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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR104.1 MILLION (US$154 MILLION EQUIVALENT) TO THE REPUBLIC OF INDIA FOR THE PUNJAB RURAL WATER SUPPLY AND SANITATION PROJECT Sustainable Development Unit India Country Management Unit South Asia Regional Office November 15,2006 Report No: IN This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective September 30,2006) Currency Unit = Indian Rupees (INR) US$1 = INR46.15 SDRl = US$ FISCAL YEAR April 01 - March 31 ARWSP cs DDWS DEA DPMC DWSC DWSS EMF FC GP GPWSC Go1 GoP IDA IEC MDGs M&E MoRD MOU MTP MV NABARD NC NGO OM O&M PC PIP PFU sc so SPMC sv SWAP SWSM TOR ABBREVIATIONS AND ACRONYMS Accelerated Rural Water Supply Program, Go1 Country Strategy Department of Drinking Water Supply, Go1 Department of Economic Affairs, Go1 District Program Management Cell District Water and Sanitation Committee Department of Water Supply & Sanitation, GoP Environmental Management Framework Fully Covered Gram Panchayat Gram Panchayat Water Supply and Sanitation Committee Government of India Government of Punjab International Development Association Information, Education and Communication Millennium Development Goals Monitoring and Evaluation Ministry of Rural Development, Go1 Memorandum of Understanding Medium Term Sector Program Multi Village National Bank for Agriculture and Rural Development Not Covered Non Governmental Organization Operational Manual Operation & Maintenance Partially Covered Project Implementation Plan Panchayati Raj Institution Scheduled Caste Support Organization State Program Management Cell Single Village Sector Wide Approach State Water and Sanitation Mission Terms Of Reference Vice President: Acting Country Director: Sector ManagerDirector: Task Team Leader: Praful C. Pate1 Fayez S. Omar Sonia HammadConstance A. Bernard Ghanasham V. Abhyankar

3 A B. FOR OFFICIAL USE ONLY INDIA PUNJAB RURAL WATER SUPPLY AND SANITATION PROJECT CONTENTS Page STRATEGIC CONTEXT AND RATIONALE... 1 Country and Sector issues... 1 Rationale for Bank involvement... 3 Higher level objectives to which the project contributes... 3 PROJECT DESCRIPTION Lending instrument Program objective and phases Project Development Objective and Key Indicators Project components Lessons learned and reflected in the project design Alternatives considered and reasons for rejection... 9 C. IMPLEMENTATION D. 1. Partnership arrangements (if applicable) Institutional and Implementation arrangements Monitoring and evaluation of outcomes/results Sustainability Critical risks and possible controversial aspects Loadcredit conditions and covenants APPRAISAL SUMMARY Economic and Financial Analysis Technical Fiduciary Social Environmental Assessment Safeguard Policies Policy Exceptions and Readiness Annex 1: Country and Sector or Program Background Annex 2: Major related Projects Financed by the Bank and/or other Agencies Annex 3: Results Framework and Monitoring Annex 4: Detailed Project Description Annex 5: Project Costs Annex 6: Implementation Arrangements... 44

4 Annex 7: Financial Management and Disbursement Arrangements Annex 8: Procurement Arrangements Annex 9: Economic and Financial Analysis Annex 10: Safeguard Policy Issues Annex 11: Action Plan for Enhancing Transparency and Accountability. 88 Annex 12: Decentralization and role of PRIs Annex 13: Social Assessment Annex 14: Engineering Aspects Annex 15: Project Preparation and Supervision Annex 16: Documents in the Project File Annex 17: Statement of Loans and Credits Annex 18: Country at a Glance MAP IBRD No

5 INDIA Punjab Rural Water Supply and Sanitation Project PROJECT APPRAISAL DOCUMENT South Asia SASSD Date: November 15,2006 Team Leader: Ghanasham V. Abhyankar Acting Country Director: Fayez S. Omar Sectors: Water supply (80%); Sanitation Sector ManagerDirector: Sonia Hammam (20%) Themes: Rural services and infrastructure (P) Project ID: PO90592 Environmental screening category: B Partial Assessment Lending Instrument: Specific Investment Credit For Loans/Credits/Others: Total Bank financing (US$m): IDA Credit ASSOCIATION Total: Borrower: I India Responsible Agency: Government of Punjab, Department of Water Supply and Sanitation Project implementation period: Five and half Years Expected effectiveness date: January 31,2007 Expected closing date: March 31,2012 Does the project depart from the Country Strategy (CS) in content or other significant respects? Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 Have these been approved by Bank management? Is approval for any policy exception sought from the Board? Does the project include any critical risks rated substantial or high? Re$ PAD C.5 i [ ]Yes [XINO [ ]Yes [XINO [ ]Yes [ IN0 [ ]Yes [XINO [XIYes [ ]No

6 Does the project meet the Regional criteria for readiness for implementation? [X ]Yes [ ] No Re$ PAD D. 7 Project development objective Re$ PAD B.2, Technical Annex 3 Assisting Government of Punjab (GoP) in increasing access of rural communities to improved and sustainable rural water supply and sanitation services. Project description Re$ PAD B.3.a, Technical Annex 4 Component 1 : Program Management : Setting up and operations of Program management Units and support services, M&E, capacity building and implementing Information, education and communication campaigns Component 2 : Community Development : Providing capacity support and building capacity of the village local governments and user communities in development and management of rural water and sanitation facilities and services Component 3 : Infrastructure Building : Construction of new drinking water supply and community sanitation schemes and up-gradation and rehabilitation of existing schemes Which safeguard policies are triggered, if any? Re$ PAD D.6, Technical Annex 10 OP 4.01 Environmental assessment Significant, non-standard conditions, if any, for: Re$ PAD C.7 Board presentation: None Loadcredit effectiveness: None Covenants applicable to project implementation: (i) For all RWSS sector investment schemes, regardless of the source of financing, GoP shall take all necessary steps to ensure that such schemes are consistent with its SWAP Program and its implementation strategy, as agreed with the Association, and that the number of ongoing RWSS sector investments financed outside the SWAP Program are reduced during the period of Project implementation such that the amount of investments in such schemes does not at any time exceed Rs 476 Crores. (ii) In carrying out Part C.2 (a) of the Project covering Performance improvement of existing water supply schemes, GoP shall ensure that the operations and management and the financing responsibilities of selected single village water supply schemes and intra village works of selected multi village water supply schemes are transferred from DWSS to the relevant GP and GPWSC in accordance with a time-bound action plan, satisfactory to the Association. (iii) In respect of components C2 (b) and C3 covering installation of innovative technologies and community sanitation schemes respectively, no withdrawal shall be made unless the first five pilot schemes of each technology option shall have commenced operations satisfactory to the Association... 11

7 A. STRATEGIC CONTEXT AND RATIONALE 1. Country and Sector issues 1. Coverage and Service Levels at National Level: India has achieved significant success in providing basic minimum service level for drinking water supply (40 liters per capita per day) to most of its rural population. However, for various reasons operational and financial sustainability of Rural Water Supply and Sanitation (RWSS) services has not been achieved. Depleting ground water table and deteriorating ground water quality are threatening source sustainability. Till recently, the program was almost totally government run without the participation of other stakeholders resulting in consumer perception of water as a free (service) commodity with the government having the entire responsibility for running the operation. The RWSS program faces serious challenges in the coming years to meet the needs of an expanding population and growing demand for improved service levels. 2. The level of household sanitation in rural areas is extremely low (less than 40% households have toilets). The rural population generally lacks an understanding of the linkages between lack of sanitation and unsafe hygiene practice, and diarrhea related diseases. The resultant morbidity and mortality, particularly in young children, significantly affects their growth, educational attendance and achievement and productive activity. Progress in sanitation and safe hygiene practice will require significant social marketing and awareness campaigns for demand creation. 3. Lack of reliable household level information and weak monitoring systems make it difficult to realistically assess achievement of sector goals. Go1 is currently undertaking a national habitation survey to update the coverage and sustainability database that would help improve results orientation in the sector. 4. Government of India s (GoI) Tenth Plan Policy and Strategy: Go1 recognizes the need to improve the functionality and sustainability of the sector and has launched significant sector reforms since Thus, GoI s 10th Plan policy objectives (as revised in its mid-term review of 2005) for RWSS are to: a) accelerate sanitation coverage to achieve 35% coverage by 2007, 50% coverage by 2010, and provide 100% of rural schools with sanitation facilities; b) strengthen sustainability of both water supply systems and water sources; c) provide minimum (basic) service level of safe drinking water to all rural habitations by 2009; and d) provide demand based higher water service standards to interested rural habitations by These policy objectives are expected to continue in GoI s llth Plan ( ), currently under preparation. 5. The main challenges now are to expand and spread the reform approach countrywide. This is required to meet GoI s policy objectives and achieve (and even exceed) the sector s Millennium Development Goals (MDGs) of halving the proportion of people without access to safe drinking water and basic sanitation by Its new centrally sponsored Swajaldhara and Total Sanitation Campaign (TSC) programs are a clear indication of this desire to expand and hasten the reform process. Go1 also plans to work with States to move towards statewide implementation of RWSS reforms. Establishing the necessary institutional arrangements, building institutional capacity, and bridging financing gaps in scaling-up are the key priorities. 1

