be in cash or labour, as decided by the GP.

o Contributions tu O&M Cost: The O&M cost for a l l investments (SVS and MVS) will be fully recovered through user charges, subject to an affordability ceiling. The O & M

Ceilings for household contribution towards capital and O&M cost are based on an affordability analysis o f rural households in AP.

6

charges for al l new schemes will be fixed prior to the commencement o f the scheme. For M V S , the DWSC will decide the bulk water charges prior to approval o f the M V S . In case o f high cost schemes, the amount exceeding household affordability level (Rs 45 per month) will be subsidized by the GP for SVS and ZP for M V S .

(vi) Integrated Water Supply and Sanitation Program: The water supply investments will be made in an integrated manner with source strengthening and catchment area protection activities, rainwater harvesting systems, sanitation programs for construction and use o f individual household latrines, safe disposal o f waste-water, solid waste management, and community health and hygiene awareness programs for improved and sustainable benefits across the community. The sustainability o f water and sanitation systems will be strengthened through improved design, construction and O & M practices.

14. Awards to the best performing GPs: Each participating district will give awards to the best performing 10 GPs, using a score-card method for combined water supply and sanitation service delivery improvements that are endorsed by the beneficiary communities. This will be rolled-out annually over the five year project period.

4. Project Components

15. The project comprises o f the following three main components: (A) Capacity and Sector Development; (B) Infrastructure Development; and (C) Project Implementation Support.

Component A: Capacity and Sector Development (US$12m): This component will support the building o f institutional capacity for implementing, managing and sustaining the project activities, along with sector development studies to inform policy decisions. The main sub- components include: (a) Capacity Building and Training activities for state level institutions, PRIs and sector stakeholders; (b) Information, Education and Communications (IEC) Program; and (c) Sector Development Studies.

Component B: Infrastructure Development (US$153,50m): This component will support investments for improving water supply and sanitation services in the project habitations, including construction o f new infrastructure or rehabilitation and augmentation o f existing schemes, with safe disposal o f waste-water. These investments would be made in an integrated manner with source strengthening and catchment area protection activities; soak-pits; construction o f latrines for BPL households; community awareness programs for improving sanitation and hygiene practices; and incentives for achieving ‘open defecation free status’. Solid waste management and surface drainage activities will be taken up in major GPs. Underground piped drainage will be supported in select Mandal Headquarters. About 80% habitations are expected to be served by SVSs using local groundwater sources. The MVSs, mainly relying on surface water sources, will be taken up for habitations where the local source i s either not sustainable or o f not acceptable quality.

Component C: Project Implementation Support (US$14.50m): A Project Support Unit (PSU) under the SWSM, assisted by staff in the districts (D-PSUs), will implement and manage the WB Project. The main functions o f the PSU will be to coordinate with various stakeholders including the SWSM, DWSM, DWSC; procure external services (as required) to support the implementation o f the Project; and review and report the progress o f the Project. This component includes establishing and operationalizing the following systems: (i) Sector Information System (SIS) and Monitoring and Evaluation (M&E) System for the Sector Program

7

and the Project; and (ii) Financial Management System for administering funds and expenses for the Project.

16. The World Bank assisted Project at a total cost o f US$180m aims to implement water supply schemes in about 1600 NC/NSS habitations and 1000 PC habitations. The total GoAP RWSS Sector Program o f US$904m and i ts break-up i s presented in Table 1 below.

5. Lessons learned and reflected in the project design.

17. The Bank’s engagement in the RWSS sector and lessons learnt from Bank-funded RWSS operations (Uttar Pradesh, Kerala, Karnataka, Maharashtra, Uttarakhand and Punjab) have contributed to the design o f the proposed Project. Besides expanding WSS coverage, these projects have pioneered the piloting o f decentralized RWSS service delivery to the Panchayati Raj Institutions (Pus) and user committees, with GPs as the focal point. Some o f the lessons reflected in the design o f th is project include: community empowerment and involvement along with promoting ‘Mahila Grama Sabhas’ (women representatives in local government). for improving the design and implementation o f projects; reaching the tribals and poor households with a socially inclusive approach; integrated approach for safe sanitation facilities and improved hygiene practices for maximizing health benefits; community contribution towards financing and maintenance o f schemes for improving scheme sustainability; macro (districthlock) and micro (village) planning, taking into consideration ground and surface water resource availability and utilization; focused capacity building for procurement and financial management in decentralized implementation arrangements; and technical and social audits for quality checks.

18. Based on the Sustainability Evaluation Exercises carried out under the Swajal project (Uttar Pradesh), an important lesson emerging i s the need for consistent policies throughout the state, irrespective o f the sources o f financing. Another important lesson i s that the PRIs need to be well integrated into the institutional design o f the project and organic l i n k s between user committees and GPs are essential for institutional sustainability. A major lesson learnt is that the sustainability issue is best addressed by emphasis on PRI and beneficiary involvement, along with building adequate capacity of the state/local governments and communities, and promoting affordable O&M cost recovery. At the same time, the recent experience in implementing the Sector-wide Approach (SWAP) in Uttarakhand and Punjab shows the need for a gradual

8

transition to a sector-wide program for decentralized responsibilities, taking into consideration the baseline sector reforms; sector institutional development agenda; capacity building requirements; and the level o f commitment towards uniform sector-wide policies. The wide experience on RWSS activities in India has contributed to the design o f the AP RWSS District Program for scaling-up the RWSS reforrn principles through select districts that commit upfront the adoption o f demand responsive approach and decentralized service delivery systems.

6. Alternatives considered and reasons for rejection.

19. The alternative RWSS service delivery models considered by the team are summarized below. Options (iv) and (v) have been considered most appropriate, with option (v) to be initiated as a Phase I program by the GoAP.

RWSS Department as sole provider o f services. This option considered al l aspects o f asset creation, maintenance and operations for SVS and MVS to be carried out by RWSSD (supply driven approach), with hardly any role o f the PRIs and communities. This option is in conflict with the 73‘d constitutional amendment and GoAP’s mandate for decentralizing RWSS service delivery. T h i s model was rejected since GoAP has already devolved the O & M responsibilities and i s committed to gradually devolving the asset creation and implementation responsibilities as part o f i t s Medium Term Program. Independent Society/Agency providing, RWSS services. An independent Society/Agency i s set up by GoAP and made responsible for asset creation and maintenance. The Agency receives funds from the State and works directly with the PRIs (Karnataka / Kerala model). This option would involve setting up another agency, and hence in conflict with the recently created RWSS Department which is responsible for the Rural Water and Sanitation sector activities. Immediate devolution o f funds, functions, functionaries to the PRIs. This option considered al l funds, functions, and functionaries to be immediately devolved to the PRIs for SVS, MVS and sanitation activities. The role o f the RWSSD would be that o f a service provider, competing with the private sector. However, given the generally weak capacity o f the PRIs, it i s too early to move to complete decentralized arrangements in AP . Gradual devolution o f funds, functions and functionaries to the PRIs with RWSSD providing technical support. This option supports a gradual decentralization o f services, along with building capacity o f the PRIs. The role o f the RWSSD will gradually change from a mix o f functions (policy, planning, construction, maintenance) to a “facilitator” and provider o f technical services. W h i l e construction and maintenance o f SVS will be devolved to the ZPs and GPs, the M V S will be gradually devolved, taking into consideration the complexity o f schemes and the capacity o f PRIs. District programs for improving RWSS service delivery. This option considers a smaller program o f about 6 districts as a Phase I program for AP, with intense capacity building for decentralizing service delivery and improving accountability at the State, district and GP levels. The DWSM will be fully responsible for the district-wide RWSS program. The SVSs and MVSs will be designed and implemented by the DWSM, with participation, endorsement and sign-off by the GP-WSCs and the MVS-WSCs. This option has been accepted as the RWSS Phase I Program in AP.

9

C. IMPLEMENTATION

1. Partnership arrangements (if applicable)

20. No other international agencies are financing the project.

2. District Institutional Framework and Implementation Arrangements

21. The project will support progressive decentralization and devolution to the PRIs, with increased community participation, financial sustainability and enhanced accountability at all levels, A major shift from the business-as-usual i s the decentralization o f RWSS service delivery responsibility to the DWSM under the Zila Parishad (district PRI) with active participation by the GPs during scheme planning, designing and implementation. The other major focus i s on strengthening policy and planning activities at the State and district levels with clear accountability to the GPs and the beneficiary communities. The existing SWSM and participating DWSMs and the GPs wi l l be strengthened and capacity built for policy, planning and review functions. All activities, including design, supervision and operations carried out by the RWSSD Divisions wi l l be under a service contract agreement with the DWSC, with endorsement and sign-off by the concerned MVS-WSC or GP-WSC for the scheme design and the payments made during scheme implementation stage.

22. The following are the main roles and responsibilities and devolution arrangements under the project (details in Annex 6 and the Project Implementation Plan).

State level: R WSSD, S WSM, PSU 23. The RWSSD, under the Department Secretary, has the overall responsibility for implementing the Project, including budget allocation, program and policies. The S WSM, which has already been established under the Go1 Swajaldhara Program, will be responsible for sector policy, planning and review, including the setting-up o f the Sector Information System for periodic monitoring o f the sector performance. The PSU will function as the secretariat to the SWSM and will be assisted by the district units (D-PSUs) for implementing the World Bank Project in six districts.

District level: ZP, D WSM, D WSC, W S - WSC, D-PSU, R WSSD Division, 24. The DWSM will be responsible for the overall district program and policies, including annual plan and budget, and periodic review o f the targets and achievements. The DWSC, as the executive arm o f the DWSM wi l l cany out the district activities, including design and implementation o f schemes and sanitation programs through RWSSD Divisions under a service contract agreement. The DWSC will provide administrative sanctions and payment authorization for all schemes. I t will also carry out the capacity building, training and IEC programs, and the management and monitoring o f all district sub-projects, The DWSC could package the GP sub- projects and programs for cost effectiveness. The MVS-WSC will endorse and ‘sign-off the scheme design and the implementation stage payments for M V S . The D-PSU, headed by the Program Director with inter-disciplinary officials (technical, environmental, social, financial), w i l l be responsible for the day-to-day operations regarding the World Bank Project.

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ViIlaae level: GP, GP- WSC 25. At the GP level, the GP-WSC, a sub-committee o f the Gram Panchayat, w i l l work with the DWSC for designing and implementing the SVS, integrated with catchment area protection works for source sustainability and village sanitation programs for improved health and hygiene practices. The GP-WSC wi l l endorse and ‘sign-off the scheme design and the implementation stage payments for SVS. The tariff-fixation and O&M o f these schemes w i l l be the responsibility o f the GP-WSC. The GP-WSC wi l l co-ordinate with the health committee at the village level to maximize health benefits through the drinking water supply and sanitation programs, as per guidelines from the Department o f Drinking Water Supply, GoI. The village Se l f Help Groups or, SOs (if required) will assist the GP-WSC in implementing i t s responsibility.

3. District Program Implementation Activities

26. An integrated water supply, sanitation and environmental sanitation approach, along with IEC programs and capacity building wi l l be adopted for each Batch o f activities. This wi l l include the following:

(i) Water Supply Schemes: A phased implementation i s planned through four overlapping batches over a period o f five years, with each batch o f about 2 year duration (Table 2 below). Each batch o f SVS wi l l follow an agreed scheme cycle consisting o f distinct phases o f pre- planning (2 months), planning (4 months), implementation (6-12 months), and post implementation (4 months). Each M V S batch will be spread over 20-30 months. Model scheme cycles have been developed in consultation with key stakeholders for both SVS and MVS (details in Annex 6).

(ii) Sanitation and Hygiene Promotion (SHP) activities: The SHP strategy and action plan for improved health and hygiene practices includes sensitizing communities through specially designed IEC; promotion and use o f household toilets; construction o f BPL toilets; and collective action by communities for achieving clean villages and ‘open defecation free status’.

(iii) Environmental Sanitation Activities: Source strengthening and catchment area protection activities wi l l be taken up to ensure sustainability o f source. Soak-pits and drainage systems wi l l be taken up for safe disposal o f waste-water. Rainwater harvesting systems and solid waste management wi l l also be supported under the project.

(iv) Groundwater Management by Communities: In addition to integrating source strengthening measures as part o f each scheme, the project will include software activities for promoting a better understanding o f the groundwater issues, especially the trade-off between agricultural use

11

and drinking water in ‘over-exploited’ and ‘critical’ aquifers. A pi lot program for select GPs will be taken up to promote self-management o f groundwater in the villages. This initiative will link up with the World Bank supported Technical Assistance for Groundwater Management in AP. (v) Capacity Building: The project recognizes that the capacity building holds the key to the success o f the District Program. Accordingly, learning and IEC programs have been identified for stakeholders at various levels. At the Apex (State) level, capacity building programs will aim at creating an enabling environment for formalizing the project’s key principles with the targeted audience including administrators, policy makers, political representatives and the media. Intermediary level (districthlock) stakeholders comprise ZPs, D WSM, DWSC, District Collectorate, D-PSUs, RWSSD Divisions, consultants and support organizations. Grassroots/project level (village) targets include GPs and user groups whose capacity will be built to translate the project’s approach into action, including designing, constructing, operating and managing, and monitoring the schemes. The capacity building strategy and program has been developed, along with a detailed capacity building plan and associated costs. Trainings will be imparted to al l project functionaries on scheme planning, design and construction, operations and management; procurement procedures and practices; financial accounting and reporting; monitoring and evaluation; etc. Other themes include change management, decentralization and community participation, public-private sector partnerships, gender, equity & empowerment, and technological excellence.

4. Monitoring and Evaluation o f Outcomes / Results

27. As part o f the SWSM, the PSU along with the D-PSUs will be responsible for the M&E and periodic review o f the district programs. The D-PSUs will provide physical and financial data input to the state-level sector database managed by the PSU. Significant capacity building would be required for the SWSM, PSU, DWSM, D-PSUs and PRI institutions to undertake data collection, consolidation, and management. Such capacity-building needs will be taken into account as part o f the Capacity and Sector Development Component A. The fol lowing systems will be established to monitor the implementation progress o f the World Bank Project as well as the Sector Program.

M&E System for WB Project: This system will gather the baseline information as well as project inputs, outputs, and outcomes for monitoring the implementation progress o f the World Bank Project.

Periodic Reviews: Reviews o f targeted processes and evaluation o f impacts will be periodically carried out to learn from the f ield experience and suggest improvements for the district program design and strategies. This would include audits by independent financial and technical auditors for randomly selected schemes.

Social Audits and Beneficiary Assessments: Social audits through NGOs and community based organizations will help beneficiary communities to track progress o f their schemes in all phases o f the project and adherence to project guidelines. In addition, beneficiary assessment through participatory community monitoring tools will be used for assessing service delivery improvements.

Based o n specially designed indicators, this exercise will help in tracking the long-term technical, financial, institutional, social, and

.

Sustainability Monitoring and Evaluation.

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environmental sustainability prospects o f the assets created during the lifecycle o f a sample o f schemes.

0 Sector Information System: This system will consolidate RWSS sector data at the state level to monitor the progress o f the overall RWSS Sector Program and will link-up with the on- line Integrated Management Information System (IMIS) o f the Department o f Drinking Water Supply, GoI.

28. Operational Guidelines: A range o f operational manuals and guidelines have been developed as reference documents for implementing and monitoring the World Bank Project. These include a detailed Project Implementation Plan along with operational manuals o n fiduciary, technical and safeguard aspects. The manuals provide details on the agreed RWSS District Program, including policy aspects and institutional arrangements at the State, district and village level, along with guidelines on the scheme cycle, appraisal and approval criteria, model formats for various agreements, MOUs to be signed, etc.

5. Governance and Accountability Action Plan

29. The major governance and accountability issues at the pre-project stage include the following: power and authority vested mostly in a single Department with l o w level PWcommunity participation in the design and implementation o f schemes, lack o f independent quality checks and inadequate monitoring and evaluation systems.

30. The Project will improve transparency and enhance governance and accountability through the following: (i) RWSS district programs supporting decentralized service delivery systems, (ii) well-defined roles and responsibilities for scheme planning, design, implementation, and maintenance, (iii) independent construction quality surveillance, (iv) social audits and c iv i l society oversight, (v) grievance redressal measures, (vi) beneficiary assessments through household surveys, (vii) technical and financial audits, (viii) procurement processes and systems, (ix) Sector Information System (SIS) and the Monitoring and Evaluation (M&E) System, and (x) public disclosure o f project reports and documents. [A detailed Governance and Accountability Action Plan i s given in the Project Implementation Plan].

RWSS district p r o m m , including policies, institutions and infrastructure development program, has been finalized after stakeholder consultations and feed-back. These include a detailed program for transition to decentralized service delivery responsibilities.

ii Roles and responsibilities have been clarified for the RWSS functionaries at each level: State, district, and GP, with well-defined responsibilities for policy and planning, and designing, implementing, managing and maintaining schemes.

iii Independent construction quality surveillance through RWSS technical experts will be carried out during implementation o f SVSs and MVSs, to ensure works are carried out as per technical design and estimates, with good engineering practices. [Random sampling for 10-15% SVS; 100% MVS].

iv Social audits and c iv i l societv supervision through NGOs and community organizations will provide oversight during project planning and implementation regarding adherence to project policies and guidelines, social and environmental aspects, etc. [Random sampling for 10-15% SVS; 100% MVS. The sample will be different from (iii).].

i

13

v Grievance redressal measures will be established at the GP, district and the State level. Gram Panchayat level: Gram Sabha will record complaints and will follow-up the remedial actions with the GP-WSC; District (ZP) level: complaints and follow-up actions will be taken up by the District Collector during his weekly ‘Praja Darbar’ meetings; and State level: any complaint persisting for more than one month will be brought to the notice o f the Secretary, RWSSD. The M&E indicators will capture the grievances and follow-up remedial actions.

vi Beneficiary assessment through household survevs will be carried out once in two years to assess water and sanitation services, including quantity and quality o f water supply, no. o f hrs o f supply, household sanitation facilities, water-borne diseases, household expenditure on water supply and sanitation, and related aspects.

vi i Technical and financial audits will be undertaken periodically, through internal and external audits, to confirm and validate the technical aspects and expenses incurred for the schemes and programs under the project.

vi i i Procurement processes, which are transparent and robust, including competitive bidding processes with on-line contract management and monitoring systems will be used to provide full information. A separate Procurement Manual has been prepared for the project.

ix SIS and M&E svstems will provide the baseline data and project implementation achievements with the help o f clearly defined indicators.

x Public disclosure o f al l project documents and reports will be ensured at the web-site of the RWSSD.

