World Bank Document · 2017. 2. 27. · MJP - Maharashtra Jeevan Pradhikaran NGO - Non-Governmental...

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No.: 18745

IMPLEMENTATION COMPLETION REPORT

INDIA

MAHARASHTRA RURAL WATER SUPPLY ANDENVIRONMENTAL SANITATION PROJECT

(Cr. 2234-IN)

December 21, 1998

Rural Development Sector UnitSouth Asia Region

This document has a restricted distribution and may be used by recipients only in theperformnance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY EQUIVALENTS(as of December 21, 1998)

Currency Unit = Indian Rupee (Rs)US$ 1.00 = Rs 42.6

ABBREVIATIONS AND ACRONYMS

DOPH - Department of Public HealthDPMU - District Project Monitoring UnitGOI - Government of IndiaGOM - Government of MaharashtraGP - Gram PanchayatGSDA - Groundwater Surveys and Development AgencyIEC - Information, Education and Communication BureauMJP - Maharashtra Jeevan PradhikaranNGO - Non-Governmental OrganizationO&M - Operation and MaintenancePPMU - Project Planning and Monitoring UnitSAR - Staff Appraisal ReportWSSD - Water Supply & Sanitation DepartmentVWC Village Water Supply and Sanitation CommitteeZP - Zilla Parishad

FISCAL YEAR

April 1 - March 31

Vice President: Mieko Nishimizu

Country Director: Edwin R. Lim

Sector Managers: Ridwan Ali & Michael Baxter

Staff Member: Inds Fraile

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TABLE OF CONTENTS

Page No.

Preface ......................................................... ivEvaluation Summary .......................................................... v

Part I - PROJECT IMPLEMENTATION ASSESSMENT

A. Statement/Evaluation of Objectives ....................................................lB. Achievement of Objectives ................................................... 2C. Major Factors Affecting the Project .................................................... 7D. Project Sustainability .................................................... 8E. Bank Performance . IIF. Borrower Performance ................................................... 13G. Assessment of Outcome ................................................... 15H. Future Operation ................................................... 161. Key Lessons Learned ................................................... 17

PART 11 - STATISTICAL TABLES

Table 1: Summary of Assessment ................................................... 19Table 2: Related Bank Loans/Credits ................................................... 21Table 3: Project Timetable ................................................. .. 22Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual ......... 22Table 5: Key Indicators for Project Implementation .......................................... 23Table 6: Key Indicators for Project Operation ................................................... 24Table 7: Studies Included in Project .......... ......................................... 25Table 8A: Project Costs ................................................... 26Table 8B: Project Financing ..... .............................................. 26Table 9: Economic Costs and Benefits ................................................... 27Table 10: Status of Legal Covenants ................................................... 28Table I1: Compliance with Operational Manual Statements ............................. 30Table 12: Bank Resources: Staff Inputs ................................................... 31Table 13: Bank Resources: Missions ................................................... 32

APPENDICES

A. Mission's Aide-Memoire ................................................... 34B. Borrower's Evaluation ................................................... 57C. Maps: IBRD No. 22833R Maharashtra Rural Water Supply

and Environmental Sanitation Project

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

iv


INDIA


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PREFACE

This is the Implementation Completion Report (ICR) for the Maharashtra Rural WaterSupply and Environmental Sanitation Project in India, for which Credit 2234-IN in the amountof SDR 76.40 million equivalent was approved on May 2, 1991 and made effective on July 31,1991. The Credit was closed on June 30, 1998 following a six-month extension. Finaldisbursement took place on November 23, 1998, at which time a balance of SDR 6.99 millionwas cancelled.

The ICR was prepared by Ms. Inds Fraile, the task team leader, reporting to the SouthAsia Rural Development Sector Unit (SASRD) and reviewed by Mr. Abhyankar (SASRD), theteam leader; Mr. Herman van Wersch (SASRD); and Ms. Jennifer Sara (AFTU2) as peerreviewer. The Borrower provided comments that are included as appendixes to the ICR.

Preparation of this ICR was begun during the Bank's final supervisionlcompletionmission, from July 6-20, 1998. It also takes into account a review of material in the project file.The Borrower contributed to preparation of the ICR by: (a) providing the Bank withinformation on implementation and operation results; (b) participating in the completionmission; (c) providing feedback on the quality of the Bank's contribution from projectidentification to supervision; (d) preparing its own final evaluation report on the project; and(e) providing comments on the Bank staff's draft ICR.

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EVALUATION SUMMARY

1. Introduction. The Maharashtra Rural Water Supply and Environmental Sanitation project,implemented between 1991 and 1998, was the first Bank-supported project in India which aimed todeliver rural water supply, environmental sanitation and health education in an integrated manner; thisapproach has since become standard and was adopted in the Government of India (GOI) sector strategy.Lessons learned during the implementation of this project contributed to improving the design ofparticipatory approaches in subsequent Bank-supported rural water supply and sanitation projects inKarnataka and Uttar Pradesh.

Project Objectives

2. The main objective of the project was to raise the standard of living in rural areas throughimproved health and productivity, by expanding access to potable rural water supply systems andenvironmental sanitation facilities. The project would also develop replicable models for coordinatingwater, environmental sanitation and health communication programs elsewhere and strengthen theinstitutional capacity to promote improved environmental sanitation. The improvements of health andproductivity would be achieved through the following measures: (a) more equitable distribution of safewater through improved design standards and community involvement; (b) improved reliability ofwater supply and drainage schemes through an upgrading of skills of the community and governmentofficials and improved cost recovery for operation and maintenance (O&M); (c) increased public andprivate investments in environmental sanitation; and (d) greater community awareness of the causes ofwater-related health problems and the need for a cleaner environment through a health communicationsprogram.

3. The project objectives were clear and in line with GOI's sector policies and the Bank's sectorassistance strategy for India. In hindsight, the objectives were ambitious in light of the Government ofMaharashtra (GOM)'s lack of experience in integrated service delivery and participatory processes inthis sector.

Implementation Experience and Results

4. Achievement of Project Objectives. The project's physical targets to expand access to potablewater supply and environmental sanitation facilities have been substantially achieved: The Piped-WaterSupply Program will benefit, as planned in the SAR, about 1.7 million people. At project closure, outof a total of 560 villages in ten project districts, construction has been completed in 337 villages (60%)and is close to completion in an additional 165 villages (30%). The appraisal target for the HandpumpProgram has been slightly surpassed; about 4,200 handpumps have been installed benefiting apopulation of about 600,000 people. The Latrine Construction Program surpassed the SAR target of80,000 latrines. The Drainage Program envisaged construction of small surface drains in about 75 largevillages. At project closure progress was insignificant, primarily due to delays in formulating thestrategy and low demand from local governments before the new piped-water supply schemes enteredinto operation. Still, the project successfully promoted the concept of private soakpits.

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5. The project has provided more equitable distribution of safe 'water supply and improvedreliability of the water supply service through increased dependability of water sources, improveddesign criteria and higher construction quality. However water supply remains somewhat irregular dueto erratic and inadequate electrical supply to pumping stations at the water source. While the highly-subsidized latrine program was a success, the output of the drainage program was negligible. Theproject has thus partially achieved increased public and private investment in environmental sanitation,mostly with public funds. Moreover, despite substantial delays in implementation, the project hasgenerated greater community awareness of the causes of water-related health problems and the need fora cleaner environment through a successful health awareness campaign carried out by public healthofficials and NGOs.

6. Project Sustainability. Sustainability is considered uncertain, especially regarding theregional piped-water schemes, because of: (a) the project's tight design parameters causing prematurestrain on the capacity of the systems; (b) unwillingness of some district Zilla Parishads (ZPs) andvillage Gram Panchayats (GPs) to take over the piped-water supply schemes; (c) weak technical andfinancial capacity of the ZPs and the GPs regarding O&M of the water supply and sanitation facilities;(d) poor water demand management at the village level; (e) poor periformance of ZPs in collectingwater charges from GPs; (f) tariff-setting rigidities that may prevent full recovery of O&M costs insome instances; (g) uncertainty regarding timely tariff increases in the future; (h) poor incentives at theZP and GP level to carry out preventive maintenance of the piped-waiter schemes since they wereneither involved in scheme planning and implementation nor contributed to the capital costs; and (i)deficient supervision of drainage and latrine construction in some instances. The handpump and thesingle-village water schemes seem to have greater chances of sustainability than the regional schemesbecause the GPs are solely responsible for O&M and better cost recovery has been observed. Duringproject implementation, water tariffs have been substantially increased, thereby somewhat improvingthe chances of sustainable operation of the piped-water schemes.

7. Sector Policies. The project failed to develop replicable models for coordinating water,environmental sanitation and health communication programs but contributed to an improvement in theformulation of GOM's sector policies. The project helped GOM and the implementing agencies toappreciate the role of communities in sustainable operation of rural water supply systems and toincrease awareness about the health benefits associated with hygiene education and village sanitation.GOM gained insights into the complexities of managing regional water supply schemes and other keysectoral issues. This increased understanding led to State-wide policy initiatives such as creation of aseparate Water Supply and Sanitation Department; raising of water tariffs; creation of Village WaterSupply Funds; launching of a massive State-wide latrine construction program; formation of VillageWater Committees; improving system design approaches; introducing third-party supervision ofconstruction; establishing a water quality monitoring system; and creation of Water Management Unitsin five districts. The project also piloted 24-hours supply, contracting out O&M to private parties, andscheme-level management by the concerned communities through cooperative societies.

8. Financial Objectives. The project has partially improved cost recovery for O&M of ruralwater supply systems. Government of Maharashtra increased the minimum and maximum tariff levelsfor rural water supply in 1997 by about four times, after remaining unchanged for 15 years. Actualwater tariffs are fixed by the GPs, within the band specified by GOM. GOM also promulgated ruleswhich require each GP to constitute a separate Village Water Supply Fund (VWSF) to be used formeeting the O&M requirements of drinking water of the village community and related works.

9. The level of tariffs set up by the GPs in the schemes which have already been handed over tothem are barely sufficient to cover O&M costs. Although there is room for improvement, the collectionrate of GPs in the single-village schemes is acceptable (it ranges from 75% to more than 90%). For

vii

regional schemes, the project required GOM to cause each ZP participating in the project to transfersufficient revenues each year to the District Maintenance Fund for annual O&M costs of the facilitiesunder its responsibility. Since the performance of the ZPs in collecting water bills from GPs is verypoor, the O&M expenses of the regional schemes are a financial burden on the ZPs, making some ofthem reluctant to take over the new facilities from the Maharashtra Jeevan Pradhikaran (MJP), the Stateengineering agency that built them.

10. Institutional Objectives. The project only partially achieved the objectives of communityparticipation and upgrading of skills on O&M of water and drainage facilities of the community andgovernment officials at the local level. Due to delays in developing the training strategy, training ofvillage water committee members, village water persons, field staff from MJP and the ZPs, NGOs andhealth workers has been going only since June 1995, about four years after project effectiveness.

11. Project Cost, Disbursements and Implementation Timetable. The Credit was closed on June30, 1998 following a six-month extension. Implementation of the bulk of the investments (i.e. thepiped-water supply component) is delayed by about one year over project closure. The communityparticipation, environmental sanitation and health education components suffered major start-up delays.The Project Planning and Monitoring Unit (PPMU) estimates that the total expenditure on the projectwill be about Rs 5,042 million, which compares with the appraisal estimate of Rs 3195.8 million (US$140.8 million equivalent). The increase in project cost, in rupee terms, is mainly due to a substantialincrease in cost of piped-water supply schemes resulting from higher bid prices, price escalation, andadditional works. Final disbursement took place on November 23, 1998, at which time SDR 69.4million (US$97.5 million equivalent) or about 91% of the original principal amount of the Credit hadbeen disbursed and the undisbursed balance of SDR 6.99 million was cancelled.

12. Key Factors Affecting Achievement of the Major Objectives. First, the project design waspoor. The main design flaws are: (i) the community participation model was not fully developed byproject effectiveness and was not integrated into the other project activities; (ii) the institutional andfinancial capacity of the local government bodies to operate the schemes was not adequately appraised;and (iii) the institutional complexity of regional water scheme management was underestimated.Second, the agency in charge of coordinating project execution (PPMU) was very weak for most of theimplementation period. Third, GOM accorded low implementation priority to the communityparticipation, environmental sanitation and health education components.

13. Borrower and Bank Performance. Government of India and GOM's performance duringproject preparation was satisfactory. GOM adopted an integrated approach to water supply,environmental sanitation and health education and fruitfully cooperated with the Bank's team duringthis stage. The Bank's performance during preparation was marginally satisfactory and duringappraisal unsatisfactory. While the project design had obvious strengths, such as introducingbeneficiary participation and NGO involvement, and bringing an integrated approach to water supply,environmental sanitation and health education for the first time in a Bank-supported project in India, thedesign of key institutional, financial and economic aspects was flawed, as stated in the previousparagraph. The project economic analysis was poor.

14. Performance of GOM during implementation was unsatisfactory, although in the end GOM hasmade progress on almost all fronts, i.e. sector policy, technical and financial issues (para 38 of ICR).The Bank's performance during supervision was moderately satisfactory. The project was adequatelyfollowed up throughout. Supervision was generally proactive, albeit by current standards this projectwould have been classified as problem project much earlier. In retrospect, it seems that the Bankshould have given more attention, earlier on in project implementation, to sustainability issues and theinstitutional and financial arrangements for O&M of the schemes, especially for the regional schemes.

viii

However, this was hardly possible because, given the lack of ownerslhip on the part of GOM and theinadequate capacity of the PPMU, most of the energy of successive supervision missions for about fouryears was focussed on the same issues, i.e. strengthening a poorly peirforrning PPMIJ and developingstrategies for the community participation, health communications and environmental sanitationcomponents. In the last two years, once project implementation improved, the Bank supervision couldfinally focus on achieving the stated development objectives.

15. Project Outcome. The overall outcome of the project is marginally satisfactory. The projectfostered sound policy initiatives, substantially achieved several project objectives, and will ultimatelymeet the physical targets of the major components. However, the results were not fully satisfactorybecause institutional and financial shortcomings threaten sustainability of the achieved benefits.

Future Operations and Key Lessons Learned

16. Future Operation. The district governments (ZPs) are responsible for O&M of the commonassets of the regional piped-water supply facilities. Parameters to monitor the performance of thepiped-water supply schemes were agreed with the ICR mission. GOM intends to continue monitoringthe performance of the systems through the ZPs. GOM is developing, approaches to improve theperformance of ZPs in collecting water bills from GPs such as the issuing separate water bills to GPsevery month, and making mandatory the creation of separate accounting and budgeting head for eachregional scheme in the ZP's books accounts rather than having just one head of water supplymaintenance for the entire district. Operation of some regional schemes has been contracted out to theprivate sector.

17. Key Lessons Learned

* Attention should be given up front in project preparation and implementation to the institutionaland financial arrangements for O&M of the new facilities.

- The entity responsible for overall coordination of implementation of a project involving variousagencies should be fully staffed prior to implementation, have control at the operational level,and be empowered to approve key project milestones and impose penalties for non-adherenceto these milestones.

* The community participation arrangements should be clearly defined prior to project appraisaland fully integrated into all other project activities.

* Planning of water supply and sanitation facilities should have a long-term horizon (say 30years) and investments should be planned to allow for infrastructure to be built in a phasedmanner, as needs develop and resources permit.

* The respective roles of government agencies (MJP and GSDA), communities, NGOs and localgovernments (GPs and ZPs) in the planning, implementation and O&M of water and sanitationfacilities should be clearly defined during project preparation.

* Criteria for the selection of NGOs should be clear, well targeted and transparent, and agreed byproject appraisal.

* Adequate orientation and capacity building for the staff of the public sector agencies and NGOsinvolved should be made available as early as possible during project implementation.

* In order to ensure affordability of the piped regional water schtemes, lower-cost alternativesshould be energetically pursued and users' willingness to pay should be assessed at an earlystage.

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PART I - PROJECT IMPLEMENTATION ASSESSMENT

A. ASSESSMENT/EVALUATION OF OBJECTIVES

1. Introduction. The Maharashtra Rural Water Supply and Environmental Sanitationproject (MRWSES), implemented between 1991 and 1998, was the first Bank-supportedproject in India which aimed to deliver rural water supply, environmental sanitation andhealth education in an integrated manner; this approach has since become standard in Bank-assisted projects. It has also been adopted in the Government of India (GOI) sector strategy.As an additional innovative feature, it was also envisaged that NGOs would play a key rolein the planning and implementation of the health communications and environmentalsanitation components.

2. Project Objectives. The main objective of the project was to raise the standard ofliving in rural areas through improved health and productivity, by expanding access topotable rural water supply systems and environmental sanitation facilities. The projectwould also develop replicable models for coordinating water, environmental sanitation andhealth communication programs elsewhere and strengthen the institutional capacity topromote improved environmental sanitation. The improvements of health and productivitywould be achieved through the following measures:

a) more equitable distribution of safe water through improved design standards, takinginto account residential patterns, and community involvement, particularly of therural poor, in the identification of schemes and the siting of standposts andhandpumps;

b) improved reliability of water supply and drainage schemes through an upgrading ofskills of the comrnunity and government officials at the local level, clarification ofresponsibilities for Operation and Maintenance (O&M), improved cost recovery forO&M to provide adequate funding and increased involvement of the community inmaintenance;

c) increased public and private investment in environmental sanitation throughprograms to increase latrine usage, the provision of small-scale drains and improvedsolid waste management; and

2

d) greater community awareness of the causes of water-related health problems and theneed for a cleaner environment through a health commulications program targetedmainly toward women, adolescents, and children.