8 6. Key Sector Issues in Punjab: Some 30% of the villages still do not have access to basic drinking water service. The remaining 70% villages do have piped water systems, but many of these are suffering from extremely low customer base and poor O&M performance. As a result, about 60 % households in Punjab are dependent on unsafe private drinking water sources. With high O&M costs of the Department of Water Supply and Sanitation (DWSS) and low O&M cost recovery from users, the water supply systems are becoming unsustainable. About 50% households have toilets. However, highly charged septic tank effluent flowing in open drains, has degraded the environmental conditions in the villages and pose a serious health hazard. The DWSS accountability and incentive structures favor new construction with little concern for the quality of service. The new schemes are planned and built with limited or no participation of the end users in decision making or service management. Thus, the current institutional, operational and financing arrangements present constraints and challenges in achieving service improvements or ensuring long-term sustainability. Main causes for poor sector performance include: lack of separation of different roles within the sector institution, limited decentralization and local capacities, fragmented sector finances, highly centralized decision-making and approvals, low priority and accountability in ensuring customer satisfaction, and weak monitoring and user feed-back systems. 7. Government of Punjab s (GoP) Vision and Medium-term Sector Program: GoP s vision and long term strategy aims at covering all Punjab villages with 100 % water supply coverage with higher service standards and private service connections to most households as well as providing modem underground waste water collection and disposal systems at an estimated cost of about U S $ 1.2 billion- over a period of next 15 years. However, in the medium term (over the next 5 years) it proposes to implement a more modest and prioritized Medium term sector Program (MTP) of about US$ 364 M, considering the likely financing envelopes that may be available, the State s absorptive capacity, and DWSS and rural local government s implementation capacity. 8. MTP will still aim to achieve full coverage for water supply with at least basic service level of 40 liters per capita per day in all Punjab villages, but propose smaller investments in community sanitation schemes. Thus the MTP s main objectives include: a) coverage of all Not Covered (NC) and Partially Covered (PC) villages to reach at least a Fully Covered (FC) status, b) ensuring sustainability of water supply services, and c) initiating measures to improve village level environmental sanitation. This will be achieved through empowerment of GPs and local communities for decentralized service delivery, and implementing institutional reforms to strengthen DWSS capacity to effectively manage and monitor the use of participatory processes and demand responsive approach. 9. The proposed MTP will be financed from already assured funding of about US$ 102 M for completing the ongoing schemes and by implementing a US$ 262 M proposed SWAP program with assistance from Go1 and IDA. The SWAP program will fund the schemes that use the new consistent sector policy principles and implementation arrangements for all sources of financing. GoI future commitments and the IDA funding support with contributions from GoP and user communities will be under the proposed SWAP Program. 2

9 2. Rationale for Bank involvement 10. The overarching challenge of the Bank s Current Country Strategy for India (Sept 2004) is to leverage Bank s limited resources to scale up its impact. Thus, Bank s support to India s RWSS program will mainly aim at assisting India in scaling up nationwide reform approach. Go1 has requested the Bank to develop statewide scaling-up projects, adopting SWAP in seven states (Tamil Nadu, Uttaranchal, Punjab, Andhra Pradesh, Rajasthan, Madhya Pradesh and Assam). It believes that these projects will develop best practice examples of statewide scaling up and provide strong demonstration impact nationwide. 11. Punjab s ownership and keen desire for reforms is evident from a number of reform initiatives already taken by the State. Further, despite being a relatively prosperous state, Punjab needs significant improvements in the quality of rural water and sanitation service delivery requiring both additional investments and reforms. Thus, extending Bank support to Punjab will be a part of the Bank s strategy to assist Go1 in scaling up the reforms nationwide and contribute to achieving the water and sanitation related MDGs. 3. Higher level objectives to which the project contributes 12. The project will help GoP in achieving its broader development goals of achieving health and water security, poverty reduction, higher enrollment of children, particularly girls, in schools, and reduction in infant mortality and maternal mortality rates. The project will also support GoP s efforts in accelerating the process of decentralization by building the capacity of the rural local governments in development and delivery of rural services. B. PROJECT DESCRIPTION 1. Lending instrument 13. The proposed instrument is the Specific Investment Credit of US$ 154 million equivalent, which will support GoP s medium term program (MTP) for the Sector. A SWAP has been chosen to implement a consistent sector policy for all new investments irrespective of the source of financing. GoP s Medium Term Sector Program (MTP) includes ongoing water supply schemes (US$ 102 million) and implementation of the proposed SWAP Program (US$ 262 million). Bank will fund a share of GoP s expenditure only under the SWAP program. 14. In India s RWSS sector, this will be the first time (along with Uttaranchal) that Bank and Go1 will work towards supporting state owned and developed sector program which will adopt single sector policy and consistent implementation strategies. This is a major step forward in moving away from the current fragmented sector finances and approaches- and the proposed project will pave way to eventual unifying of processes and pooling of funds. This is considered as a pragmatic approach given the current country and the sector context. 1 The definition as in Section A1 para 7 of this PAD * The key elements of the new sector policy are in Section B3 para 17 to 27 of this PAD 3 The definition of new investments is described in Section B4 of this PAD 3

10 15. The SWAP is expected to enhance the Bank s development effectiveness through statewide implementation, build stronger partnership with Go1 and the partner state and contribute to efficient management of sector resources. During project implementation, a plan would be developed to transit from multi programs to just one state RWSS program including phasing out of the ongoing programs. 2. Program objective and phases Not Applicable 3. Project Development Objective and Key Indicators 16. The Project development objective will be to assist GoP in increasing access of rural communities to improved and sustainable RWSS services. The key outcome indicators will be: (i) percentage of habitations in the rural areas of Punjab that are fully covered (FC) for access to drinking water; (ii) percentage of rural households in the state with access to safe and adequate drinking water supply throughout the year; and (iii) percentage of participating habitations having satisfactorily performing community sanitation facilities. GoP s New RWSS Sector Policy 17. GoP s new sector policy has been approved and communicated to the Bank (vide Chief Secretary, GoP s letter of July 12, 2006) and also included in the Project Implementation Plan. The key elements of GoP s proposed new sector policy are summarized below4 : Policy/ Institution a1 18. GPs / GPWSCs will be responsible for planning, technology selection (type of scheme), procurement (bid invitation, award), construction and O&M management of all new Single Village (SV) water schemes and for all intra-village water supply works of Multi Village (MV) water supply schemes with capacity support from DWSS / NGOsl Private sector. 19. The role of DWSS will mainly cover: (i) overall RWSS program management including IEC and M&E of activities, outcomes and impacts; (ii) development and management of common infrastructure of MV schemes with improved financial and operational performance; (iii) planning and construction of community sanitation schemes with active participation of GPs and households; and (iv) arranging social, technical and management support to GPs and GWSCs for all intra-village RWSS schemes and services. 20. Self selection of Villages based on transparent eligibility and selection criteria - determined upfront by GoP - will be adopted in each district. GPs will need to apply to DPMC endorsing the project principles to seek project support. 21. Scheme and Tender approvals: The District Annual plans for each year will be prepared by DWSC and approved by SWSM before the end of the previous fiscal year and included in the state budget. Thereafter, approvals of all detailed scheme reports and implementation phase proposals upto Rs.30 lakhs will be provided by DWSCs. While GP/GPWSC and DPMC will Various Institutions mentioned in this Section are defined in Section C2 para 40 to 49 of this PAD 4