6. Sustainability

31. The commitment and ownership o f the project design and principles, the key ingredient for sustainability, has been confirmed with the RWSSD, GoAP. The RWSSD will enter into an MOU with the select districts for implementing the Bank Project, The other factors critical to the implementation o f the project and thereafter are: (i) timely implementation o f the envisaged institutional framework with new roles and responsibilities o f the district and GP functionaries; (ii) sufficient awareness and capacity building o f the PRIs to take over the responsibilities for RWSS service delivery; (iii) appropriate change management efforts to gradually shift the mindset o f RWSSD f rom service provider to facilitator; (iv) well-defined “outputs” and quality checks to ensure project i s implemented effectively in a time-bound manner; (v) coordination with various departments to ensure integrated approach to RWSS service delivery; and (vi) independent checks and beneficiary assessments to assess the performance o f schemes. Quality checks and periodic reviews have been in-built in the project design to ensure feed-back for improving design and sustainability o f schemes and directions for policy reforms.

32. Various upfront actions and activities by GoAP are init ial steps for the proposed approach, including the issuance o f i t s Sector Vis ion statement (October 2006), GO that supports devolution o f powers and functions (December 2007), and establishment o f the SWSM and the DWSMs.

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7. Critical risks and possible controversial aspects

33. The following risk factors have been identified.

To PDOs

Reluctance o f RWSSD to evolve its quasi monopolistic role as a ‘facilitator’ and technical support

Political changes may adversely affect the RWSS Sector Program.

Lack o f capacity with PRIs to take up the responsibility o f RWSS service delivery thus adversely affecting sustainability.

To Component Results Ambitious targets for SVS and MVS. PWcommunity participatory approaches may slow down implementation. GPs reluctance to implement cost recovery strategy.

Source depletion or scheme break-downs .

Procurement:

Use o f consistent and appropriate procurement procedures and transparency poses a challenge

0 Commitment o f GoAP for decentralizing service delivery i s demonstrated through the Government Order (GO) issued in December 2007 for devolving powers and functions to the Panchayati Raj Institutions (PRIs).

Clearly identified and agreed policies and institutional arrangements for the proposed project: (i) The PRIs (Gram Panchayat and Zila Parishad) need to ultimately sign-off against all deliverables. (ii) All relations with the RWSSD (whether for design, supervision or operational activities) will be undertaken through an agreement between the concerned parties.

0 Strong consensus at the grass-root level (PRIs) for moving towards decentralized arrangements. .

0 Advocacy of reforms, including national and international exposure visits will be undertaken.

However, the residual risks associated with the uncertainties o f future GoAP decisions and policies cannot be avoided.

0

0

0

0

DWSM and GP-WSCs have already been established under the GO1 Sector Reform and Swajaldhara Program. O&M for SVS and MVS has already been devolved to the PRIs. Capacity building programs for the PRIs are currently on-going through dedicated responsibility o f the AP Academy of Rural Development. PRIs are very active in AP (compared to other States) in developing and implementing programs.

Additional capacity will be built during project implementation for handling the RWSS project cycle.

’

0

The targets are based on a realistic assessment o f the GoAP’s capacity to implement such a project. Annual reviews will be undertaken during implementation to revise targets (if necessary).

0 Uniform district-wide policies, including Operations and Maintenance (O&M) cost recovery as an upfiont agreement between the RWSSD and the participating districts. O&M of schemes has already been devolved to the GPs. 0

Source strengthening programs and catchment area protection will be fully integrated with RWSS schemes. GoAP’s general policy in overexploited / quality affected areas i s to increase the use of surface water (mostly irrigation canals/ tanks) and promote synergies with the Irrigation Department.

Procurement Manual has been prepared to ensure consistency and adherence to the required procedures. Procurement Cell will be established for continuous procurement support to al l implementing agencies. National Competitive Bidding will include specific disclosure

0

0

0

Rating with Mitigation

M

S

M

L

L

M

H

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due to large number o f schemes and the limited capacity o f DWSC in Bank procurement procedures.

Financial Management: GPs with weak FM capacity. Significant weaknesses in areas o f budgeting and planning; hnd flow and accounting/ financial reporting; and internal controls. Monitoring &Evaluation:

Inadequate Monitoring & Evaluation reporting systems

L-Low, M- Moderate, S- Subs

requirements. Appropriate contract packaging, including modified qualification criteria w i l l improve participation in the bidding process. Presence and support o f external procurement consultants w i l l increase procedural transparency and ensure guidelines are adhered. Introducing external procurement audits, including post-reviews by the Bank and independent construction quality checks. Development and use o f an online contract database, updated monthly and key information periodically reported to the public, w i l l improve transparency. Mandatory recordkeeping through maintaining data and records o f al l contracts by al l implementing agencies w i l l provide a transparent data-base for periodic checks.

Project w i l l finance an accountant for a set o f GPs. Concurrent audit o f GP-WSC and MVS-WSC wi l l be carried out by independent auditors (CA f m s ) .

Development and implementation o f the following reporting systems (details in PIP):

WB Project M&E System Independent construction quality supervision Social Audits Beneficiary Assessments Sector and District Information System

ntial, H- High

Rating with Mitigation

Note: A separate detailed Risk Identification Worksheet has also been prepared.

8. L o a d c r e d i t conditions and covenants

34. The following covenants are applicable for project implementation: (i) At MTR stage M a y 31,2012: o Independent assessment o f the District Program and decentralized institutional

arrangements to provide mid-course recommendations. o Beneficiary assessment o f WSS service delivery improvements for completed schemes. (ii) By November 30,2014: o Independent assessment o f the achievements o f the District Program. o Beneficiary assessment o f the WSS service delivery improvements for completed schemes.

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D. APPRAISAL SUMMARY

1. Economic and financial analyses

35. The cost-benefit analysis has been carried out for a sample o f schemes using representative technology options: SVS (not covered habitations); SVS (habitations with no safe source); SVS (partially covered habitations); and M V S . A representative household sample survey covering 3256 households has been used for the cost-benefit analysis. The following benefits have been quantified: (i) time saved in water collection; (ii) benefits from incremental water supply; (iii) savings on recurring and capital costs; and (iv) health benefits f rom reduction in gastroenteritis, diarrheal and malarial diseases. The average unit cost o f capital investment (Rs per capita) for SVS (NC); SVS (NSS); SVS (PC) and MVS are 1982, 2560, 1754, and 5977 respectively. A wide variation in cost i s expected across villages, depending on the number o f households in the village, new schemes to be provided, and the extent o f augmentation o f existing water supply schemes. The O&M cost varies from Rs 20 to Rs 100 per capita per

36. The above costs are extrapolated for the entire Project, based on the following phasing o f schemes: lo%, 20%, 30%, 30% and 10% for the first, second, third, fourth and fifth year respectively. The software cost (including capacity building and program management) are extrapolated based on the projections for five years: 30%, 35%, 20%, lo%, and 5% in first, second, third, fourth and fifth year respectively.

37. The O&M cost recovery i s expected to increase from the current l o w level o f 20% to at least 70% by the end o f the project period. The proposed project is justified on the basis o f direct benefits to about 4,00,000 households, or, 2 mi l l ion rural population to be covered under World Bank assisted project. The economic rate o f return (ERR) o f the project i s estimated to be 21 percent. Sensitivity tests based on assessed risks indicate that the project i s able to absorb negative impacts and s t i l l generate positive ERR. 2. Technical

annum.

38. Water Supply: AP has r ich experience in the rural water supply for both simple and complex schemes and hence there are no major technical issues in preparation, implementation and O&M o f water supply schemes in AP. The water supply schemes will mainly consist o f (i) piped water supply schemes with ground water as a source for SVS , (ii) piped water supply schemes with surface water as a source, usually for a group o f villages ( M V S ) and (iii) strengthening, rehabilitation and improving operational performance o f existing piped water supply schemes.

39. The DWSC will implement the district program in participation with the GPs, and will take support from RWSSD Divisions and private sector engineering consultants (if required). The RWSSD engineers possess the required capabilities o f design, construction and O&M o f the rural water supply schemes. However with a view to enhance the quality o f designs and drawings and save time in planning, the total station method for survey with digitized village road maps, standard software for hydraulic designs, auto C A D and GIS will be used for the preparation o f plans and estimates. A technical manual has been developed covering design criteria, guidelines on sound engineering practices, standard drawings and typical scheme cost estimates, specifications for construction materials, goods, equipment and c iv i l works. Use o f the technical manual along with scientific selection o f sources i s expected to result in good

17

quality construction and sustainable water supply schemes. In addition, an independent agency will be contracted to ensure quality control during the construction o f schemes.

40. Multi Village Piped Water Supply Schemes: These schemes will involve: (i) combining a top-down planning approach with bottom-up demand assessment; and (ii) developing and implementing alternate institutional models to ensure sustainability o f operations. Though the RWSSD has built several MVSs and operated these through service management contracts, there is need for the RWSSD to focus on customer satisfaction, building partnership with the GPs, and improving i t s operational and financial performance.

4 1. Environmental Sanitation: The project includes liquid and solid waste management activities for GPs that are provided with water supply facilities under the project. These provisions include: (i) underground drainage in Mandal head quarters, (ii) drains and pavements in major panchayats, and (iii) soak pits in other GPs covered with water supply. RWSSD has no prior experience in planning, designing, construction and O&M o f the underground drainage facilities, and will seek external technical assistance where required. RWSSD has agreed that about 5 sample schemes will be sent for prior review to the Bank during project implementation.

42. The areas that require further capacity building are: (i) procurement, construction, operations, maintenance, and management o f schemes, (ii) use o f computer oriented design tools for survey, design, and preparation o f drawings and estimates for the water supply schemes, and (iii) technical design and management o f underground drainage systems.

3. Fiduciary

Procurement 43. the RWSSD as the Principal Implementing Entity (PIE) and the six DWSCs as the sub- implementing agencies under the respective District Collectors, The D WSC will be responsible for procurement o f al l SVS, M V S , Under Ground Drainage and Community Sanitation schemes under the Project, including procurement o f goods and consultancies. The RWSSD is the facilitator for a l l aspects o f the project and will provide technical support to the DWSC for implementing the schemes. The PSU at the State level will be involved in the procurement o f goods and consultancies, as required for the project.

The GoAP will implement the project as an investment project in six districts, through

44. In view o f their limited capacity, the PSU and the DWSCs require substantial procurement capacity building. They also need to strengthen monitoring and oversight for compliance with the agreed procedures. To address these issues, the RWSSD has developed a Procurement Manual for the procurement procedures to be adopted under the project. This Manual will be disseminated to the six DWSCs and other agencies engaged in the implementation o f the project and al l procurement under the project will be handled as per provisions in this Manual. The Manual stipulates that procurement o f goods, works and services will be carried out in accordance with the World Bank Guidelines: “Procurement Under IBRD Loans and IDA Credits dated M a y 2004, revised October 2006”, and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers” dated M a y 2004 revised October 2006.

45. The large number o f procurement activities, l imited capacity and the number o f risks (including those given in the manual) pose challenges and ‘high’ risk, from the viewpoint o f the Bank procurement procedures. Several measures have been introduced in this project to minimize these risks. Key features include preparation o f Procurement Manual in accordance

18

with the Bank Guidelines, formation o f Procurement Cell, provision o f a procurement risk mitigation plan, prior and post procurement reviews, proactive information disclosure and complaint redressal mechanism, etc. Detailed arrangements are described in Annex 8 (Procurement Arrangements).

Financial Management 46. Budgeting, Fund Flow and Disbursements: The GoAP will implement the project as an investment project in six districts, with the state budget fimding routed through the RWSSD. The DWSCs will be responsible for planning, designing and implementing the district RWSS program. The existing state financial management systems o f GoAP will be used for the Project. These systems relate to budget allocations and fund f low for the project, financial sanctions and approvals, and require all payments to be made through the state government’s Pay and Accounts Office (PAO). The project related modifications to the existing system o f approvals include, the DWSC providing administrative approvals for al l schemes and authorization for al l payments, and the concerned GP-WSC and MVS-WSC endorsing and signing-off the final design o f the scheme and the payments made during the scheme implementation stage.

47. Financial Reporting and Auditing: The expenditure reporting in respect o f the Division level works will be as per information generated through the standard Government Accounting Systems, which include monthly RWSSD divisional accounts rendered to the AG by the district Pay and Accounts Office. This information will be sent by the concerned Division, through the DWSC, to the PSU. The ‘actual expenditure’ incurred for the SVS will be consolidated by the respective DWSC and the district expenditure report will be sent to the PSU for overall consolidation at the state level. The quarterly financial monitoring reports (Interim Un-audited Financial Reports, IUFRs) will provide information by project components and sub-components, as well as project categories. The project will have a system o f quarterly internal/ concurrent audit by an independent firm o f Chartered Accountants for covering the activities at the PSU, DWSCs and the RWSSD divisions.

4. Social

48. Andhra Pradesh state i s identifiable into three regions (Telangana, Rayalseema and Coastal Andhra), each o f which i s distinctly different due to physical, demographic and endowment characteristics. Intra-regional differences too are quite high, including social (scheduled caste, backward, others), economic (landless, small, marginal and large farmers), ethnic (scheduled tribe, others), occupation (agriculture and allied, other secondary as wel l as tertiary activities) and resource endowments (areas with high salinity/ fluoride);. Effectively reaching and mobilizing local communities, thus becomes a challenging task and requires multi- prong interventions. Additionally, W A T S A N sector mainly rests with the Government Department, with top-down and hierarchical decision making and hardly any accountability to the communities. Given th is setting, the project identifies the following as significant social issues: (i) ensuring inclusion and enhancing equity, (ii) decentralizing service delivery underpinned by the principle o f subsidiarity; and (iii) grass roots human and institutional development. The other important issues are enabling participation, especially o f women; GP strengthening; change management initiatives for changing the role o f Government from ‘provider’ to a ‘facilitator’; improving accountability and transparency; and information, education and communication (IEC) campaigns along with capacity building programs.

19

49. The project will provide capacity support to the local self-govemments and strengthen the existing and/or new institutions at the grassroots level to enable local communities participate in planning and construction o f rural water supply and sanitation facilities and subsequently operate and maintain the systems on their own.

Safeguards - Social 50. Land for Water Supply and Sanitation Facilities: The land requirement for water supply schemes essentially depends upon the geographical coverage (single/multi GP schemes), and o n the source o f water, or the type o f technology (ground / surface water) used for water supply. In single village schemes, land requirements are quite modest and public land will be available in a large number o f cases. In case public land i s not available, the same will be secured voluntarily, either through donations or outright purchase. Rules for securing private land through purchase will essentially be voluntary and market led. Mechanisms have been developed to ensure voluntariness and do not involve any significant adverse impacts upon income or physical displacement.

5 1. Land for Multi Village Schemes (MVS): In case o f M V S s and surface water schemes, land requirement arises for three additional purposes: (i) intake structures, (ii) intermediate balancing reservoirs and (iii) water treatment plants. Normally, public land is available and selected to establish storage and treatment facilities and the water treatment plant. Although no physical displacements are envisaged, there could be some cases wherein land may have to be acquired. T o address this, a Resettlement Policy Framework (RPF) has been developed, drawing on the provisions o f the Andhra Pradesh Resettlement and Rehabilitation Policy which is broadly consistent with the Bank’s OP 4.12 on Involuntary Resettlement. The RPF will form an integral part o f project planning and will be adopted as and when a multi-village scheme i s formulated and lands have to be acquired. At the village level, a Resettlement Action Plan (RAP) will be prepared adopting the framework and will be integrated into the overall RWSS Plan. Appropriate institutional and implementation arrangements have been developed and budgetary provision made.

52. Tribal Development (Indigenous Peoples Policy- OP/BP 4.10): Andhra Pradesh has a significant tribal population o f about 5 mil l ion people or about 7% o f the total population, categorized as Scheduled Tribes (ST). The State policies ensure safeguarding the tribal interests. In accordance with the Indian Constitutional provision (Article 244), a significant geographical area is recognized as a distinct tribal territory, normally called ‘Scheduled Area’ where the constitutional provision o f the Fifth Schedule applies. The AP scheduled area i s spread across as many as 10 districts. The proposed project interventions are not likely to have any adverse impact o n the tribal groups. However, a majority o f the tribals are socially and economically weak, prone to vulnerability, and often excluded from development initiatives. Specific targeting i s essential to ensure ‘inclusion’ and ‘equity’, so that they have access to project benefits on par with others. Accordingly, in line with the Bank’s OP 4.10, a Tribal Development Plan has been prepared, aimed at ensuring that the project reaches the Tribals.

5. Environment

Environmental screening category: B - Partial Assessment 53. W h i l e the proposed project interventions are expected to result in overall environmental and public health improvements in the state, negative environmental impacts can occur if the

20

schemes are not properly designed, sited, implemented, and maintained. Key elements o f the environmental baseline relate to water quantity, water quality and sanitation issues. Project also recognizes interface with the forestry as a key issue, as some o f the water schemes, particularly in tribal areas, are likely to be in the forest areas. In order to ensure that the environmental issues are systematically identified and addressed in the various stages o f the implementation o f project-sponsored schemes, an Environment Analysis (EA) and Environment Management Framework (EMF) have been developed. Forestry interface issues will be addressed as per the national legislation outlined in Forest Conservation Act, 1980 and The Scheduled Tribes and other Traditional Forest Dwellers (Recognition o f Forest Rights) Act, 2006.

54. AP RWSS Project falls in the environmental assessment category B as per OP 4.01 6. Safeguard Policies

55. The social and environmental assessment studies have been conducted with active participation by relevant stakeholders. Stakeholder consultation workshops were held at al l levels - grassroots, regional and state. The summary Environment Management Framework, Resettlement Policy Framework, and Tribal Development Plan have been disseminated throughout the state. These documents were disclosed at the Info Shop o n March 3 1 , 2009.