3. Evaluation of Objectives. The project objectives were clear and in line with GOI'ssector policies and the Bank's sector assistance strategy for India. In hindsight, theobjectives were ambitious in light of the Government of Maharashtra (GOM)'s lack ofexperience in integrated service delivery and participatory processes in this sector. Thefinancial and cost recovery objectives were in line with the Bank's standards prevailing at thetime but would be considered insufficient under current standards for free-standing projects inthis sector. Based on today's better knowledge about social intermediation and NGOinvolvement, the project objectives could have been more clear and detailed in terms ofcommunity participation. Considering the novelty to GOM of an integrated approach,community participation and NGO involvement, this project bore substantial risks.

B. ACHIEVEMENT OF OBJECTIVES

4. Expanding access to potable water supply and environmental sanitationfacilities. The project's physical targets have been substantially achieved in the maincomponents.

a) Piped-Water Supply Program. The target has been substantially achieved. Thescope of the piped-water supply component was reduced during projectimplementation from 660 villages in the SAR to 560 villages, mainly due to failureof some of the initially-identified water sources. However, since the villagesselected in Phase II were larger than anticipated, the total number of beneficiarieswill be as targeted in the SAR about 1.7 million people. At project closure, out of atotal of 560 villages in ten project districts, construction lhas been completed in 337villages (60%) and is close to completion in an additional 165 villages (30%). Fullcompletion in these 165 villages is only pending on minor civil works or the securingof electrical connections for the pumping stations. Construction in the remaining 58villages (about 10%) will be progressively completed, with GOM's own funds, bythe end of 1999.

Status Individual Regional Schemes TotalVillage No. of No. of No. of No. of Villages

Schemes Schemes Villages Schemes P% of total)Completed 60 29 277 89 337 (60%)To be completed:

By 31/12/98 71 45 483 116 554 (99%)By 31/03/99 72 47 488 119 560 (100%)

Handed over to ZPsl & 48 13 190 61 238 (42%)GPs2

Zilla Parishad.

2 Gramn Panchayat.

3

Delays in obtaining administrative approvals, inadequate procurement packaging,land acquisition issues and insufficient source yields are the main causes of delay.

The actual per capita supply is less than design supply due to intermittent powersupply, higher-than-projected population growth, and yield limitations of the watersource. Because of these factors as well as poor demand management, the durationof water supply is only 1-2 hrs per day in many cases, below the design standard of 3hrs twice a day. Private connections3 are an option in the piped-water schemes forthose willing to pay.

b) Handpump program. The appraisal target has been slightly surpassed. Thiscomponent comprised drilling of some 1700 borewells and installing handpumps onthem, hydrofracturing over 1000 existing borewells, replacing 1300 broken-downhandpumps and procurement of some state-of-the-art equipment (drilling rigs andinstruments for hydrogeological surveys). The original program was completed in1995. At project closure, about 4,200 handpumps have been installed benefiting apopulation of about 600,000 people in 506 villages and 1024 hamlets. The achievedlevel of service is one borewell for 150 persons.

c) Latrine program. The latrine construction program surpassed the SAR target of80,000 latrines in about 2,100 villages of the ten project districts. As of the end ofMay 1998, the number of latrines constructed in the 560 project villages (i.e. coveredunder the piped-water supply program) was reported to be nearly 24,000 against theplanned number of 25,000 (96% achievement). In addition, about 121,283 latrineshave been constructed in non-project villages. A GOM's State-wide program topromote latrine construction contributed to achieve this impressive quantitativeresult, but quality of design and construction is uneven.

d) Drainage program. Drainage construction was insignificant; however, the projectsuccessfully promoted the concept of private soakpits, and over 5,859 soakpits havebeen constructed by the beneficiaries in the project villages. The project envisagedconstruction of small surface drains in about 75 large villages (i.e. population >5,000). In practice, this program did not really take off till almost the last year of theproject. At project closure, some 3 Km of drains were constructed in 34 projectvillages. This was primarily due to delays in formulating the environmentalsanitation strategy and low demand from local governments before the new piped-water supply schemes entered into operation.

5. More equitable distribution of safe water supply. This objective will besubstantially achieved. Unlike regular government schemes, project schemes were designedto cover the entire village area, including the associated hamlets. Distribution pressures aregenerally satisfactory, even though they are not always equitable, particularly in multi-

3 Unmetered.

4

village schemes. The location of standposts and handpumps in the villages was decided inconsultation with the villagers.

6. Improved reliability of water supply and drainage schemes. This objective willbe partially achieved. The project has brought about considerable improvements in thewater supply service because of increased dependability of water sources, improved designcriteria and better construction quality. In addition, the formal commitment of thecommunities to take over O&M of the schemes, along with training of village maintenanceworkers and district-level officials for O&M of water supply schemes, weighs in favor ofgreater reliability of performance of the schemes. However, water supply remains somewhatirregular due to erratic and inadequate electrical supply to pumping stations at the watersource. Moreover, sustainability of the improved service is doubtful because the technicaland financial capacity of the local government bodies remains poor, especially to manageregional schemes. These factors, compounded by unsuccessful social intermediation,explain why a number of schemes have not been taken over by the local bodies on schedule.

7. Increased public and private investment in environmiental sanitation. Thisobjective will be partially achieved, mostly with public funds. Beneficiaries were supposedto contribute to the cost of both household latrines and public drainage facilities, still theircontribution has not been very significant. The latrine construction took off after GOM'ssubsidy was increased from the Rs 1,500 per latrine initially agreed to Rs 2,500. In addition,the ZPs provided a subsidy of Rs 1,000 per latrine, therefore the beneficiaries' contributionwas minimal. The outcome in terms of drainage construction and solid waste facilities wasnegligible. Nevertheless, the project successfully promoted the concept of private soak-pitsat the owners' expense.

8. Greater community awareness of the causes of water-related health problemsand the need for a cleaner environment. Despite substantial delays in implementation ofrelated activities, this objective is likely4 to be achieved because of a successful healthawareness campaign carried out by public health officials and the NGOs.

9. Sector Policies. The project aimed at developing replicable models for coordinatingwater, environmental sanitation and health communication programs. This objective has notbeen accomplished. The project's delivery system had some design flaws, as explained inparagraph 15 below. Nonetheless, lessons learned during the implementation of this projectcontributed to improving the design of participatory approaches for delivering water,environmental sanitation and health education in subsequent Bank-supported projects inKarnataka and Uttar Pradesh.

10. The project also had a positive impact on GOM's sector policies. The project helpedGOM and the implementing agencies to appreciate the role of communities in sustainableoperation of rural water supply systems and to increase awareness about the health benefitsassociated with hygiene education and village sanitation. GOM gained insights into the

4 This assessment is solely based on mission field visits because no independent evaluation has been carried out so far.

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complexities of managing regional water supply schemes and other key sectoral issues. Thisincreased understanding led to State-wide policy initiatives such as creation of a separateWater Supply and Sanitation Department; raising of water tariffs; creation of Village WaterFunds; launching of massive State-wide latrine construction program; formation of VillageWater Committees; and creation of water management units in five districts. The projectalso piloted 24-hour supply; contracting out O&M to private parties; and scheme-levelmanagement by the concerned communities through a society. Full operationalization ofthese initiatives may take a while. Further improvements to the administrative proceduresand greater support to capacity-building initiatives are badly needed, but these are steps inthe right direction.

11. Financial Objectives. The financial objective of improved cost recovery for O&Mhas been partially achieved. The project required GOM to cause each Gram Panchayat'(GP) participating in the project to set and collect water tariffs at levels to cover O&M costsof the village water supply schemes and hand-pumps, including appropriate bulk watercharges for the regional schemes. GOM accomplished the following albeit with considerabledelays:

a) GOM revised the minimum and maximum tariff levels for private, domestic andnon-domestic rural water supply on 6th March, 1997 after remaining unchanged for15 years. For water supplied through public standpipes (PSP) the minimum tariffwas raised by more than four times to Rs 75 per annum, as against 3 1/2 times fordomestic private connection to Rs 360 per annum for 12-inch connection. Actualwater tariffs are fixed by the GPs, within the band specified by GOM.

b) GOM promulgated rules known as "The Maharashtra Village Water Supply FundRules, 1997". These rules require each GP to constitute a Village Water Supply Fund(VWSF) with 35% of the land revenue received as a grant from GOM, water tariffs,and fees for private connections to be used for meeting the requirements of drinkingwater of the village community and related works. GOM also prescribed accountingand auditing procedures in respect of this fund; in particular, the VWSF must be in aseparate account from the other resources of the GP.

12. The level of tariffs set up by the local government bodies (i.e. GPs and ZPs) in theschemes which have already been handed over to them are barely sufficient to cover O&Mcosts6. Although there is room for improvement, the collection rate of GPs in the single-village schemes is acceptable' (it varies from 75% to more than 90%). For regionalschemes, the project required GOM to cause each Zilla Parishad8 (ZP) participating in theproject to transfer sufficient revenues each year to the District Maintenance Fund for annual

5 Lowest level of local government in rural areas. In Maharashtra, in most cases, each village has a Gram Panchayat.

6 Excluding preventive maintenance.

7 Assessment based on mission field visits. It would be advisable for WSSD to carry out a more comprehensive andsystematic analysis.

s Local government body at the district level.

6

O&M costs of the facilities under its responsibility. The ZPs which have taken over theregional water schemes charge a bulk rate of Rs 1.80 per m3 to the concerned villages tocover O&M expenses of the common facilities9. The performance of the ZPs in collectingwater bills from GPs is very poor; GPs are not regular in paying the ZP and have largeoutstanding balances due to the ZP. The O&M expenses of the regional schemes are thus afinancial burden on the ZPs and some ZPs, especially if they are in a weak financialposition, are reluctant to take over the schemes from the Maharashtra Jeevan Pradhikaran'0

(MJP)I'. It should be noted that the project design did not aim at achieving full O&M costrecovery in the regional schemes where especially high O&M costs could not be fullycovered by maximum statutory charges. The provision of government grants to covercapital costs and portions of the O&M costs for regional schemes was considered justifiedbecause of: (a) the supply of potable water being essential to public health; (b) relativelyhigh capital costs, given the small size of villages served; (c) absence of industry in ruralareas for cross-subsidizing; and (d) widespread poverty in rural areas (SAR paras. 4.04-4.06).

13. Institutional Objectives. The project only partially achieved the objectives ofcommunity participation and upgrading of skills of the community and government officialsat the local level. The community participation component was expected to be a criticaldelivery mechanism for health education and for the formation of social capital. AlthoughVillage Water Supply and Sanitation Committees (VWSCs) and Mahila Mandals (women' sassociations) have been established in 523 of the 542 villages in which the NGOs areworking, and the members of 520 VWSCs have visited the facilities of their water supplyschemes, community involvement came only late in project implementation and its scopewas limited to the operational phase of the new systems.

14. Training of village water committee members, village water persons, field staff fromMJP and the ZPs, NGOs and health workers has been going on since June 1995, about fouryears after project effectiveness, as per a strategy prepared by the project's trainingconsultants. The total number of persons that have received training adds up to about 63,000(62,000 village water persons, 500 masons, and 275 Junior Engineers and other staff). Mostof the training efforts focused on technical aspects and techniques for obtaining communityparticipation and financial issues received very little attention. FParticipation of ZPs staff inthe O&M training program was grossly inadequate.

15. Adequacy of project design. The project design was not fully appropriate forachieving the stated objectives and the criteria for judging the achievement of objectiveswere not clearly specified, nor quantified, in the SAR. The main design flaws are: (a) thecommunity participation concept was not fully developed by project effectiveness and wasnot integrated into the other project activities; (b) the technical aLnd financial capacity of the

9 It normally includes the intake, water treatment plant, and transmission mains ulp to the boundary of each village.

10 The State engineering agency responsible for implementation of the piped-water supply component.

1 Maharashtra Jeevan Pradhikaran.

7

local government bodies to operate the schemes was not adequately appraised; and (c) theinstitutional complexity of regional water scheme management was underestimated.

16. Project Cost and Disbursements. PPMU estimates that the total expenditure on theproject will be Rs 5,042 million, which compares with the appraisal estimate of Rs 3195.8million (US$ 140.8 million equivalent). The increase in project cost, in rupee terms, ismainly due to a substantial increase in cost of piped-water supply schemes resulting fromhigher bid prices, price escalation, and inclusion of additional works. The finaldisbursement took place on November 23, 1998, at which time SDR 69.4 million (US$97.5million equivalent) or about 91% of the original principal amount of the Credit had beendisbursed and the undisbursed balance of SDR 6.99 million (US$9.69 million equivalent)was cancelled.

17. Project Net Present Value (NPV). Neither a NPV nor an economic rate of returnwere estimated at appraisal because it was argued that the primary objective of the projectwas to reduce the incidence of water-related diseases and any attempt to select and quantifymeaningful health benefits would likely be only approximate and incomplete. Also, themethodology would be open to challenge. Similarly, using time saved by women in haulingwater, as a means of measuring economic benefits, would represent only a small share of theactual benefits expected. The calculation of women's time would be equally incomplete andthe methodology inexact. Finally, it was considered that, even though water tariffs wereoften used as a proxy for benefits in rural water supply projects, this approach did not reflectany of the true benefits which were health related or social in nature. This view does notprevail at present. Currently, an economic evaluation is carried out for most stand-alonerural water supply and sanitation projects, mainly on the basis of quantifiable benefitsassociated to time savings in fetching water and increased water consumed by the users.

C. MAJOR FACTORS AFFECTING THE PROJECT

18. This section highlights the major factors that affected achievement of the projectobjectives.

19. Poor project design. The design of the community participation, environmentalsanitation and health communication components was not sufficiently prepared at projectapproval. Community participation was never integrated into other project activities andwas treated as an add-on to be implemented by a different agency from that responsible forscheme construction. Therefore, the timing of community participation interventions wasinappropriate, considerably reducing their potential positive impact on cost recovery andproject sustainability. The design also neglected the institutional complexity of multipleimplementing agencies and the intrinsic social, technical and financial complexities of theregional schemes (serving 85% of the project villages). There is little or no discussion in theSAR about institutional capacity of the local government bodies to take over theresponsibilities envisaged under the project (such as technical capacity to operate theregional schemes, issues about the performance in tariff collection, and financialmanagement of water supply assets) or possible alternative institutional models. The needs

8

for institutional strengthening were not properly assessed either. These factors contributedto the limited project achievements regarding the financial and institutional objectives.

20. Weak Project Planning and Monitoring Unit (PPMU). During the first few yearsof implementation, the PPMU was understaffed, under-equipped, and did not havesatisfactory office space. Therefore, it failed to provide the leadership required in a complexproject like this. Several supervision missions singled out this factor as the main cause ofdelays in implementation and of unsatisfactory performance. Finally, GOM strengthenedthe PPMU by appointing a project director relieved of other major responsibilities in thedepartment and by providing office space. Towards the end, the performance of the PPMUwas satisfactory, although it was never given optimal powers in managing the project.

21. GOM according low implementation priority to the community participation,environmental sanitation and health education components. GOM's lukewarm supportto these activities, especially during the first four years of implementation, is an importantreason for major start-up delays. While this risk was identified in the SAR, measuresconceived to mitigate it (such as the creation of a short-lived GC)M-NGO Task Force) couldnot make up for the lack of Borrower's ownership. Support for these activities grewconsiderably in the last two years, especially after a State-wide effort was mounted toexpand the latrine program.

22. Implementation Delays in the piped-water supply conaponent. The bulk ofproject investments was for construction of piped-water supply systems in ten districts ofMaharashtra. Implementation of this component is delayed by about one year over projectclosure and by about one year and a half over the original closinlg date. The main factorscausing this delay are: (a) procurement delays; (b) modifications in scheme design due tochanges in project villages, failure of initially identified water sources or site conditions; (c)delays of 6 to 15 months to obtain GOM's administrative approvals, including passingscheme resolutions by the ZPs to participate in the project, permissions from otherdepartments on water abstraction, transfer of Government land, power supply connections,identification of alternate sources by the Groundwater Surveys and Development Agency(GSDA) when the first source failed, etc.; (d) delays in the flow of fimds from GOM toMJP; and (e) poor contractor performance (in 4 of 35 contracts). Overall, contract awardswere delayed from 6 months to 2.5 years, as compared to the SAR estimate. Final delayshave been reduced by speeding up construction; work under 11 contracts will be completedbefore the date stipulated in the contracts.

D. PROJECT SUSTAINABILITY

23. Project sustainability is considered uncertain, especially regarding the regionalpiped-water schemes, because of: (a) the project's tight design parameters causingpremature strain on the capacity of the systems; (b) unwillingness of some ZPs and GPs totake over the piped-water supply schemes; (c) weak technical and financial capacity of theZPs and the GPs regarding O&M of the water supply and sanitation facilities; (d) poor

9

water demand management at the village level'2 ; (e) poor performance of ZPs in collectingwater bills from GPs; (f) tariff setting rigidities that may prevent full recovery of O&Mcosts in some instances; (g) uncertainty regarding timely tariff increases in the future; (h)poor incentives at the ZPs and GPs level to carry out preventive maintenance of the piped-water schemes since they were neither involved in scheme planning and implementation norcontributed to the capital costs; and (i) deficient supervision of drainage and latrineconstruction in some instances. The sustainability of the handpump program is likelybecause the handpumps are being handed over to the ZP/community for maintenance andbecause of the simplicity of the India Mark III handpumps installed. Most of the handpumprepairs can be carried out at the village level with minimum outside support. The single-village water schemes also seem to have greater chances of sustainability than the regionalschemes because the GPs are solely responsible for O&M and better cost recovery has beenobserved. However, the GPs are technically and financially weak, thus the issues of poordemand management and preventive maintenance are common to all piped systems. Duringproject implementation, water tariffs have been substantially increased, somewhat improvingthe chances of sustainable operation of the piped-water schemes. However, thesustainability of the benefits achieved by the project will be negatively affected by thefollowing institutional and financial issues.

24. Tight design parameters. The project brought about improved design approachesto take into account the needs of livestock and the demand for private connections.Nevertheless, the design horizon (2007, i.e. about 15 years) used for the piped-water supplyschemes is too short, considering that completed systems have been in operation only forabout two years and that many schemes are yet to be completed. This will strain thecapacity of the systems. Before considering costly investments for augmentation, otheroptions to extend the useful life of the project investments should be explored, even thoughthese may increase the operating costs per unit produced and the financial burden on the ZPsand GPs.