11 approve tenders up to the same value for SV and common infrastructure of MV schemes respectively. 22. All existing SV water supply schemes will be transferred to GPs/ GPWSCs in a time bound manner (in about 2 year s time). For all existing MV water supply schemes, transfemng intra-village O&M management and financing responsibility to GPs/ GPWSCs will be progressively completed during the project period. 23. For O&M of common infrastructure of all New MV schemes, DWSS will deploy private sector service/ management contracts as per its current practice. For O&M of SV schemes, DWSS will provide guidance to GPs/ GPWSC on entering into management contracts including billing and collections. DWSS will also gradually introduce the practice of O&M management contracts for existing MV schemes linked to natural attrition of current operating staff of DWSS. Financial 24. O&M financing of Water Supply Schemes: For all new SV Schemes, users will finance the recurrent O&M costs (electricity bill, staff cost, chemical, minor repairs and routine maintenance). For all existing SV Schemes, full O&M cost recovery from user charges will be achieved in a phased manner. For all new MV schemes, GPs/GPWSC will finance O&M cost of intra-village water distribution system + bulk water charges to be fixed by DWSS. DWSS will implement a phased program of installing bulk water meters at the entry to each village in all its existing MV Schemes. This will help DWSS to introduce water audit, better assessment of water supplied to each village, and introduction of billing based on volumetric measurement of bulk water supply in existing MV Schemes. 25. User Capital Cost Sharing for Water Supply Schemes: On the lines of GoI s Swajaldhara program, users will finance at least 10% of capital cost irrespective of the technology choice or SV or MV schemes. The capital cost sharing by users will be at 50% of the above rule for the Scheduled Caste villages, villages in hilly areas and in international border/ flood prone zone. To ensure affordability, an upper ceiling of Rs.1500/- per house hold will be applicable for the scheme-users as a group. GPWSC can adopt internal cross subsidization if they wish. 26. User Capital Cost Sharing for Community Sanitation : the level of user contribution to capital costs will be same as for water supply - except that up to 50 % of user contribution can come from other sources such a GP funds and private donations. 27. Funds Flow: RWSS investment hnds will be transferred by SPMC to GPs/ GPWSCsthrough an independent channel of SPMC- DPMC-GPWSC (and not through DWSS divisions providing technical and monitoring support) for SV schemes and for intra-village works of MV schemes. GPWSCs will be responsible for management of investment and O&M fhds for all intra-village water supply schemes (with adequate capacity support from DWSS). 5

12 ~ 4. Project components 28. The Program will be implemented in all 19 districts of Punjab. There are 12,278 GPs (approximately the same number of villages or habitations) in Punjab. As per 2001 census, total rural population in Punjab is 16.1 million, of which 30 % is Scheduled Caste (SC) population. There is no tribal population in Punjab. 29. The GoP s proposed SWAP Program for FY to FY aims to implement water supply schemes in about 3000 NCFC villages and thereby achieve 100% coverage of all villages in Punjab. In addition, the proposed Program intends to improve operational and financial performance of existing water supply schemes and initiate introduction of community sanitation schemes on a pilot basis. The proposed SWAP Program is expected to directly benefit about 7.4 million people (about 46% the state s rural population). The program will particularly benefit population belonging to Scheduled Caste (SC) and those living in hilly areas and along the international border (about 40% of the State s population). 30. The size of the proposed SWAP Program within the MTP i s estimated at Rs.1290 crore or about US$262 million. The SWAP Program will have three main components: Component A: Program Management, Component B: Community Development and; Component C: Infrastructure Building. The estimated investment and operating costs for these components and the Bank financing shares are summarized below. Component T Total program (US$M) Financing share (US$M) Go1 GoP Comm. Bank Fin. of GoP contributions (US$M) Bank * financing as a YO of GoP contribution Program Management % Community Development % Infrastructure Building % *Ban TOTAL - SWAP Program will reimburse GoPS share o I I I I 75.6% 31. Component A: Program Management (US$ 31.4 M): This component will finance establishment and operating costs of the program institutions and training, consultancies, and goods and equipment for: management support to DWSS, information, education and communication (IEC) campaigns, operating M&E and MIS systems, capacity building programs, sector development programs and studies; and grants to be provided as awards to best performing GPs and User groups. The main target group is the project institutions and support organizations and the main intermediate results indicators are: i) Participating habitations for schemes under SWAP as a % of total habitations with a N C or PC status (cumulative habitations covered); (ii) Participating habitations for performance improvements of existing SV/MV schemes as a % of total habitations planned to be covered (cumulative habitations covered); and (iii) % of resources disbursed to GPs that are utilized in time. 6

13 32. Component B: Community Development (US$ 24.4 M): This component will mainly finance consultancy contract fees of the Support Organizations (SOs) (personnel, other resources, travel, documentation, etc) for their support services to DWSS, GPs and project communities and the operating cost of DWSS staff (travel and incidental expenses but not their salaries and allowances) for providing support to village communities for both new schemes and for performance improvement of existing schemes. The DWSS staff will work with village support teams and / or SOs to provide single window assistance to GPs and communities in technical, financial and management aspects. SOs equipped with social mobilization skills, will be enlisted to provide support in implementing the agreed participation framework. Roles and responsibilities of the key stakeholders (GP/GPWSCs, SOs and DWSS), funds flow and procurement procedures will be spelled out in a tripartite agreement. Finally, the component will also finance engineering design support. The intermediate results indicators for this component include : (i)% of participating GPWSCs with high or medium rating for operational sustainability of their schemes; (ii)% of participating GPWSCs meeting the full O&M costs through user charges; and (iii) YO of participating GPWSCs of MV schemes with a billing to collection ratio of >90% for bulk water charges. 33. Component C: Infrastructure Building (US$205.6 M): C1: New/ Upgrading of Water Supply Schemes for NCPC habitations (US$ MI: This component will mainly finance civil works contracts for construction of new or improvement of existing drinking water schemes in about 3000 NC/ PC villages in the State. More than 80% of the drinking water schemes will be based on ground water sources and a range of technology options which would be selected by the communities and DWSS. Traditionally, DWSS provides only piped water systems with two technology options: deep tube well and canal based schemes to support either SV schemes or MV schemes. MV schemes are selected when local water sources are not of acceptable quality or do not guarantee adequate quantity. About 30% habitations are expected to demand SV water schemes. Remaining schemes are expected to be MV schemes based on either ground water or surface water (canals) as their source. However, MV schemes in Punjab generally cover only about 2-4 habitations and are small enough for progressive local management by communities and GPs. C2: Performance Improvement of Existing Water Supply Schemes (US$ 54.9 M): The sub- component C2 (a) will mainly finance up-gradation of existing water supply schemes in some 1600 FC villages to improve their operational performance. This is aimed at transfening the management responsibility to Gram Panchayats for SV schemes and intra-village works of MV schemes. These will include augmenting the source, repairs and replacement of leaking pipes, rehabilitation of tanks and other system components, repairs of motors, disinfection units, introducing distribution zoning and extension of pipelines. In addition, it will support fixing of bulk water meters in all the existing MV water supply schemes. The sub-component C2 (b) will finance installation of defluoridization and reverse osmosis plants and potable water treatment units, initially on a pilot basis. All these schemes are expected to provide greater user satisfaction with small incremental investments. 7