56. The Safeguard policies triggered for the proposed project are highlighted below.

Yes No Environmental Assessment (OP/BP 4.0 1) 1x1 [I Natural Habitats (OPBP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Physical Cultural Resources (OPBP 4.1 1) [I [XI Involuntary Resettlement (OPA3P 4.12) [X 1 11 Indigenous Peoples (OPBP 4.10) [XI [I Forests (OPBP 4.36) [XI [I Safety o f Dams (OP/BP 4.37) 11 [XI Projects in Disputed Areas (OP/BP 7.60)' [I [X 1 Projects on International Waterways (OPBP 7.50) [I [XI

7. Policy Exceptions and Readiness: None.

21

Annex 1: Country and Sector or Program Background

INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

1. Government o f India’s Sector Reform Program: India has embarked on a significant reform program in the RWSS sector since 1999, due to i t s recognition that a transformation was urgently required from a target-based, supply-driven approach to a demand-based approach, where users get the service they want and are willing to pay for. The Government o f India (GoI) has developed the Swajaldhara guidelines and the more recent National Rural Drinking Water Program which provide the basic principles for RWSS sector reform, including community participation in planning, implementation, O&M o f schemes, and the changing role o f government from ‘service provider’ to a ‘facilitator’. This decentralized service delivery approach has followed the 73‘d constitutional amendment o f 1992 which introduced devolution o f financial and decision-making powers to the three-tier local Governments (PRIs).

2. Overview o f State of Andhra Pradesh: The State o f Andhra Pradesh, with over 76 million population (Census 2001) and spread across over 277,000 sq. k m s i s India’s 4th largest state in terms o f geographical area and 5’ largest state in terms o f population. It has a coastline stretching over 1,200 kilometers. For administrative purposes, AP has been divided into 22 rural districts, each o f which i s divided into revenue mandals (blocks). The state comprises of 1 , 105 revenue mandals and 29,994 villages. Each mandal has 20-35 revenue villages with Gram Panchayats as the village level local government. Each revenue village has about 1 to 5 habitations.

3. On the basis o f history and socio-cultural aspects, the state can be classified into three regions - Coastal Andhra, Rayalseema and Telangana. The tribal dominated hilly areas which spread across the Telangana and Coastal Andhra regions can be considered a fourth zone as they are particularly under-developed and have a unique set o f problems. The economy o f the state i s largely dependent on agriculture. About 70 % o f the total population depends on fanning for their livelihood. The state has a vast variety o f mineral resources which contribute significantly to the state’s economy. Rural literacy i s 55 percent as against all-India average o f 59 percent. Currently around 16 percent of the AP population lives below the poverty line.

4. Although the State has three major rivers (Godavari, Krishna and Pennar) and significant ground water resources, yet i t faces serious challenges in water resource management. Depletion o f ground water levels and quality problems (fluoride, salinity) in some parts o f the state need to be addressed urgently. Only 40% o f the rural households have access to piped water schemes and water i s distributed through public stand posts in most villages. Almost 80% habitations are served through SVS. Though the coverage through MVS , which predominantly depends on surface water, has gone up in recent years, it accounts for only 19% habitations. The general situation relating to sanitation in rural Andhra Pradesh i s quite dismal. Sanitation coverage in the state i s 50% with only 30% use o f toilets in the rural areas. Open field defecation i s quite prevalent and has led to significant pollution and health issues. Andhra Pradesh, l ike many other states has introduced the GO1 program on Total Sanitation Campaign (TSC), but has yet to scale up effectively.

22

5. Access to Water Supply and Sanitation: The information from the GOI-led state habitation survey as on 1st April, 2008, shows 46 percent habitations ‘Fully Covered’ with at least 40 LPCD water supply, 45 percent habitations with 20 to 40 LPCD and the remaining with less than 20 LPCD. Despite an annual expenditure o f about US $ lOOm on water supply, the data shows ‘slippages’ rather than improvements in the status o f fully covered habitations.

as on 01.04.2008

71710 33098 46 31910 45 5111 7 1591 2

6. The habitation survey considers only public schemes as acceptable sources and does not capture access to own private sources o f water supply, generally used by a large proportion o f population in AP. Hence, household surveys reported in Table 3 provide a different picture o f very high level o f access by 78 % households (within and near premises). About 40 % households have access to taps and about 3 1 % depend on hand-pumps. Although there has been some improvement in sanitation coverage, i t lags behind with about 54 % households (2008 survey) having access to individual household latrines.

Tap Hand Pump Other

Note: BPL: Below poverty line, APL: Above poverty line, IHL: Individual household latrine

9 22 9 40 Closed drainage 6.3 7 17 7 3 1 Open drainage 35.1 7 16 6 29 N o drainage 58.6

I Total 1 23 I 55 I 22 I 100 I Total I 100 I Source Census 200 1

23

7. Sector financing: Table 4 provides details o f the main sources o f investment financing for new schemes, including: a) Sate Government's own resources (MNP); b) GO1 budget allocations through plan schemes (ARWSP, AUWSP for major panchayats, Swajadhara, Sector reforms, Twelfth Finance Commission, PMGY); and c) borrowings by GoAP fiom NABARD and HUDCO. In recent years GoAP has significantly increased investments in the sector with the annual outlays reaching nearly US $1 OOm.

0.000 Sector Reforms

ARWSP I 23.488 I 1,649 I 34.186 1 2,366 I 31.860 1 3,232 1 26.744 I 2,007 I 29.767 1 1,718 I 40.930 I 3,529 1 67.674 1 5,855 I

341 0 14.186 0 23.953 1,133 12.093 189 3.953 90 2.326 1.163 14

SMP 12.558 488 6.512 189 2.326 29 1.395 40 0.000 2 0.233 0 6.279 0 A W S P 0.000 0 0.000 0 0.930 0 1.395 3 1.628 3 4.186 7 3.721 8 MNP 9.535 673 8.837 487 2.093 592 4.186 401 0.465 220 0.000 890 0.000 0

NABARD 8.372 16 17.442 611 13.023 263 20.930 167 24.419 251 22.326 195 30.465 292

Others Total

TFC 0.000 0 0.000 0 1.628 '21 2.093 186 0.000 48 0.465 8 13.023 0

P M G Y 0.698 0 0.000 8 2.326 79 6.279 366 6.047 146 2.326 208 1.395 30

0.000 259 0.000 0 0.000 6 0.000 0 0.000 521 0.000 0 0.465 8

54.651 3,085 81.163 3,661 83.256 5,414 86.512 4,129 74.419 3,294 98.140 5,198 165.349 7,070

HUDCO 0.000 0 0.000 0 0,000 0 0.000 0 1.163 0 18.837 14 33.488 298

Swajaladhra 0.000 0 0.000 0 5.116 59 11.395 770 6.977 295 6.512 7.674 565 - .-

Conflicting role of governance and execution. The roles o f governance, policy making, execution and regulation have all converged into the RWSSD. There i s need for separation o f roles and responsibilities pertaining to governance and execution to enhance accountability.

Linkages with Water & Sanitation Missions. Operational linkages between the RWSSD and the StateDistrict Water & Sanitation Mission are weak and need to be strengthened.

Centralized decision-making in approval and sanction of schemes. The current system o f centralized administrative sanction and technical sanction results in long process time and delays in execution.

Limited involvement of community. The limited involvement o f the community in planning, implementation and O&M o f RWSS facilities needs to be addressed.

Awareness and capacity building. There i s need to inculcate a sense o f ownership with the PRIs and communities to enable their effective participation in all stages o f RWSS activities.

24

There i s also an urgent need to.build technical capacity o f the PRIs and communities to effectively take over and manage the RWSS services.

9. Recent Initiatives by GoAP: Following steps have been taken by GoAP during 2006-08 to devolve responsibilities and improve sustainable coverage.

0

0

0

0

0

0

0

0

0

RWSS Department created in 2007. The Panchayati Raj Engineering Department (PRED) has been bifurcated in 2007 into (i) RWSS Department and (ii) Panchayati Raj Department, with a dedicated RWSS Secretary and Minister for pursuing the RWSS Sector Program and Policies.

RWSS Sector Vision (October 2006) on sector policy and decentralizing service delivery, with RWSSD evolving i ts role as a technical supporter and facilitator.

Devolution o f powers and functions to PRIs (GO Issued in December 2007). Following functions and related funds have been devolved to the PRIs: participation in planning o f schemes; O&M o f MVS and SVS; training programs and IEC activities; planning, implementation and monitoring o f TSC program.

Separation o f policy and planning activities. GoAP has taken initial steps in setting-up the State Water & Sanitation Mission (SWSM) for sector planning and policy formulation at State level; District Water & Sanitation Mission (DWSM) at the district level for implementing the RWSS reform program.

Capacity building and training activities for Panchavats. AP Academy for Rural Development has carried out extensive capacity building and training programs for PRIs (GP, Mandals, ZPs), to discharge their functions, including accounting, auditing and financial management programs. Communication and Capacity Development Unit (CCDU) has implemented specific programs to enhance capacity o f the PRIs for RWSS works.

Formation o f GP-WSCs. GP-WSCs have been formed in most GPs under the recent Go1 Sector Reform Project and Swajaldhara Program. A policy decision has been taken to involve the Se l f Help Groups (a major women empowerment initiative in AP), as part o f this committee to strengthen an integrated water and sanitation approach at the grass-root level.

Performance based service contracts under MVS. RWSSD currently outsources O&M o f MVSs to private contractors and has initiated performance based O&M service contracts, taking into consideration the quantity and quality aspects o f water supply.

Priority Program for fluoride affected habitations. GoAP has identified and approved schemes to cover all fluoride affected habitations during 2008-09. About 1500 habitations w i l l be covered on a priority basis.

Source Sustainabilitv linkages with Irrigation and Tank Projects. The Irrigation Department has agreed to take up priority schemes (including groundwater recharge through tank projects) in overexploited and critical areas, with the purpose o f improving source sustainability for rural water supply schemes.

10. Program Development: Vision and Policy: The GoAP envisions a progressive transformation in the role o f RWSSD from a “provider o f services” to a “facilitator” and “technical support” agency, while building capacity o f the PRIs for implementing and maintaining the SVSs. As part o f the World Bank project, the GoAP i s adopting a five year program for interested districts to gradually transit to decentralized service delivery systems.

25

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

- Sector Issue Project Latest Supervision (PSR) Ratings (Bank-

financed projects only) Implementation Development Progress (IP) Objective (DO)

District Poverty Initiatives

RWSS (closed) Maharashtra RWSES (Closed) OED Rating - Marginally Unsatisfactory AP DPIP (ongoing) S S

Project (DPP j

Watershed Development

Water Supply and

~-

Rajasthan DPIP (ongoing) S S Madhya Pradesh D P P (ongoing) S S Karnataka Watershed (ongoing) S S Uttaranchal Watershed (ongoing) S S Madras WSS (closed) OED Rating - Satisfactory

Sanitation Tamil Nadu WSS (closed) Kerala WSS (closed) Gujarat WSS (closed) Hvderahad WSS (closed)

26

OED Rating - Satisfactory OED Rating - Marginally Satisfactory OED Rating - Marginally Satisfactory

OED Rating - Satisfactorv

DFID DANIDA

The Netherlands

Maharashtra RWSS Closed State projects in Karnataka, Orissa, Closed Tamil Nadu, Kerala State projects in Gujarat, UP, AP, Closed Karnataka, Kerala

Annex 3: Results Framework and Monitoring INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

R 3: Improved RWS asset creation and management

1. Monitoring and Results Framework Matrix - Kev Indicators

To improve rural water

Indicator 12: Improved Community water points (shared connections) constructed or rehabilitated under the

Track functionality and source sustainability o f created RWS schemes for improved asset

supply and sanitation services through progressive decentralization, community participation and enhanced accountability.

Indicator 1: People / households (number) in project areas with accesshse to improved water supply services. Indicator 2: People / households (number) in project areas with accesshse to adequate piped water supply throughout the year. Indicator 3: People /households (number) in project areas adopting improved hygiene and sanitation practices. Indicator 4: Improvements in cost recovery (%): (i) contribution to capital cost; (ii) contributions to O&M cost; and (iii) collection efficiency.

1. RESULTS INDICATORS FOR EACH COMPONENT

Component I: Sector Development and Capacity Building

R 1: Decentralized institutional framework established and functional.

R 2: Capacities built of participating PRIs and RWSSD

Indicator 5: Number o f water utilities the project i s supporting Indicator 6: Number of other water service providers the project i s supporting Indicator 7: % SVSs constructed in participation with GPs against the total target. Indicator 8: % M V S s constructed in participation with ZPs as against the total target. Indicator 9: % participating GPs meeting the full O&M cost through user charges. Indicator 10: Capacity building activities undertaken as per agreed strategy and plan in response to the requirements o f the scheme cycle Indicator 11: Annual project fund utilization within 10% shortfall as per agreed estimates

Assess whether expected results are being achieved and whether district program implementation strategy and plan are working.

SULTS MONITORING

Review of decentralization process as a sector development activity.

Ensure that planned capacity building activities like exposure visits, training, IEC, technical assistance, analytical studies and knowledge sharing are undertaken to achieve expected results.

27

R 4: Improved hygiene and sanitation practices

Component 3 : Project IC R 5: World Bank Project M&E System and Sector Information System established and Dperational

project. Indicator 13: New piped household water connections that are resulting from the project intervention. Indicator 14: Piped household water connections affected by rehabilitation works undertaken under the project. Indicator 15: % constructed SVS and M V S yielding required quantity and quality o f water Indicator 16: % commissioned schemes with catchment area treatmenthource sustainability measures in-built into the design Indicator 17: % households having access to safe sanitary latrines. Indicator 18: % habitations/villages having well maintained drainage as against the total habitations/villages planned to be covered. Indicator 19: % habitationshillages with compost pits, soak pits, and garbage pits constructed as against the total number o f villages planned. Nzagement Indicator 20: Field based periodic reviews undertaken by SWSM PSU Indicator 21: % SVS/MVS which have carried out: (a) independent supervision quality checks; (b) community monitoring /social audits; (c) beneficiary assessments. Indicator 22: Baseline data collected for project villages as per agreed baseline format; and impact evaluation (mid-tern and end term) as planned by independent agencies Indicator 23: External Audit of environmental performance of project.

management.

Assess improvement in access to safe sanitation, with mid-course corrections in implementation strategy and plan, as required.

Track results, ensure concurrent community oversight, and undertake independent verification o f program outcomes and impact

28

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Annex 4: Detailed Project Description INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

I. Project Components 1. The WE3 Project wi l l have three main components: (A) Capacity and Sector Development, (B) Infrastructure Development, and (C) Project Implementation Support. The total Project Cost i s US $ 180m with WB financing o f US$ 150m.

ComDonent A: Cagacitv and Sector DeveloDment (US$12 m) 2. This component aims at building capacity and training the RWSS institutions and PRIs for implementing the Project.

i) Sub-component Al: Capacity building (US $8 m): This sub-component would support capacity building and institutional strengthening programs for the sector stakeholders. Proposed activities are derived from a comprehensive capacity building plan to be adopted by the Go@.

o Training at the State level : Capacity building and training activities wi l l focus on strengthening the sector policy and planning functions at the state level. These include strengthening capacity o f RWSSD and SWSM through training programs in sector policy and planning, program management, policy implementation, s k i l l development, financial management, M&E, etc.

o Training at District level; The district functionaries have a key role in developing the district-level programs as well as facilitating the PRIs for planning and implementing the RWSS schemes. The specific capacity strengthening activities at the district level include training in policy and planning, engineering design and implementation o f schemes, project management, financial and accounts management, procurement, community development, and health and hygiene aspects.

o General training activities for PRIs: Trainings to the PRIs on the scheme design, implementation and maintenance, procurement and financial management, health and hygiene aspects, etc. would be supported under th is sub-component. These activities wi l l be coordinated with the on-going trainings under the Swajaldhara and other State PRI programs.

In addition, change management and other trainings wi l l be carried out at all levels to bring about a sh i f t in mindset from traditional supply driven mode to a demand driven community participatory approach.

ii) Sub-Component A2: Program Information, Education, and Communications (IEC) (US$ lm): This subcomponent aims at facilitating the RWSS Sector Program activities by disseminating relevant information amongst stakeholders:

o IEC for empowering PRIs to adopt their new role in planning and implementation o f RWSS Projects;

o IEC to promote behavioural change among stakeholders for improving sanitation and hygiene practices;

o Development o f manuals, hand books, field books etc. on the District Program.

33

A communication strategy will also be developed and implemented.

iii) Sub-component A3: Sector Development Studies (US$ lm): This component comprises technical, institutional, economic, and social studies intended to inform the state level policy decisions, including the following broad topics:

o R WSS Sector Program and Policies

o Cost Efectiveness and Sustainability Analysis

o Appropriate Technologies for R WSS Schemes

o Institutional Models for Service Provision

o Groundwater Management by Rural Communities

o Independent Assessments and Project Reviews

iv) Sub-component A4: District Excellence Awards (US$ 2m): The project will give away annual awards to the best performing 10 GPs in each district, based on completing works as per district program and policy, within the prescribed time-limit with no cost overruns; completing the technical, financial and social audits; and demonstrating full beneficiary satisfaction.

ComDonent B: RWSS Infrastructure DeveloDment (uS$153.5m) 3. This component includes investments required to improve RWSS services to the Project communities. These investments would be made in an integrated manner with source strengthening measures and catchment area management activities; safe disposal o f waste-water; health and hygiene awareness programs; and community incentives for attaining ‘open defecation free status’. The main sub-component are:

i) Sub-component B1 (US$ 117.5 m): New Investments: This sub-component will finance new schemes in N C M S S P C areas (including source strengthening measures), support rain water harvesting structures, and test new technologies. Public-Private Partnerships will be supported as part o f the new investment programs.