25. Reluctance of some GPs and ZPs to take over the new water supply schemes.GPs and ZPs, particularly in the more backward districts, are reluctant to take over theschemes because of lack of technical capacity and of financial resources for O&M. Somelocal governments also complain about leakage in the systems, mostly in the previouslyexisting distribution pipes, and refuse to take over the schemes until the distribution networkis replaced. Meanwhile, water supply is provided free of charge by MJP for long periodsand the users get accustomed to a higher service level without paying for it.

26. Weak technical and financial management capacity of the local governmentbodies. Quality of management of O&M of schemes already taken over by the ZPs and GPshas been mixed. Deficiencies observed include: conditions at public standposts aresometimes unsanitary due to poor drainage disposal arrangements; leakage from thedistribution system; wastage from public water points (taps stolen, removed); and

12 Many standposts do not have taps; poor materials are often used for household connections; and price signals are notused to reduce the demand for private connections when water availability is a constraint.

10

unacceptable water quality. Problems are more acute in the regional schemes where, insome cases, the water treatment units are being bypassed, supply amongst the participatingvillages is inequitable, duration of supply from the treatment plant is insufficient due tointerruptions in electrical supply, and water leakage from feeder mains is not alwayspromptly attended to. Determined efforts by GOM are required to build the managementcapacity of the local bodies and to improve the collection of sufficient user charges to meet(already subsidized) O&M costs.

27. Poor performance of ZPs in collecting water bills from GPs. The GPs haveconsiderable arrears with the ZPs. Currently, the ZPs are not adequately monitoring andhandling billing and collection. As a result, GPs do not regard water charges as a liability tobe paid to ZPs.

28. Tariff increases. By prescribing a ceiling for water supply tariffs, GOM hasblocked the ability of GPs and ZPs to adequately meet the O&M costs of water supplyschemes in cases where such costs exceed the revenue even at the maximum tariff level.Furthermore, unless this threshold is periodically increased to take into account inflationarycost increases, it could become a serious obstacle for sustainable operation of the newfacilities. Moreover, additional increases may be needed to phase out current subsidies. Atpresent, GOM is subsidizing the O&M of rural water supply to a significant extent. Forexample, electric power tariffs charged for rural water are about one third (1/3) of the normaltariff and charges are based on the capacity of the pump and not on consumption. Most ofthese subsidies are hidden in nature and escape budgetary scrutiny by legislature. Given thenegative fiscal impact of these subsidies, they will be difficult to maintain over time, as newschemes come into operation. GOM should, over time, progressively reduce these subsidiesand, in the short run, consider linking the quantum of subsidy with the performance ofZPs/GPs in maintaining the VWS assets.

29. Poor incentives at the ZP and GP level to carry out preventive maintenance.Since the capital cost of the water supply scheme is fully funded by GOM grants, it is likelythat ZPs and GPs will have very little stake in maintaining these assets in satisfactoryoperating condition. Normal tendency amongst the local governments is to request GOM torehabilitate and increase the capacity of non performing schemes. ZPs and GPs, therefore,would tend to have a breakdown maintenance policy instead of aLn adequate preventivemaintenance policy. Unless ZPs and GPs contribute towards the capital cost of a scheme --thus creating a stake in the asset, it will be reasonable to assume that adequate preventivemaintenance will not be undertaken. In drainage works, GPs are required to contribute 30%of the capital cost. In the few project villages where drains have been constructed, GPs havemet this requirement by appropriating funds from external sources instead of raising thecontributions from the community.

30. Further, current regulations fail to address the issue of adequate maintenance,particularly preventive maintenance, of water supply schemes. Although districtmaintenance funds have been established at the ZPs, resources are limited. The GPs are leftto maintain the schemes out of available resources in the VWS Fund. As a result, only those

11

maintenance works which can be funded out of the available balance in the VWS Fund willbe undertaken by GPs. The level of maintenance is likely to be sub-optimal, thus leading inthe long run to faster wear and tear and a reduced life span of the assets.

31. Sanitation. Sustainability of the latrines is likely, as the beneficiary households bearthe responsibility for maintaining them. A district-wise survey of the overall governmentlatrine program has shown that the rate of usage of latrines is generally quite high, withnotable exceptions. Only in a few villages (concentrated in a few districts), the rate of usageis below 50%. Operation and maintenance instructions have been provided orally to thehouseholds by NGOs, supplemented by written material. Gram Sevaks'3 , who are located inthe GPs and are close to the villagers, are being trained to assist on these aspects (e.g. toswitch between pits when one is full). Concerning the maintenance of the drains, the mainproblem is the lack of funds and low priority accorded by the local government bodies.

E. BANK PERFORMANCE

32. The Bank's performance at the identification stage was satisfactory. The Bankteam engaged in a dialogue from early 1988 with several candidate States (primarilyMaharashtra, Karnataka, Uttar Pradesh, West Bengal), under the overall coordination ofGOI, and pursued project preparation according to the level of preparedness in each State.This dialogue led to the Maharashtra project and subsequent Bank-assisted projects. TheKamataka Rural Water Supply and Environmental Sanitation Project was approved in 1993;and the Uttar Pradesh Rural Water Supply and Environmental Sanitation Project in 1996.Lessons leamed during the early implementation of the Maharashtra project contributed toimproving the design of participatory approaches in the subsequent projects.

33. The Bank's performance during preparation was marginally satisfactory. Theproject design had obvious strengths, such as introducing beneficiary participation and NGOinvolvement, and bringing an integrated approach to water supply, environmental sanitationand health education for the first time in a Bank supported project in India'4 . However, thedesign had also flaws in key institutional, financial and economic aspects. Theimplementation details of the community participation, environmental sanitation and healthcommunications components were insufficiently defined in the SAR and poorly integratedinto the other project activities. The project planning and monitoring unit as designed wasunable to cope with the complexities of coordinating several components implemented bydifferent government departments or agencies in a large geographical area. The institutionalcomplexity of regional water scheme management was underestimated. There is noevidence that ZPs and GPs were consulted during project preparation about beneficiarywillingness to pay. The NGOs were supposed to create consumer awareness, assist in the

3 Extension officers that support the functioning of the Gram Panchayats as Secretaries. They are responsible forrecord keeping.

4 DANIDA and the Netherlands pioneered the efforts to linking rural water supply, sanitation and health educationprograms in India.

12

fornation of village water supply and sanitation committees (VWCs), and inform thevillagers of the committees role and responsibilities with regard to O&M of the systems.Implementation experience subsequently proved that the NGOs lacked knowledge regardingthe O&M of water and sanitation facilities and needed extensive training to carry out theabove responsibilities. It must be recognized, though, that some of these flaws were due tothe innovative nature of the project. In particular, the ability of the NGOs to develop theimplementation strategies of the environmental sanitation, health education and communityparticipation components was overestimated.

34. Aspects of the design which have had positive impacts are the procurementprocedures and the third-party supervision of construction, which have brought aboutimproved quality of construction. In view of the result, MJP has adopted some of theseprinciples to all their works, regardless of the source of financing.

35. The Bank's performance at appraisal was unsatisfactory. Appraisal of theinstitutional arrangements for O&M was scanty. The SAR envisaged that the schemeswould be handed over to the local government bodies (ZPs and GPs) for O&M, yet the Bankfailed to properly appraise their technical and financial capacity. As long as it was alsoenvisaged that VWCs would be formed in the villages with piped-water supp]y, their rolevis-a-vis the GPs were not defined. The project economic analysis was poor. Even allowingfor the fact that an economic analysis of the investments was nct warranted and that themain benefits were social and health in nature, at least an analysis of the fiscal impact shouldhave been carried out.

36. The Bank's performance during supervision was marginally satisfactory. Theproject was adequately followed up throughout. The team skill mix was adequate, althoughgiven the innovative nature of the project, it would have been desirable to have greatercontinuity of the social scientists in the team, and more intensive inputs from this area ofexpertise during the first two years of implementation. The supervision of theenvironmental sanitation components improved substantially when a low-cost sanitationspecialist joined the team. The large procurement packages proimoted by the Bank had to bemodified subsequently because they were not suited to the scattered locations of rural watersupply schemes, partially contributing to the delays in implemenitation of the piped-watersupply schemes. Supervision was generally proactive, albeit that by current standards thisproject would have been classified as problem project much earlier (by December 1993,serious problems were quite apparent in the back-to-office reports and Aide-M[emoires butthe Form 590 showed satisfactory ratings until early 1996). In retrospect, it seems that theBank should have given more attention, early on in project implementation, to sustainabilityissues and the institutional and financial arrangements for O&M of the schemes, especiallyfor the regional schemes. However, this was hardly possible because, given the lack ofownership on the part of GOM and the inadequate capacity of the PPMU, most of the energyof successive supervision missions for about four years were focussed on the same issues:i.e. strengthening a poorly performing PPMU and developing strategies for the communityparticipation, health communications and environmental sanitation components. Successiveagreements with GOM resulted in little visible incremental improvements but, finally,

13

enabled satisfactory implementation progress during the last few years of execution,catching up part of the delays of previous years in some components. In the last two years,once project implementation improved, the Bank supervision could finally focus onachieving the development objectives. The main aim of GOM's Action Plan of December15, 1997 for the project extension was to strengthen the focus on the sustainability of thewater supply and sanitation facilities constructed or soon to be completed.

F. BORROWER PERFORMANCE

Borrower performance during project preparation

37. GOI's and GOM's performance during project preparation was satisfactory.While GOI provided overall coordination with the Bank, GOM had the main responsibilityfor project preparation. GOM adopted an integrated approach to water supply,environmental sanitation and health education and fruitfully cooperated with the Bank'steam during this stage. The technical designs of Phase-I villages were well prepared,although it should have been anticipated the need for a longer-term planning horizon (2007was too short). In addition, the water source dependability should have been more criticallyassessed at this stage. In a number of cases, the original source was later found to be notreliable, and major modifications to the designs, with considerable cost variations, wereneeded during implementation, at the time when the contractors had already initiatedconstruction.

Borrower performance during project implementation

38. GOM's performance during implementation was unsatisfactory. The magnitude ofthe implementation delays compromised the achievement of the project developmentalobjectives although, finally, GOM has made some progress on almost all fronts, i.e. sectorpolicy, technical and financial issues. GOM's initiatives include: (a) creating a separateWater Supply and Sanitation Department; (b) launching massive training programs forroutine O&M of water supply schemes; (c) creating a Water Resources Authority to addressinter-sectoral water allocation issues; (d) piloting service contracts for O&M; (e) pilotingcommunity management of regional schemes through the formation of cooperative societies;(f) launching a massive State-wide latrine program; (g) improving design approaches; (h)introducing third-party supervision of construction; (i) establishing a water qualitymonitoring system; (j) forming village water funds; and (k) substantially raising watertariffs. Moreover, GOM complied with all major credit covenants (see Table 10), althoughsometimes only partially (e.g. GOM causing each GP participating in the project to set andcollect water tariffs at levels to cover O&M costs) or with delays (e.g. timely obtaining waterabstraction permits; handing over of schemes to ZPs; and submitting a strategy onenvironmental sanitation and health education programs). An overview of the performance ofthe main State agencies involved follows:

* PPMU's perfonnance. As mentioned above, the PPMU was weak during the firstyears of implementation and GOM failed to promptly address this problem.

14

Furthermore, the PPMU was not adequately empowered to ensure integration ofmultiple activities at the village level and effective collaboration amongst numerousactors at the various levels (i.e. ZPs, GPs, VWCs, MJP, GSDA, DPMUs, Departmentof Public Health, Irrigation Department, empowered committees, NGOs,consultants, etc.). The implementing agencies did not require PPMU's approval ofkey milestones, nor were they subject to sanctions by the PPMU for non-adherenceto the milestones. Because of its subordinate position, thLe PPMU could not preventbureaucratic delays in obtaining approvals from the implementing departments.

* MJP's performance in engineering and construction was satisfactory. However, itstechnical capacity was hampered by delays which were beyond its control, i.e. delaysin ensuring administrative approvals, seeking water abstraction permits from theIrrigation Department, and obtaining groundwater use permits from GSDA. Delayswere more significant prior to construction, which by-and-large progressed accordingto schedule, except in a few cases where the contractor performed poorly.

* GSDA's performance in implementing the handpump program has been fullysatisfactory.

* The performance of the ZPs and District Project Monitoring Units (DPMUs) wasrather poor due to their late involvement, limited capacity and the lack of definitionof their respective roles and accountabilities in the project design.

39. Late introduction of Community Participation, Health Education, Training andEnvironmental Sanitation. Low priority accorded by GOM for almost four years toimplementation of these components; lack of familiarity with an integrated approach;unsuccessful involvement of NGOs in strategic planning; and poor performance of theconsultants recruited to prepare strategies for these components are the main causes of thedelays on the Borrower side. The major start-up delays in the execution of thesecomponents have reduced their positive impact. The strategy for community participation,health education and environmental sanitation was developed only in 1996 by the HealthEducation and Community Participation sub-unit of the PPMU, following the recognition ofunsatisfactory performance of the consultant that had been recruited to carry out this task.

* Community participation. The NGOs' performance was umeven. The selectioncriteria for the NGOs were not very transparent. The short duration of the contractsand the poor remuneration made it difficult for the NGOs to recruit and retainqualified staff. Essentially, the NGOs were treated as minor contractors rather thanpartners in development.

* Health Education. The Department of Public Health did some excellent work in thehygiene awareness program during the last two years of project implementation.

* Training. The performance of the training consultants has. been adequate. Theprograms have contributed substantially to skills development at the grassroots level.However, some of these (such as those for NGOs and Graim Sevaks) have beenlaunched only recently and will need to be completed before they confer full benefits.

15

* Environmental Sanitation. During the last few years of implementation, GOM hasaccorded high priority to the latrine program, which particularly benefits women.Performance has been impressive in terms of the numbers constructed, although thishas been achieved with very high subsidies. GOM's performance in the constructionof drains and provision of refuse bins has been deficient. Consequently, the criticalintegration of water supply and environmental sanitation components has beendeficient.

40. Funds Flow. In the absence of well-defined procedures for flow of funds fromGOM to the implementing agencies, in the beginning, there were considerable delays in fundreleases, especially to MJP. However, towards the end of the project, GOM constituted aninter-departmental committee to oversee the flow of funds to various implementing agencieswhich did improve the situation.

41. Monitoring and Evaluation suffered from inadequate attention. As a result it wasunsatisfactory. Monitoring the performance of the various agencies involved and the NGOshas been a difficult task for the PPMU. While there is an institutional set-up for regularmeetings and periodic reports generated for the attention of the Director, PPMU,compilation, analysis and feedback on the basis of these reports was delayed because theUnit only had a single computer.

42. Unduly delayed compensation payments for land acquired under the Project.There was no resettlement under this project but some land was needed for the constructionof the piped-water supply systems. At project closing, only 72 out of a total of 330 affectedowners had been fully compensated. All outstanding cases are being processed but delayshave been experienced because of extremely cumbersome procedures and lack of prioritygiven to this matter by the MJP and the PPMU.

43. GOI's role during implementation of the project was limited to the release ofcredit proceeds to GOM, which was generally timely.

G. ASSESSMENT OF OUTCOME

44. The overall outcome of the project is marginally satisfactory. Despite all the delaysand difficulties, the physical targets of the major components will be met and several projectobjectives have been substantially achieved. The project fostered sound policy initiatives(see para 38) and also increased awareness in GOM regarding the importance of capacitybuilding and participation of the users in scheme planning and implementation forsustainable operation of the rural water supply and sanitation facilities. The policy makersand the communities are now more aware of the importance of proper handling of water,personal hygiene, and safe disposal of excreta and sullage water to obtain the health benefitsassociated to increased availability of safe water. However, this increased understanding hasonly found limited application since GOM has recently launched a massive Tanker-FreeVillage Program characterized by a top-down approach, deficient cost recovery policies and

I

16

disregard for sustainability of the assets created. Moreover the project could not deliverfully satisfactory development results because of institutional and financial shortcomings.

H. FUTURE OPERATION

45. Institutional arrangements. The district governments (ZPs) are responsible forO&M of the common assets of the regional piped-water supply ifacilities. VWCs have beencreated in the project villages to assist the GPs regarding the O&M of the new facilitieswithin the village boundaries. The weaknesses of this setting have been summarized above.GOM is aware of the issues threatening sustainable operation of the piped-water supplyassets and is taking some actions to address them, including preparation of O&M manualsfor ZPs and GPs; training of ZPs and GPs staff; revision of the Z'Ps' financial andaccounting procedures for collection of water tariffs; drafting standard contracts forcontracting out O&M for up to five years to private operators; and exploring possiblereforms of institutional arrangements for O&M of regional schemes.

46. Parameters to monitor the performance of the piped-water supply schemes wereagreed with the ICR mission. GOM intends to continue monitoring the performance of thesystems through the ZPs.

47. Sanitation. Maintenance of latrines is the responsibility of individual householdsand is not expected to be an issue because relevant information has been widely provided bythe NGOs and the Gram Sevaks have received various rounds of training. In some casesthough, maintenance problems may appear with septic tanks, andl with twin-pit latrinesconstructed without following proper designs (e.g. pans that do not have the correct slope).Maintenance of the village drains is even more problematic. GOM is considering a proposalto amend the State Panchayat Act to provide for the levy of a cess to fund the maintenanceof drains by GPs. GOM has indicated that it will utilize the services of NGOs to improvedrain maintenance in the villages through facilitation of voluntary labor contributions byvillagers.

48. Financial Issues. GOM is developing plans to improve the performance of ZPs incollecting water bills from GPs. One such plan is that the ZPs should issue a separate waterbill to GPs every month. Furthermore, GOM is thinking to make mandatory the creation ofseparate accounting and budgeting head for each regional scheme in the ZPs' books ofaccounts rather than having just one head of water supply maintenance for the entire district.This would facilitate measurement of performance of each regional scheme.