14 C3: Construction of Community Sanitation Schemes (US$ 19.0 M): This component will finance construction of small bore sewers and sewerage schemes in about 100 villages which already have good household sanitation coverage but where the release of septic tank effluent on the village streets and open drains creates a serious health hazard. The sub-component will also finance rehabilitation of existing sullage drains and village ponds in about 1000 villages - to improve water disposal systems and reduce environmental degradation. 34. The main intermediate results for component C are: (i) % of new (and upgraded) water schemes under SWAP Program completed within planned time and costs; (ii) % of participating GPWSCs achieving planned performance improvements in rehabilitated schemes measured 6 months after completion; and (iii) % of new community sanitation schemes completed within planned time and costs. 5. Lessons learned and reflected in the project design 35. International experience: The emerging international good practice calls for treating water as an economic and social good managed at the lowest appropriate level. For the provision of RWSS, this requires that the consumers be engaged in the process of selecting, financing, implementing and managing systems that meet their demands and willingness to pay. Yet putting demand responsive principles into practice presents significant challenges. The experiences from the Bank-assisted projects in Paraguay, Bolivia, Ghana, China, Indonesia, Nepal and Sri Lanka have demonstrated the effectiveness of these approaches in improving the sustainability of investments. Global experience in use of SWAPS in the RWSS sector, though limited does provide evidence of its strength, especially for countrywide scaling up of reforms. Experience from health sector is particularly relevant in this regard. 36. Indian experience: The Bank has engaged actively in the RWSS sector in India since Bank support has helped to pilot and begin to scale up a reform program for RWSS delivery across several states - targeting over seventeen million rural beneficiaries to date. There have been some important lessons from the Bank engagement. Foremost among these is that sustainability is a major challenge which is best addressed by involving coilimunities in the design, construction and operation of schemes, including through their contribution to capital costs and their financing of O&M costs. Given these lessons, it is clear that GoVstate investment and Bank support to RWSS should emphasize beneficiary involvement and empowerment; institutional reform and capacity building of state/local governments and communities; the active participation of NGOs; promotion of cost recovery; and targeting of services to the poorest areas and vulnerable groups. Though official statistics indicate good progress across India, direct observation suggests that the data substantially overstates access to safe drinking water and sanitation. Therefore, it is clear that large investments remain to be made if the MDG for access to safe water is to be achieved, and therefore the main challenge is to roll out the lessons learned on a much larger scale. 37. The OED's Impact Evaluation Report of five Bank-assisted India RWSS projects (May 1998) as well as lessons learned from projects supported by other donor agencies (Netherlands, DANIDA, DFID) and GoI's own sector reform pilots in India have also provided valuable lessons to designing participatory projects and are reflected in designing this project. Some experiences and key lessons learned so far from these national experiences and built into the project are: 8

15 (a) Policv: Ownership of the project design, at political, bureaucratic and operational levels is a prerequisite for project success. A conducive policy environment and willingness to learn by doing are equally vital for success. Project design should respond to villages desire for high service standards. Villages should be selected based on their felt need and an expression of the demand through a self-selection process. (b) Institutional: The PR institutions should be well integrated into the project s institutional design. Organic links between user committees and GPs are essential for institutional sustainability. NGOs are an important option to build beneficiary capacity, generally due to their better credibility with the communities. Beneficiary participation and capacity building takes time, and this should be factored into project design and implementation. Changing mandates and mind-sets of state agencies, capacity building of all stakeholders need to be at the core of project design. Capacity building efforts for project staff should address motivation, team building and managerial aspects. Concurrent monitoring and evaluation, innovating and experimenting, learning from experiences contributes positively to improving project performance. Women s active participation improves local ownership and the quality of implementation. Rehabilitation and integration of existing facilities with the new schemes is essential for cost effective and sustainable system improvements. (c) Financial: Partial financing of capital cost by the users has proved to be a viable option, however, the cost recovery rules should be simple and their administration user-friendly. User management and financing of O&M has also proved to be viable. Even though rural water projects have made great strides in getting rural villagers to cover more of the operating costs of their systems, nowhere in the world are communities yet ready to cover the costs of a major overhaul and/or the complete replacement of the most expensive components of their systems after only one project. Achieving financial self-reliance may not be a one-project exercise. 6. Alternatives considered and reasons for rejection 38. Alternatives that were considered and rejected and the selected option are briefly presented below. (a) Continuing Business as usual through DWSS: GoP s new policy framework requires adopting demand responsive and decentralized service delivery responsibility through rural local governments. The current DWSS model supports a top-down supply driven approach with highly centralized decision making with no role for users to participate in any decision making or shoulder service management responsibility. It focuses on infrastructure building rather than on service delivery or its sustainability. This option in its current form was therefore rejected. (b) Implementation throuh PRIs: It would be desirable for rural infrastructure projects to be implemented through PRIs. The process of devolution of functions and finances to PRIs and the transfer of hctionaries to PRIs has begun. However, it is too early to move to complete sector management by PRIs in Punjab. Hence this option was also rejected. 39. The Proposed Option: The proposed option is a combination of the above two models such that the GPs with user committees start taking greater responsibility in RWSS facility improvements and service management and the DWSS starts providing capacity support to them rather than being an implementing agency. Further because of its high technical capacity, DWSS will continue to be 9

16 responsible for more complex MV water supply schemes, but with improved operational and financial performance. Even in MV schemes, the intra-village system will be managed by the GPs/GPWSCs. This would be a major change in Punjab s RWSS service delivery systems and would pave the way for eventual transfer of fuller RWSS responsibility to GPs and PRIs. C. IMPLEMENTATION 1. Partnership arrangements (if applicable) No other international agencies are financing the project. 2. Institutional and Implementation arrangements (Refer Organograms in Annex 6) 40. DWSS will have the lead responsibility for program implementation and ensuring that the program development objectives are met. The functions of policy, managing the reform process, and service delivery would be separated as below: Main Function Policy, Annual Plans and budget approvals Leading and managing the reform process and outcome monitoring Implementation and service delivery Responsible Institution State Water and Sanitation Mission (SWSM) and District Water and Sanitation Committees (DWSC) DWSS Program management wing : State Program Management Cell (SPMC) and District Program Management Cells (DPMC) DWSS Operations wing (ie. regular Circles/divisions/ sub divns) and Gram Panchayat Water and Sanitation Committee (GPWSC) in the Gram Panchayats 41. The State and district level water and sanitation missions have already been set up under the GoI s Swajaldhara program. They have been reconstituted to expand their mandate to cover the management of entire MTP. The SPMC & DPMC would be the new structures created by redeployment and reorganization of some of the existing divisions of DWSS. These will be an integral part of the DWSS s current structure. The implementation and service delivery responsibility will be shared between DWSS s existing organizational structure (Operations wing) and the GPWSCs. At the village level GPWSC will be set up as a committee of the GP and will be the key driver of community empowerment at that level. Distribution of primary institutional responsibilities, by component, are described below: Comp A: Program management State Level t District Level CompB: Community Village and Scheme Level Develo ment Comp C: Infrastructure Building SV water supply schemes and Intra-village works of MV water schemes Common infrastructure of MV water schemes; Up gradation of Existing schemes, Community Sanitation schemes SWSM with SPMC DWSC with DPMCs DWSS OPswing GPWSCs DWSS OPs wing in partnership with GPWSCs 10

17 42. The proposed institutional arrangements, roles and responsibilities of various actors and their organizational linkages have been described in detail and also depicted in flow chart forms in Annex 6 and the PIP. A brief description of key actors and their implementation responsibilities is provided below. State Level: 43. State Water and Sanitation Mission (SWSM): This will be the highest policy making body in the sector. It will be chaired by the Chief Secretary and the Principal Secretary, DWSS, will be the Member Secretary. The other members of the Mission will include: a representative of the Dept. of Drinking Water, MoRD, GoI; Secretaries of other relevant GoP departments and three sector experts. 44. State Program Management Cell (SPMC): SPMC has been set up within the DWSS under the Principal Secretary with an exclusive mandate for providing statewide leadership, collaboration and management of RWSS sector reform in Punjab. Its main functions are: overall program planning and management such as to ensure that the Program development objectives are fully achieved in a timely manner, management of sector funds, capacity building of all program partners, managing statewide IEC campaigns, ensuring appropriate community empowerment and participatory framework, ensuring appropriate procurement practices and high quality of engineering designs and construction, implementing enhanced transparency and disclosure Action Plan (see Annex ll), and regular monitoring and evaluation of sector performance. It is also responsible for regular review of strategies and implementation arrangements in the context of implementation experiences and for ensuring course corrections as needed. 45. SPMC s mandate, composition, functions and operational procedures have been agreed and are included in the project implementation plan. The SPMC will be headed by a Program Director, an officer not below the rank of a Chief Engineer or a Joint Secretary of GoP and will have about 20 key staff. The staff will be multi-disciplinary including finance, operations, HRD, M&E, water supply and sanitation engineering, procurement and communications disciplines. SPMC will recruit project management consultants to support the institutional, finance, participatory development, procurement and management skills or recruit staff from the private sector and NGOs/ Support Organizations (SOs) on contract basis. Most engineering staff will be drafted from within the other DWSS offices. DWSS staff members are already in position and a few additional positions are being filled with staff on deputation from other organizations or with staff on a contract basis. District Level: 46. District Water and Sanitation Committee (DWSC): SWSM s counterpart at the district level will be the District Water and Sanitation Committee (DWSC), chaired by Chairman of the Zilla Panchayat and the Superintending Engineer of the DPMC will be the member secretary. Its other members will include Deputy Commissioner (or his representative), heads of other departments in the district, and representative of NGOs and 3 sector experts. 11