(i) New investments in SVS (ii) New investments in MVS (iii)

(iv)

Source strengthening measures, rain water harvesting (roof-top o f schools/public institutions) Pilot testing o f new innovations and technologies: RO plants; fluorosis removal etc.

ii) Sub-component B2 (US$14 m): Rehabilitation and Augmentation of Existing Schemes: The following activities will be undertaken to improve service delivery in existing schemes:

(i) (ii) (iii)

Rehabilitation and augmentation o f SVS Rehabilitation and augmentation o f M V S Protection o f catchment areas and recharge o f ground water sources through plantations, check dams, sub-surface dykes, etc.

iii) Sub-component B3: Sanitation and Hygiene Promotion (US$ 22m): This sub-component will supplement the existing Go1 led Total Sanitation Campaign (TSC Program) and will be carried out in an integrated manner with water supply activities. The Project would focus on creating awareness and demand for health, hygiene, and sanitation, as wel l as motivating communities to attain open defecation free status. The investments will cover:

34

a) Individual Sanitary Latrines for BPL households b) Soak pits for al l project households c) Drainage facilities and solid waste management in major GPs. d) Under Ground Drainage in select Mandal headquarters e) Hygiene promotion and incentives for ‘open defecation free status’ o f habitations

Component C: Project Implementation Sumort (US$14.5 m) 4. A Project Support Unit (PSU) at the state level, along with sub-units at the district level (D-PSUs) will support the following sub-components:

i) Sub-component C1: Staffing & Consultancy cost of PSU (US$ 5.7m): This sub- component supports staffing and consultancy cost o f the Project Support Unit (PSU) at the state level and sub-units at the district level for the following tasks:

a) Implementing and managing the WE3 RWSS Project. b) Facilitating the RWSS District Program. c) Coordinating with various stakeholders, especially S W S M and DWSMs. d) Procuring serviceshonsultants to support the implementation o f the WB Project. e) Reviewing and reporting the progress o f the District Program.

ii) Sub-component C2: Equipment & Misc. costs (US$2m): This will include the operational costs o f the PSU and D-PSU, covering routine establishment expenses (rent) and other costs (computers, stationary, fuei etc.).

iii) Sub-component C3: Monitoring, Evaluation and Impact Analysis (US$ 0.8m): This component will support the establishment and operationalization o f the following activities: (i) Computerized Sector Information System and M&E System for monitoring the achievements o f the RWSS sector and the Project, including the type and cost o f schemes, service levels, water quality, O&M cost recovery and collection efficiency, etc. A benchmarking system will allow comparisons amongst districts, GPs and across schemes. (ii) Financial Management System to record available funds and disbursements under the WB Project, including annual financial audits.

iv) Sub-component C4: Governance and Accountability Activities: (US$ 0.6m): This will include independent verifications, technical audits, social audits and beneficiary assessments.

v) Sub-component C5: Engineering Support (US$ 3.3m): Engineering support would be provided for designing and implementing the SVS and intra-village M V S facilities. This includes field surveys, geophysical surveys for source selection, geotechnical investigations for determining safe bearing capacity, water quality analysis, preparation o f designs, drawings, estimates, bid documents, engineering supervision during project implementation, O&M support, etc.

vi) Sub-component C6: Community Support (US$ 2.lm): The services o f SOs, NGOs and community based organizations will be used for pre-planning and planning phase activities, including the formation o f GP-WSCs and MVS-WSCs. The activities include workshops, group discussions, information campaigns, participatory community action planning, and training for organizing and electing a representative-cum-responsive GP- WSC.

35

Annex 5: Project Costs INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

Table 1: Proposed AP RWSS Project Cost Estimate In U S $ Mi l l ion

Note: Totals may not add due to rounding * Price escalation @ 10% per annum are factored in the costs indicated.

36

Table 2: Proposed AP RWSS Project Component-wise Sources of Funds In US $ Million

Government o f Andhra Pradesh (own funds)

Community

Total

C4 Governance and

2.60 6.10 7.70 6.70 2.50 25.60 14

0.40 0.90 1.30 1 .oo 0.80 4.40 3

18.00 40.00 53.00 45.70 23.30 180.00 100

Note: Totals may not add due to rounding

Table 3: Proposed AP RWSS Project Expenditure Profile by Financiers In U S $ Million

I I I I I I I I I Note: Totals may not add due to rounding

37

Table 4: Average Unit Costs adopted in the Project Cost Estimate

I

I SNo

Drainage scheme 1 I F

Capital cost per habitation Rs Lakhs 14.35 16.22 20.95 48.90

7.95

371.00

Type of Scheme Water source Population 1 Per habitation Per capita cost Rs

1754 1982 2560 5977

972

3707

I (State Average) SVS-PC to FC ' I Ground water I 8 1 8 SVS-NC to FC SVS- NSS to FC M V S - common

Ground water 8 18 Surface source 8 18 Surface source 8 18

& intra village facilities Augmentation o f Ground water/ existin WSS surface source Underground 10000

l

e whole state. The actual population in - - the six project districts i s likely to be different andhence the actual scheme costs could vary.

* The average costs arrived with 10% raise in costs per year to factor inflation.

Table 5: Project Cost by Component

38

Annex 6: Implementation Arrangements INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

1. The existing institutional structure comprises o f overlapping roles and responsibilities for policy-making, scheme design, implementation and management, with most activities carried out by the RWSSD. A small GO1 Swajaldhara Reform Program and Total Sanitation Campaign (10% RWSS funds) through the PRIs has piloted demand responsive schemes during the last 6-7 years. The challenge is to scale up these pilot programs. Chart 1 presents the arrangements under the project, with increasing role o f the district and village level PRIs (Zila Parishad and Gram Panchayats) in the design and implementation o f schemes, along with separation o f governance and operational responsibilities.

2. A major sh i f t f rom the business-as-usual is the decentralization o f RWSS service delivery responsibility to the DWSM under the Zi la Parishad (district PRI). The SVSs and MVSs will be designed and implemented in participation with the GP-WSCs and the MVS-WSCs. The O&M will be devolved to the GP and the ZP. The other major focus i s on strengthening pol icy and planning activities at the State and district levels. The existing SWSM and participating DWSMs will be strengthened and capacity built for policy, planning and review functions. The administrative sanctions and authorization o f payments for a l l schemes will be provided by the concerned DWSC, an executive arm o f the DWSM. The DWSC will take decisions on the works and other programs to be implemented across the district, including the requirement o f engineers and Support Organizations (SOs), and will package these programs for cost effectiveness. In case the RWSSD Divisional Engineers are not available or do not have the capacity, the D W S C could hire the Technical Service Providers (TSPs) f rom the market. In either case, the engineers will be accountable to the DWSC and the concerned GP through a service contract agreement. The SOs could be hired, or existing Self Help Groups could be used, taking into consideration the cost effectiveness o f the program. All activities, including design, supervision and operations carried out by the RWSSD Divisions will be signed-off at critical stages by the MVS-WSC or GP-WSC. The institutional and implementation arrangements are presented below (details in the Project Implementation Plan).

39

Chart 1: Proposed Institutional Arrangements

GP and GP-WSC Design and implementation of SVS in participation with DWSC

0 O&M o f SVS and intra-village MVS - Tariff Design rind Collection ofconununity

* Coordinating with MVS-WSC * Spreading awareness on sanitatiodhygiene Ensuring participation o f beneficiaries

contributions

Collection o f user charges

Framing Sector policy guidelines Issuing directions for coordination betwee

I I I I I I

WSM Executive Committee Issuing Policy guidelines Issuing Government Orders Overall Sector monitoring Funding budgets, borrowing

SWSM

Executive Committee

Headed by Secretary RWSSD

I I L - - - - -. I

I I I Engineer-in-Chief I I I I ! I

I tate PSU Overseeing implementation o f policy decisions

I I I I I I I I I .I.

Program V f 1

* Implementing WB Project I Facilitating application of reform principle2

Coordinating with GoAP departments *Technical, Financial and Social Audits

Monitoring & Evaluation

- *Monitoring & Evaluation of District

i I I Zil la Parishad I I RWSSD Engineering Division

40

State level 3. State Water and Sanitation Mission (SWSM): The SWSM, under the Minister RWSSD will be responsible for the entire RWSS Sector Program. The Executive Committee o f the SWSM, headed by the Secretary RWSSD wil l assist SWSM in all i ts responsibilities, including planning and policy formulation; capacity building; fund flow; approval o f the annual plan and budget allocation; review, monitoring and evaluation o f the Sector and District Programs.

4. The RWSSD wi l l work substantially as the ‘facilitator’ for all aspects o f the District Programs, including technical support for RWSS activities, capacity building, training programs, etc. The RWSSD Divisions will continue to plan and implement the MVSs in participation with the ZP, while O&M wi l l be devolved to the ZP.

5. Project Support Unit (PSU): The state level PSU, under a Senior Project Director will be the secretariat to the SWSM for implementing the District Programs. I t will coordinate with various departments o f GoAP, Go1 and other sector partners.

6. Communication and Capacity Development Units (CCDUs). The project will liase with the existing CCDU for IEC and capacity building activities.

Rural Water Supply & Sanitation Department (RWSSD):

District level 7. District Water and Sanitation Mission (DWSM): The DWSM, headed by the ZP Chairperson wi l l be responsible for the district-wide RWSS program and policy, including annual plan and budget. The District Water and Sanitation Committee (DWSC) headed by the District Collector, as the executive committee of the DWSM, wi l l be responsible for implementing the district program, including design and implementation o f SVS and MVS as well as district-wide sanitation programs. The DWSC will provide administrative sanctions for all schemes as well as authorization o f payments during the scheme implementation stage. It wi l l also carry out the district level capacity building and M&E activities.

8. District Project Support Units (D-PSU): The D-PSUs headed by a Program Director wi l l be responsible for managing the District Program. Each D-PSU will have 5 to 6 staff comprising 2-3 technical staff in the cadre o f Deputy EE and below and three professionals (Social, Environmental and M&E experts) for supporting the implementation o f program and policies o f the DWSM, including communications and capacity building, monitoring and evaluation programs, technical and social audits.

9. R WSSD Divisions: The RWSSD Divisions at the district level (Superintendent Engineer / Executive Engineer) wi l l be responsible for designing and implementing the M V S in partnership with the MVS-WSC. All design, supervision or operational activities wi l l be undertaken through an agreement between the RWSSD, DWSC and MVS-WSC.

10. Multi Village Water Supply & Sanitation Committee (WS- WSC): The MVS-WSC at the district level wi l l be a representative committee o f the group o f GPs for a M V S . This wi l l be a sub-committee o f the ZP and will work closely with the RWSSD Division in planning, designing and implementing the MVS. The MVS-WSC wi l l endorse and sign o f f the scheme design and implementation stage payments.

41

Village Level 11. Gram Panchayat (GP): The GP will be responsible for village level program and planning, tariff fixation, accounts management, M&E and conflict resolution. I t will provide capacity support to the GP-WSC and will ensure regular O&M and cost recovery through user charges.

12. Gram Panchayat Water Supply and Sanitation Committee (GP-WSC): The GP-WSC, a sub-committee o f the Gram Panchayat, will work with the DWSC for scheme planning, designing and implementation. The GP-WSC will be fully responsible for O&M o f schemes, including community contributions towards capital and O&M cost, accounts management, IEC activities, etc. The GP-WSC will also be responsible for in-village sanitation facilities such as ISLs, soak-pits, drains, source strengthening activities, etc. The GP-WSC will endorse and sign- o f f the scheme design and implementation stage payments.

Stages

, Scheme Planning and Design Stage :ompleted (as per scheme cycle)

!. Scheme Implementation Stage :ompleted (as per scheme cycle)

Confirmation of Processes and Outputs

Key Processes

DWSC confirms: o Baseline data established as per agreed indicators o GP-WSC/MVS-WSC participated at planning and design

stages o Design o f scheme endorsed and ‘signed-off‘ by GP-WSC /

Mvs-wsc o Initial (agreed) capital cost contributions collected o MOU signed between GP-WSC/MVS-WSC and DWSC o Implementation Phase Plan including Community Action Plan

Prepared o SVSIMVS appraised and approved by DWSM DWSC confirms: o System has been built o Satisfactory Independent Implementation Quality Checks

carried out o Satisfactory independent technical and social audits carried

out o Payments endorsed and ‘signed-off by GP-WSC/MVS-WSC

13. scheme planning and implementation stages (Table 1).

The DWSC will confirm, on a six monthly basis, the key processes followed under the

Table 1: Processes followed and Outputs Achieved for SVS and M V S

42

svs Total Period o f

Activity in months

1 1 1

NA

A Pre-Planning Phase MoU signed between RWSSD & DWSC Prioritization of GPs by DWSC

Formation of MVS-WSC by RWSSD Tripartite agreement signed between RWSSD, DWSC & MVS-WSC

Joint undertaking between GP-WSC & DWSC

MVS Total period o f

Activity in months

1 NA

1 1

Quality Surveillance (ICQS) Implementation Stage Payments sign-off by GP-WSC/MVS-WSC

~

Preparation of Implementation Phase Completion Reports by RWSSD with 1 1

Construction o f scheme by contractor Construction supervision by RWSSD in coordination with GPWSC in case o f SVS or MVS-WSC in case of MVS and Independent Construction

10 18 11 18

43

facilities of MVS Training by RWSSD on O&M to GP-WSC/MVS:WSC O&M assistance by SHGs/SOs & RWSSD/TSP Exit o f SHGs or SOs and TSPRWSSD from the GP Operation & Maintenance Phase -Total 4 Phases- Total

3 3 3 3 1 1 4 4 22 30

Project Milestones and Post Project Sector Institutional Vision

15. are:

The identifiable milestones for the participating districts under the World Bank Project

A. At the start of Project e

e

e

e 0

B. 0

e

e 0

0

0

C. e

0

e 0

D. e

e

e

E. e e

Government Orders issued regarding roles and responsibilities o f SWSM, PSU, DWSM, DWSC, D-PSU, ZP, MVS-WSC, GP, GP-WSC for the implementation o f the District Program. The PSU fully functional and manned by senior officers deputed from RWSSD and other contractual arrangements. Pilot Batch feasibility study completed; pre-planning stage and planning phase completed for select schemes (20 SVS). MVS user committees formed in at least 10 M V S . Batch I fully identified. Capacity development program initiated for RWSSD, SWSM, PSU, DWSM, DWSC, ZP, D-PSU and GP.

By the end o f first year o f Project

SWSM, DWSM, DWSC, PSU and District PSUs - all fully operational. Bulk water tariff policy and O&M policy issued. All aspects o f IEC program launched. Capacity o f at least 25% o f the staff o f DWSM, DWSC and PRIs built on principles of demand responsive and community managed RWSS systems. Batch 1 completes pre-planning and planning stages. Wherever M V S i s taken up, appropriate capacity building plans have been taken up for Mvs-wscs,

By the end of Second year o f Project

Capacity o f at least 75% o f the staff o f DWSM, DWSC, and PRIs built on principles of demand responsive and community managed RWSS systems. Batch 1 completed. Batch I1 completes pre-planning and planning stages. Batch I11 and IV identified.

By the end of Third year o f Project

Capacity o f 100% staff o f DWSM, DWSC, and PRIs built on the principles o f demand responsive and community managed RWSS systems. Batch I1 completed. Batch I11 and IV complete pre-planning and planning stages.

By the end of the Project Batch I11 and IV completed. Capacity development for the PRI staff will be an ongoing and regular Program.

44

0 Uniform district policy and guidelines applied and all RWSS functionaries work in participatory mode with the PRIs.

0 At least 70% O&M cost recovery achieved.

Post Project Sector Institutional Vision

16. GoAP’s vision for the RWSS Sector envisages a gradual transformation o f the role o f the RWSSD from service provider to a facilitator, while decentralizing RWSS services and building capacity o f the PRIs. Based on the success o f the proposed project, the RWSSD wi l l scale-up the district program to other interested districts as a follow-up Phase I1 program.

45

Annex 7: Financial Management and Disbursement Arrangements

INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project State Level Financial Management Issues 1. Andhra Pradesh State Financial Accountability Assessment was conducted by the Centre of Good Governance, Hyderabad on behalf o f the Government o f Andhra Pradesh (GoAP) and was completed in 2002. The Assessment examined inter a l ia the areas o f budget formulation and execution, accounting and reporting, internal controls and external auditing and identified strengths and weaknesses in the above areas with recommendations for improving the overall financial management and accountability systems in the state.

2. One o f the key issues that emerged from the Fiduciary Risk Assessment Report o f the SFAA was the danger o f circumventing the Treasury System o f the state government and the government accounting and reporting procedures. The report concluded that state systems have built in checks and balances and bypassing these could lead to weaker financial control and accountability. The report also concluded that “Compliance with controls was adequate in the treasury system and in those areas in which discipline can be enforced through the treasury system (this also includes the PA0 system for payment functions). However compliance in other departmental areas such as cash records, utilization certificates, AC/ D C bi l ls and P D accounts in the past has been weak. In fact successive reports o f the Comptroller and Auditor General of India (the state supreme auditor) have pointed out financial management issues and irregularities with the PD accounts. All these aspects have been considered while designing the project financial management arrangements.

Project Implementation Arrangements 3. The GoAP will implement the Project as an investment project in six districts, under state budget financing routed through the RWSSD. The Principal Implementing Entity (PIE) i s the GoAP RWSSD and the sub-implementing agencies are the six DWSCs under the respective District Collectors. The DWSCs will be responsible for planning, designing and implementing the district RWSS program, as described in Annex 6. The GoAP’s existing P A 0 and LoC system, with some modifications, will be followed for the Bank Project. The administrative sanctions for al l schemes and authorization o f a l l payments will be given by the DWSCs under the Bank Project. The concerned GP-WSC and MVS-WSC will endorse and sign-off the design o f the scheme and the payments made during the scheme implementation stage.

Financial Management Assessment of Gram Panchayats and DWSCs

4. A Financial Management Assessment study o f a sample o f GPs was conducted by an independent consulting firm to assess the capacity o f GPs in the area o f financial management. The study covered aspects relating to planning and budgeting; accounting systems and procedures; fund f low and financial reporting system; and internal and external control systems and processes, including audits. The study concluded that over 90% o f the GPs selected for the detailed review required further strengthening and intense capacity building o n key financial management aspects. In particular, the study found that the GPs were extremely weak in the areas o f budgeting and planning, fund flow, accounting and financial reporting and internal controls. The results provided insights and pointers on the lack o f adequate procedures and adherence checks with respect to internal controls. A preliminary assessment also indicates that the DWSCs have never handled a Bank project and most o f them lack the experience and

46

capacity to handle and report on project funds. However since the DWSCs wil l not be handling finances in this project, no detailed F M assessment o f the DWSCs was carried out.

5. FM Risk Assessment (M- Moderate, S- Substantial, H- High) R i S aknesses

Project Risk This i s on account o f the multiple implementing agencies: RWSSD divisions and DWSCs, the latter with weak capacity Control Risks Budgeting: The GoAP i s committed to adequate finding for the project but this could change if the financial position o f the state changes.

Accounting: Funds flow: Risk o f project not receiving adequate allocations from the finance department or delay in issue o f LoC by the RWSSD to the divisions . DWSC capacity for authorizations/ approvals i s weak and may lead to delays in payments. Internal Controls: Wh i le internal controls within the regular RWSSD divisions are documented and in use, controls at the level o f the DWSCs are weak or non-existent

As per present procedure, the P A 0 makes payment in respect o f bills passed by the Ex-engineer, and does not recognize any other authority. The new agreements require the P A 0 to recognize GP- WSCs and W S - WSCs as co - signatories, and that could be missed out.

Weak FM capacities of the DWSCs and GPs: The independent study on the F M capacity o f DWSCs and GPs has identified some key weaknesses which could impact the project.