49. GOM might consider further measures to improve sustainability in this sector, suchas incorporating in the user charge a contribution to future capital investments forreplacement or scheme improvement, progressive phasing out of GOM subsidies for O&M,and reducing subsidies for latrines as per the GOI line ministry's guidelines. As demand forlatrines grows, the high levels of subsidy provided by GOM do not seem fiscally sustainable.

17

50. Contracting Out. Operation of some regional schemes has been contracted out.Preliminary results are positive, on account of cost savings and less strain on scarcetechnical capabilities at the ZP level. Some difficulties have also been observed (e.g. poorperformance of the contractor with the lowest bid) which indicate that the biddingdocuments need to be improved and the length of the contracts extended (in most casescontracts are only for one year). GOM is taking steps to address these problems and MJP isdrafting standard contracts that will be distributed to the ZPs.

I. KEY LESSONS LEARNED

51. Key lessons learned from the project relevant for future operations are:

* Attention should be given to the institutional and financial arrangements for O&M ofthe new facilities up front in project preparation and implementation, especially inthe case of regional piped-water supply schemes.

* Most capacity building efforts under the project were addressed to the members ofthe VWCs, however their role in the future, once the support structure provided bythe project disappears, is uncertain. Should the capacity-building efforts have beenaddressed to the GPs instead, so that synergies with other sectors would emerge?Studies are needed to better understand the benefits of the VWC and its role versusthe GP after a few years of operation.

* The unit or agency responsible for overall coordination of implementation of anintegrated project involving various agencies should have control at the operationallevel, and be empowered to approve key project milestones and impose penalties fornon-adherence to the milestones. It should also have its logistic arrangements andkey staff in place prior to project implementation.

* The community participation arrangements should be clearly defined prior to projectappraisal and fully integrated into all other project activities. Moreover,beneficiaries' capacity has to be built through social intermediation to enable theirmeaningful participation in the project.

* Planning of water supply and sanitation facilities should have a long-term horizon(say 30 years) and investments should be planned to allow for infrastructure to bebuilt in a phased manner, as needs develop and resources permit. Feasibility studiesto identify least-cost solutions should be carried out before detailed engineeringdesigns are developed.

* An integrated watershed management approach should be applied to theidentification of rural water supply sources, and dependability of the water sourcesshould be confirmed prior to calling for bids.

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* The respective roles of government agencies (MJP and GS]DA), communities, NGOsand local governments (GPs and ZPs) in the planning, imp]lementation and O&M ofwater and sanitation facilities should be clearly defined duting project preparation.

* Criteria for the selection of participating NGOs should be clear, well targeted andtransparent, and agreed by project appraisal.

* Adequate training for the staff of the agencies involved ancl the NGOs should bemade available as early as possible during project implementation.

* Upfront beneficiaries' commitment through capital cost contribution increases thechances of sustainability and reduces the demand for higher levels of service. Whenthe local governments (GPs and ZPs) only finance O&M costs, their incentive is toneglect preventive maintenance and to promote private connections because theyincrease the potential revenue via tariffs, but this may strain the capacity of thesystems and lead to premature obsolescence of the capital investments.

* In order to ensure affordability of the piped regional water schemes, lower-costalternatives should be energetically pursued and users' wil]l[ingness to pay should beassessed at an early stage.

* An adequate M&E system should be operational as early as possible in projectimplementation.

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INDIA


(Cr. 2234-IN)

PART II - STATISTICAL TABLES

Table 1: Summary of Assessments

A. Achievement of Objectives Substantial Partial Negligible Not applicable

Macro Policies n oo

Sector Policies V/

Financial Objectives n I a OInstitutional Development a

Physical Objectives ,/ ElIPoverty Reduction I /

Gender Issues E lCommunity Participation / 0 0Environmental Objectives a I 0 0Public Sector Management 0 I 0 0Private Sector Development ] E l 1'Other (specify) 1] 0 Cl

B. Project Sustainability Likely Unlikely Uncertain

0 0 1

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Highly Marginally

C. Bank Performance satisfactory Satisfactory Satisfactory Deficient

Identification o a/ o E

Preparation Assistance El E] / V

Appraisal E a /

Supervision : I]

Highly MarginallyD. Borrower Performance satisfactory Satisfactory Satisfactory Deficient

Preparation El EDlImplementation E EEl V/

Covenant Compliance a Ea Operation (if applicable) aD/ E

Highly Satisfactory Marginally Unsatisfactory HighlyE. Assessment of Outcome satisfactory Satisfactory unsatisfactory

El El / El E

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Table 2: Related Bank Loans/Credits

Loan/credit title Purpose Year of StatusApproval

Preceding Operations

1. Bombay Water Supply & Water supply and conveyance sewers 1974 CompletedSewerage Project (Cr.390-IN) in Greater Bombay

2. Second Bombay Water Water supply and waste water 1979 CompletedSupply & Sewerage Project treatment and disposal in Greater(Cr.842-IN) Bombay

3. Third Bombay Water Supply Expand water supply by 455 mld in 1987 Completed& Sewerage Project Greater Bombay(Ln.2769-IN) (Cr. 1750-IN)

4. Maharashtra Water Supply Water Supply and Sewerage in 1979 CompletedProject (Cr.899-IN) Thane-Kalyan-bhiwandi sub-region

Following Operations

1. Karnataka Rural Water To improve health and productivity 1993 OngoingSupply & Environmental through improved access to potableSanitation Project water supply and environmental(Cr.2483-IN) sanitation facilities in rural areas.

2. Uttar Pradesh Rural Water To deliver sustainable health and 1996 OngoingSupply & Environmental hygiene benefits to the ruralSanitation Project (Ln.4056- population through improvements inIN) (Cr.2763-IN) water supply and environmental

sanitation services.

3. Bombay Sewerage Disposal Sewerage disposal through deep 1995 OngoingProject (Ln.3924-IN) marine outfalls and aerated lagoons

22

Table 3: Project Timetable

Steps in Project Cycle Date Planned Date Actual/Latest Estimate

Identification (Executive Project Summary) - August, 1989

Preparation - October 12, 1989

Appraisal October 22, 1990 October 22, 1990

Negotiations February 18, 1991 February 28, 1991

Board Presentation March 26, 1991 May 2, 1991

Signing June 5, 1991

Effectiveness July31, 1991

Mid-term review February 14, 1995

Credit Closing December 31, 1997 June 30, 1998

Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual(thousands)

_____________________ FY-92 FY-93 FY-94 FY-95 FY-96 FY-97 FY-98 FY-99

Appraisal Estimate (US$) 15,050 34,240 59,120 83,050 101,290 109,700 109,900 109,900Appraisal Estimate (SDR) 10,459 23,806 41,096 57,735 70,418 76,262 76,400 76,400Actual (SDR) 5,095 10,637 13,839 18,495 27,653 45,407 57,350 69,407Actual as % of Estimate 48.71 44.68 33.68 32.03 39.27 59.54 75.07 90.84

Date of Final Disbursement: November 23, 1998

23

Table 5: Key Indicators for Project Implementation

I. Key ImplementationIndicators in SAR/ Estimated ActualPresident's Report

NA NA NA

II. Modified Indicators (ifapplicable) l

1. Construction Works:

No. of Villages with Piped-water Supply SchemesCompleted 560 337

No. of Handpumps Installed 4,000 4,167

No. of Latrines Constructed 80,000 121,283

No. of Villages DrainageSchemes Completed 75 34

2. InstitutionalActivities:

No. of Trained People NA 63,000

No. of Village Water SupplyCommittees Constituted 660 560

NA = Not Available

24

Table 6: Key Indicators for Project Operation

I. Key Operating Indicators inSAR/President's Report Definition Unit

1. water quality NA NA2. use of new water supplysources3. water consumption

4. hand washing

5. health of women

6. health of children

7. use of latrines

8. disposal of waste water

9. time saved by women

10. incidence of water relateddiseasesI 1. awareness of health educationmessages

II. Modified Indicators for FutureOperation (if Applicable) l

1. quantity of water produced 1. output from water treatment 1. Million littersvis-a-vis design supply plant or source pumping station vis- per day (Mld)

a-vis design supply2. quantity of water supplied 2. daily supply at each village 2. Mld.

against design supply measuredfrom the bulk meters

3. average duration of daily 3. hourswater supply in the village againstdesign duration

4. O&M cost recovery 4. annual collection from water 4. %taxes against annual O&M costs perscheme

5. water quality 5. water samples not meeting 5. %acceptable standards

NA = Not Available

25

Table 7: Studies Included in Project

Purpose as DefinedStudy at Appraisal/Redefined Status Impact of Study

1. Preparation of pre appraisal report Completed

2. Preparation of pre appraisal report Completedfor Phase-I

3. Preparation of Phase-II of Project Completed(6 districts)

4. Preparation of project reports for CompletedPhase-Il schemes includingPreparation of D.T.P.

5. Assessment of System Losses Completed

6. Checking of RCC Designs Phase-I Completed

7. Evaluation of bid for Package- I CompletedAdditional Work

8. Evaluation of bid for Package-II Completed

9. Evaluation of bids for Package-III Completed

10. Consultancy for scrutiny, Completedevaluation of prequalification ofapplication for Package-IV

11. Leak Assessment Pilot project Completed

12. Evaluation of bids for Package-IV Completed

13. R.C.C. Design Checking of CompletedSchemes Package-IV

14. Protection of Water Sources

15. Community Participation CompletedManagement

26

Table 8A: Project Costs

Cumulative Expenditure Latest Estimate to CompleteAppraisal Estimate (USSM) Up to 6/98 (US$M)) Works as of 12/98 (in USSM)

Local Foreign Local Foreign Local ForeignItem Costs costs Total Costs costs Total Costs costs Total

1. Piped Water Supply Schemes 66.83 13.06 79.88 71.12 13.89 85.01 65.80 12.86 78.65

2. HandpumpProgram 5.07 1.14 6.22 3.18 0.72 3.90 3.23 0.73 3.96

3. Sanitation Program 8.91 0.47 9.38 6.34 0.33 6.67 10.07 0.53 10.60

4. Project Support 1.58 0.07 1.65 4.82 0.21 5.03 6.29 0.28 6.57

5. Institution Building 3.98 1.39 5.37 0.27 0.10 0.37 1.36 0.48 1.84

6. Health Education 4.65 0.51 5.16 0.97 0.11 1.07 1.29 0.14 1.43

7. Other Consulting Services 0.61 0.16 0.77 0.27 0.07 0.34 0.30 0.08 0.388. ZP/GSDA/DOPH Incremental StaffSalaries 3.85 0.68 4.53 0.48 0.08 0.57 1.08 0.19 1.27

9. MJP'sEngineeringCosts 11.80 2.08 13.88 13.24 2.33 15.57 11.65 2.05 13.71

10. Land Acquisition 0.23 0.23 0.42 - 0.42 0.14 0.14

TOTAL Base Costs 107.51 19.56 127.07 100.65 18.31 118.96 100.31 18.25 118.56

Physical Contingencies 7.60 1.40 9.00 0 3.96 0.73 4.69

Price Contingencies 1.70 3.00 4.70 0 6.97 12.30 19.27

TOTALPROJECTCOSTS 116.81 23.96 140.77 0 118.26 24.26 142.51

Table 8B: Project Financing

Appraisal Estimate (US$M) Latest Estimate to Complete Worksas of December 1998 (US$M)

Local Foreign Total Local Foreign TotalSource Costs Costs Costs Costs

IDA 86.00 23.90 109.90 87.04 24.26 111.30

Government of Maharashtra 26.80 26.80 27.13 27.13

District Governments 2.00 2.00 2.07 2.07

Household Contribution 2.00 2.00 2.02 2.02

TOTAL 116.80 23.90 140.70 118.26 24.26 142.51

27

Table 9: Economic Costs and Benefits

NEITHER A NET PRESENT VALUE NOR AN ECONOMIC RATE OFRETURN (ERR) WERE ESTIMATED AT APPRAISAL (PLEASE REFER TOPARA 6 OF THE ICR)

28

Table 10: Status of Legal CovenanitsIndia

Maharashtra Rural Water Supply & Sanitation Project

Agreement Section Covenant Present Original Revised Description of Commentstype status fulfillment fulfillment Covenant

date date

Credit Ag. 4.01 1 C GOI to ensure records are maintained iln compliance.of all SOEs and audits are carried outof all records including specialAccount and submitted to theAssociation within 9 months of theend of each fiscal year.

Proj. Ag. 4.01 1 CD GOM to cause PPMU to maintainrecords of all project expendituresand provide audit reports within 9months after the end of each fiscalyear.

Proj. Ag. 2.01 5 C GOM shall submit each year by An Action Plan for the ExtensionDecember 31, an annual action plan of the Project period wasfor the following year for all project furnished on Dec. 15, 1997.components including status of land Status of land acquisitionacquisition. furnished separately to the

2.01 5 CP GOM shall employ consultants for Consultants employed forevaluation of construction quality and supervision of water supplysupervision of WS and drainage works.works.

2.01 5 C GOM shall employ consultants for In compliance.monitoring health communication.

2.01 5 SOON GOM shall employ consultants for The Bank gave comments oncarrying out impact evaluations. draft TOR for this study which

GOM is committed to carry outwith its own funds in the nearfuiture.

2.01 5 C GOM shall employ cornsultants for In compliance.support for organizationmanagement.

2.01 9 C GOM shall ensure regular inspection In compliance.and evaluation of dam safety.

2.01 5 CD GOM shall by May 31, 1992, submit In compliance.a strategy report on environmentalsanitation and health educationprograms.

2.01 5 C GOM shall ensure that all water In compliance.abstraction permits in respect ofsurface water schemes are obtained ina timely manner.

29

Agreement Section Covenant Present Original Revised Description of Commentstype stau fulfillment fulfillment Covenant

date date

2.01 5 CP GOM shall cause the Board to All water supply schemestransfer all WS schemes constructed completed have been handedunder the project to the Zilla over to Zilla Panchayats/ GramrPanchayats or Gram Parishads as the Parishads.case may be for O&M.

2.01 2 CP GOM shall cause each Gram Water tariffs have been set up toPanchayat participating in the project cover O&M costs in the waterto set and collect water tariffs at supply schemes which have beenlevels to cover O&M costs. handed over to ZPs/GPs. In the

regional schemes, concernedPanchayats are charged by theZPs to cover maintenance costsof common facilities butpayments are not being made ona regular basis and the GPs havethus large outstanding balances.

2.01 2 C GOM shall cause each Zilla Parishad For regional schemes taken overparticipating in the project to transfer by the ZPs. maintenance fundssufficient revenue each year to the for O&M of common facilitiesDistrict Maintenance fund for annual have been established. GramO&M costs for regional water supply Panchayats are responsible forO&M csts or rgionl waer spplymaintenance of facilitiesschemes under its responsibility. provided in the village and a

separate Village Water Fund hasbeen established in each village.

Covenant types:

I. = Accounts/audits 8. = Indigenous people2. = Financial performance/revenue generation from 9. = Monitoring, review, and reporting

beneficiaries 10. = Project implementation not covered by categories 1-93. = Flow and utilization of project funds 11. = Sectoral or cross-sectoral budgetary or other resource4. = Counterpart funding allocation5. = Management aspects of the project or executing 12. = Sectoral or cross-sectoral policy/

agency regulatory/institutional action6. = Environmental covenants 13. = Other7. = Involuntary resettlement

Present Status:

C = covenant complied withCD = complied with after delayCP = complied with partiallyNC= not complied with

30

Table 11: Compliance with Operational Manual Statements

NO SIGNIFICANT LACK OF COMPLIANCE WITH ANY APPLICABLE BANKOPERATIONAL MANUAL/STATEMENT (OD OR OP/BP) WAS NOTICED.

31

Table 12: Bank Resources: Staff Inputs

Stage of Planned Revised Actual 1/Project Cyclel

Weeks J US$ Weeks US$ Weeks US$

Preparation to Appraisal NA NA NA NA 186.0 319.8

Appraisal - Negotiations NA NA NA NA 42.3 84.5

Negotiations through Board Approval NA NA NA NA 12.8 39.6

Supervision NA NA NA NA 126.3 297.3

Completion 16.8 56 18.5 47.9 9.2 28.2

TOTAL NA NA NA NA 376.5 769.3

I/As of December 21, 1998

32

Table 13: Bank Resources: Missions;

Performance Rating

Number Days Specialized Im plemen- DevelopmentStage of Month/ of in Staff Skills tation Objectives Types of

Project Cycle Year Persons Field Represented Status Problems

Through Appraisal Feb-89 6 10 SOC, ENG, SE, FIN, CD - -

June-89 2 5 SOC, ENG - - -

Oct-89 7 9 ENG, TNG, CD, FIN, - - -

PROC, FA

Mar-90 10 10 ENG, FA, SOC, PROC, _ _CD, SE

Appraisal through Oct-90 10 16 ENG, FA, SOC, HS, SE - - -

Board Approval

Mar-91 3 8 SOC,TNG,SE

Aug-91 4 5 SOC, ENG, FIN

Supervision Mar-92 3 3 ENG, SOC HS HS

Apr-93 3 3 ENG, HS, ECON S S M

July-93 3 3 ENG, HS S S

Oct-93 4 4 ENG S S

Feb-94 6 8 ENG, SOC S S

May-94 4 5 ENG, SOC S S

Mar-95 4 10 SE, UP, SOC S S

Not in OIS June-95 1 3 SE

Jan-96 3 10 SE, COM U S E

Aug-96 3 9 SE, CD U S E

Dec-96 4 9 FIN, SAN, SE, CD U U M, E

May-97 6 11 PROC, SAN, SE, FA, S SSOC

Sept-97 5 9 SAN, SE, SOC, GW, S STNG

Mar-98 6 12 SE, ECON, SOC, SAN, S SDISB

Completion July-98 6 13 SE, SOC, SAN, DISB,---PRO

33

Staff Skills:

ENG = Engineer SOC = Sociologist HS = Health Scientist

ECON = Economist UP= Urban Planner SE = Sanitation EngineerCOM = Communication Spec. FIN = Finance/Inst. Spec. SAN = Sanitation Spec.CD = Community Dev. Spec. PROC = Procurement Spec. FA = Financial AnalystGW = Ground Water Spec. TNG = Training Spec. DISB = Disbursement Spec.