18 47. District Program management Cell (DPMC): DPMCs have been set up within the DWSS - one in each district. The DPMCs are headed by a Superintending Engineer (SE) of the DWSS. One SE may head one or more DPMCs. The DPMCs will have mandate, composition and functions exactly like that of the SPMC, but only for intra district activities and except for policy and approval of district plans (which will be done by SWSM). In addition, DMPC will be responsible for transfer of investment funds to implementing agencies - viz the GPs / GPWSCs and DWSS divisions. DPMC will also be responsible for progress reporting to SPMC. Village Level: 48. GPs will be mainly responsible for seeking project assistance, constituting a GP level GPWSC representing the user communities and empowering the GPWSCs to take responsibility for program implementation on their behalf. During the post-implementation phase, the GPs will monitor the sustainability of operations and ensure that the GPWSCs satisfactorily discharge their O&M management function including levying and collecting user charges from the beneficiaries. For MV schemes, GPs will be responsible for payment of bulk water charges to DWSS. 49. GPWSC: The GPWSC will represent the community and will have four main functions: (i) planning, and technology selection, (ii) partial user financing of capital costs, (iii) procurement and construction, and (iv) management and full financing of O&M, including levying and collecting sufficient user charges. The composition of GPWSCs, their functions, and method of selecting members, bylaws, legal framework and relationship with the GPs have been agreed (included in PIP). The project would make vigorous efforts to maximize women's representation and management role in the GPWSCs. For MV schemes, scheme level committees will be set up with representatives from participating GPWSCs to perform the same functions. Role of Operations Wing (OPs Wing) of DWSS 50. For all new investments, the role of OPs wing of DWSS will mainly cover: (i) development and management of common infrastructure of MV schemes; (ii) planning and construction of community sanitation schemes with active participation of user groups; (iii) up gradation of existing WS schemes; and (iv) arranging social, technical and management support to GPs and GPWSCs for all intra-village RWSS schemes and services. SMPC and DPMC will ensure capacity building of the OPs wing of DWSS, especially that of the Sub Divisional Engineers and Junior Engineers -the main interface actors with the GPs and GPWSCs. 51. For existing WS schemes, OPs wing - DWSS role would be: (i) transfer of SV schemes to GPs; (ii) transfer of intra-village works of all MV schemes to GPs in a phased manner; (iii) O&M management of common infrastructure of MV schemes, but with improved operational and financial performance; and (iv) providing O&M back-up support to GPs/ GPWSCs in schemes managed by the latter. OPs wing, DWSS will complete construction of all ongoing water supply schemes before March

19 Implementation Arrangements 52. Implementation Schedule: The SWAP Program implementation will be launched from January 01, 2007 but will include GoP s current fiscal year s expenditures that have been incurred in accordance with the new sector policy. The program will be implemented in all the 19 districts in four batches each covering on an average about 50 villages per district per year. A detailed Program implementation schedule has been developed for a 6-year implementation period.(details in Annex 6). 53. Pilot batch: Program Implementation was initiated in October 2005 in 90 pilot GPs (4-5 in each of the districts) to develop the modalities of conducting a demand driven, decentralized, participatory planning process. The planning phase in some 50 villages has been completed and construction activities are expected to start shortly on those schemes. 54. Batch 1: Selection of villages for the first batch of schemes (about 500 villages) has already started and subsequent batches will be launched once every year starting in April. 55. Scheme Cycle: Each batch would follow a 21 month scheme cycle consisting of four distinct phases (Preplanning-3 months, Planning-6 months, Implementation - 9 months, and Post Implementation-3 months) for most schemes (for MV schemes it will be spread over months). Model scheme cycles have been developed in partnership with all the key stakeholders (see Annex 6) for SV schemes and MV schemes. These will be an important tool for implementation planning and monitoring of project activities. The scheme cycle is not intended to be a process blueprint, but would be used flexibly to accommodate the needs of the communities, GPs and the schemes on a case-by-case basis. However, experience (Karnataka 11, Maharashtra 11, UP and Kerala RWSS projects) has shown the utility of such a tool in implementing the project s participatory and demand responsive approach. 56. Capacity Building: The Program will have a full scale capacity building component. Capacity of the GPs and GPWSCs will be built in selection of schemes, construction and operation of schemes and management of investment and O&M finds. External capacity support will be provided by DWSS and SOs. The capacity of the DWSS and SOs themselves will be built in adopting participatory process and changing mind sets, attitudes and incentives in supporting such an approach. A detailed capacity building plan has been developed and is included in the PIP. 57. Operational Guidelines: A range of operational manuals and guidelines to facilitate program implementation and monitoring have been developed. These include guidelines on village selection criteria and process, scheme appraisal criteria, and model formats for various agreements, MOUs to be signed with GPs and GPWSCs. Operational manuals on fiduciary, technical and safeguard aspects have been developed and agreed. Where necessary, GoP orders have been issued to formalize setting up new institutions, their mandates and powers and approval of various operational manuals. All these have been documented and referenced in the PIP. 13

20 3. Monitoring and evaluation of outcomeshesults 58. With increasing national and international focus on sustainability of development over the past decade, GoI, States and the Bank have developed considerable capacity, experience and tools to monitor intermediate results and outcomes of RWSS services with a particular focus on service quality and sustainability. Well functioning computerized MIS have also been developed and are effectively used in project management in all recent Bank financed RWSS projects. These systems have set up the indicators and methodology for gathering village-based information on all four areas: inputs, outputs, sustainability and outcomes. This experience has been drawn upon in developing the results monitoring system for this project. 59. Tees of monitoring: In the context of SWAP, the M&E system is designed to align with the normal government systems as far as possible, avoid information overload and provide incentives through GP level awards. A key objective of the M&E system is continuous learning during implementation. 60. Types of indicators: GoP has developed three sets of indicators: (a) inputs-outputs to measure program implementation performance including related process indicators; (b) intermediate results indicators to measure performance on specific program components including service performance and sustainability assessment of WSS services; and (c) outcome indicators to assess achievement of program development objectives in relation to access and coverage. Annex 3 provides details of these indicators. 61. Monitoring reports and MIS: One coordinated set of program management reports (PMR) has been designed to capture all monitoring results, which will be generated at DPMC and SPMC levels on a quarterly and annual basis. The quarterly PMRs will focus on routine program implementation whereas the annual PMRs will also include strategic monitoring of intermediate results and outcomes. Institutional responsibilities for the M&E system at different levels for collection, analysis and reporting of information, as well as mechanisms to enable efficient use of the M&E system by managers, policy makers and other key stakeholders, have been identified. Consultant recruitment for designing and operating the computerized MIS will be done in the first year of operation. 62. The Bank's global knowledge and experience will provide an important input to SPMC in continuously refining the M&E initiatives during implementation as more experience is gathered. 4. Sustainability 63. Sustainability implies that the water and sanitation system is operated and maintained beyond the life of the project, and is able to generate adequate cash flows for future expansiodrenewal. The factors critical for sustainability of the project are summarized below: (a) Ownership and financial sustainability: The proposed self selection process of GPs and capital cost sharing by users will be first indicators of ownership and demand by the communities. Since the GPs and GPWSCs will have greater control over decisions and resources, there is a greater chance that they will also raise resources to manage scheme operations on a sustainable basis. 14

21 (b) Water source sustainability will be enhanced by adopting scientific practices in locating these and implementing associated water conservation measures. (c) Water and sanitation systems sustainability will be strengthened by improved design and construction practices and by building capacity of the GPs and GPWSCs in all aspects of O&M management and providing initial support during the post-construction period. Construction and water quality monitoring and surveillance will be important program inputs. (d) Institutional sustainability: GoP has set up the new structures within the existing sector institution to take over the responsibility of shifting the current target driven top down approach to a demand responsive approach over the entire state. Sustainability of GPWSCs is likely because of their legal empowerment and the positive experience of the pilot projects. Thus, the project institutional structure uses the existing delivery channel at the GPs, strengthens them with new enabling government structures at the state and district levels and is likely to be sustainable. (e) Post Implementation monitoring and back-up support: The Program implementation arrangements provide for regular monitoring of scheme performance and back-up support to GPs and GPWSCs. It also provides for systematic consumer satisfaction and outcome monitoring surveys. Feedback from these will provide ample opportunities to take corrective actions to ensure sustainability of scheme operations, the ultimate measure of project success. 5. Critical risks and possible controversial aspects power with GPs/ communities GPs/ GPWSCs will fail to manage and account for funds S initiatives; change in accountability and incentive parameters, GoP commitment to progressively strengthen decentralization Fund releases only in installments and based on satisfactory utilization and physical progress; special accounting support to GPs/ GPWSCs; ensure downward accountabilitv 15