Financial reporting: Risk o f delays in expenditure reporting due to number o f implementing units (RWSSD Divisions/ DWSCs) could lead to delays in preparation o f IUFRs, thereby affecting disbursements.

Auditing: The overall project financial statements w i l l be audited by the CAG/ AG, AP. Coordination o f audit activity and timely availability o f reports i s a potential risk Overall Control Risk Overall Risk Rating

Risk Rating

H

H

S

H H

Remarks/ Proposed risk mitigation measures

The project design and F M arrangements (country systems) have addressed this factor

A commitment wi l l be sought from the GoAP for appropriate budget allocations for the project -this i s a standard legal covenant.

A commitment wil l be sought from the GoAP for adequate allocations and regular/ quarterly issue o f LoC by RWSSD to divisions - this i s covered under the standard legal covenant. Also, standard guidelines and benchmarks for processes wi l l be worked out with the GoAP, including the t ime for approvals, etc The internal audit o f the project wi l l be conducted six-monthly by CA f m s . They wi l l also review the internal control systems and procedures and recommend improvements.

This risk wi l l be mitigated through issue o f appropriate orders at the district level and reviewing these during the supervision missions, as also compliance verifications.

0 DWSCs / GPs wi l l not be handling finances; as such this risk i s relatively low. However they wi l l require training in the process and procedures o f administrative authorizations, oavment amrovals. etc. Project wi l l post a gazetted finance officer from the state finance department (preferably the Directorate o f works accounts) at the PSU and a Divisional accountant at each o f the implementing divisions. They wi l l coordinate and ensure that financial/ expenditure information i s received on time

GoAP wil l be requested to provide a consolidated audit report on the project by the due date.

Residual risk rating*

S

M

S

S

M

S S

47

Strengths

6. Since the project proposes to use the Government accounting system for its accounting and reporting, this will be one o f the strengths o f the program. Established FM arrangements at the RWSSD Divisions will be completely followed in respect o f the works carried out. The divisional accountants o f the RWSSD are well-versed with such established processes qnd will be responsible for financial management duties at the Divisions.

Weaknesses and Action Plan

7. Weak Capacities at Gram Panchayat (GP) Level: The independent FM capacity study o f the GPs conducted by PwC identified some key weaknesses. However since the GPs are not receiving funds, these weaknesses may not impact the implementation o f the project.

Budgeting

8. The GoAP will make an appropriate allocation for the project through a budget line item and release funds through the mechanism o f the budget. The state government will make an annual budgetary allocation for the project as a “Plan-Capital” item (expenditure head o f account), under a separate budget line i tem “AP RWSS World Bank Project”, in the demand for Grants by the RWSSD. The Finance Department will provide the Budget Release Order (BRO) to the Engineer-in-Chief o f the RWSSD, who would be responsible for allocating the LoCs to the RWSSD Divisions for implementing various Single and Multi village schemes.

’

Fund Flow, Payments, and Disbursement Arrangements

9. The Principal Implementing Entity (PIE) is the GoAP RWSSD and the sub-implementing agencies are the six DWSCs under the respective District Collectors. The DWSCs will be responsible for planning, designing and implementing the district RWSS program and the RWSSD engineers will work for the DWSC under a service contract as described in Annex 6. The RWSSD Secretary will provide the administrative sanction for the overall state program while the DWSC will provide administrative sanction and authorization o f expenditures at the district level.

10. The Finance Department will provide the Budget Release Order (BRO) to the Engineer-in- Chief o f the RWSSD, who would be responsible for allocating the LoCs to the RWSSD Divisions for all the works. The RWSSD will utilize funds to the limit o f the LoC for implementing the works. The PSU will have funds allocated for the Capacity Building component and the Project Management component through the respective budget sub-heads.

11. Financial Management Arrangements (PA0 and LoC system): The entire project will fol low the existing GoAP financial management and fund f low system, with al l project components conforming to the requirements and procedures o f the GoAP Departmental LoC system (fund allocations and raising o f bi l ls for works done) and the P A 0 system (payments against works done). The LoC will be issued to the Executive Engineers o f the RWSSD Divisions as per departmental procedure, and not to any other entity responsible for project implementation (DWSC, MVS-WSC, GP-WSC etc). The Executive Engineers o f the RWSSD Divisions (who are also the Drawing and Disbursing officers- DDOs) will have the authority to

48

operate the L O C under an allocated budget (in terms o f the authority to operate the LoC), and will be the sole authority responsible for raising bills (in respect o f part or full SVS and MVS related works) and sending these to the P A 0 for payment. As per the existing P A 0 system, no funds will be placed at the disposal o f the DWSC or any other implementing entity, except funds for Component A which will be given by the RWSSD to a state level nodal implementing agency, and Component C which will be available with the PSU/D-PSUs. The authority to make payments/ issue cheques will continue to be with the respective PAOs in the districts.

12. The existing state financial management systems o f the GoAP will be used for the Project. These systems relate to budget allocation and fund f low for the project, financial sanctions and approvals, and require al l payments to be made through the state government's Pay and Accounts (PAO) System, as per rules o f the GoAP. As per the state financial management system, the Engineer-in-Chief RWSSD allocates the funds to the RWSSD Divisions through the LoC mechanism, authorizing them to incur expenditures till the limit indicated in the LoC. A copy o f the LoC will be sent to the DWSC to provide information on the allocation and limits to which the DWSC can authorize payments. Once a specific work i s completed and is verified and check measured, the Deputy Executive Engineer o f the RWSSD Division will raise the bill for payment in respect o f the works completed. Keeping in view the above agreed roles and responsibilities o f DWSC, the Executive Engineer o f the division (who i s the D D O as per the existing FM system in Ap) will seek authorization from the DWSC, prior to sending the bill to the P A 0 for payment.

13. The GP-WSC will actively participate at al l stages o f design, implementation and management o f the SVS and will be co-signatories to the bills raised by the Deputy Executive Engineer for payment, who will then forward these to the Executive Engineer o f the RWSSD Division. The latter will verify the bills, seek authorization f rom the DWSC and forward these to the P A 0 for payment. In respect o f the MVS, the Executive Engineer will raise the bill on the basis o f works completed and get endorsement f rom the MVS-WSC and authorization f rom the

'DWSC, before sending it to the P A 0 for payment. Payments in respect o f a l l expenditures incurred on M V S and SVS schemes, as well as al l the other project components will be made through the P A 0 system.

14. In the case o f small in-village works (like Individual Sanitary works, roof water harvesting systems etc.) the existing system o f nomination limit upto Rs 5 lakh will be followed. Details will be worked out with the GoAP during implementation.

15. The following fund f low arrangements have been agreed in principle with the GoAP:

GoAP Finance Department to RWSSD: The GoAP will make a budget allocation for the RWSSD World Bank Project and the E-in-C RWSSD will issue quarterly LoCs to the RWSSD Divisions.

o Component B (Infrastructure Development): The RWSSD will allocate funds to the RWSSD Divisions as per the LoC allocation given by the Engineer-in chief. The RWSSD Divisions will work under a service contract with the DWSC to plan, design and implement the SVS and MVS in participation with the GP-WSC and MVS-WSC, as described in Annex 6. The RWSSD will be fully responsible for the check measurements,

49

verification o f works completed, and raising bills to the PAO, who will make payments as per existing procedures o f GoAP.

o Component A (Capacity and Sector Development) and Component C (Project Implementation Support): Funds will be allocated to these components under the respective budget sub-heads under the Project Major Head. The Project Director will then allocate these funds as per regular procedures o f the state government to the concerned Implementing Agency for Component A and to the PSUD-PSUs for Component C.

16. Disbursement from the Bank: For disbursements, the quarterly Interim Unaudited Financial Reports (IUFRs) will be prepared by the PSU on the basis o f consolidated “actual expenditure” information received from the D-PSU. The “actual expenditure” figures will be those that are sent each month by the P A 0 to the state Accountant General through the monthly accounts o f the divisions.

I - - - - - - - - - I I I I I

I I I I I I I I I I I I I I I I I I I I I I I 1- -

Requirements offinds Division- Wise

Requirements offirnds Division- Wise

, -

. - _ I I I I I I I I I

I I I I I I I I I I I I I I I I I I I

i rd RWSSDdivisions I . . -’. (Executive Engineer)

‘1 I I I I

I I I I I . - I I I

P M U Authorization of Pavment bv D WSC

I I I I I I I I I I

50

Accounting & Financial Reporting 17. The GoAP’s existing FM procedures and rules will be applicable to al l the activities undertaken in the project. These will apply to al l aspects relating to budgeting; fund flow; accounting; internal control; financial and administrative delegation; internal and external reporting; staffing and audit arrangements. The expenditure reporting in respect o f all works will be as per information generated through the standard Government Accounting Systems (in which monthly RWSSD divisional level accounts are rendered to the AG by the district Pay and Accounts Officer, PAO). The quarterly financial monitoring reports (Interim Un-audited Financial Reports, IUFRs) will provide information by project components and sub-components, and by project categories.

18. P A 0 will prepare the division-wise monthly accounts that will record “actual expenditure” in the classified abstracts, on the basis o f payment vouchers. Whi le the AG accounting system will record project expenditures by budget heads and sub-heads, the PSU will prepare IUFRs by project components and sub-components after consolidating expenditure information from the division level classified abstracts. Expenditures will be recorded as per the 16 digit budget code o f the GoAP.

19. Finance Staffing: A senior gazetted finance officer, preferably f rom the Directorate o f Works Accounts o f the Finance Department o f the GoAP, will be deputed at the PSU. He/ she will be responsible for overall coordination o f financial matters and overseeing o f preparation o f quarterly IUFRs. At each Division, a Divisional Accounts Officer (gazetted rank) will be supported by the divisional level accounts staff, along with additional staff if necessary. The finance staff at the PSU will also be responsible for coordinating the external audit by the CAG/ AG AP for the entire project. The finance staff at the PSU and at the DWSMs will be in place before implementation.

20. InternaYConcurrent Audit: The project will have a system o f quarterly internall concurrent audit by independent firm(s) o f Chartered Accountants, who will cover the activities at the PSU, the DWSC, and the RWSSD. They will review that the systems, procedures and rules o f the GoAP as applicable to the Project are being adhered to across various project levels. The TOR for internal audit will be reviewed by the Bank. The internal audit reports will be examined by the project authorities who will report to the Bank any significant issues brought out in the reports.

21. External Audit: The Comptroller and Auditor General o f India through its offices in AP will be the statutory auditor for the project. The office will conduct an annual audit o f the project financial statements (the IUFRs) and the audit report will be sent to the Bank within six months o f the close o f each financial year. The Terms o f Reference for the audit (along with the draft format o f the financial statements and audit opinion) are the standard TORS agreed with the C A G for audit o f al l the World Bank projects. The audit reports in the Table below will be monitored in the Audit Reports Compliance System (ARCS).

51

Financing & Disbursement Arrangements 22. The Bank will finance approximately 83% o f GoAP’s contribution to meet the project expenditure, subject to a limit o f US$l50 mi l l ion equivalent. Funds from the World Bank will be made available to GoAP (through the GoI) under the back-to-back arrangement. The Bank will advance an initial amount o f US$15 mi l l ion to the Designated Account and subsequent releases wil l be a reimbursement on the basis o f actual expenditures incurred, as reported in the IUFRs.

Supervision Plan 23. From a financial management perspective, the project will need an intensive review o f the internal controls, fund flow, auditing arrangements and training. This will be through a combination o f periodic desk reviews and field visits. Special focus will be given by the PSU for building staff capacity and timeliness and quality o f financial information. Compliance testing o f payment approvals will form part o f the supervision plans.

52

Annex 8: Procurement Arrangements INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

1. The procurement o f works, goods and services under the project will broadly involve the following: (a) construction o f new piped water schemes and rehabilitation and augmentation o f existing schemes; (b) household sanitation, drainage systems and solid waste management activities; and (c) catchment area protection works. The goods wil l generally be office equipment and vehicles. The consultancy services include services for project management, M&E, quality assurance, capacity building, engineering design and supervision, accounts and book keeping, training, etc.

Procurement Implementation Arrangement 2. The GoAP will implement the project as an investment project in six districts, through the RWSSD. The Principal Implementing Entity (PIE) is the RWSSD and the sub-implementing agencies are the six DWSCs under the respective District Collectors. The DWSC will be responsible for procurement o f all SVS, M V S , under-ground drainage and community sanitation schemes under the Project, including procurement o f goods and consultancies. The RWSSD i s the facilitator for al l aspects o f the project and will provide technical support to DWSC in implementation o f al l the schemes. PSU at the State level will be involved in some procurement activities o f Goods and consultancies required by PSU for the project.

3. Given the weak capacity o f the DWSC to carry out Bank Procurement, the RWSSD has developed a Procurement Manual for procurement procedures to be adopted under the project. This Manual will be disseminated to al l DWSCs, and other agencies engaged in the implementation o f the project and al l procurement under the project will be handled as per the provisions o f this Manual. The Manual stipulates that procurement o f all goods, works and services, financed through the Bank Project, will be carried out in accordance with the World Bank Guidelines: “Procurement Under IBRD Loans and IDA Credits dated M a y 2004, revised October 2006”, and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers”, dated M a y 2004 revised October 2006. The Manual also stipulates that for al l procurement following NCB, the Bank’s Standard Bidding Documents as agreed with the GO1 task force and as amended from time to time, will be used. For procurement following I C B and procurement o f consultancy services, the Bank’s Standard Bidding Documents and Standard Request for Proposals wil l be used and will be as agreed with the Bank. In case o f any ambiguity between the Bank Guideline and the Project Procurement Manual or any other project document in regard to Procurement, the Bank guidelines as detailed above will prevail.

Procurement Arrangements 4.

(0 Civil Works The procurement arrangements for works, goods and consultancies are given below.

a) All SVS, M V S and intra village facilities o f M V S will be procured and implemented by the DWSC. The DWSC will be responsible for packaging the GP schemes (as necessary) and taking al l procurement decisions. The concerned GPs will endorse and sign-off the scheme design and payments made during the scheme implementation stage. The procurement by the DWSC will be conducted in accordance with the threshold and method o f Procurement agreed with the Bank. The RWSSD will provide engineering

53

and technical support to the DWSC. However in case o f any capacity issues and if required, the DWSC may hire a TSP for providing technical support.

b) The DWSC will procure the complete SVS/ M V S scheme including works related to tube well (or canal as applicable), pumps, rising mains and OHSR in a single contract package. The procurement will be done on a single responsibility basis wherein al l materials and labor component will be arranged by the contractor. The DWSC will not carry out any procurement o f materials l ike cement, steel and pipes etc. for supplying to the contractor. The contractor will arrange al l the materials on h i s own as per the specifications stipulated in the bid document.

(ii) Goods There may be some small value procurement o f goods to be procured by D W S C and PSU and this will fol low agreed procurement procedures for a given threshold. The rate contracts o f DGS&D would only be acceptable as substitute for shopping. The State government rate contracts would not be used as a substitute for shopping. Books, periodicals, software, proprietary equipment would be procured following Direct Contracting procedures as per Para 3.6 of the Bank Procurement Guidelines. Procurement o f petty purchases upto $200 can be under Direct contracting.

(iii) Consultancies The consultancies at the District level will be handled by DWSC and al l project consultancies will be hired by the PSU. The consulting services include hiring o f Support Agencies, specialist f i r m s and individual consultants (management, engineering, monitoring, finance, supervision, Sector Information System and M&E System, training institutions and other studies. Major consultancies include:

(i) SOs/NGOs for providing support to GPs for community mobilization and capacity building. (ii) Engineering design support consultancy. (iii) Management Support Consultancy. (iv) Chartered Accountancy f i r m s to provide bookkeeping. (v) Consultant services required for training, workshops and seminars. The training and

(vi) Independent Construction Quality Surveillance. workshops will be arranged at the State, District and Mandal levels.

5. All the consultancies including procurement o f SO shall be done in accordance with the methods agreed with the Bank. The Short lists o f consultants for services estimated to cost less than US$500,000 equivalent per contract may comprise entirely o f national consultants, in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

6. Operating Costs. These will cover the cost o f operating the project management units. The costs include staff salaries (only contract staff) staff travel, conveyance and subsistence cost, and operating costs such as office rental and other expenses, vehicle rentals, equipment maintenance contracts, etc.

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Procurement Capacity and Risk Assessment

7. The procurement capacity and risk assessment o f different un i t s o f GoAP was carried out by Global Procurement Consultant Limited, Mumbai. An assessment o f existing procurement policies and procedures suggests that the procurement adopted by RWSSD authorities including district level functionaries originates from AP Financial Codes and Rules, APWD Code, and Buildings and Roads Manual. Standard practice therefore i s to rely more on rules and executive instructions o f the GoAP, rather than on Codes and Manuals. The PRED (which has devolved into two departments and RWSSD i s one o f them) has implemented the following World Bank projects: (i) APCERP -I (1992-1994); (ii) APCERP - 11; (iii) AP Hazard Mitigation and Emergency Cyclone Reconstruction Project (AP HMCERP 1998-2002); and (iv) AP Economic Reconstruction Project (APERP) - Rural Road Component (1 998-2004).

8. The deficiencies in the current status o f procurement includes: (a) lack o f a dedicated Department or Agency exclusively responsible for framing policies or regulating public procurement; (b) lack o f clarity on bid documents used for small works, big works and ICB/ NCB; (c) lack o f standard bidding documents for procurement o f goods; (d) bid document for works differs from place to place; (e) lack o f guidelines and rules for consultancies; ( f ) use o f two-envelope / cover system; g) lack o f fair claim and dispute resolution mechanisms in contracts; (h) restrictions on sale o f bid documents (advertised tenders are only open to approved registered contractors for participating); (i) lack o f systemic training available to engineers for procurement s k i l l up-gradation and knowledge enhancement; and (i) lack o f regular practice o f preparation o f procurement plans (mostly decided by budget allocation).

Methods of Procurement and Prior Review Threshold

9. The choice o f appropriate method o f procurement i s related to the nature, size and complexity, likely impact o f the assignment, technical and financial considerations and particular circumstances o f the assigned job. One o f the following methods, presented in the Table below may be used for procurement o f Goods, Works or Consultancy and will be agreed with the Bank as part o f the procurement plan.