Key:HS= Highly Satisfactory S = SatisfactoryU Unsatisfactory HU = Highly UnsatisfactoryM Managerial E = Environmental

34 Appendix A

INDIAMAHARASHTRA RURAL WATER SUPPLY AND ENVIRONMENTAL

SANITATION PROJECT (Credit 2234-IN)

Implementation Completion Mission: July 6-20, 1998AIDE-MEMOIRE

1. A World Bank mission"5 visited Maharashtra from July 6 to 20, 1998 to carry out afinal supervision mission of the above project, in combination with an implementationcompletion review. The mission met with Government of Maharashtra officials from theWater Supply & Sanitation Department; the Project Planning and Monitoring Unit (PPMU);the Maharashtra Jeevan Pradhikaran (MJP); the Groundwater Surveys and DevelopmentAgency (GSD); the Department of Public Health (DOPH); and the Information, Educationand Communication (IEC) Bureau. The mission undertook field visits along with staff of thePPMU, District Project Monitoring Units (DPMU), MJP, DOPH and NGOs and covered 15project villages from the districts of Aurangabad (2), Beed (2), Ahmednagar (2), Pune (1),Thane (3), Satara (2) and Sangli (3). The mission thanks all these officials for their courtesyand cooperation throughout. Upon return to New Delhi, the mission met with officials fromthe Department of Economic Affairs, Government of India (GOI) and from the Rajiv GandhiNational Drinking Water Mission, Ministry of Rural Areas & Emaployment, GOI. This Aide-Memoire summarizes the mission findings and recommendations.

SUMMARY OF MAIN FINDINGS

2. Background. The project was approved by the Board on May 2, 1991 for a Creditof SDR 76.4 million and was closed on June 30, 1998 following a six-month extension. Asof 14th July 1998, US$ 80.7 million equivalent (or 75% of the original principal amount ofthe credit) has been disbursed. On the basis of PPMU's expenditure estimates, thecumulative eligible disbursements by project closing are about US$98 million, and thusabout US$8.2 million are likely to be canceled. The mission noted that no withdrawalapplications will be processed by the Bank after October 31, 1998.

3. Country and Sector Context. This was the first project in India to integrate ruralwater supply, environmental sanitation and health education in a single operation; thisapproach has since become the standard intervention and was adopted in the GOI sectorstrategy. It was also envisaged that NGOs would play a key role in the planning andimplementation of the health communications and environmental sanitation components.GOM has introduced some reforms across the State inspired by this project, such as givinglegal status to Village Water Supply Funds, revising water tariffs, and piloting servicecontracts for operation and maintenance of regional water supply schemes. GOM hasrequested Bank's support for a follow on operation to build on this experience and to carryout large investments in this sector. Despite protracted discussioins, however, agreement has

15 Mme/Messrs. Ines Fraile, G.V.Abhyankar, P.C. Mohan, Sanjay Vani, S. Krishnan, and V.R. lyer

35 Appendix A

not been reached between the Bank and GOM on the key elements for reform. The mainissues are the level of capital cost recovery from the users and the top-down approach ofGOM's Water-Tanker-Free-Village Program.

4. Project Achievements. At project closure, the physical targets of the StaffAppraisal Report (SAR) for the piped water supply component have been substantially butnot fully achieved due to implementation delays: out of a total of 560 villages, constructionhas been completed in 337 villages (60%) and is close to completion in an additional 165(30%); the remaining will be progressively completed with GOM funds by the end of 1999.The field visits indicate that, where the schemes are in operation, the investments havebrought about benefits in terms of increased water availability, time savings for fetchingwater and decreased incidence of water borne diseases, although these benefits have notbeen quantitatively assessed. Ultimately, the completed piped water supply schemes willbenefit about 1.7 million people, as envisaged at appraisal. While the borewell and latrineprograms have surpassed the SAR targets, very little progress has been achieved in drainageconstruction.

5. Despite substantial start-up delays in implementation, the recruitment of NGOs tofacilitate community participation, the health communication, training and environmentalsanitation components seem to have had positive impacts. They have created awarenessabout the role of the Zilla Parishads (ZPs) and GPs in the operation and maintenance (O&M)of water supply schemes, and have successfully promoted latrine construction and adequatehygiene practices. These are preliminary findings, since no independent evaluation of any ofthese components has been carried out so far. GOM will carry out an impact evaluationstudy of this project; the Bank has given comments on the corresponding draft terms ofreference.

6. Sustainability. During project implementation, water tariffs have been substantiallyincreased, somewhat improving the chances of sustainable operation of the piped waterschemes. However, the benefits achieved by the project could be short-lived unless GOMtakes more determined action to address the following remaining institutional and financialissues:

* unwillingness of some ZPs and GPs to take over the piped water supply schemes;

* weak technical and financial skills in the ZPs and GPs regarding O&M of the schemes;

* tariff setting rigidities that may prevent full recovery of O&M costs in some instances;

* poor water demand management at the village level'6 ;

* poor performance of ZPs in collecting water bills from GPs in the regional schemes;

16 Many standposts do not have taps; poor materials are often used for household connections; and price signals are notused to reduce the demand for private connections when water availability is a constraint (it was observed that thedifference between the water tax for households with private connection and for those using the public standposts isoften small, e.g. Rs. 360/year and Rs 120/year respectively.

36 Appendix A

* poor incentives at the ZPs and GPs level to carry out preventive maintenance of thepiped water schemes since they do not contribute to the capital costs; and

* deficient supervision of drainage and latrine construction in some instances.

7. Problems are more acute in the 85% of the project villages served through regionalwater schemes, which are more complex to operate. In retrospect, it seems that both GOMand the Bank, should have given more attention early on in project implementation to theinstitutional and financial arrangements for O&M of the schemes, especially for the regionalschemes. GOM is aware of the issues mentioned above and is taLking some actions toaddress them, including preparation of O&M manuals for ZPs and GPs; training of ZPs andGPs staff; revision of the ZPs' financial and accounting procedures for collection of watertariffs; drafting standard contracts for contracting out O&M for up to five years to privateoperators; and exploring possible reforms of institutional arrangements for O&M of regionalschemes. The mission encourages GOM to speedily carry out such initiatives.

8. The mission also welcomes GOM's decision to continue its support to the PPMUand key unfinished project activities until the end of 1998, including the contracts with theNGOs, the training activities, the impact evaluation study and other consultancies providingassistance with the handing-over process. It is also essential that GOM maintains somesupport beyond that date to facilitate the handing-over of the unfinished piped water supplyschemes. Finally, the mission encourages GOM to consider further measures to improvesustainability in this sector, such as contributions to capital investments by the beneficiaries,progressive phasing out of GOM subsidies for O&M, and reducing subsidies for latrines asper GOI guidelines.

9. Borrower's Views on Implementation Performance. GOM and the PPMU believethat their overall performance has been satisfactory. Regardless of implementation delays,most project objectives have been achieved. Also the Water Supply and SanitationDepartment, including MJP, has been strengthened as a result of participating in the project.The main area of concern is the O&M of regional schemes. The Bank's performance issatisfactory, although supervision should have given more emphaLsis to sustainability issuesearly on during project implementation.

10. The Mission's Views on Implementation Performance.. Implementation of thepiped water supply schemes was moderately satisfactory because of delays in theadministrative approvals and procurement processes. The Bank also contributed to thedelays by recommending large procurement packages which did not seem suitable to localconditions. Huge start-up delays (of three/four years) in the community participation, healtheducation, training and environmental sanitation components have reduced their positiveimpacts. Lack of familiarity on the part of the Bank and the Borrower with this integratedapproach, poor definition of implementation details in the SAR, low implementation priorityaccorded by GOM during the first years of implementation, unsuc cessful involvement ofNGOs in strategic planning, inadequate criteria for selection of the NGOs, and poorperformance of the consultants recruited to prepare strategies for these components are the

37 Appendix A

main causes of the delays. The PPMU was fairly weak during the first years ofimplementation and has had very limited powers in project management throughout.

11. GOM's Action Plan for the Extension Period. The main aim of the Action Planwas to strengthen the focus on the sustainability of the water supply and sanitation facilitiesconstructed or soon to be completed, while the physical targets for piped water supplyschemes envisaged in the SAR were attained. Implementation of the Action Plan remainsdelayed but progress since the last mission has been satisfactory. The district Task Forceshave re-visited all completed schemes and have drafted action plans of mixed quality toaddress the issues that hamper proper operation of the systems'7 . The individual action plansare now being reviewed by the PPMU. Since some issues are common to several schemes,the PPMU is preparing guidelines to address these problems and to clarify the roles of thedifferent actors involved. It is expected that GOM will support the implementation of theaction plans and will provide adequate support and supervision for the handing-over ofunfinished schemes.

SUMMARY OF AGREED ACTIONS

Action By when By Whom

Send draft ICR to GOM for comments mid-Sept. 1998 Bank

Send to the Bank the final Borrower's ICR Sept. 30, 1998 PPMU

Submit to the Bank withdrawal applications for eligible October 31, 1998 PPMUexpenditures incurred up to June 30, 1998

Maintain support to PPMU and DPMUs December 31, 1998 GOM

Address issues identified by the District Task Forces in the December 31, 1998 PPMU, MJP,completed schemes DPMU

Issue & distribute final ICR December 31, 1998 Bank

Send to the Bank Project and SOE Audit accounts of 1997-98 December 31, 1998 PPMU

Make available adequate funds (about Rs 500 million) and March 31, 1999 GOM, MJPcomplete unfinished piped water supply works

Complete unfinished drainage works March 31, 1999 ZPs, GPs

Complete compensation payments of land acquisition June 30, 1999 GOM

Continue support to the PPMU and DPMUs for proper hand- till handing-over is GOMover to ZPs and GPs of unfinished water supply schemes completed

Send to the Bank Project and SOE Audit accounts of 1998-99 December 31, 1999 PPMU

17 This does not include village requests for expansion of the systems to cover new settlements.

38 Appendix A

STATUS AT PROJECT CLOSURE

PIPED WATER SUPPLY

12. Physical Progress. The project scope was reduced during project implementationfrom 660 villages in the SAR to 560 villages. However, since the villages selected in Phase2 were larger than anticipated, the beneficiary population remained the same at about 1.7million. At project closure, the physical objectives of this component have beensubstantially achieved: out of a total of 560 villages, construction has been completed in 337villages (60%) and is close to completion in additional 165 (30%). Full completion of thepiped water supply schemes in these 165 villages is only pending on minor civil works orsecuring electrical connections for the pumping stations. They should be completed withinthree months.

13. Construction of unfinished schemes in the remaining 58 villages (about 10 %) is welladvanced. These schemes suffered delays due to the termination of contract with onecontractor land acquisition problems, insufficient source yields and local political conflicts.MJP estimates that these schemes will be completed by March 31, 1999, including a 3-month trial-run period. The table below shows a quarterly forecast of the number ofschemes that will be commissioned in the following months.

Status Individual Regional Schemes Total

Village No. of No. of No. of No. of Villages

Schemes Schemes Villages Schemes (% of total)

Completed 60 29 277 89 337 (60%)

To be completed:

By 30/09/98 68 40 449 108 517 (90%)

By31/12/98 71 45 483 116 554 (99%)

By 31/03/99 72 47 488 119 560 (100%)

Handed over 48 13 190 61 238 (42%)

14. MJP estimates that eligible expenditure on piped water supply schemes (PWS) atproject closure is Rs 3070 million (including some Rs 75 m yet to be paid) and totalexpenditure at completion of all schemes will be about Rs 3600 million (a 70% cost overruncompared to the SAR cost estimate of Rs 2130 million). GOM will fully finance theexpenditure after the project closing date, about Rs 530 million. 'lhe explanatory factors ofthe increased costs are: higher bid prices (50 %); price escalation during construction (25%); additional works (15 %); and changes in the design (10 %).

39 Appendix A

15. Handing-over of Schemes. Out of 89 schemes completed, MJP has handed over 61schemes (70%) covering 238 villages to the ZPs and GPs. Normally, the handing overshould take place after the three-months trial-run. Some reasons that explain MJP'sproblems in handing over completed schemes are:

* Since water tariffs are not collected immediately after commissioning, the users getaccustomed to a higher level of service without paying for it;

* If the ZP does not take over, MJP automatically runs the scheme using GOM'sinvestment funds. Also, MJP cannot discontinue water supply even when water chargesare not paid by the ZPs or the GPs, because of political pressure (water as a social good);

* Lack of technical and management capacity at the ZP level to operate large and complexmulti-village schemes;

* Insufficient resources at the ZP level to cover O&M expenses'8 and reluctance to collectwater charges from the beneficiaries and/or the GPs;

* Ineffective social intermediation by NGOs and insufficient efforts by DPMUs;* Lack of ownership by the ZP, GP and the community because they have not contributed

to the capital costs nor have been involved in scheme planning and implementation,choice of service level and technology; and

* GP's or ZP's dissatisfaction because of problems with the water sources identified aftercommissioning, poor quality of construction, difficulties with land acquisition, demandsfor additional works or for repairing existing scheme components

16. Leak Detection. The project made a budget provision to undertake a leak detectionand repairs (LD & R) program in 150 project villages having existing piped systems, withassistance from consultants. However, MJP's efforts to recruit consultants failed because theconsultants failed to propose methodologies appropriate to rural systems and their offers hadvery high price (more than the cost of full replacement by new pipes). In fact, provision ofdrinking water to rural population through piped systems is a relatively recent developmentin India. Simple and cost effective methods to undertake LD & R in rural systems are yet tobe established. Therefore, MJP in consultation with the Bank, decided to carry out only apilot study to develop and test suitable methodologies and then implement the program in-house, using trained engineers. The pilot study with consultant assistance was successfullycompleted in 1994. At project closure, MJP has completed the LD & R program in another15 villages. MJP intends to reinforce its focus on this important aspect of schemesustainability and complete the work in all the 150 villages by Mar-99. Under thecircumstances, the mission felt that this project objective has been partially met.

17. Protection of Water Sources. In response to earlier mission's recommendation,MJP has recruited a consultant (NEERI) to visit the water sources of all the 119 piped waterschemes to undertake their quantitative and qualitative assessment, identify potential risk ofpollution, recommend an action plan to protect these water sources against pollution andprovide guidelines to MJP for necessary proactive monitoring of water quality at source.

18 In most cases, the ZPs collect water charges from the GPs only once a year; however operating expenses are daily ormonthly. If the financial situation of the ZP is not very sound, there can be a cash flow problem.

40 Appendix A

The consultants study began in Mar-98 and is scheduled for completion in Oct-98. Themission requested PPMU to send a copy of the consultant's report when available.

18. Pilot 24 hrs Experiment. MJP has carried out an interesting pilot experiment toprovide continuous water supply in two of the project villages where the water source isabundant (Sulewadi in Satara and Patoda in Beed). Both villages have requested MJP todiscontinue the experiment because of the following reasons: the additional resourcesneeded (staff, electricity and chemicals) were not affordable; lack of continuous electricsupply to run the pumps; insanitary conditions at the public water points; wastage andmisuse of water because of lack of domestic metering; and concern that continued supplywould generate low demand for private connections and thus reduce potential revenues.

19. The mission visited Sulewadi, where the scheme had been handed over a few monthsago, and its findings are not fully consistent with the above concerns. The GP reported thatdemand for private connections is growing. The standposts had taps installed. Serviceinterruptions are rare, as opposed to Patoda (visited by the previous mission), because powersupply is fairly reliable. During the discussions, it was observed ithat many villagers like theconvenience of continuous supply but do not know all its benefits (improved water quality)and lack the capacity or willingness to deal with necessary complementary arrangements tolimit wastage or provide adequate drainage at the standposts. The GP was concerned aboutincreased operating costs but had no objective base to estimate the cost savings'9 (there isonly one pumping operator). Since the system has been handed over, the VWSC and the GPwill take a decision on whether to suspend the continuous supply. In any case, the ZPshould continue monitoring the pattern of consumption and sharing the results with the GPto facilitate decision making. The mission compliments GOM for undertaking this rareexperiment.

20. Water Quality Monitoring and Surveillance. The improvements to the qualitymonitoring system suggested by the last mission have not been irnplemented.

21. Compensation Payment for Land Acquired. Since last mission only marginalimprovement in the numbers of total compensation paid (which have risen from 51 to 72)have been achieved. Out of a total of 330 cases, about 173 are through Section-4 andawaiting Section-6 notification. GOM expects that by June 1999 payments would have beenmade in all the remaining cases. The mission expressed its serious concern regarding thelong delays that continue to occur in paying compensation to private land owners whoseland had been acquired for the project during the past 4-5 years. The mission will highlightthis serious shortcoming in the ICR, currently under preparation.

BOREWELL PROGRAM

22. The Ground Water Survey and Development Agency (GSDA) of the GOM wasresponsible for implementing this component. Physical objectives of this component have

19 It may well happen that the savings with only a few hours of supply per day would be below the GP's expectations.

41 Appendix A

been fully achieved. These included drilling of some 2700 borewells and installinghandpumps on them, hydrofracturing over 1000 existing borewells and procurement of somestate-of-the-art equipment (drilling rigs and instruments for hydrogeological surveys).GSDA estimates that over 500,000 population has benefited from these programs. Theachieved level of service is one borewell for 150 persons. Implementation was in line withthe schedule prepared at appraisal.

23. At closure, only one item of this subcomponent remains unfinished, i.e. GSDA'soffice building at Pune. Construction started in November 1997, following considerablestartup delays. The scheduled date for completion is Sep-99.