22 Risk GPWSC may lack sufficient capacity to manage and sustain facilities The GPsl GPWSCs with DWSS divisions may indulge in corrupt practices in award and management o f works contracts Overall Risk Rating Risk Rating Risk Mitigation Measure M Project s capacity building programs focus on GPWSC and GPs; post implementation hand holding and regular O&M back up support and monitoring by DWSS M Award decisions by committees, strengthened procurement and award procedures, enhanced transparency and disclosure requirements, strict use of fiduciary manuals, independent monitoring of construction quality and rigorous supervision by SPMCDMPC will minimize the corrupt practices S Possible Controversial aspects: None 6. Loadcredit conditions and covenants 64. The following covenants have been agreed for project implementation: (i) For all RWSS sector investment schemes, regardless of the source of financing, GoP shall take all necessary steps to ensure that such schemes are consistent with its SWAP Program and its implementation strategy, as agreed with the Association, and that the number of ongoing RWSS sector investments financed outside the SWAP Program are reduced during the period of Project implementation such that the amount of investments in such schemes does not at any time exceed Rs 476 Crores. (ii) In carrying out Part C.2 (a) of the Project covering Performance improvement of existing water supply schemes, GoP shall ensure that the operations and management and the financing responsibilities of selected SV water supply schemes and intra-village works of selected MV water supply schemes are transferred from DWSS to the relevant GP and GPWSC in accordance with a time-bound action plan, satisfactory to the Association. (iii) In respect of components C2 (b) and C3 covering installation of innovative technologies and community sanitation schemes respectively, no withdrawal shall be made unless the first five pilot schemes of each technology option shall have commenced operations satisfactory to the Association. D. APPRAISAL SUMMARY 1. Economic and Financial Analysis 65. The economic analysis has been carried out for the SWAP Program. The cost-benefit analysis uses data from a sample of representative technology options, based on six technology types / clusters: tube well based SV scheme for NC or PC habitations; canal based SV and MV schemes; tube well based MV scheme for NC or PC habitations. The analysis also utilizes data from a representative household sample survey covering about 3000 households (including 523 control households) in 84 GPs. 16

23 66. The following major benefits have been quantified: (i) time saved in water collection; (ii) benefits from increased (incremental) water supply; (iii) savings in recurring and capital costs; (iv) health benefits from reduction in gastroenteritis, diarrhea and malaria diseases; (v) livestock benefits from improved quality and yield of milk. The average unit cost of capital investment (Rs) per capita for various technology options range between Rs.lOOO - Rs.2000 (Details in Annex 9). A wide variation in cost is expected across villages, depending on the number of households in the village, new schemes to be provided, and the extent of augmentation of existing water supply schemes. The O&M cost depends on the type of scheme and varies from Rs.2 to Rs.5 per kilo liter of water (including bulk water and intra-village O&M cost for MV schemes). The above costs are extrapolated for the entire Program, based on the proposed phasing of schemes. The entire SWAP is justified on the basis of direct benefits to more than 659,000 households from 3000 NC/ PC villages. 67. ERR and Sensitivity Analysis: The ERR of the proposed SWAP program is estimated to be 23%. Sensitivity analysis based on assessed risks indicate that the program is able to absorb negative impacts and still generate positive ERR:. Significant decrease in benefits or increase in total costs: A 54% increase in total costs or a 36% decrease in total benefits, or a combined 21% increase in total costs and decrease in total benefits reduces the project ERR to 12%; Delay in implementation : If benefits are delayed by 3 years, the ERR falls to 12%; Significant decrease in benefits or increase in water supply costs: A combined 26% increase in water supply cost and decrease in benefits reduces the project ERR to 12%;. Failure of schemes: If 50% of water supply schemes fail after 10 years the ERR is reduced to 18.5%. Fiscal Impact of Punjab RWSS Project on GoP Budget 68. RWSS sector has been a priority sector for GoP and the proposed program is in line with GoP s plan priorities. Total allocation during the 6 year including for the program and ongoing schemes, represents an expenditure of about Rs.656 Crore (US$135 M) from GoP s own budget. This expenditure will be greater in the first three years, due to the completion of ongoing and committed schemes. However, even during these years, this represents an increase of about 15% over the current levels of RWSS sector allocations by GoP from its own Plan Allocations. The net impact of this on the GoP budget is not expected to be substantial. 69. Besides the MTP funding and debt servicing, no significant additional recurrent O&M costs are expected to be borne by GoP since these would be met through user charges collected by the GPWSCs. In addition, it is also expected that with the successful implementation of the SWAP Program, it will be possible for the DWSS to reduce its current non-plan allocations (US$ 7.5 million per annum) on operations and maintenance of existing water supply schemes as schemes are transferred to GPs and reduction in staff costs because of curtailment on new recruitment and gradual rationalization of bulk water charges for MV schemes. 17

24 2. Technical 70. Water Supply: There are no major technical issues to be addressed during preparation of water supply schemes or their implementation, since India and Punjab have rich experience in both simple and complex technologies used in water supply schemes. The schemes will mainly involve (a) construction of piped water systems - with tube wells or canal sources-for SV and MV schemes; and (b) up gradation, rehabilitation, and improving operational performance of existing piped water systems. 71. Most water supply schemes will be designed by the DWSS engineers with support from private sector engineering consultants. The DWSS engineers possess the required capabilities for design, construction and O&M of the rural water supply schemes. However with a view to enhance the quality of designs and drawings and save time in preparation, new techniques such as total station methods for survey, standard software for hydraulic designs, auto CAD and GIS are now being used. Incorporating the above, DWSS has now developed a detailed technical manual covering design criteria, guidelines on sound engineering practices, standard drawings and cost estimates, and specifications for construction materials, goods, equipment and civil works. DWSS has recruited a specialized agency to prepare GIS based water quality and resource maps which will enable selection of sustainable water sources. Use of scientific methods, such as geophysical surveys, remote sensing data, and resource mapping coupled with local knowledge, are expected to ensure appropriate selection of sites for proposed groundwater sources. DWSS will recruit consultants to assist it in independently ensuring quality control in design and construction of water supply and sanitation schemes. 72. MV piped water schemes: These schemes will involve: (i) combining a top-down planning and bottom-up demand assessment and (ii) developing and implementing alternate institutional models for scheme operations to ensure their sustainability. Though DWSS has built and operated many MV schemes, developing these in partnership with the GPs and improving their operational and financial performance will require change in mind set and a focus on customer satisfaction. DWSS has already initiated service contracts for components of MV water schemes and the scope of these contracts would be further expanded during implementation (GoP intends to seek PPIAF support for this). 73. Community Sanitation: The project will include up gradation of open drains and rehabilitation of village ponds used for disposal of waste water as well as construction and management of some small bore sewers/ sewerage schemes. This is one area where DWSS has limited capacity and experience. DWSS is seeking expert guidance from Punjab State Council for Science & Technology in preparing a few sample schemes. There are a range of technical design, O&M and financing issues that need to be addressed and piloted before taking up full scale implantation of this component. DWSS has agreed that only about 5 schemes will be implemented over the first two years and their operational performance studied before taking up more community sanitation schemes under the project. 74. Thus, the areas that will need further capacity building are: (a) Improving O&M management and capacity building of GPs/ GPWSCs in procurement, construction and O&M management and (b) technical design and management of sanitation schemes. The project provides for intensive capacity building of DWSS and GPs/GPWSCs and also for use of privatesector support, which is available. 18