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NCB (Work)

=< $50000 per contract

Petty purchases up to $200 Goods and works which meet the requirement o f Paragraph 3.6 o f the Bank Guidelines with prior Bank Agreement

$15000 Works that meet the requirement o f paragraph 3.8 o f the Guidelines may be implemented, with prior clearance from the Bank

L Shopping(Goods & Works) Bank All contracts will be subject to Post review by the Bank Post review by Bank Contracts >$IO000 will be prior reviewed by Bank

Post Review Will be procured as per Bank prior clearance.

Direct Contracting (Goods) Direct Contracting (Goods &Works)

Community Contracting Force Account

Select Quality and Cost Based Selection, Quality-Based Selection; Fixed Budget Selection, Least Cost Selection; Consultants’ Qualification Single Source Selection in accordance with the provision o f Bank Guideline

Individual Consultants in accordance with provisions o f the Bank Guideline.

Table 1: Methods of Procurement

contract implemented by each district irrespective o f value. b) Subsequently, al l contracts more than $500,000 c) All other contracts will be subject to Post review by the

Contracts estimated to cost $100,000 or more shall be prior reviewed All other contracts are subject to Post review

All contracts will require Bank prior approval. Sole source contracts more than $50000 for Firm and more than $30000 for the individual will be prior reviewed by the Bank.)

Contracts estimated to cost U S $ l O O O O or more shall be prior reviewed. All other contracts are subject to post review by the Bank

contract

I

N o Goods and Woks procurement under ICB method i s envisaged under the project

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Procurement o f Support Organization (SO) if any will be carried out in accordance with the Bank guidelines and the procedures detailed in the Project Procurement Manual.

10. Procurement Plan. The Borrower has developed an 18 month Procurement Plan for project implementation. This provides the basis for procurement methods and prior review thresholds. The Plan will be updated in agreement with the Project Team annually, or as required, to reflect the actual project implementation needs and improvements in institutional capacity. This plan will be finalized and agreed between the Borrower and the Bank team by Project Negotiations. It will also be available in the Project database and in the Bank’s external website. All procurement under the project will be included in the plan and will be carried out in accordance with the agreed procurement plan.

11. Procurement-Risk Mitigation Action Plan. An action plan has been developed to mitigate the risk associated with lack o f clarity on public procurement processes, deficiency in planning, monitoring, evaluation and reporting, weakness in implementation, lack o f transparency in decision making, weakness in procurement audit and vigilance follow-up, inadequacy in record keeping, etc. The main elements o f the action plan are given below.

a.

b.

C.

d.

e.

Procurement Cell: An adequately staffed procurement cell, consisting o f department o f f c ia l and a procurement consultant, will be established at the State level as the nodal monitoring and disseminating agency. The procurement cell wil l provide oversight function for the entire procurements under the project, including review o f bidding documents on a regular basis, review o f bid evaluation reports and post review reports. All documents for Bank clearance will be sent to the Bank by the procurement cell with their comments. The procurement officers appointed at DWSC, PSU or any other agency involved in procurement activities will provide relevant information to the procurement cell at regular intervals. Procurement cell will also disseminate al l relevant information required by the implementing agency for smooth execution o f the project. Procurement cell wil l provide necessary support, guidance and training on al l issues related to procurement. All procurement reports and MIS shall be maintained by the cell.

Contract Management System: Effective Contract Management will be developed by the Procurement cell which will help to improve performance, support compliance and manage risks. An online Contract Management System will be in place for obtaining full information about the contracts through well-defined procurement performance indicators. This will include information about the contracts, compliance and reporting systems, and contracting and administration processes. Such a system will also help in ensuring consistency in methods and documents, a challenge for the decentralized projects.

Procurement Monitoring Report: The procurement cell will prepare bi-annual Procurement Monitoring Reports, providing the status o f procurement activities.

Procurement Manual: A Procurement Manual will contain methods and procedures to be followed for procurement. The manual will help address the deficiencies regarding inconsistency in use o f Procurement procedures and bidding documents

Capacity Building: Staff dealing with procurement at DWSC, PSU and procurement cell will receive training in Bank procurement procedures. Project may also consider identification o f a good local institution for conducting trainings and hand-holding for the

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capacity building o f the concerned official. Project would retain the trained staff and use them for procurement activities and in case replacement becomes necessary, the incumbents shall be suitably trained at the earliest to avoid depletion o f capacity.

Social Oversight: Social oversight would be in the nature o f requirement o f approval o f al l schemes by the Gram Panchayat, access to community o f a l l documents relating to procurement, and suo-motu disclosure by the RWSSDI DWSC o f contract award data, including cost o f procurement.

Social Audit: A strong monitoring mechanism including social audit will improve transparency and inclusion.

Disclosure: The State office will ensure suo-motu disclosure o f al l relevant information o f procurement activities on the department website to ensure transparency. RWSSD will ensure prompt response and effective follow-up o f procurement audit observations, if any.

Record keeping State office and District offices will maintain al l records duly catalogued and indexed in a manner and form which facilitates the Right to Information under the RTI Act, 2005. I t will ensure that al l records appropriate for computerization (within a reasonable time and subject to availability o f resources) are computerized and connected through a state- wide network to facilitate access.

Complaint Redressal Mechanism: A robust complaints redressal mechanism shall be put in place to ensure all complaints are received, and promptly and appropriately addressed.

Procurement Review and Audit. The following procurement reviews shall be undertaken: Independent post review: For post review o f the procurement done by a l l implementing agencies (IA), the project will hire a consultant, whose terms o f reference will be agreed with the Bank. The report o f the consultants wil l be shared with the Bank.

Procurement Post Review For compliance with the WB’s procurement procedures, the WB will carry out sample post review o f contracts that are below the prior review threshold. . The bank staff or the Bank hired consultants or both would conduct post award review during supervision missions or special post review missions.

Internal Audit: The Internal auditor (firm o f chartered accountants) will be appointed by the PSU for conducting the Financial Audit at the department level. The TOR o f financial audit will include adequate requirement to cover review o f procurement activities. The auditor will carry out the review o f procurement procedures adopted for works, goods and consultancy services.

12. NCB Conditions. In addition to the above plan, it has been agreed that for NCB procurement, the following procedures will apply:

Invitation to bid shall be advertised in at least one widely circulated national daily newspaper, at least 30 days prior to the dead l ine for submission o f bids Only the model bidding documents for NCB agreed with the Go1 Task Force [and as amended from time to time] shall be used for bidding;

i)

ii)

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iii)

iv)

v>

vi)

vii)

viii)

No special preference will be accorded to any bidder when competing with foreign bidders, state owned enterprises, small scale enterprises or enterprises from any given State, etc.

Except with prior concurrence o f the Bank, there shall be no negotiation o f price with the bidders, not even with the lowest evaluated bidder. Extension o f bid validity shall not be allowed without prior concurrence o f the Bank: (a) for the first request for extension if it i s longer than 4 weeks; and (b) for al l subsequent requests for extension irrespective o f the period.

Re-bidding shall not be carried out without 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.

Rate contracts entered into by DGS&D will not be acceptable as a substitute for NCB procedures. Such contracts wil l be acceptable for any procurement under National Shopping procedures.

The two or three envelope system will not be used

13. Risk Rating. In view o f the large number o f procurement activities and given the l imited capacity o f the DWSC in Bank procurement procedures, the overall project risk for procurement i s considered ‘High’. The residual risk after implementation o f r isk mitigation measures shall be ‘High’. This will be reviewed during the l i fe o f the project and if necessary, may be revised.

14. Frequency of Procurement Supervision. In addition to supervision carried out from Bank offices, an annual visit to the field to carry out post review o f procurement actions i s considered necessary.

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Annex 9: Economic and Financial Analysis INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

1. A specially designed representative household survey covering about 3256 households for SVS and M V S was carried out to get baseline information, and an additional sample survey o f 200 “control households” (Fully Covered Habitations) was undertaken to document data on the post-project scenario. The cost related information i s based on a representative sample o f schemes selected across 34 GPs (136 habitations in 8 districts) on the basis o f sources o f water supply and the type o f proposed technology:

Cluster 1 : Single Village Scheme- Not Covered (SVS-NC) Cluster 2: Single Village Scheme- No Safe Source (SVS-NSS) Cluster 3 : Single Village Scheme- Partially Covered (SVS-PC) Cluster 4: Multi Village Scheme ( M V S )

2. the project as a whole, using likely technology mix and phasing proposed in the project.

The project economic analysis was carried out separately for each o f the schemes and for

PROJECT BENEFITS

3. The proposed project i s justified on the basis o f direct benefits to about 4,00,000 households, or, 2 million rural population to be covered under World Bank assisted project. The rate o f growth o f population i s considered to be 1.3 1% per annum. Based on the survey data and secondary sources o f information, the likely quantifiable benefits due to the proposed project interventions are:

Value o f time saved in water collection; 0 Value o f incremental water supply; 0 Value o f saving in recurring and capital cost (cost incurred to maintain the existing

supply o f water in the ‘without’ project situation); 0 Value o f health benefits due to reduction in incidence o f diahorrea, fluorisis,

gastroenteritis and malaria;

4. Benefits from Time Saved in Water Collection: The time saved per household i s calculated based on the analysis o f field data regarding time currently spent for commuting to the source o f water and for collection o f water. The time saved i s taken as the weighted average for wet, dry, summer and winter seasons. The value o f time saved i s calculated on the basis o f wage rate or the income foregone in other income generating activities. I t i s assumed that a person can be gainfully employed for 250 days out o f 365 days in a year. It i s assumed that 20% households in the village wi l l opt for stand post or public delivery system and 80% for house connections. These assumptions provide an overall weighted average for time saved as 52%. The expected time savings i s 0.66 hrs / household/ day after the project.

5. Benefits from Incremental Demand for Water: The reduction o f time in collecting water and improved availability wi l l increase consumption o f water. The project envisages at least a supply o f 40 lpcd to households. The incremental water consumption i s estimated as the difference between the designed supply and present water consumption, after the schemes are

60

operational. This incremental’ consumption is valued at the average demand price (average o f present and future cost o f water). The value o f incremental water is calculated by multiplying the percentage o f people (30%) who will completely sh i f t f rom existing source to new source with the average value o f incremental water and multiplying the percentage o f people (70%) who will partially shi f t f rom existing source to new source with the future value o f incremental water.

6. Value o f Capital and O&M Cost saved: (otherwise incurred in a without project situation to maintain existing water supply arrangements). In the absence o f this project, intermediate capital investment will be required to maintain the current level o f 40 lpcd water supply to an increasing population. Taking the cost o f 1 handpump as Rs 50,000, the per household investment saved i s about Rs 250 (for second and tenth year o f project). This i s a very conservative estimate o f the capital costs saved. Similarly, in the absence o f this project, O&M costs will be required to maintain the existing water supply schemes. For estimation o f benefits, the recurring cost saved has been assumed as the existing power costs saved and 20% o f the proposed staff costs saved (as some staff is already employed under on-going schemes). Also, the O&M cost recovery is expected to increase from the current l o w level o f 20% to about 80% by the end o f the project period.

7. due to reduction in Diarrhoea, Gastroenteritis and Malaria content in water.

Health Benefits: The health benefits from water supply are quantified as health benefits

Expenditure Incurred on Medication: The incidences o f diseases (diarrhoea, gastro- enteritis and malaria) have been calculated from the field survey. The reduction in expenditure on medication o f diarrhoea (21%), gastro-enteritis (39%), malaria (38%) and fluorosis (100%) is taken as the benefit. The average expenditure incurred on medication o f diarrhoea (Rs 72), gastro-enteritis (Rs 275) and malaria (Rs 247) per incidence are taken for the economic analysis.

0 Disability Adjusted Life Year: Disability Adjusted L i fe Years (DALYs) is considered as a measure o f the global burden o f disease. D A L Y s combine information about morbidity and mortality in numbers o f healthy years lost. DALY is a summary measure o f population health that combines in a single indicator years o f l i fe lost from premature death and years o f l i f e l ived with disabilities. DALY can be considered as one lost year o f ‘healthy’ l i fe and the burden o f disease (which i s a measurement o f the gap between current health status and an ideal situation where everyone lives into old age free o f disease and disability). DALY is taken as summation o f Years Lost Due to Disability (YLD) for incident cases o f health conditions and Year Lost Due to Premature Mortality (YLL) in the population. The basic formula for calculating DALY is: DALY =Year Lost Due to Disability (YLD) + Year Lost Due to Premature Mortality (YLL) The total DALY for India’s population for 2002 i s 2999104. The shares o f DALYs due to Diarrhoeal and Malaria diseases are 5.09% and 0.28% respectively o f the total DALY for India’s population. For economic analysis purpose, the reduction in DALYs i s valued at the labour opportunity cost.

0

WHO 2002

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Indirect person days Lost: Based on the inputs from the village doctors, private practitioners and health sub-centres, the morbidity rate o f diarrhoeal and gastroenteritis has been determined. I t was reported that the diseases are more prevalent during the monsoon season. Based on the inputs from the doctors during f ield survey, the number o f indirect person days lost has been determined. It was reported that indirect man days lost are 2 days for gastroenteritis, 1 day for diarrhoea and 4 days for malaria per incidence o f disease. For economic analysis purpose, the reduction in indirect person days lost i s valued at the labour opportunity cost.

Cluster4 Entire Project

PROJECT COST

MVS 16% 14% 13% 14% 1.13 2234

25% 20% 20% 21% 1.73 39950

8. The total proposed project cost including the water supply and environmental sanitation etc i s US$180m for the World Bank Support. The average unit cost o f capital investment (Rs per capita) for SVS (NC); SVS (NSS); SVS (PC) and MVS are 1982, 2560, 1754, and 5977 respectively. A wide variation in cost is expected across villages, depending on the number o f households in the village, new schemes to be provided, and the extent o f augmentation o f existing water supply schemes.

9. The O&M cost depends o n the type o f scheme and varies from Rs 20 to Rs 100 per capita per annum. The above costs are extrapolated for the entire Project, based on the following phasing o f schemes: lo%, 20%, 30%, 30% and 10% expected in the first, second, third, fourth and fifth year respectively. The software cost (including capacity building and program management) are extrapolated based on the projections for f ive years: 30%, 35%, 20%, lo%, and 5% in the first, second, third, fourth and fifth year respectively.

ERR AND SENSITIVITY ANALYSIS FOR WORLD BANK SUPPORT

62

Increase in the Costs and Decrease in Benefits by 27% 12 L < Reduction in’Time Saving‘ > . S I h I

63

10% Reduction in Time Saving 20% Reduction in Time Saving

21 21

Benefits are delayed by 1 year Benefits are delayed by 2 years Benefits are delayed by 3 years

21 19 18

Annex 10: Safeguard Policy Issues INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

Introduction

1. The project will support investments related mainly to water supply and sanitation facilities in the rural areas complimented by local level human and institutional development. As a part of the project preparation, social and environmental assessments were conducted by consultants with the objective o f identifying social and environmental issues associated with the proposed project activities and to design appropriate management measures for enhancing the positive impacts and mitigating negative impacts (if any). These assessments included f ield level enquiry into 34GPs (1 36 habitations) coupled with extensive stakeholder consultations and suggest that the project will not have any significant adverse and/or irreversible social and environmental impact. Hence, the project has been classified as a Category B project for safeguard purposes. Overall, the project has a potential to further social and environmental development objectives.

Social and Environmental Assessments

2. Social Assessment comprised :(i) Beneficiary Assessment (BA), (ii) Stakeholder Analysis (SA), (iii) Institutional Analysis; (iv) Impacts Assessments; and (v) Risk Analysis. BA enabled building socio-economic profiles at the state, district, block and village level; the project beneficiary assessment o n the current status o f water and sanitation services and their linkages with service delivery systems. SA resulted in identifying stakeholders at different levels and mapping the key expectations, issues and concerns as related to each stakeholder and the sub- groups thereof. Institutional analysis led to documenting and analyzing the existing institutional arrangements, conducting a SWOT exercise, and formulating inputs into the design o f decentralized extension delivery system in consultation and collaboration with the stakeholders. This was followed by impact assessments and risk analysis. The results helped in designing the delivery system and addressing safeguards, thus ensuring positive and sustainable impacts.

3. W h i l e the proposed project i s expected to lead to overall environmental and health improvements, negative impacts can occur if the schemes are not properly designed and implemented. To ensure that the environmental issues are identified and addressed, the PSU with help f rom consultants has developed an Environment Analysis (EA) and Environment Management Framework (EMF). The methodology comprised collection and collation o f relevant secondary data and an analysis o f pol icy and legal framework. This led to defining the baseline environmental status and provided the basis for identifying potential environmental impacts and preparation o f EMF for mitigating adverse impacts and enhancing beneficial impacts. Public consultation was undertaken prior to and after drafting the EMF, and the document was suitably revised.

Key Stakeholders and Consultations

4. Key project stakeholders were identified and consultations held at grassroots, regional and state level, to seek views and incorporate these in the project design. Grassroots level stakeholders include: (i) beneficiary households (including women, poor, Scheduled Castes, and

64

Scheduled Tribes); (ii) Gram Panchayats (men and women elected representatives), (iii) Junior Engineers o f RWSSD, and (iv) other community based organizations. Block/ district level stakeholders include the respective Panchayat Raj Institutions; other concerned line departments such as health, rural department, power, irrigation; district/ block administration; RWSSD; and non-governmental organizations, contractors/ suppliers and consultants. State level stakeholders include the Departments o f Finance, Rural Development and Panchayat Raj, Science and Technology, Irrigation, Health, Tribal Welfare, political leaders, NGOs and consultants. There have been consultations throughout the project preparation both by the Bank Missions as well as by the Government o f Andhra Pradesh. The environmental and social assessment studies have been conducted with active participation by relevant stakeholders. Summaries o f the assessments, in particular, Environmental Management Framework (EMF), Resettlement Policy Framework (RPF) and Tribal Development Plan (TDP) have been translated into local language and disseminated throughout the state. Stakeholder consultation workshops have been held at a l l levels (grassroots, regional and state).

Key Social and Environmental Development Issues

5. Social Issues. The project recognizes that Andhra Pradesh is quite diverse on socio- economic, geo-physical, and strategic fronts. It has the longest coastal line in the country inhabited in large numbers by socially disadvantaged fisherfolk. Scheduled Caste and Scheduled Tribals constitute 7% (5 million) o f the total population spread across 10 districts predominantly covered by forests. AP i s unique in having the distinct Fifth Scheduled Areas, a constitutional provision to safeguard the interests o f tribals. The tribal areas typically characterized by scattered houseshettlements with non-accessibility and undulating as wel l as dif f icult terrain, make them ‘excluded’ and ‘vulnerable’. The non-tribal areas are characterized by large intrdinter-village social diversity, poverty, illiteracy, and poor hygiene and drudgery for women. All these render Water and sanitation (WATSAN) management a challenge. The PRIs, and in particular the GPs have yet to start shouldering any responsibility. Given this setting, the project identifies the following as significant social issues: (i) ensuring inclusion and enhancing equity; (ii) decentralizing service delivery underpinned by the principle of subsidiarity; (iii) enabling participation, in particular of women; (iv) improving customer base & demand generation; (v) supporting capacity building for communities; (vi) enabling transforming the government department into a Yacilitator ’ with change management trainings; and (vi0 effectively reaching the stakeholders through information, education and communication (IEC) campaigns.