ENVIRONMENTAL SANITATION

24. Latrines. As of end of May 1998, the number of latrines constructed in the 560project villages was reported to be nearly 24,000 against the planned number of 25,000(96% achievement). As advised by the Sept.-Oct. 1997 mission, GOM has concentrated onconsolidating the gains in the project villages. Consequently, no more latrines have beenconstructed in the non-project villages, beyond what was constructed until February 1998(121,283). Overall, the SAR target of 80,000 latrines has been exceeded.

25. Drainage. The project envisaged construction of small surface drains for about 75large (population > 5000) project villages. It also envisaged promotion and construction ofhousehold soak-pits where the soil conditions were favorable for percolation of waste waterin the ground. The SAR provided a budget of Rs 72 million. The capital cost sharingformula for drainage was the same as GOM's formula for construction of drains under itsown program (GOM 60 %: ZP 10 %: GP 30 % ). At project closure, about 2,600 metres ofdrains have been constructed in 34 project villages of 5 districts. Only about Rs 1.3 million(less than 2 % of the budget allocated), have been utilized at closure. Thus, the achievementof this component has been negligible. The main reasons of slow progress have been: (a)low priority given to this activity by GOM for the first three years of the project; (b)ambitious and expensive designs initially prepared by the consultants; unaffordable to thevillagers; and (c) low level of interest and capacity on the part of the ZPs and GPs who wereresponsible for its implementation. The demand for drainage construction by the GPs hasdeveloped only after increased water supply was made available thus creating greaterproblems with sullage water disposal. Construction has started when the designs werephased according to the degree of priority, reducing costs to an affordable level. The PPMUintends to continue the drainage construction program in these 34 villages after projectclosure and complete it by March 1999.

26. Solid Waste & Soakpits. The program for installation of dustbins in large villagesenvisaged at appraisal was not implemented due to lack of demand from the villages andlack of promotion by GOM. However, PPMU successfully promoted the concept of privatesoak-pits and over 5,859 soakpits have been constructed by the beneficiaries in the projectvillages using their own resources.

42 Appendix A

27. Credit Utilization. In financial terms, against the SAR provision of Rs 167 millionand the project mid-terrn provision of Rs 375 million (Rs 175m for latrines and 200m fordrainage), the expenditure reported until May 98 is a little over Rs 69 million. However, theactual expenditure figures as at the end of June 98 are expected to be higher.

28. Implementation of GOM's Action Plan of Dec-97. The District Task Forces havecompleted sanitation surveys in the 280 villages where water supply schemes have beencompleted. Preparation of sanitation plans based on the surveys are reported to be in processby the Task Forces in consultation with Village Water Supply Committees (VWSC). Thisprocess is expected to be completed by August 98. Thereafter, the plans will be approved,executing and supervising agencies will be identified, a reporting system will be established,and the plans implemented. Because of delays in the preparation of plans, theirimplementation will now extend beyond the project closing date.

29. Field Visits. The Gram Sevaks who have received training in environmentalsanitation greatly value the exposure and appear to be strongly motivated to improvesanitation in the villages under their charge. The NGOs are discouraging the construction ofseptic tanks wherever lower cost alternatives are feasible, but GOM continues to providesubsidy for their construction against the recommendation of successive missions.Deficiencies in maintenance of drains have been observed, even in the case of recentlyconstructed drains (in Sarole). The design and supervision of the work by the ZPengineering staff has also been deficient in this case. Instead of improving sanitation, it isapparently worsening the situation.

30. Actions Agreed with the Previous Mission. The PPMUJ has made good progress inthe training of Gram Sevaks to supervise latrine construction. Details of other activities arein Annex 2.

COMMUNITY PARTICIPATION

31. Handing-Over Process. The PPMU has recruited a consultant to prepare guidelinesand assist in following up the handing-over of completed schemes.

32. Support by the NGOs. The community participation component was conceived asa critical delivery mechanism for health education and for the formation of social capital.The mission is pleased to note that VWSCs and Mahila Mandals have been established in523 of the 542 villages in which the NGOs are working, and the water supply schemes havebeen explained to 520 VWSCs. The GPs and VWSC members are aware about their role inO&M of the schemes, except in the most backward districts, where MJP has been unable tohand over the schemes. Collection of water tariffs started in 244 villages and separate bankaccounts have been opened for water supply in all project villages. However, the knowledgeat the village level of the rules governing the Village Water Fund (such as joint operation bythe Sarpanch and Gram Sevak) is limited. The mission also observed that in most instances,the NGO and the project block district officer (BDO) had a good working relationship.However, in institutionally sustainable terrns, this may not augur well for post-project

43 Appendix A

activities as the regular BDO tends to be somewhat marginalized in the process. Overall,given the late start made regarding the selection of NGOs, the mission feels that relativelygood progress has been made since 1995-96 in meeting the objectives of the communityparticipation component. GOM has extended the contracts of the 43 concerned NGOs tillend- 1998.

33. After a sharp decline in training in Community Participation, as reported in April1998, the HEO and concerned BDOs have restarted this training.

34. The mission recommends that the PPMU organize a workshop to capture anddisseminate the Lessons Learned in selecting, training and working with NGOs for socialintermediation in this project.

35. The revised expenditure for this component was Rs. 53 million, of which anexpenditure of Rs. 20.23 million was recorded by the end of the FY. Anticipated additionalexpenditure till credit closing is Rs. 10 million.

36. Village Action Plan by the District Task Forces. The field visits indicate that thetask forces re-visiting the schemes have conducted the audit jointly with the villagers, anddocumented the findings of the villages as well.

HEALTH EDUCATION

37. Notwithstanding the very late implementation start, the health education componenthas performed well in the 10 districts of project implementation. This observation is madeon the basis of field visits made to several regional and single village schemes (see Annex2). In all the villages visited, the community stakeholders had grasped the significance of the6 basic water and sanitation messages being propagated. This was especially true of thewomen and schoolchildren. The Information, Education and Communication (IEC) printmaterials have been disseminated extensively and the non-print media vehicles being used(Lok kalakars, films) have proved popular and effective in communicating messages.Quantitatively, a large number of activities have been carried out (these are detailed in thePPMU's Status Report, 30 June 1998 and include wall paintings, posters, calendars,exhibition sets, prabhat pheries, folk media, film shows, demonstrations of soakpits,compost pits, etc.). The IEC Bureau has developed communication tools related toenvironmental sanitation, as recommended by previous missions. Finally, major effortshave been made on training: about 653 staff from the ZPs and the NGOs; some 3,228 watercommittee members, AWWs, Mahila Mandal members, Tarun Mandal members; and 163folk artists, puppeteers, folk singers, painters, etc. have been trained in health education.

38. Impact Evaluation. The mission recommends that a detailed evaluation becommissioned to understand the impact of on-going IEC activities and modify them, ifneeded, to achieve greater impact.

44 Appendix A

39. The revised expenditure on this component was Rs. 50.75 million of which Rs. 38.15million was spent by the end of the FY. The anticipated additional expenditure till creditclosing is not yet available.

TRAINING

40. Summary of Findings. As of March 31, 1998, about 1,152 persons had been trainedat the NRTC, Nashik. These courses included both technical and managerial courses, withthe former predominating. The latter includes Personality Development courses andObjective-oriented Project Planning. The projected number of batches was 148, of whichapproximately 115 have been already conducted; 33 are planned for the 1998/99 period. 400operational staff should benefit of this training. The number of ZP staff attending trainingcontinues to be low (147 of the 1,152 mentioned); the ZP staff may accord low priority totraining because they report to a different department.

41. As planned at appraisal, strengthening of MJP's training center at Nashik has beensubstantially completed at project closure. The infrastructure facilities (workshop,classrooms, test-models, equipment, etc.) have been enhanced, training capacity has beendoubled and the training programs now cover most aspects of water supply engineering andO&M. A few unfinished items of infrastructure strengthening are scheduled for completionby Dec-98 (estimated cost Rs 29 million, expenditure at closure = Rs 26 million). As theGSDA training center is still under construction, GSDA staff continue to be trained out ofthe state.

42. Public Health training has been imparted as scheduled by DOPH through theHFWTCs and MO-DTTs. The average percentage of trainees against projected numbers isapproximately 77%. The Community Participation training has not been consistentlydelivered, apparently because of the BDO's work load and shortage of staff.

43. The modules created by the consultants for training are generally satisfactory andwere prepared in consultation with the beneficiaries. The consultants have also built in aprocess for measuring the impact of training by visiting the trainee a few months subsequentto the training and by questioning his/her supervisor. The mission recommends that anevaluation of how the training helped improve the quality of work be carried out.

44. The "Sustainability Development of RWS Schemes- formation of Task Force " is avery useful workshop, and the table on the role of various categories of persons forsustainable water and environmental sanitation schemes should be publicized as widely aspossible, especially at the village level (in Marathi) so that people's roles and responsibilitiesbecome as transparent as possible.

45. Actions Agreed with the Previous Mission have been executed (extension ofcontract of training consultants and refocus training for the hand-over process) except thestrengthening of the PPMU training cell.

45 Appendix A

46. The revised expenditure for this component was Rs. 65 million, of which Rs. 38.38million was spent. The anticipated expenditure till Credit closing was Rs. 3 million.

DISBURSEMENTS, CREDIT UTILIZATION AND AUDIT

47. Disbursements: As of 14th July 1998, US $ 80.7 million equivalent, which is 75%of the original principal amount of the credit, has been disbursed. PPMU anticipates that by31st October 1998 further disbursement amounting to about US$ 17 million would be made.Thus, the estimated amount of credit unused would be US$ 8.2 million (about 7.5% of theoriginal credit amount).

48. Total Project Costs: PPMU estimates that the total expenditure on the project willbe Rs 4410.2 million, which compares with appraisal estimate of Rs 3195.8 million (US$140.8 million equivalent). The increase in project cost, in rupee terms, is mainly due tosubstantial increase in cost of piped water supply schemes resulting from higher bid prices,price escalation, and additional works.

49. Audits. Article IV in the Project Agreement required GOM to furnish to the Bankaudited project financial statements and an audit report thereon within nine months from thedate of each financial year. GOM did comply with this financial covenant albeit withsignificant delays. For example, audited financial statements and audit report for the year1996-97 which were due by 31st December, 1997 were not received until July 20th, 1998.This resulted in discontinuation of use of SOE procedure for withdrawal of credit.

ECONOMIC BENEFITS

50. The field visits show that the project has rendered substantial benefits. Since the newschemes began operating, women in the villages of Sangli and Satara are saving at least 2-4hours and up to 8 hours in fetching water. In most cases, at least part of this time is used forproductive activities. Also, the quantity of water consumed has substantially increased(doubled or tripled). In all the villages, health conditions have reportedly improved.Villages with guinea worm prior to the project are now free of such disease. Althoughvillagers were unable to estimate the savings in medication costs, benefits in terms of timesavings of the active population are likely. Moreover, villagers with cows have seen theirrevenue increase due to two factors: i) reduction in medication costs, and ii) increase in milkproduction because the families can breed greater number of cows and, in some instances,can breed hybrid species which require more water and produce more milk. Finally, some ofthese villages were supplied through water tanks at great cost during the summer months,post-project, this expenditure is no longer there.

51. GOM's impact evaluation study could quantify these benefits in some samplevillages to estimate the rate of return of these investments; the SAR had not included aneconomic evaluation of the proposed investments.

46 Appendix A

IMPLEMENTATION PERFORMANCE

VIEWS OF THE BORROWER

52. Overall Performance. GOM and the PPMU believe that their overall performancehas been satisfactory. Regardless of start-up delays most project objectives have beenachieved. The main area of concern is the O&M of regional schemes

53. Piped Water Supply Schemes. GOM and MJP feels that all the designed objectivesof the project have been substantially achieved. This was an innovative project with anintegrated approach to water supply, health education and environmental sanitation and wasspread over a large area of Maharashtra. The Water Supply and Sanitation Department ofGOM has improved its own functioning as a result of its participation in the project. Keyaspects of the Bank's procurement procedures have been adopted by MJP in their regularprogram. One of the greatest contributions of the project was the third party supervision ofconstruction. This has improved the quality of construction in the project schemes. MJP isalso considering to use this principle for their regular program.

54. Borewell Program. GSDA feels that the project helped it to pilot some innovativeand unconventional technologies ( e.g. hydrofracturing). The institutional strengthening hasalso been achieved through acquisition of modem technologies, equipment and stafftraining. Drawing on success from the project, GSDA now has a regular hydrofracturingprogram for the whole state.

VIEWS OF THE MISSION

55. Overall Performance. The PPMU was fairly weak during the first years ofimplementation and has had very limited powers in project management throughout. Theresources were directly channeled to the implementing agencies (MJP, GSDA, DOPU, etc.).

56. Piped Water Supply Schemes. GOM's implementation performance wasmoderately satisfactory since it was delayed compared to schedule. Delays were moresignificant prior to construction, which by-en-large progressed according to schedule, due toadministrative approvals and, more importantly, delays in procurement. It took some timefor MJP to become familiar with some innovative features brought about by the Bank'sprocurement guidelines. The Bank also contributed to the delays by recommending largeprocurement packages. The local contractors were not used to the large size of the packagesand it was difficult to obtain bids. Finally, some modifications to the contract packagingwere needed.

57. Though the SAR envisaged that the schemes would be handed-over to the localgovernment bodies (ZPs and GPs) for O&M, the Bank failed to accurately appraise theinstitutional capacity of these bodies. In retrospect, it seems that both GOM and the Bank,should have given more attention early on in project implementation to the institutional andfinancial arrangements for O&M of the schemes, especially for the regional schemes. Partof this deficiency is to be blamed on GOM's failure to strengthen a poorly performingPPMU and to develop strategies for the community participation, health education and

47 Appendix A

environmental sanitation components. These issues focused most of the energy ofsuccessive supervision missions for about four years.

58. Borewell program. The GSDA's performance has been fully satisfactory.

59. Community Participation, Health Education, Training and EnvironmentalSanitation. Huge start-up delays (of about three years) in these components have reducedtheir positive impacts. The strategy for the community participation, health education andenvironmental sanitation was developed (unsatisfactorily) only in early 1995. The revisedfinal strategy prepared by the contractor in February 1996 was also rejected by GOM andIDA, and the services of the contractor were sought to be terminated in early 1996. The finalstrategy was developed only subsequent to this by the Health Education and CommunityParticipation sub-unit of the PPMU. The performance of the training consultants has beenadequate. The programs have contributed substantially to skills development at the grassroot level. However, some of these (such as those for NGOs and Gram Sevaks) have beenlaunched only recently and will need to be completed before they confer full benefits.

60. Lack of familiarity on the part of the Bank and the Borrower with this integratedapproach, poor definition of implementation details in the SAR, low implementation priorityaccorded by GOM during the first three/four years of implementation, unsuccessfulinvolvement of NGOs in strategic planning and poor performance of the consultantsrecruited to prepare strategies for these components are the main causes of the delays. Therisk of GOM's according low implementation priority to these components was clearlyidentified in the SAR, but measures to address it were inadequate. The capacity of theNGOs to play a key role in the planning and implementation of the health communicationsand environmental sanitation components was overestimated in the SAR. Finally, both, theBank and GOM are responsible for not delineating clear and adequate procedures ofselection of NGOs and of consultants to prepare strategies for these components at the outsetand subsequently, for not taking timely action regarding ineffective performance by theconsultant.

61. Latrines. During the last few years of implementation GOM has accorded highpriority to the latrine program, which particularly benefits women. Performance hasconsequently been impressive in terms of the numbers constructed, although this has beenachieved with very high subsidies. As demand grows, the high level of subsidy provided byGOM do not seem fiscally sustainable. The mission recommends that GOM reduce the levelof subsidy and eliminate the existing subsidies to higher income households as per GOIguidelines. Moreover, issues persist such as: use of inappropriate technology (e.g.construction of septic tanks where lower cost technologies are feasible); inadequate tqchnicalsupervision; lack of training of NGOs and others concerned; and insufficient effort toprocure pans with the right slope for two-pit latrines. While GOM has taken actions toaddress these issues, the results need to be closely monitored to ensure an efficient product.

62. Drainage and solid waste. GOM performance in the construction of drains andprovision of refuse bins is deficient. Consequently, integration of water supply and

48 Appendix A

environmental sanitation components has not been achieved. In particular, the problemscaused by waste water stagnation are likely to intensify in the villages receiving additionalwater as a result of the project, in the absence of proper drainage.

63. Funds Flow. In the absence of well-defined procedures for flow of funds fromGOM to the implementing agencies, in the beginning, there were considerable delays inrelease of funds to various agencies, more importantly, to the MJP. However, towards theend of the project, GOM constituted an inter-departmental committee to oversee the flow offunds to various implementing agencies which did improve the situation.

64. Monitoring and Evaluation tended to be weak and not dlone in a timely manner.The performance of the NGOs has been uneven and monitoring their performance has been adifficult task for the PPMU. While there is an institutional set-up for monthly meetings withthe NGOs and monthly reports generated for the attention of the ]Director, PPMU,compilation, analysis and feedback on the basis of these reports is delayed since the Unit hasa single computer.

OPERATIONAL PLAN AND SUSTAINABIL][TY ISSUES

INSTITUTIONAL ARRANGEMENTS FOR O&M OF PIPED WATER SCHEMES

65. Based on the mission field visits, information provided by the PPMU, and thefindings of the District Task Forces, the following issues affecting sustainability of schemescurrently operated by the local government bodies (ZPs and GPs ) have been identified:

66. MJP's tight design parameters. The project design horizon (2007) is clearly tooshort, considering that completed systems have been in operation only for about two yearsand that many schemes are yet to be completed. This will strain the capacity of the systems.Before considering costly investments for augmentation, other options should be explored,such as installation of stand-by diesel pumps to extend the number of hours of pumping upto 24 hours (poor power availability now limits the maximum number of hours of pumpingto 8-16 hours/day). This would increase the useful life of the project investments although itwould increase the financial burden on the ZPs and GPs. The ZPs and GPs would have tocover the capital investment of the additional pump and the increased operating costs perunit produced.