25 3. Fiduciary 75. Overall, financial management arrangements as proposed for the project are considered to be adequate to account for and report on the project expenditure as well as satisfy the fiduciary requirements of IDA. The project envisages a sector wide approach to implementation, following common principles and common internal guidelines for financial management. The FM arrangements have been built on and integrated with GoPs own systems for budgeting, funds flow, accounting and internal control with specific strengthening in areas of audit, financial monitoring and control over GPWSC and ensuring timely release of funds. These arrangements are documented in the Financial Management Manual and the GPWSC Handbook for Procurement & Financial Management. The project will provide periodic financial reports and annual audited financial statements broken down by components and expenditure under Go1 and Bank financed schemes. The Bank and GoI, however, will not pool funds, but provide them in parallel, to the GoP and there will be some differences in financial reporting (frequency and content). 76. The GoP would budget for the project by the components split between Go1 funded and Bank funded schemes on the expenditure side with corresponding provisions in the receipt side in the State Budget. This will facilitate accounting by components using mainstream government accounting systems. This will be supported by a detailed Annual Work Plan. Finance Dept. will issue LOC to SPMC (within 2 weeks of the request from DWSS) based on its quarterly requirement of funds, which will in turn reallocate these funds (LOC) to various DPMCs. DPMCs will be responsible for further release of funds to GPWSCs and allocation o f LOC to DWSS Divisions. The LOC system would be used in the project, except at the GPWSC level, where a separate bank account will be maintained for receipt and payment of project funds. 77. Additionally, a Note on the Workings of the State Public Financial Management (PFM) System in the State (Report No IN, May 2006), identified a number of issues relating to governance and systemic weaknesses. Suitable measures to mitigate the weaknesses that impact project implementation have been agreed to. In addition, GoP has developed and shared an action plan to implement the recommendations contained in the PFM report. 78. Audit: The Comptroller and Auditor General of India (C&AG) through its offices in Punjab will be the external auditor for the project. The C&AG s office will conduct an annual audit of the financial statements of the project covering all sources of funds (Go1 and the Bank). The audit report will be submitted to the Bank within six months of the close of each financial year. The Terms of Reference have been sent to the C&AG for their consent. This will be supplemented by internal audit of the project (for SPMC, DPMC and divisions o f DWSS) and concurrent audit of GPWSCs by independent firms of Chartered Accountants as per TOR consented by the Bank. 79. Disbursement Arrangements: The Bank will finance approx 75 % of GoP s estimated contribution to meet the project expenditure (detailed in Annex 5) subject to a limit of USD 154 million equivalent. Funds from the Bank will be made available to GoP (through the GoI) under the standard arrangements between Go1 and the States. The Bank will provide an initial advance which will be transferred by Go1 to the GoP. Subsequent releases will be on re-imbursement basis, based on Bank s share of eligible project expenditure. This would be determined on the 19

26 basis of the interim expenditure reports (Component wise) from the AG s accounting system and confirmed by annual audited financial statements. 80. Retroactive financing: Up to US$l.SM equivalent will be available for financing eligible project expenditures incurred before Credit signing, but on or after February 1, Procurement: DWSS will carry out the procurement of common infrastructure of MV water supply schemes, community sanitation schemes and goods to be procured under the project. The procurement of works for SV water supply schemes and intra-village works for MV Schemes will be done by GPWSC with technical assistance from DWSS. 82. As DWSS has not carried out any procurement under the Bank funded project so far, an assessment of the procurement capacity in RWSS sector of GoP was carried out and improvements needed to address identified issues have been agreed with GoP. One of the differences is that, GoP procures cement, steel, pipes etc. departmentally through centralized procurement and issues these materials to the contractors. This has been specifically discussed and DWSS has agreed that for the works to be undertaken under the SWAP program the supply of all materials shall be in the bidders scope and that GoP will not supply materials to the contractors. A workshop of contractors was also held during preparation and during which the bidders also preferred this approach. There is also a requirement of training of DWSS officials and that of GP/GPWSC members to handle procurement under the project. 83. In view of the findings in the PFM report for Punjab, prepared by the World Bank and forwarded to GOP on May 19, 2006 a Risk Mitigation Action Plan and an Action Plan for Enhancing Transparency and Accountability have been agreed with GoP (Annex 8A and Annex 11 respectively). 84. To follow common procurement methods, a Procurement Manual has been developed, which addresses the deficiencies observed in the procurement capacity assessment. GoP has opted to carry out procurement of goods and works under the project as per the Bank s Procurement Guidelines, May 2004, and that of Consultancy Services as per Bank s Consultant s Guidelines, May For procurement of Consultancy services, Bank s standard RFP will be used as a base. For NCB procurement, GoP has opted to use the bidding documents agreed by the Bank with Go1 Task Force and as modified from time to time. For procurement following ICB procedures if any, the Bank s SBD will be used as a base. 85. The procurement of works by GPWSC will be in accordance with paragraph 3.17 of Procurement Guidelines. GPWSC will also follow NCB and shopping procedures with technical assistance and guidance from DWSS at various stages. Procurement of consultancy services will be required to access consulting firms / NGOs, agencies like Punjab Remote Sensing agency and Punjab State Council of Science and Technology and individual specialist/resource persons in various project planning and implementation activities such as engineering design and construction management, community mobilization and development, financial and program implementation management, sector policy studies, M&E and MIS, capacity building and training and monitoring & evaluation. 20

27 4. Social 86. Punjab is quite diverse socio-economically.. As much as 30% of the population (highest in an Indian state) belongs to Scheduled Caste. Physically, Punjab has a sizeable proportion of hilly areas with undulating topography. Further, Punjab attracts a significant seasonal migrant labor population which renders its economic resource base quite diverse. The state s borders also serve as international border with Pakistan. As a result, a sizeable number of its villages are classified as border villages (falling within a distance of 16 Km from the Line of Control) whose residents encounter/ encountered a variety of difficulties. Unlike the situation in many states, a large number of Punjab s households possess their own drinking water sources (hand pumps), but quality and cost considerations are compelling them to look for piped water schemes serving the village as a whole. However, the customer base viz. number of households officially drawing water from the Government s PWS is quite low and distribution management is poor. Sullage water disposal is a serious issue in most villages resulting in unhealthy conditions in most communities. 87. Provision of RWSS services through a Government Department, with its characteristically hierarchical and top-down decision making does not promote accountability to the communities. Given this setting, the program identifies the following as significant social issues :(i) ensuring inclusion and enhancing equity, (ii) decentralizing the service delivery underpinned by the principle of subsidiarity; (iii) enabling participation, in particular of women; (iv) improving customer base & demand generation; (v) Community capacity supporthuilding; (vi) change management, enabling transforming the government department into a facilitator ; and (vii) an IEC campaign to reach the stakeholders effectively. 88. Inclusion and Participation: GPs being the focal point, inclusion is viewed &om two different perspectives: inter and intra GP. Given the project s demand-driven self-selection processes, GP prioritization criteria are drawn such as to ensure that GPs encountering greater degree of difficulty are not left out. To promote participation by SC communities, and in hilly, border and flood prone areas, special rules of engagement have been drawn. Once a GP is selected, all households within a GP will have an equal opportunity to participate in, and derive benefit from the project. Beneficiaries will be able to be represented in a village-based institution GPWSC. As the women bear greater responsibility for water supplies, their role needs to be emphasized and supported. Issues related to gender, in general, and women, in particular, will be given special emphasis to ensure full opportunity for the involvement of women at all levels in all activities in the project. Capacity building initiatives will underpin gender and development as one of the major themes. 89. Decentralization and Subsidiarity: The program will aim at decentralizing on a significant scale RWSS service delivery to the GPs and communities. This will be premised on the principle of subsidiarity viz., that a particular decisionl activity will be made/ take place at the lowest most appropriate level. Accordingly, GPWSCs will, in most cases, be the primary management units exercising control over resources and decision making. To ensure ownership and effective participation, every village will be enabled to prepare a PRA/SARAR-based community development plan - GPWSC Plan. This will form an attachment to a Memorandum of Understanding to be signed among GP, GPWSC and District Program Management Cells and will outline role and responsibilities of all the three players along with fund flows/management. 21