6. Key environmental issues and challenges

The following are the salient features o f the state relevant to the safeguard analysis:

Water Quantity 0 46% habitations.are Fully Covered (FC) and 45% Partially Covered (PC) with respect to

water supply. The rest o f the habitations fal l in the N o t Covered (NC) or N o Safe Source (NSS) categories.

Coverage o f rural households with household water supply (near premises) i s 22%, while the coverage o f urban households i s 57%.

0 Average state groundwater development is 45%.

0

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Excessive groundwater withdrawal in parts o f the state. Groundwater development in districts o f Chittoor, Kadapa, Anantapur, Nizamabad, Medak and Ranga Reddy ranges between 70% and >loo%. O f the 1108 mandals in the state, 15% (172) are classified as over- exploited and 5% (58) are classified as critical with respect to groundwater status.

Water Quality About 80 percent o f the rural water schemes are dependent on groundwater sources while 20 percent are dependent on surface water sources.

About 6.5% ,habitations are reportedly affected by water contamination, including chemical, physical and biological contamination. O f these, 195 1 habitations (41 % o f total affected habitations) do not have access to a safe source o f water (classified as NSS).

High salinity in roundwater in the districts o f East Godavari, West Godavari, Krishna, Guntur, Prakasam . High concentration o f fluoride in ground water beyond the permissible limit o f 1.5 mg/L i s a significant health problem in Andhra Pradesh. The groundwater in 3 12 1 habitations has high fluoride concentration6. O f the affected districts Prakasam, Nalgonda, Khammam, Karimnagar, Anantapur are more severely affected7.

Physical and biological contamination o f water i s reported in 2 1 8 habitations'.

Q

Sanitation 0 Rural sanitation coverage i s 54%, while only 30% o f these households actually use toilets.

0 A large percentage o f the rural population s t i l l practices open defecation. The health implications are 20% cases o f illnesses due to water borne diseasesg.

Forests and Tribals 0 Andhra Pradesh has over 5 million tribals accounting for about 7% o f the total population in

the state. Whi le 93% o f them live in rural areas, highest concentrations are found in 10 districts. Apart from undulating terrain, high rainfall and poor reach, majority o f these areas are in and around forests. O f the 11,540 tribal habitations located in this area, 701 have N C status (Not Covered). Hence, interface with the forestry assumes significance, from the view points o f identifying water sources and developing the facilities.

Social Safeguards Management

7. Land: The Social Assessment study indicated that the project would require land for various facilities such as: head works, treatment plants, summer storage tanks, transmission lines, overhead or ground level storage tanks, distribution lines, etc. However, nature and extent o f land requirements vary substantially across the schemes. Water supply schemes can be classified into two broad categories: Single Village Scheme (SVS) and Multi Village Scheme (MVS). As the name suggests, SVS serves one or more villages within a Gram Panchayat (GP) while MVS serves villages beyond a single GP. There are two types o f MVS: Small M V S and Large MVS.

Central Ground Water Board, 2007 National Habitation Survey, 2003 RWSS Department, GoAP, 2007 National Habitation Survey, 2003 Directorate o f Economics and Statistics, GoAP, 2007

5 6 7 8

9

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Generally a small M V S caters to about 5 to 10 villages and a large M V S caters to 10 to 50 villages and beyond. Ground Water based SVS would require about 0.03 H a o f land per scheme, Surface source based SVS would require 0.65 H a o f land. Similarly, small MVS would require 2 H a o f land per scheme or 0.2 H a per village. Similar figures for Large MVS are 3-14 H a and 0.3 Ha per village respectively. Thus, land requirements are substantial only in Large M V S which account for 5-10 % o f the schemes in the project. Overall, about 480 H a o f land i s required for about 3,000 schemes, and share o f large M V S would be 39 Ha. Given this background, two methods are proposed for securing lands (below). It may be noted that initially the project had planned for 3,800 schemes, but now the scope i s reduced to 2,600 schemes. With the result, land requirements are l ikely to be lesser than 480 Ha.

8. Small Schemes: AP RWSS Project, as planned initially envisages covering about 3800 habitations. O f these, 80% are likely to be single village schemes. O f the remaining 20% schemes, hal f o f them would be simple multi village schemes. Thus, securing land in about 90% o f the cases i s l ikely to be quite simple, as public land is expected to be available in a majority o f cases (about 60%). The discussions with the communities and experts as well as experiences from previous project reveal that, (i) almost al l villages do have an existing water supply system and the project intervention will be restricted to improving/rehabilitating/augmenting the existing supplies which would mean land requirement will be limited; (ii) most villages do have sufficient publicPanchayat land; and (iii) in case, it becomes inevitable, the local community will secure lands either through voluntary donations or outright purchase.

Rules governing taking possession o f land through donations and/ or purchases are developed based on the experience o f the Bank assisted projects: Kerala Rural Water Supply and Sanitation Project, Karnatakahlaharashtra Rural Water Supply and Sanitation Project; and U P Sodic Lands Reclamation Project. These rules will be binding on the part o f GOAP, with the following major elements:

0 All donations and purchases will be voluntary. Mechanisms will be developed not only to ensure the voluntariness but also that i t will not involve any significant adverse impact upon incomes or physical displacement. ,

0 All voluntary land transactions will meet the following criteria: (i) the land in question will be free o f squatters, encroachers or other claims o f encumbrances; (ii) land will be chosen by the community after ensuring that water will be available in that particular piece o f land; (iii) verification o f the voluntary nature o f land donations in each case; (iii) due transparent measures will be in place; (iv) land transfers will be complete, land title will be vested in the community; and (v) provision will be made for redressal o f grievances (ROG) if any.

0 All voluntary transactions will be documented and signed by both the parties. Agreements on above wil l be reached during appraisal and legal documents will include the necessary clauses.

9. Large Schemes: In the case o f large schemes, donations and / or purchase may not work as the scheme would be spread over many villages and arriving at a consensus across the communities will be difficult. So, land may have to be acquired, in case public lands are not available. In addition, it could be the same situation in some small village schemes too. However, as the project i s fully demand driven, the l i s t o f project villages will become known as and when the villagers come forward and express willingness. This demand driven selection

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process will start once the project becomes effective and will occur over a period of 5 years. Thus, at this stage, the project does not have full details about the lands to be acquired for the project. Hence, a generic frame work i s prepared instead o f a village specific resettlement action plan. RPF will be adopted by the project as and when a village/ scheme i s selected and the detailed project report preparation begins. The framework has been developed based o n the following policies/ legislations:

Andhra Pradesh Resettlement and Rehabilitation Policy 2005 The Land Acquisition Act 1894

0 R&R framework developed for the World Bank assisted Andhra Pradesh Community Based Tanks Management Project

0 RPF prepared recently for the World Bank assisted Orissa Community Tank Management Project.

6 Panchayat Extension to Scheduled Areas ( PESA) Act, 1996

10. The proposed framework comprises: (i) identificatiorddefinition o f project affected households; (ii) compensation in l ieu o f lands; (iii) resettlementhehabilitation assistance; and (iii) institutional and implementation arrangements. Entitlements proposed for the affected families are provided in the Resettlement Policy Framework. The identification o f the affected people and preparation o f a Resettlement Action Plan (RAP) will be done by the GP-WSC with technical assistance from non-government support organizations. The identification o f project affected persons (PAPS) will be vetted/ reviewed by the local engineer as wel l as local revenue officials and finally approved by the District Collector. The RAP will be integrated into the overall Village Water Supply and Sanitation Plan and approved by the Institutional Development Specialist in the District Project Unit. This will also be monitored by the State Project Management Unit.

11. Tribals: Andhra Pradesh has 33 tribes out o f which Gond, Koya, Sugali, Yenadi, Yerukula Konda Dhora are the main tribes. O f these Sugali, Koya, Yenadi, Yerukula and Gond constitute over 75% o f tribal population o f the state. The tribals normally live in contiguous areas unlike other communities. Their lives are closely associated with the nature as they eke out their livelihoods from the natural environ - streams, trees, plants, animals etc. It is, therefore, recognized that maintaining their identities would invariably mean keeping their environ intact with them. They also have contiguous inhabitations which not only help in designing an area based approach but also protecting their cultural identity and resources. In order to protect the interests o f the Scheduled tribes with regard to land alienation and other social factors, provision o f “Fifth Schedule” is enshrined in the Constitution under article 244 (2). A P has Scheduled (or normally called Tribal) Areas spread over 97 Mandals in 10 districts.

12. Whi le the project interventions will not adversely affect the tribals, these groups do require special attention f rom the viewpoint o f ensuring inclusion and equity. Hence, to ensure their inclusion, specific targeting i s essential. In this context, a Tribal Development Plan (TDP) has been prepared in accordance with the Bank’s OP 4.10, with the fol lowing objectives: (i) ensuring inclusion through selective targeting/prioritization; (ii) establishing a new, or strengthening the existing tribal institutions to undertake RWSS management; (iii) reducing the drudgery for tribal women and children by reducing time spent in fetching water; and (iv) hygiene and behavioral changes. The key elements underpinning the tribal development plan

68

(TDP) relate to: (i) discriminatory targeting - to ensure inclusion and equity; (ii) governance - for ensuring that the project’s implementation arrangements are in accordance with existing government stipulations, particularly the Panchayat Extension to Scheduled Areas Ac t (this provides special functional powers and responsibilities to ensure effective participation o f tribals); (iii) implementation arrangements - rules o f engagement, including community contributions will be flexible to accommodate the tribals; and (iv) capacity suppodbuilding - to enable tribals to participate and derive full benefits. Separate budget provision has been made for implementing the TDP.

13. Given the constitutional provision for Scheduled Areas, the TDP has been designed exclusively for these areas. Overall, about 400 schemes are expected to be taken up under the project in the Scheduled Areas o f AP. It may be noted that initially the project had been designed for 3,800 schemes and the TDP for 600 schemes. As the scope o f the project got reduced to 2,600 schemes, the TDP too has been reduced proportionately. The schemes will be taken up in the needy Mandals o f the Scheduled Areas.

Environmental Safeguards

Environmental Management Framework

14. The key environmental issues and recommended mitigation measures are summarized ielnw:

Water Availability - Inadequate and/or disrupted water supply; Overexploitation o f groundwater leading to saline water intrusion in coastal areas, quality deterioration (salinity, excess fluoride, etc.), drying up o f drinking water wells.

Water Quality - Pollution o f surface water sources; Improper collection, storage and handling at household level; Excess salinity and fluoride in ground water; Ground water contamination due to poor management o f domestic and industrial wastes; Inefficient and irregular disinfection.

Environmental Sanitation - Poor environmental sanitation (inadequate latrines, low usage o f latrines, poor wastewater disposal, improper disposal o f solid wastes, poor personal hygiene) leading to high incidence o f vector-borne and diarrheal disease.

Construction phase impacts - erosion o f land, cutting o f trees, dust and noise pollution, inadequate safety measures.

Issues related to maintenance.

Criteria for selection o f source for water schemes to integrate safety and sustainability; Augmentation o f existing water supply schemes; Conservation o f existing resources especially for critical/overexploited aquifers; efficient implementation o f the Andhra Pradesh Water, Land and Trees (APWALT) Act; Promoting efficiency o f use o f water.

Water quality testing and sanitary survey prior to source selection; Alternate safe source (groundsurface water) in flouride affected areas and community awareness measures; Effective disinfection and maintenance o f distribution system; Regular water quality testing (including community based water quality monitoring and surveillance).

Construction o f household latrines; Installation and maintenance of surface sullage drains / small bore sewer systems; Adequate treatment o f the sullage; Vector control measures; Sustained IEC campaign on personal hygiene; Solid waste management.

Detailed guidelines to ensure appropriate design and location o f schemes and adoption o f safety measures during construction to mitigate the impacts.

Appropriate system for monitoring; Capacity building of community institutions and RWSSD staff,

Environmental Assessment

15. Basic environmental data pertaining to the proposed scheme is compiled at the f ield data collection stage. For this purpose, a simple Environmental Data Sheet (EDS) has been formulated for schemes on water supply, sanitation, solid and liquid waste management. The AEE/AE o f the RWSSD fi l ls up the EDS in discussion with the GPWSC and with the facilitation support of the NGO/SO. At the Detailed Scheme Report (DSR) preparation stage, the available information in the EDS will be evaluated, and based o n the level o f expected impacts, the proposed scheme would be classified as either Category I (basic) or Category I1 (detailed environmental assessment required). The classification o f schemes by using the screening tool is done by the EE o f the RWSSD in consultation with the AEE/AE o f the RWSSD. For a l l category I schemes, there shall be no separate assessment other than filling up o f EDS included in the DSR. For category I1 schemes, a detailed environmental assessment is required. This will be done by the district level environmental expert attached to DPSU or with support f rom the external environmental resource persons at districtlstate levels. Detailed technical checklists for use in environmental assessment o f category I1 schemes have been formulated for various scheme types. The assessment process ensures that appropriate mitigation measures are identified and are integrated in scheme design and implementation plans. Detailed Environmental Codes o f Practice (ECOP) have also been developed for various scheme types.

Supervision, Monitoring and Audit:

16. Environmental supervision: A sample o f 10% schemes will be visited at six-monthly intervals by a team from the DWSC to check if al l 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.

17. Environmental monitoring: Water quality monitoring will be conducted as per the project's water quality monitoring protocol. Once every year, the state Project Support 'Unit (PSU) wil l prepare a report o f the environmental situation in the state including data and analysis o f relevant parametres such as rainfall, depth to water levels, status o f groundwater basins, incidence o f water-borne diseases, etc., as wel 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 o n the basis o f this document by the state PSU.

18. undertake an independent audit o f the environmental performance o f the project. The EMF presents details o f sampling and a list o f performance indicators to be used in the audit.

Environmental audit: Once every year, the state PSU will appoint an external agency to

19. training, supervision, monitoring, audit, IEC as wel l as the cost o f sourcing external technical expertise as required.

Budget: The EMF will require a budget o f Rs. 4.24 crore. This includes the costs o f

70

Performance Indicators

20. Environmental performance indicators have been integrated with the overall project indicators for monitoring and evaluation o f the project performance: (Indicators are as percentage o f total project)

Water Quantity: Habitations with at least 40 lpcd o f drinking water supply; Habitations in critical and overexploited basins provided an alternative sustainable source; Wells providing sustainable yield; Functional rainwater harvesting structures.

Water Quality: N S S habitations provided a safe water source; Habitations with contamination in drinking water supplies; Habitations with no residual chlorine levels; Habitations with disinfection facility.

Environmental Sanitation: Households with access to safe sanitation facilities; Households with regular use o f sanitation facilities; Habitations with solid waste management; Habitations with liquid waste management; Length o f streetjroads in habitations with storm water/sullage drains.

Institutional Arrangements and Capacity Building: Districts with staff to anchor responsibility o f EMF; Project staff at state, district and mandal levels trained in EMF; Community institutions that participated in IEC programs o n EMF; Detailed Scheme Reports having the properly f i l led EDS; Number o f schemes visited for monitoring o f field implementation o f EMF by the DRPs; Number o f external audits conducted as against the target number o f audits.

Institutional and Implementation Arrangements

2 1. Roles and responsibilities for ensuring implementation o f the environment and social safeguards have been detailed out at state, district, mandal and village/scheme levels. At the state level, the Project Support Unit (PSU) is being set-up within the RWSSD, with a mandate to manage the proposed project. The PSU staff will include Environment and Social Development Specialists charged with the overall responsibility o f ensuring the implementation o f the environmental and social aspects. Similarly at the district level, each o f the District PSU (D- PSU) will include an Environmental/ Social Development Specialist in their staff, who will be responsible for ensuring social and environmental capacity support to the project partners-PRIs and. communities. At the village level, the awareness and capacity for environmental management in the local GPWSC and SO would be'enhanced through a targeted training and capacity building program.

22. The social and environmental management will form an integral part o f the overall scheme cycle. Each detailed scheme report shall contain environmental/ social checklist highlighting the issues and mitigation measures. Scheme appraisals will take due note o f this and shall guide in decision making. Grassroots/village level checklist preparation will rest with the concerned Junior Engineer and the Support Organization. Implementation monitoring will rest chiefly with the GPWSC who will be capacitated and supported for this by RWSSD. The post implementation supervision (including water quality) would be integrated with the overall monitoring o f performance indicators. Training and information, education, communication (IEC) activities are planned to build the capacity o f community institutions as wel l as project staff for effective integration o f safeguards measures into the scheme-based activities.

71

23. In respect o f the OP 4.12, the identification o f the affected people and preparation of a Resettlement Action Plan (RAP) will be done by the GP-WSCs with technical assistance by SOs and RWSSD. The identification o f project affected persons (PAPS) will be reviewed by the local engineer as well as local revenue officials and finally approved by the District Collector. The RAP will be integrated into the overall Village Water Supply and Sanitation Plan and approved by the Institutional Development Specialist in the D-PSU. This will also be monitored by the PSU. No construction will begin unless al l the entitlements are extended and the process o f economic rehabilitation started. The TDP will be implemented as per the overall implementation arrangements outlined in Annex 6. For ease in implementation, a Process Map has been prepared detailing the activities to be carried out in a sequence during different phases: pre- planning, planning, implementation and post-implementation phases o f RWSS schemes (provided in PIP). The roles and responsibilities o f different actors are also provided against each activity. W h i l e the first 10 RAPS will be mandatorily reviewed by the Bank, the remaining will be reviewed on a sample basis during the implementation support review missions.