67. The per capita supply is less than design supply due to higher than projectedpopulation growth and/or yield limitations of the water source. Because of these factors andpoor demand management, the duration of water supply is in many cases far below ( 1-2 hrs)the design duration (of 3 hrs twice a day). Although the project has brought about greatimprovements in the regularity of service, water supply remains somewhat irregular due toirregular and inadequate electrical supply to pumping stations at the water source. Thedistribution pressures are generally satisfactory but not always equitable (particularly inmulti-village schemes).

49 Appendix A

68. Weak technical and financial management capacity of the local governmentbodies. The quality of management of O&M of schemes already taken over by the ZPs andGPs has been mixed. The deficiencies observed include: conditions at public standpost aresometimes insanitary due to poor drainage disposal arrangements; leakage from thedistribution system; wastage from public water points (taps stolen, removed); andunacceptable water quality. This threatens the sustainability of scheme operations.Problems are more acute in the regional schemes where, in some cases, the water treatmentunits are being bypassed, supply amongst the participating villages is inequitable, durationof supply from the treatment plant is insufficient due to interruptions in electrical supply,and water leakage from feeder mains are not promptly attended to. Determined efforts byGOM are required to build the management capacity of the local bodies and to improve thecollection of sufficient user charges to meet (already subsidized) O&M costs.

69. Contracting Out. The operation of some regional schemes has been contracted out.Preliminary results are positive, since there are cost savings and less strain on scarcetechnical capabilities at the ZP level. Some difficulties have also been observed (e.g. poorperformance of the contractor with the lowest bid) which indicate that the biddingdocuments need to be improved and the length of the contracts extended (in most casescontracts are only for one year). GOM is taking steps to address these problems and MJP isdrafting standard contracts that will be distributed to the ZPs.

FINANCIAL ARRANGEMENTS FOR O&M OF PIPED WATER SCHEMES

70. Financial Covenants Compliance. The Project Agreement (Schedule 2, section 8)required GOM to cause each Gram Panchayat (GP) participating in the project to set andcollect water tariffs, from private house taps and public stand-posts, for village water supplyschemes and hand-pumps at levels to cover operation and maintenance costs of suchschemes (including bulk water charges related to regional schemes). GOM accomplished thefollowing albeit with considerable delays:

* GOM revised the minimum and maximum tariff levels for private, domestic and non-domestic rural water supply on 6th March, 1997, after remaining unchanged for 15 years.The last tariff revision had been made in June 1982. For water supplied through publicstandpipes (PSP) the minimum tariff was raised by more than four times (from Rs 18 perannum to Rs 75 per annum) as against 3 1/2 times for private connection ( for 12 inchconnection from Rs 101 per annum to Rs 360 per annum). It may be noted that actualwater tariffs are fixed by the GPs, within the band specified by GOM.

* GOM promulgated rules known as "The Maharashtra Village Water Supply Fund Rules,1997". These rules require each GP to constitute a Village Water Supply Fund (VWSF).The fund is to be used for meeting the requirements of drinking water of the villagecommunity and related works. The source of funds for this VWSF are 35% of the landrevenue received as a grant from GOM, water tariffs, fees for private connections. GOMhas also prescribed accounting and auditing procedures in respect of this fund.

50 Appendix A

71. District Maintenance Fund. The Project Agreement (Schedule 3, section 9)required GOM to cause each ZP participating in the project to transfer sufficient revenues(including all those derived from bulk water charges) each year to the District MaintenanceFund. In this regard, GOM already had the necessary legislation. However, the rules fail toaddress the issue of adequate (and preventive) maintenance of regional water supplyschemes.

72. Agreements with previous mission. PPMU intended to recruit JPS consultants tofurther study financial issues of O&M of regional water schemes, however this initiative hasfailed to materialize.

73. Issues having a negative impact on sustainability. Sustainability will remainuncertain unless GOM takes determined action to address the following issues:

(i) By prescribing maximum threshold for water supply tariflfs, GOM has blocked theability of GPs to adequately meet O&M costs of water supply schemes in cases wheresuch costs exceed the revenue even at the maximum tariff level.

(ii) The current regulations fail to address the issue of adequate maintenance, particularlypreventive maintenance, of water supply schemes. GPs are left to maintain theschemes out of available resources in the VWS Fund. As a result only thosemaintenance works which can be funded out of available balance in the VWS Fundwill be undertaken by GPs. The level of maintenance would be below the optimum,thus leading in the long run to faster wear and tear and reduced life span of the assets.

(iii) Since the capital cost of the water supply scheme is fully funded by GOM grants, it islikely that GPs will have very little stake in maintaining these assets in very goodcondition. The normal tendency amongst the GPs would be to assume that thegovernment will implement a new scheme if the current scheme fails. GPs, therefore,would tend to have a breakdown maintenance policy instead of an adequatemaintenance policy. Unless GPs contribute towards the capital cost of a scheme --thus creating a stake in the asset-- it will be reasonable to assume that adequate andpreventive maintenance will generally be ignored. In drainage works, GPs arerequired to contribute 30% of the capital cost. In the few project villages where drainshave been constructed, GPs met this requirement by appropriating funds from theirown funds instead of raising the contributions from the community.

(iv) The performance of ZPs in collecting water bills from GPs, in respect of regionalschemes, has been very poor. GOM will need to address this issue rather urgently.GOM is developing some ideas in this regard. One of them is that ZPs should issue aseparate water bill to GPs every month. Currently, no water bills are issued by ZPs; asa result, GPs do not regard water charges as a liability to be paid to ZPs. Secondly,GOM is considering making mandatory the creation of separate accounting andbudgeting head for each regional scheme in the ZP's books accounts rather than

51 Appendix A

having just one head of water supply maintenance for the entire district. This wouldfacilitate measurement of performance of each regional scheme.

(v) GOM is subsidizing O&M of rural water supply to a significant extent (refer to themission Aide-Memoire of March 1998). For example, electric power tariffs are aboutone third (1/3) of the normal tariff. Moreover, charges are based on the capacity ofthe pump and not on consumption. Most of these subsidies are hidden in nature andescape budgetary scrutiny by legislature. GOM should, in the long run, progressivelyreduce these subsidies and, in the short run, consider linking the quantum of subsidywith the performance of ZPs/GPs in maintaining the VWS assets.

(vi) Another important aspect GOM will have to consider is the role of the ZPs/GPs in theimplementation of schemes. Once GOM adopts the policy of capital cost contributionby ZPs/GPs, the ZPs/GPs may demand greater say in the design and implementationof schemes. Perhaps some flexibility should be introduced in the current proceduresto allow the ZPs or the GPs to handle procurement and supervision of construction insome instances, with MJP's technical advise.

INSTITUTIONAL AND FINANCIAL ARRANGEMENTS OF THEENVIRONMENTAL SANITATION COMPONENT

74. Latrine program. Sustainability is likely as the households will be maintainingthem. Operation and maintenance instructions have been provided orally to the householdsby NGOs and will be supplemented by written material which has since been produced.Gram Sevaks who are located in the Grarn Panchayats and are close to the people are beingtrained to assist the people when needed (e.g. to change pits when they are filled).

75. Drains. One of the main problems is the lack of funds for maintenance. GOM istherefore considering a proposal to amend the Panchayat Act to provide for the levy of a cessto fund the maintenance of drains by GPs. GOM will also utilize the services of NGOs toimprove drain maintenance in the villages through voluntary labor contributions byvillagers. Further, to improve the quality of construction of new drains, consultants areproposed to be engaged to provide technical assistance and supervision.

76. GOM will need to ensure that the village sanitation plans are prepared andimplemented effectively. The Zilla Parishads and Gram Panchayats will apparently beresponsible for environmental sanitation activities when the PPMU and DPMUs cease toexist. GOM will issue clear and detailed instructions to ZPs and GPs on this subject tosecure continued and sufficient attention to these activities. Based on the results of GOM'simpact evaluation study, additional actions might be considered by GOM to enhancesustainability.

52 Appendix A

PROGRAM FOR ICR PREPARATION AND BORROWER INPUTS

77. The mission discussed with the GOM and PPMU the objectives and content of theimplementation completion report (ICR). The mission thanks GOM officials for theircooperation in furnishing necessary information. The Bank will send a draft (ICR) to GOMfor review by mid-September 1998. GOM's contribution should be completed and sent tothe Bank by September 30, 1998.

Washington, August 5, 1998

53 Appendix A

ANNEX 1: ENVIRONMENTAL SANITATION

Details on Progress on Actions Agreed with the Previous Mission.

(a) GOM was requested to secure proper maintenance of existing drains before new drainsare sanctioned. GOM is considering a proposal to amend the Village Panchayat Act toprovide for the levy of a sanitation cess as a source of funds to the gram panchayats formaintenance of drains. While this will be useful in the long term, the mission suggestedthat, in the short term, the NGOs should be advised to motivate the villagers to keep thedrains clean through voluntary labor or other means. GOM has agreed to the suggestion;

(b) The training of Gram Sevaks and the field staff of NGOs on enviromnental sanitation isunderway. Ninety-three gram sevaks have been trained out of 318 working in the projectarea. Similarly, 28 members of the staff of NGOs have been trained out of 128 who needtraining. The remaining persons are planned to be trained by the end of August 1998. Thisinitiative should enhance the sustainability of the sanitation component.

(c) The training of masons and junior engineers (JEs) who have not yet received trainingwill be organized after collecting data on those who need to be trained. The objective is tocover all villages and JEs. According to information provided by PPMU, 492 masons and225 junior engineers have received training so far;

(d) PPMU has identified three suppliers of pans and traps conforming to prescribed designsand specifications and has informed Zps of the suppliers, adding that no subsidy will beprovided if the right pans and traps are not used. The suppliers identified are: SubhashCeramics, Amravati; Sheetal Ceramics, Ahmedabad; and Mapuskar Institute, Pune. GOMhas also advised ZPs to set up sanitary marts for which UNICEF assistance is available;

(e) PPMU has advised DPMUs and NGOs not to encourage the construction of septic tanks.However, subsidy for septic tanks has not been withdrawn;

(f) Material on use and maintenance of latrines has been produced by the Health EducationBureau and distributed to project villages;

(g) The previous mission's recommendation to promote sanitation through messages on TVand radio is under consideration of GOM;

(h) The previous mission had suggested an evaluation of the program. This is yet to beorganized. In the meanwhile, GOM has taken action to revise the training curriculum basedon the findings of an evaluation of the training programs organized through UNICEF.

54 Appendix A

Field Visit

The mission, accompanied by officers of PPMU, DPMU, MJP aLnd ZP, visited the villages ofVadavli and Sonale in Thane district as also the office of the DP'MU. The key observationswere as follows:

(a) The gram sevaks who have received training in environmental sanitation greatly valuethe exposure and appear to be strongly motivated to improve sanitation in the villages undertheir charge;

(b) The DPMU is without the BDO for nearly a year now and is hardly effective;

(c) The NGO has announced that, for the latrine program, a subsidy of Rs 1,000 per latrinewould be provided by the ZP (in addition to Rs 2,500 provided by GOM); the ZP has nothowever provided the subsidy;

(d) The NGO indicated that while it was discouraging the construction of septic tankswherever lower cost alternatives were feasible, subsidy continued to be provided by GOM tothose who constructed septic tanks. This obvious contradiction needs to be removed througha clear policy and guidelines to NGOs and other field levels; and,

(e) The drain constructed recently in Sarole village has several deficiencies. It is choked insome stretches with rubble and rubbish. Sullage is stagnating and there is mosquitobreeding. Instead of improving sanitation, it is apparently worsening the situation. Thedesign and supervision of the work by the ZP engineering staff has been deficient.

55 Appendix A

ANNEX 2: HEALTH EDUCATION, COMMUNITYPARTICIPATION, AND TRAINING FIELD VISIT

The Communications Specialist visited 4 regional schemes (Shedgaon, Thane dt.,Chandanapuri and Kadit, Ahmednagar dt., and Katpur, Aurangabad dt., ) and 3 single villageschemes ( Rohatwadi and Wasanwadi, Beed dt., and Gallebargaon, Aurangabad dt.) as wellas the Nashik Research and Training Center. The main observations are as follows.

1. In all the villages visited, the VWSCS and Mahila Mandals seemed active participants inwater and sanitation activities; in virtually all, both the VWSCs and Mahila Mandals hadkept scrupulous minutes of their monthly meetings; there was evidence of regular interactionbetween the 2 bodies.

2. The communities were uniformly willing to pay the water tax as long as service wasregular. On more than one occasion, representatives of the Mahila Mandal made theconnection between improved health and the provision of treated water by saying that theyused to pay more to the doctors for treatment of diarrhea before the regular supply of water.

3. There was evidence that the lower-income households were not being marginalized in thescheme, with allowances being made for their inability to make lump sum payments - forexample, a family earning approximately Rs. 4,000 a year was allowed to pay ininstallments. However, there was no suggestion anywhere of accessing water withoutpayment.

4. The contractor is emerging as a new institutional player at the village level. On oneoccasion, when the ZP did not respond to a water main break, the contractor stepped in torepair the leak.

5. Village water persons had been appointed in all the villages and proved competent intesting the quality of water. Their salaries ranged from Rs. 350-Rs. 800.

6. Sarpanches and Gram Sevaks seemed committed to maintaining the water supply andenvironmental sanitation schemes.

7. Evidence suggests that the Gram Panchayats have been energized and are giving the leadto BDOs and NGOs. This could result in the formation of a Community-based Organization(CBO) that substitutes for NGOs.

8. The relationship between GPs and the ZP seems to be problematic and a threat to moreeffective decentralization - an alternative mechanism such as the formation of societies, evenfor large groups of villages, will need to be investigated.

9. The performance of NGOs has been uneven. Also, the formula of paying the NGO Rs. 10per person does not seem to have any practical basis. It would perhaps have been moreuseful to have ascertained budgets on the basis of consultation and negotiation.

56 Appendix A

10. With the end of the project, the impression gained from the villages visited is that theconcept of water as an economic good has come to stay, especially in the minds of women.It seems likely that interest in water and sanitation activities will survive the project.

11. Virtually everywhere, the incidence of diarrhea has diminished considerably. MedicalOfficers and MPWs (M) have been asked to provide statistics to empirically substantiate thischange.

12. There seemed to be a good demand for latrines with the VWSCs and Mahila Mandalsactive in this regard.

13. IEC materials such as posters, wall messages and calendars were in evidence in allvillages. The 6 water and sanitation messages seem well-understood. The use of long-handled ladles was, however, the exception rather than the rule. It would be useful andcreate more ownership if inputs from village-level stakeholders were factored into thematerials created. It would also be useful to write about real people and interview them aspart of the effort to document and disseminate the lessons learned across the project districts.This could be a useful motivational factor for the non-project districts.

14. All the MPWs(M) interviewed indicated that they were spending more time on water andsanitation activities than before. However, this may not last after the project closes.

15. There seems to be a growing demand for private connections. However, the VillageWater Person and VWSCs will need to curb.wastage from these connections.

16. No women masons or plumbers have been trained to date.

17. While the NRTC seemed to be delivering close to the targeted number of courses, with areasonably good mix of technical and non-technical courses, there is a need for the Center todocument and disseminate information on the processes and outcomes of training initiativesacross the project districts

57 Appendix B

BORROWER'S EVALUATION


(Cr. No. 2234-IN)

The Maharashtra Rural Water Supply and Environmental Sanitation Project wasapproved on June 5, 1991. The original project was estimated to cost Rs. 3195.8 million orUS $ 140.7 million equivalent. Net project cost, exclusive of contingencies was estimated atUS $ 127.03 million. Nearly 1100 villages were to be benefited in 10 districts of Maharashtra.Main component of the project was the piped water supply schemes which was estimated tocost US$89 million. Other components included sanitation, health education, communityparticipation and institutional strengthening. In addition nearly 1700 boreholes were to bedrilled and 1000 existing borewells were to be hydrofractured to provide benefits to smallvillages/vastis. Under the Sanitation component construction of 80000 individual latrines wastaken up and drains in larger villages. Due to various reasons, chief amongst them being lackof adequate source, some of the schemes had to be dropped leaving 119 schemes to becompleted benefiting close to 1100,000 people in 558 villages and two towns.

Main objectives of the project was to raise the productivity level of people byimproving their standard of living through better access to drinking water supply andenvironmental sanitation facilities. In the areas where the schemes have been completed, thisobjective has largely been achieved. A survey conducted by the World Bank to assess impactof the project, has clearly pointed out that the users of the water supply schemes now haveaccess to assured and safe water supply. The distance and hence the time required earlier infetching water have also been greatly reduced. The greatest beneficiaries of this have beenwomen. Unfortunately, at the beginning of the project a baseline survey was not carried outto compare the pre-and post- project scenario. However, a quick assessment of the villagesreveals that the incidence of waterbome diseases has been substantially reduced. This isamply supported by the evidence at the Primary Health Centres, which has shown a markedreduction in the extent of morbidity in the project areas.

(A): Major achievements of the Project:

1. Shift from access to water to Access to Health:-

Water hitherto was looked upon as an end in itself. Implementation strategy thereforerevolved around making this commodity available. Its quality and sustained availability didnot receive its due attention. The Project looked upon water as a means to an end i.e.improving the health status of the people thereby raising their standard of living on asustained basis. The Project thus made an attempt to evolve an appropriate institutionalstructure for ensuring good quality construction, its proper maintenance so as to deliversustained water supply and monitoring of the quality of the water supplied.

58 Appendix B

2. Improved quality of construction:-

This was achieved by following the World Bank Procurement guidelines. A singlecontract for execution of the entire water Supply scheme including a 3 month trial run,apportionment of specific responsibility on the contractor to deliver good quality output,restrictions on post tender negotiations and third party inspection went a long way in ensuringbetter quality of construction. The MJP functionaries have been benefited by the interactionwith Indian and overseas experts in the field.