72

Annex 11: Project Preparation and Supervision INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

PCN review 0 1 I 3 012007 Initial PID to PIC 04/05/2007 Init ial ISDS to PIC 03I20l2007 Appraisal 712012009 Negotiations BoardiRVP approval 0911 512009 Planned date of effectiveness Planned date of mid-tern review Planned closing date

Key institutions'responsible for preparation of the project: Borrower: Government o f India Ministry o f Finance, New Delhi Responsible Agency: Government o f Andhra Pradesh Rural Water Supply and Sanitation Department Hyderabad

Bank staff and consultants who worked on the project included:

Nam T i Unit Smita Misra Sr. Economist and Task Team Leader SASDU Fook Chuan Eng Sr. Financial Analyst SASDU S. Satish Sr. Social Development Specialist SASDI Priti Kumar Sr. Environmental Specialist SASDI Priti Jain Procurement Specialist SAWS Atul Deshpande Financial Management Specialist SARFM D. M. Mohan Consultant ( Engineering) Consultant SASDU Kalyani Kandula Consultant (Environment) Consultant SASDU Juan Carlos Alvarez Senior Counsel LEGES Thao L e Nguyen Senior Finance Officer LOAFC Vidya Mahesh Program Assistant SASDU Michelle L. Chen Program Assistant SASDU Midori Makino Peer Reviewer AFTU 1 Wambui G Gichuri Peer Reviewer ETWAF David Savage Peer Reviewer SASDU

Bank funds expended to date on project preparation: 1. Bank resources: USD$ 291,688.53 2. Trust funds: USD$2,863.15 3. PHRD Trust funds: USD$482,332.86 4. Total: USD$ 776,884.54

Estimated Approval and Supervision costs: E. Remaining costs to approval: F. Estimated annual supervision cost:

73

Annex 12: Documents in the Project File INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

A. . . . . . . . . H . . . .

Preparation Study Reports

Baseline assessment o f RWSS coverage Institutional Analysis Multi Village Schemes Environmental Assessment Study Capacity Building Economic Analysis Study Communication Strategy Financial Management Study Accounting and Accountability Arrangement in PRI and DWSS Social Assessment M&E with MIS design Procurement Manual Technical Manual

Bank Staff Assessments

. . PCN . Aide Memoires

Procurement Assessment for State and District level institutions PADS for Karnataka RWSS 11, Kerala RWSS, UP RWSS, Maharashtra RWSS, Uttaranchal RWSS, Punjab RWSS,

74

Annex 13: Statement o f Loans and Credits INDIA: Andhra Pradesh Rural Water Supply and Sanitation Project

Original Amount in US$ Millions

Difference between expected and actual

disbursements

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

PO93478 PO94360 P 0 9 6 0 2 3 PlOOlOl P100735

P102331 P112033 P105124 PO95 1 14 P102737 P 10 1653 P102547 PO96019 PO83 187 PO90768 PO90764 PO90592 PO90585 PO7 1 160 P100789

PO75060 PO75 174 P102768 PO78538

PO78539 PO99047 PO93720 PO92735 PO86414 PO83780 PO78832 PO79675 PO79708 PO73370

PO73651 PO75058 PO77856 PO77977 PO86518

2009 2009 2009 2009 2009

2009 2009 2008 2008 2008 2008 2008 2007 2007 2007 2007 2007 2007 2007 2007

2007 2007 2007 2007

2007 2007 2006 2006 2006 2006 2006 2006 2006 2005

2005 2005 2005 2005 2005

Orissa Rural Livelihoods Project National VBD Control&Polio Eradication Orissa State Roads Coal-Fired Generation 'Rehabilitation Orissa Community Tank Management Project

UP Sodic I11 HP DPL I

Rampur Hydropower Project Bihar DPL Power System Development Project I V Elementary Education (SSA 11) HP State Roads Project Uttaranchal RWSS TNIAMWARh4 Bihar Rural Livelihoods Project Punjab Rural Water Supply & Sanitation Punjab State Roads Project Kamataka Health Systems AP Community Tank Management Project RCH I1 AP DPL I11 Stren India's Rural Credit Coops Third National HIV/AIDS Control Project TB I1 Vocational Training India Mid-Himalayan (HP) Watersheds NAIP Power System Development Project I11 TN Urban I11 Kamataka Panchayats Strengthening Proj Kam Municipal Reform TN Empwr & Pov Reduction Madhya Pradesh Water Sector Restructurin DISEASE SURVEILLANCE TN HEALTH SYSTEMS Lucknow-Muzaffarpur National Highway Rural Roads Project SME Financing & Development

MPDPIP-I1

0.00 0.00

250.00 180.00 56.00

0.00 0.00

135.00 400.00 150.00

1,000.00 0.00

220.00 0.00

335.00 0.00 0.00

250.00 0.00

94.50

0.00 150.00 300.00

0.00

0.00 0.00 0.00 0.00

400.00 300.00

0.00 216.00

0.00 394.02

0.00 0.00

620.00 99.50

520.00

82.40 521 .OO

0.00 0.00

56.00

100.00 197.00 65.00 0.00

75.00 0.00

600.00 0.00

120.00 150.00 63.00

154.00 0.00

141.83 94.50

360.00 75.00

300.00 250.00

170.00 280.00

60.00 200.00

0.00 0.00

120.00 0.00

120.00 0.00

68.00 110.83

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 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 75.20 ,O.OO 489.62 0.00 249.38 0.00 180.00 0.00 105.33

0.00 100.70 0.00 198.44 0.00 99.75 0.00 318.30 0.00 111.86 0.00 602.32 0.00 354.45 0.00 195.63 0.00 111.58 0.00 406.12 0.00 59.07 0.00 142.56 0.00 143.81 0.00 84.57 0.00 174.53

0.00 204.28 0.00 76.02 0.00 287.00 0.00 197.47

0.00 112.22 0.00 202.52 0.00 33.41 0.00 164.74 0.00 23.86 0.00 192.32

,O.OO 82.41 0.00 171.18 0.00 82.85 0.00 302.87

0.00 53.26 20.06 37.63 0.00 219.45 0.00 102.33 0.00 400.00

-0.47 13.98 0.00 0.00

-2.74

0.00 0.00 0.00 9.30

111.10 -50.68

2.47 24.58 49.60 8 1.06 2.27

81.77 -12.19 -13.09 18.03

42.95 -77.33 135.25 116.73

-13.22 -17.77

3.40 48.94

-1 26.14 98.07

-33.18 68.18 27.76

223.12

44.49 46.46 69.45 63.82 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 20.57 0.00 0.00 0.00

75

PO84792 2005 PO84790 2005 PO84632 2005 PO94513 2005 PO82510 2004 PO78550 2004 PO50655 2004

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

PO50653 2002 PO50647 2002

Assam Agric Competitiveness W A R WSP Hydrology I1 India Tsunami ERC Kamataka UWS Improvement Project Uttar Wtrshed RAJASTHAN HEALTH SYSTEMS DEVELOPMENT TN ROADS UP ROADS AP RURAL POV REDUCTION AP Comm Forest Mgmt Chatt DRPP KERALA STATE TRANSPORT KARN Tank Mgmt MlZORAM ROADS RAJ WSRP MUMBAI URBAN TRANSPORT PROJECT KARNATAKA RWSS I1 UP WSRP

0.00 154.00 325.00 0.00 104.98 0.00

0.00 465.00 39.50 0.00 0.00 69.62 0.00 89.00

348.00 0.00 488.00 0.00

0.00 215.03 0.00 108.00 0.00 112.56

255.00 0.00 32.00 130.90 0.00 78.00 0.00 140.00

463.00 79.00

0.00 151.60 0.00 149.20

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

20.06 0.00

25.07 0.00

25.84 0.00

15.04 40.11

74.35 228.41

84.06 397.35

7.38 35.74 40.42

54.59 90.26 27.07 17.69 50.28 93.42

112.43 16.47 41.10

255.28

16.20 73.47

50.37 129.41 71.51

387.83 7.38 2.43

32.58

54.59 90.26

-58.48 -2.77 57.05 93.42 50.61

-13.12 28.25

242.37

3.70 85.16

-18.51 0.00

42.25 0.00 2.53 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

-6.27 0.00 0.00

111.37

0.00 0.00

Total: 8,125.50 6,775.47 0.00 0.00 146.18 8,865.01 2,348.52 151.94

INDIA STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions o f US Dollars

~~ ~~ ~~~

Committed 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

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

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 0.00 0.00 0.00 5.08 0.00 0.00 0.00 5.00 0.00 0.00 25.00 4.00 0.00 0.00 0.00 0.00 0.00 9.36 13.81 0.00 0.00 0.00 0.68 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.30 0.00 10.30 0.00 15.00 0.00 0.00 3.98 0.00 0.00 0.43 0.00 0.00 0.00 10.52 0.98 0.00 0.00 0.00 0.00 4.50 0.00 0.00 0.00 0.00 0.00 5.70 0.00 0.00 0.00 0.59

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

0.00 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

10.30 0.00 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.30 0.00 0.00 0.00 0.00 0.00

76

2006 1990 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

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

7.00 4.61 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

2.00 0.00 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 2.57 1.10 0.00 7.62 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 9.3 1 2.79 0.00 0.73 0.00 4.74 0.00 0.00

77

0.00 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 0100 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

12.40 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

7.00 4.61 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

2.00 0.00 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 8.3 1 2.49 0.00 0.73 0.00 4.54 0.00 0.00

0.00 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

12.40 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

1995 2004 2005 2005 2001 1997 2000 1995 2004 2001 2003 2004 2000 2002 I998 2005 2004 1996 2005 2002 2001 2005 1997 1997 2006

Rain Calcining Rain Calcining

Ramky Ruchi Soya SBI SREI S E I 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 WIV Walden-Mgt India iLabs Fund I1

0.00 10.00 3.74 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

2.29 0.00

10.28 9.27 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 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 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 10.00 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

2.29 0.00 0.00 6.77 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 0.00 0.00 0.00 0.00

Total portfolio: 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

78 ,

Annex 14: Country at a Glance INDIA: Andhra Pradesh Rural Water Supply and Sanitation Project

s:: :::&

India at a glance 9124/08

Oeveiopment diamond POVERM and SOCIAL

2007 Populalion, midyear (mi,,iOns) GNI per capita (Ailas mefhod, US$) GNI (Allas method. USS billions) Average ennuel growth, 200147 Populalion (96) Labar force (%) Most recent estimote (lotest war oveilable, 200147l Povedy (% ofpopufation ~WownaliOnelmveW line) Urban population (% oftofdppulalion) Life expdancy at Litth (veers) lnfantmortality(per f.GUOlive births) Child m a l n m (% of&Mren under 5) Access to an impmved water source i76 ofpopulaon) Literaq (se ofpopulafion age fs+t Grooo primary enrdhnt (se ofschool-age p p d a h )

Male Female

m ECONOMIC wnos mnd LONG-TERM TRENDS 1987

GDP (US$h7lh) 276.0 Gross capital formatiodGDP 22.0 Ewpocts of goDdsand SeM'COS/G!3' 5.7 Gross domestic savingdGDP 20.6 Gross national saviWGDP 20.9 Current account balandGDP -1.9 Merest paymenWGDP 0.7 Total deWGDP 20.1 Total debt servieslexpcrts 29.7 Present value d dobVGDP Present value of debVeworts

1987-97 1997-07 (amwe annoel growth) GDP 5.5 6.9

Exports of goodsand services 11.5 15.4 GDP per capita 3.5 5.3

2o06 2007 916.3 1.171.0

India

1,123.3 950

1,064.4

'1.4 1.8

29 61 57 44 89 61

112 114 109

1997 410.9

23.9 10.8 226 24.7 -1.4 1.1

23.0 21.6

2006

9.7 8.2

18.9

Economic ratios'

1987-97 199747 2006 (average annuaigmdi) Agriwlhlre 3.5 2.7 3.8 4.5 hdusw 6.3 . 7.2 11.0 8.5

Manufacturing 6.6 6.8 12.0 8.8 SeMfes 6.8 8.5 11.1 . 10.8 Househdd fnal consumption expenditure 5.5 5.8 10.3 7.3 General wv't final consumption emenrimre 4.2 3.9 6 2 5.5 Gross capital formabn 6.8 11.0 14.3 13.3 Imports of weds and Swvices 12.3 14.8 24.5 7.7

1.520 3.437 880 1.887

1,339 6.485

Growth of exports and imports (%I

,,, 20

o m m N M M 07 - Expwls - m m

Life expectancy

T GNI

primary capita enrollment

2 1

Access to improved water source

-India Lower-m'ddlwnmme group

2 i 64 62 41 87 58

108 111 111 112 104 109

1

38.2 21.3 35.1 37.2 -2 1

2007-11

8.5 7.2

'13.8

Trade

Domestic Capital savings h a t i o n

1

Indebtedness

-India - Lower-mddlmncome gmup

STRUCTURE of the ECONOMY

(?% of GDP) Agriculture lndusby

services Hwsehdd final consumption expendnure General gov'l final mnsomph ewditure hprb of gwds and sewices

Manufacturing

1987 1997 2006 2007

29.4 26.1 18.3 17.8 26.3 26.8 29.3 29.4 16.4 16.4 16.3 16.4 44.3 47.1 524 52.8 67.1 66.0 56.7 54.8 123 11.4 10.3 10.1 7.1 12.1 25.1 24.4

1 Growth of capital and GOP (%) . I

79

PRICES and GOVERNMENT FINANCE

Domestic prices (94 change) Consumer pnces lmplickt GDP deflator Gbvemment finance (ss afGDP, includes cumfltqranfsJ Current revenue Current b a e t balance Overall sumluddeficit

TRADE

(US% m r h / T S ) Total exports (fob)

Manne producls Ores and minerals Manufactures

Total impacts (uf) F d Fuel and enerqy Capital gwds

ExswI pnce index f ~ 2 o o o = 1 ~ ~ import pnce index fZoO=fO5J Term of trade (zwo=fC?O)

BALANCE OF PAYMENTS

(US$ milliofisl Exports of gwds and sewices Impom of qoods and SE?MC~S Resource balance

Net i n m e Met current transfers

Current account balance Finanarq items [net) Changes in net reserves

Memo: Resaves including gald (US3 milkms] Cmvewion rate (D€C, /mavUSO

EXTERNAL DEBT and RESOURCE FLOWS

(US$ mrllions) Total debt outstmding rand disblirsed

IBRQ IDA

IBRD IDA

Ofticfa1 qranls offcial c r ~ t o r s Priv3te mdktors Foreiqn direct invertment (net inflows) Portfolio equity (net inflows)

World Bank proqnrn Commitments Disbursements Principal repayrcpents Net ffows Interest paVments Net transfers

Total debt semce

Composition of net resource Rows

1987 1947

7.a 7.0 9.3 6.5

19.4 17.4 -2.7 -3.5 -9.2 -6.3

1987 1997

12'34 35,680 411 1,207 601) 1,061

8.195 26.547 -19,812 51,187 7,141 1.483

5.064 9,796

113 116 116 110 97 106

3,118 a , w

1967 1997

16,216 45,109 59.297

-6,623 -14,ia8 -t,337 -3,521 2,698 11,830 -5.262 -5,879 4,526 9,n2

736 -3,893

6,223 29,367 13.0 37.2

1987 1997

55,570 94,317 4,709 8,138

11,615 17,912 5,686 12,413

808 1,410 156 381

531 549 2,498 406 2,877 1,089

212 3.577 0 2,556

3,504 z306 2,212 1,372

499 1,070 1,714 302

476 721 .E,238 419

2006

6 7 5 6

20 6 4 4 6.5

2006

128,083 1,744 7,033

8281 8 191,254

3.291 57,074 52,944

2006

204,264 235,625 -31,3G1 -6,573 27,941 -9.993 46,59§

-36,606

198,710 45 2

2006

153.07 5 6,177

24.059 17,879

597 841

873 2,144

16,097 17,453 9,549

1,228 I .?87

942 8d5 496 349

2007

5.3 4.3

22.4 -1.6 -5.6

lnflation (%) 1 E. 6

4

z

Expotf and impont levels (&IS$ mill.)

146.632 /_a 91,6n zM.Doo

238,296 I c0.m

71.31; 0

246.071 3 297,009 2 30,176

30,176 0

-24,408 -' 44,202 -'

-19.674

1 - 218.582

40.3

G 11.071 7,040

26.512

739 915

F 87.

E . BilJterol

G -Short-term 826 566 251

The Wodd Bank Group This table was prepared by country unit &a#; figures may differ from other World Bank pubfished data 9/24lD8

80

MAP SECTION

Chittoor

NelloreKadapa

Anantapur

Kurnool

Ongole

GunturMachilipatnam

Eluru

Khammam

NalgondaMahbubnagar

Kakinada

Vishakhapatnam

Vizianagaram

Srikakulam

SangareddiWarangal

Karimnagar

Nizamabad

Adilabad

CHITTOOR

NELLOREKADAPAANANTAPUR

KURNOOL PRAKASAM

MAHBUBNAGAR GUNTUR

WESTGODAVARI

KRISHNA

NALGONDA

WARANGAL

KHAMMAMEAST

GODAVARI

VISHAKHAPATNAM

VIZIA

NAGA

RAM

SRIKAKULAM

RANGAREDDY

MEDAK

NIZAMABADKARIMNAGAR

ADILABAD

HYDERABAD

Chittoor

NelloreKadapa

Anantapur

Kurnool

Ongole

GunturMachilipatnam

Eluru

Khammam

NalgondaMahbubnagar

Kakinada

Vishakhapatnam

Vizianagaram

Srikakulam

SangareddiWarangal

Karimnagar

Nizamabad

Adilabad

HYDERABAD

CHITTOOR

NELLOREKADAPAANANTAPUR

KURNOOL PRAKASAM

MAHBUBNAGAR GUNTUR

WESTGODAVARI

KRISHNA

NALGONDA

WARANGAL

KHAMMAMEAST

GODAVARI

VISHAKHAPATNAM

VIZIA

NAGA

RAM

SRIKAKULAM

RANGAREDDY

MEDAK

NIZAMABADKARIMNAGAR

ADILABAD

B a y o f

B e n g a l

AUGUST 2009

Th i s map was p r oduced by t he Map De s i g n Un i t o f T h e Wo r l d B a n k . T h e b o u n d a r i e s , c o l o r s , d e n o m i n a t i o n s a n d a n y o t h e r in format ion shown on th is map do not imply, on the par t o f The Wor ld Bank Group, any judgment o n t h e l e g a l s t a t u s o f a n y te r r i to r y, o r any endorsement or acceptance of such boundar ies .

KILOMETERS

1050

INDIA

PROPOSED ANDHRA PRADESH RURALWATER SUPPLY AND SANITATION PROJECT

PROJECT DISTRICTS

DISTRICT CAPITALS

STATE CAPITAL

DISTRICT BOUNDARIES

STATE BOUNDARIES

IBRD 37129