3. Integration of Water Supply and Sanitation:-

The project emphasised that availability of safe and adequate water may not be enoughto provide sustained health benefits. Unless the users are educated to properly handle thegood quality water and also to look after its safe disposal , making the water available may notminimise serious health hazard. Through the Village Water and Sanitation Committees,people were educated, as an integral part of the Project, about the importance of personalhygiene and need for improving village sanitation.

4. Greater appreciation of the role of community in Rural Water Supply:.

In the past, water supply was considered to be an engineering problem. The project,however, greatly changed the perception of the implementing agencies. In the course of theProject, they realised that involvement of the user community during various stages of thescheme execution could lead to greater sustainability. In villages where community identifieditself closely with the progress, the incidence of illegal connections, breakages of standposts,etc. were perceptibly less. At the same time, general level of satisfaction of the villagers withthe scheme was much higher. This resulted in greater water tax recoveries, both in value andpercentage terms.

5. Impact on Government's policies:-

5.1 The World Bank Project has provided an opportunity to gain insights into the WaterSector. A series of initiatives were taken by the Govermment of Maharashtra during theproject implementation. The major impact was felt in 1995 with the publication of the WhitePaper on Drinking Water which indicated the present status and future direction. Manyimportant policy initiations followed this. A few of them are listed below.

(1) Creation of separate Water Supply and Sanitation Department,(2) Formation of Statutory Village Water Committee,(3) Raising of Water tariff rates,(4) Raising of per capita norms of Water Supply Schemes,(5) Provision for household connection in the scheme,(6) Creation of Village Water Fund,(7) Creation of Water Management Unit in five districts,(8) Re-organisation of Water Supply Board (Now MJP),(9) Enhancement of the powers of the Field Officers,(10) Launching of massive Latrine Construction Programme,(11) System for Water Quality Monitoring established,(12) Third Party Inspections.

59 Appendix B

5.2 For the last six years with the benefit of close association with the project, the projecthas helped in bringing to the centre stage issue of providing safe and sustainable WaterSupply and Sanitation services to the people of Maharashtra. Apart from triggering a series ofreforms in the Water and Sanitation Sector, the Project brought about a high level of politicalcommitment that the State Government is now willing to commit almost six times its pastannual allocation every year over the next three years. On the Sanitation front the politicalleadership has realised its importance in improving the health system of the people whichresulted in setting up of an ambitious programme of latrine construction. The Water SupplySector is thus receiving highest priority in Government. High level politicians are takinginterest in the activity. A Water Resources Development Authority has also been set upwhich is headed by the Chief Minister of Maharashtra and the Secretaries of the concernedDepartments are the members. The committee deals with problems relating to water issueslike allocations/permissions. The permissions are granted at various levels depending uponquantum of water allocation required with respect to the capacities of storages. As a policythe underground sources are first exploited and if these are not adequate then only surfacewater sources are considered. While giving water allocation storages available as well asunder construction are considered so that the Water Supply Project gets the allocation fromthe nearest source. The implementation of Water Supply Project is synchronised with theconstruction of on-going storages so that availability of water is ensured at completion stageof the project. As such there is now dynamic situation prevailing for dealing water supplyactivity.

5.3 To make the scheme self-sustaining multi disciplinary task force have been formed togo into the financial operational and technical aspects of the Scheme. The task forces visit thecompleted and handed over schemes to address the issues pertaining to the above aspects andan action plan is prepared and implemented. Realising the complexities of RRWS Schemesthe Government is now considering to evolve a suitable institutional structure for themanagement of operation and maintenance of RRWS. Standard bid documents have beendeveloped for the contracts of management of 0 & M of RRWS Schemes so that there isstandard procedure in all the districts in contracting of 0 & M of the Schemes. In theimplementation of the schemes, the contractors being a part they are also involved in thetraining process and training programmes were arranged for the contractors at Regional leveland also a book giving suitable guidelines to help the contractors has been published by theMJP.

6. Quick decision making:-

The project enabled creation of a number of high powered committees such as theEmpowered Committee, State and District level Steering Committees, Review Committee,Fund Release Committee, etc. These greatly facilitated quick decision making on importantpolicy issues. It also provided a good forum for resolving interdepartmental issues.

7. Training and capacity building:-

For the first time in the Water and Sanitation Sector, massive training and capacitybuilding initiatives were taken involving not only the official machinery but also villagemasons involved in rural sanitation, and the Village Water Persons for routine operation andmaintenance of the water supply schemes in the villages. Nearly 62000 village water persons

60 Appendix B

have been trained in this massive exercise. Even the communities were imparted basiceducation in personal hygiene, environmental sanitation and financial management of theirwater supply schemes.

( B ) Shortcomings in the Project

1. Institutional structure:-

The project has been implemented through a large number of agencies, with the WaterSupply & Sanitation Depth. as the overall Co-ordinating Authority, at the State level. TheDirector, PUMP has been in charge of the Planning and Monitoring functions. TheMaharashtra Jeevan Pradhikaran has executed the Water Supply Schemes while the ZPs havebeen responsible for the health and Environmental Sanitation aspects, including enlisting ofcommunity participation through NGOs. Though the project envisaged an integratedapproach, the multiplicity of implementing agencies made its achievement somewhat difficult.

There is however, a strong argument in favour of this approach. The Project didassume that replicability of the new approach depended largely on the existing institutionalstructure. So it was attempted to operate through the existing institutional apparatus.Operationally independent project structure might have facilitated a better final outcome butmay have failed in being replicable.

(a) PPMU:-

The Project Planning and Monitoring Unit was to act as thie nodal authority at the Statelevel whose function was not only to monitor the project implementation but also co-ordinateamongst the large number of implementing agencies. The structure of PPMU should,therefore, have been lean but highly result oriented. In a way it should have been differentfrom a typical Government Office. Greater number of experts could have been drawn notonly from Government establishment but also from outside.

For the purpose of the Project, it would have been desirable to authorise the PPMU toapprove modifications in design, approving the milestones, impose penalties for nonadherence to milestones , approving the rates for extra items, etc. This would have made thePPMU largely responsible for timely completion of the project.

(b) DPMU:-

This was the weakest link in the Project. The DPMU was headed by a BDO. He wasassisted by a Deputy Accountant and a Clerk. BDO's job comprised co-ordination withvarious departments and also getting community participation and health education activitiesimplemented through the NGOs. Lack of experience of working with NGOs made it difficultfor the DPMUs to get the best out of the NGOs. There did exist a certain level of distrustbetween the Government staff and NGOs. Making the DPMUs a part of the establishment ofPPMU, greater reach in the rural areas through adequate supporting field staff and insistenceof fixed tenure of 3 years for them and the field staff would have ensured qualitatively betterperformance.

61 Appendix B

(c) VWSC:-

This was the forum around which the entire Community Participation activities werestructured. Though the creation of VWSC's did prevent, to some extent, the politicalinfluences from interfering with the logical and generally beneficial processes, where itsucceeded, it did raise doubts about the future role -of the VWSC's vis-a-vis the villagePanchayats, who are ultimately responsible for taking over the schemes. The VillagePanchayats should have been made partners right from the initial stages of execution of theWater Supply Schemes.

2. Late appreciation of the complexities involved in the Regional Water SupplySchemes:-

As per the existing policy, the regional or Multi-village schemes are to be handed overto the Zilla Parishads for day to day maintenance. Within the Zilla Parishad, there is nospecialised authority to look after these schemes. The Water Supply Department engagesitself in the construction of new schemes and 0 & M aspects of the existing schemes remainlargely neglected. Only towards the end of the Project, the need for making properinstitutional, technical and financial arrangements was appreciated. The process of gettingthem to be in place, therefore, had to spill over beyond the Project closing date.

3 . Inadequate Consultations with the Community:-

Consultations with the Community here were restricted to passing of resolutions in theGram Panchayats for taking over the schemes after their completion and fixing of locationsfor standposts. Participation of the Community right from scheme selection till final executionwould have ensured timely completion. Besides, the schemes may have proved to be lessexpensive.

4. Late introduction of Health Education and Sanitation:-

It has been the experience that unless water supply commences, health and sanitationactivities do not receive due attention of the communities. However, with the availablemeans of water supply, existing hygiene behaviour and general environmental sanitationcould be improved. In fact, this can be the main theme before the Village Water andSanitation Committee, around which they can organise themselves. In the Project, apart fromidentifying the location of the standposts, the community did not have any meaningful role toperform. Under such circumstances, sustaining their initiative over the project period provedto be an uphill task.

5. Inadequate initial preparations:-

The Project has been executed in two phases. In the initial phase, the schemes whichwere ready were taken up for execution immediately. However, other villages for whichdetailed investigations were required to be carried out took a fairly long time. This wasmainly due to the delay on the part of the Zilla ParishadsNillage Panchayats to passresolutions to agree on taking the subsequent responsibility of operation and maintenance ofthe schemes. Difficulties in obtaining various permissions viz: from the Irrigation and Forestdepartments did add up to the delays.

62 Appendix B

6. Lack of ownership of the Project:-

There are numerous agencies involved in the Project all of which discharge their ownresponsibilities. However, none of them is in a position to fully owned the Projects. So it isdifficult to assign success or failure of a Project to one single authority/agency. Existence ofsuch a single controlling authority at operational level could have helped in visualising theultimate goal of the schemes by every agency involved.

7. Limited availability of NGOs in the field of Water and Sanitation:-

This has been a serious handicap during Project implementation as the NGOs were toplay a pivotal role in community mobilisation. In their absence, NGOs experienced in relatedfield were assigned this responsibility. They were found wanting, particularly in case ofvoluntary agencies where the reasons for their existence did not match the objectives of theProject. Quite often this has resulted in a loss of their special commitments.

Areas of concern:- Overall, the experience brings out certain aspects needing moreattention in future, such as -

(i) High cost of operation and Maintenance.(ii) Inadequate Institutional, Financial and Technical Support Systems with the

Zilla Parishads.(iii) Frequent power failure in the rural areas. This could affect schemes which

presuppose long hours of availability of electric supply.(iv) Weak financial position of the Zilla Parishads/Village Panchayats.(v) Use of old distribution systems in some cases, which if faulty could negate the gains of

good quality water availability.(vi) Over utilisation of water sources leading to shortages during summer.(vii) Unwillingness on the part of the local bodies to increase tariff rates and

improve recoveries.(viii) Non-availability of experienced contractors in the rural areas to take over the

management of Regional Water Supply Schemes.(ix) Lack of effective communication and convergence of view points between the

Village Panchayats and Village Water Committees.(x) Delay in paying compensation for lands acquired under the Project schemes.(xi) Unreliability of underground water sources in individual village schemes.

Suggestions for future Projects:- From the experience of the Project, the followingsuggestions can be made-

(a) Works related:

(i) Considerable delays occur due to the process of pre-qualifications. It would beadvisable to devise means for minimising the delays such as making tender noticesmore elaborate, and holding pre-bid conference and post-qualifications.

(ii) The facility to amend the offer even at the last moment can be misused. This needs tobe suitably revised.

63 Appendix B

(iii) Just as there exists a provision for Levying penalty for delay in execution, thereshould be an incentive for the contractors for completing the works before time.

(iv) There needs to be a clear understanding regarding the methodology for working outpayments towards extra items and excess quantities.

(b) Scheme design:

(i) Schemes should be designed with their ultimate operational and financialsustainability in view.

(ii) User Community needs to be given an opportunity to suggest various options andmake an appropriate choice or combination of choices from such alternatives.

(iii) A clear distinction in approach is necessary for Regional and Individual schemes.(iv) Regional schemes be taken up with reliable sources only, preferably surface water

sources.

(c) Implementation related:

(i) The authority which is ultimately going to be responsible for maintenance of thescheme, should be closely involved during the implementation phase. Ideally, suchauthority should be assigned the responsibility of deciding the implementation agency.

(ii) Implementation schedule need to be scientifically drawn up to ensure that the schemedoes not take unduly long to be completed.

(iii) Scheme level committees be formed to monitor implementation schedule.(iv) The implementation agencies should be trained to facilitate better community

interface.(v) Strengthening of the monitoring agency is necessary to follow-up on the reports of the

third party inspection consultants. This may also help qualitatively improve theperformance of the consultants.

(vi) Support be given to PPMU for monitoring land acquisition cases, by posting an officerof Deputy Collector's level.

(d) O & Mrelated:

(i) Large Regional schemes should be handled by independent corporate bodies.(ii) Level of subsidisation, if any, should be based on recovery performance. To

ensure this, a regulatory body may have to be created.(iii) Greater incentives need to be built into the system to ensure better maintenance of

schemes. In the existing system, the local bodies cannot hope to get adequateassistance for maintenance from the government. Instead, tendency is to neglectroutine maintenance which results in failure of the system much earlier that expected.Then such a replacement is being fully assisted by the government. This approachneeds a shift to maintenance based incentives.

(e) Finance & Accounts related:

(i) Improved operational efficiency is possible only through financial discipline. Thecorporate bodies managing the regional water supply schemes should be run oncommercial lines. A commercial view can promote improved customer service at thesame time rationalise costs.

64 Appendix B

(ii) At the village level, separate accounts for village water fund and grampanchayat fundsshould be done away with. It would be possible to integrate both the accounts withoutcompromising on the principle behind their creation.

(f) Community related:

(i) Village based organisations(VBOs) such as the youth mandals or mahila mandals begiven a greater role in community mobilisation. Thus the interface of the NGOs withthe community needs to be reduced. NGOs, being inadequate in number should playan important role in building capacities of such VBOs.

(ii) Selection of villages should be based on the desire of the community to improve itsown standard of living. Even before executing the water supply scheme, thecommunity can take initiatives in creating awareness about personal hygiene andenvironmental sanitation within the available means.

(iii) Large and smaller villages should be treated differently in the way community is to beinvolved.

In conclusion it can be said that the Maharashtra Rural water Supply & EnvironmentalSanitation Project has succeeded in providing a viable model subject to some refinements.Some of the features are already incorporated in the newer generation projects such as theones being executed in Uttar Pradesh and Kamataka. India being demographically so diverse,successful models elsewhere, cannot be implemented as they are. Besides, it will have to beseen if the structures created and found to be efficient under the watchful eye of thegovernment and the World Bank can actually stand the enormous pressure it may have tosustain due to the sheer magnitude of the task. The success of this Project lies in itsperformance in real life situation. Conclusions drawn from it may help to provide a bettervision for the future of the Water supply and sanitation sector in Maharashtra.

65 Appendix B

GOVERNMENT OF MAHARASHTRA

Dr. Bhagawan Sahai, D.O.No.P.A.,J.S./WS-1 1/98Jt. Secy. & Director. Water Supply & Sanitation Deptt.,

Mantralaya, Mumbai-400 032.

14th December, 1998.

Dear Madam,

This is with reference to our telephonic conversation today. We havereceived a copy of the letter from Mr. Abhyankar dated 16.11.98, addressed toMr. Jha, Deputy Secretary, DEA, Govt. of India, along with a DraftImplementation Completion Report in respect of Maharashtra Rural WaterSupply & Environmental Sanitation Project (Cr.2234-IN).

Kindly find enclosed herewith our comments on the Draft ImplementationCompletion Report.

With regards,

Yours sincerely,

Encl: As above. (Bhagwan Sahai)

Ms. Ines Fraile,Task Manager,The World Bank,1818, H. Street, N.W.,Washington D.C.204 33U.S.A.

C.C. 1) Mr. Abhas Kumar Jha,Deputy Secretary ( Fund Bank ), DEA, Ministryof Finance, 32 A North Block, New Delhi 110 0012) Mr. G.V. Abhyankar, Sanitary Engineer, World bank, 70 Lodi Estate, NewDelhi.

66 Appendix B

COMMENTS ON THE DRAFT ICR

1. We are not in agreement with the view expressed in the first line of para 7 of theEvaluation Summary--- sector policies- repeated at the beginning of para 9, page 4, of themain text of the ICR. We find it difficult to agree with the conclusion that the projectimplementation has not succeeded in developing a replicable model. GOM is of the view thatthe project in Maharashtra has demonstrated implementation of a co-ordinated Water Supply,Environmental Sanitation and Health Education programme, which can be implementedelsewhere with suitable situation specific adaptations.

2. With respect to item (c) under para 12 of the Evaluation Summary, GOM is not inagreement with the view expressed. The slow progress under community participation,Environmental Sanitation and Health Education Components during the initial period was notbecause of low priority of GOM. Rather it was because of inclusion of these components withthe water supply schemes for the first time in the State as a new learning experience and,therefore, there were start-up delays.

3. Under para 14 of the Evaluation Summary, the view expressed has contradictions.Since the project was a new learning experience for the GOM, speed of the progress achievedunder the project has been relatively slow. However, as mentioned in the EvaluationSummary, good progress has been made on all fronts during the project implementation.Therefore, viewed overall, the performance of GOM during project implementation cannot betermed to be unsatisfactory.

4. Also, with respect to the opinion mentioned in second half of para 14 of the EvaluationSummary, to the effect that there was lack of ownership on the part of GOM for the project,GOM does not at all agree with this opinion. The.opinion has no factual basis whatsoever.Within the institutional and legal arrangements in place, the GOM has implemented theproject in all earnestness with a sense of full ownership of the project. This needs to beappreciated fully.

5. With respect to last portion of para 6 on page 4 of the ICR, GOM is not in agreementwith the view expressed in the line: quote "Moreover, sustainability of the improved service isdoubtful because of poor technical and financial capacity of local government bodies,especially to manage regional schemes". Because of the interventions made during the projectimplementation, GOM is of the view that sustainability of the i:mproved services is likely tobe a success to a large extent.

6. The GOM subsidy for latrine construction (i.e Rs.2500/-), does not cover 100% of thecosts. Therefore, in para 7, page 4 the percentage mentioned as 100% of the costs is notcorrect, the correct figure is about 60 % of the costs.

7. With respect to para 23, page 8, GOM feels that there are fairly high chances of theWater Supply Schemes, completed project, proving sustainable in the long run.

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