28 This will constitute not only the basis for implementation, but would also enable comparative assessments in future. 90. Capacity Support/Buildinq: To provide capacity support to the GPs and GPWSCs, and in turn build their capacity, the program would enlist the services of non-government support organizations (SO) and or Village Support Teams (VSTs). The latter will comprise some development entrepreneurs including GP chairperson, educated youth and other opinion leaders, and complemented by the skills of a Jr. Engineer. The designated functions include: awareness creation, mobilizing communities and assisting the communities in the preparation and implementation of community development plans, conducting andor facilitating in capacity building, liaison with GP and other agencies. Initially, SOsl VSTs will be strengthened to allow them to undertake capacity building of the communities. 91. Change Management: It is recognized that success depends upon the program s effectiveness in bringing a change in thinking and action among the government engineers. A number of capacity building interventions will be designed, piloted and institutionalized to achieve such a change, including observation study tours, stakeholder workshops, and programs covering: management by objectives, leadership and team building, conflict management etc. 92. E: To achieve a change in mindsets and enable capacity building, the program has recruited consultant services which have identified key messages to be communicated and the various tools for improving communications, including, interpersonal tools, and extensive use of print and electronic media. 5. Environmental Assessment Environmental Category: B (Partial Assessment) 93. The EA study indicated the following baseline environmental issues affecting the water supply and sanitation situation in the state: (a) Water Availability: Shallow groundwater has traditionally been the major source of water for drinking, irrigation and industrial uses in Punjab. Owing to large-scale extraction of groundwater, the shallow aquifers in large parts of Punjab are in a state of overexploitation, resulting in a significant ongoing decline in groundwater levels. For a large number of rural households, which are not covered by public water schemes and which are dependent on private sources like the shallow hand-pumps or tube-wells, the declining groundwater levels have adversely affected the water supply. However, the water for public piped water systems is sourced from the deep aquifer layers, ranging in depth from 75m - 335m. This water supply for drinking water from the deep aquifer is considered abundant from the perspective of ensuring long-term source sustainability. About 20% o f the water supply schemes in Punjab are based on canal-water supply, and in some cases the water supply is adversely affected during the periods of canal maintenance shutdown. 22

29 (b) (c) Water Quality: According to DWSS estimates, about 44% of the total 12,278 villages in Punjab suffer from poor water quality conditions, with salinity, nitrate and fluoride being the key problems. Due to its higher depth and relative hydro geological isolation from the shallow aquifer, deep groundwater is expected to be free from the presence of bacteriological/chemical contaminants. Environmental Sanitation: 49% of the rural households in Punjab have household sanitation coverage, and the main factors affecting the status of sanitation in the villages are improper drainage of household wastewater without adequate arrangements for treatment and disposal, effluent overflow from septic tanks and deteriorating water quality in the village ponds. Environmental Management: 94. An environmental management framework (EMF) prescribing the requisite measures to addressing these issues has been developed. These include: 95. Water Availability: Piped water systems will draw water only from deep aquifers. The current and expected future drinking water abstractions from these aquifers are very small compared to the estimated sustainable yield of the deep aquifer, and therefore source sustainability for deep groundwater-based schemes is ensured. In areas where deep aquifers are saline, canal-based schemes will be implemented, and adequate year-round supply will be ensured through storage or other measures. 96. Water Oualitv: Due to its higher depth and relative hydro geological isolation from the shallow aquifer, deep groundwater is expected to be free from the presence of bacteriologicavchernica1 contaminants. Conventional water quality parameters for DWSS s deep groundwater-based schemes indicate acceptable water quality for drinking purposes. However, in view of the traditional emphasis on shallow groundwater quality and due to emerging concerns regarding possible presence of industrial or agricultural chemicals in some locations, the project will commence and support a systematic assessment of deep groundwater quality in the state. Effective and regular disinfection, preventive and corrective maintenance of water distribution systems and regular water quality testing and control will be ensured. 97. Environmental Sanitation and Hygiene: The project will support IEC campaign to create and enhance awareness on hygiene aspects pertaining to hand-washing, water collection, storage and handling practices; and to generate demand for drainage improvement schemes including small-bore sewerdsewerage schemes and village ponds rehabilitation. 23

30 6. Safeguard Policies Safeguard Policies Triggered by the Project Environmental Assessment (OPBP 4.01) Natural Habitats (OPBP 4.04) Pest Management (OP 4.09) Cultural Property (OPN 11.03, being revised as OP 4.11) Involuntary Resettlement (OPBP 4.12) Indigenous Peoples (OPBP 4.10) Forests (OPBP 4.36) Safety of Dams (OPBP 4.37) Projects in Disputed Areas (OPBP 7.60) Projects on International Waterways (OPBP 7.50) Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank-Supported Projects (OPBP 4.00) Yes No X [I [I X [I X [I X [I [I 11 [I [I [I X X X X X X [I X 98. Projects on International Waterways (OP/BP 7.50): Based on a technical consideration of the proposed project interventions, the hydro geological characteristics of the deep aquifers, the state policy on provision of canal water, where needed, for rural water supply schemes, and in the context of the Bank s determination of the applicability of OPBP 7.50 (International Waterways) on a case-by-case basis, it has been determined that the proposed project activities do not trigger OPBP This determination is based upon the provision that no bore-wells will be installed within 1 km of the line demarcating the international border between India and Pakistan. See Annex 10 for detailed information. Safeguards - Social 99. No lands will be acquired involuntarily and hence OP 4.12 is not triggered. So is OP 4.10 as there are no tribal (indigenous peoples) settlements in Punjab. The project, however, does need lands and mechanisms of securing the same are described in Annex Policy Exceptions and Readiness 100. There are no Policy exceptions to be sought from the management Formal GoP approval of the proposed project concept and design including adoption of a SWAP, and the cost recovery and institutional reforms to be implemented under the project, has been accorded in the letter of July 12,2006 from the Chief Secretary, GoP. The Go1 line ministry has endorsed the GoP proposal to adopt a consistent sector policy, fiduciary processes, implementation arrangements and a common M&E systems for all sources of financing including its own Centrally sponsored schemes. M&E indicators and institutional arrangements for M&E have been developed and agreed. The planning phase of the pilot batch covering 90 GPs (estimated budget: US$ 8 million) is nearing completion. Selection of GPs for the first batch of another 500 villages has been initiated. The institutional arrangements have been agreed and the State level Project management Cell is already under operation and all the 19 DPMCs have been set up. A range of Operational manuals - including fiduciary, technical and environmental management have been finalized. The procurement plan for the first 18 months of implementation has been finalized. A range of Government orders have been issued formalizing various institutional and implementation arrangements and these have been included in the PIP. All disclosure requirements have been met. Overall the project meets criteria for readiness for implementation. 24

31 Annex 1: Country and Sector or Program Background INDIA: Punjab Rural Water Supply and Sanitation Project 1. Access to Water Supply and Sanitation: There are two sources of information for assessing the coverage of water and sanitation in Punjab, as in most other states in India: a) household survey based information from the Census of India (using the results reported in Household Tables) and from a Demographic and Health Survey (DHS); and b) facility inventory linked information as from the GoI-led Habitation Survey. While the household surveys provide greater clarity on household access, the habitation survey provides supply side information that has generally been used for planning and find allocation. 2. Based on the supply-side information from the 2003 habitation survey, as illustrated in Table 1, only about 30 percent of the habitations were FC implying that they had water supply levels of at least 40 litres per capita per day (lpcd). Another 37 percent of the total habitations were PC with a level of supply 20 to 40 lpcd. The per capita levels in this survey are arrived at by dividing design supply quantity by total population with potential access rather than those actually served. As the habitation survey considers only public schemes as acceptable sources, it does not capture the access to own private sources of water supply on which a large proportion of the population in Punjab survives. For example, results from 2001 Household surveys reported in Table 2 provide a different picture of very high level of access to water supply within the house (82%), and of these mainly through hand pumps (84%) and some through taps (12%). The 1998 survey showed similar results. However, in many parts of the state, hand pumps do not provide safe and potable water due to increasing pollution of ground water. Thus, it is necessary to expand the reach of piped water supply schemes and to enhance their sustainability. Sanitation, however, lags behind with at least 60 percent not having access to toilets. > Fully covered Partially covered Not covered Number YO Number of YO Number YO Period Habitations of habitations of >. habitati habitatio ons ns 2003 Main habitations Total Number of YO habitations Source: 2003: based on the Habitation Survey by DWSS; 2006: compiled by DWSS using information on additional schemes completed. 25

32 boreholes Other Total 1.1 No facility Total Two recent decisions of the GoP and their related implementation over the past few years have started to introduce some key changes: a) transfer of SV water supply schemes to GPs, and b) curtailing all new recruitment which has resulted in introducing private contracts for operations of all new WS schemes. 5. Sector Financing: Table 3 provides details of main sources of investment financing for new schemes, which mainly include: a) state government's own resources (from MNP), b) Go1 budget allocations through plan schemes (such as ARWSP, Swajadhara and TSC), and c) borrowing by GoP f'rom NABRAD under its Infrastructure Rural Development Fund (IRDF). In recent years GoP has significantly increased investments in the sector with the annual outlays reaching nearly Rs.200 Crore over the past two years. RWSS investments are at times also mobilized through other sources at district level using general rural development type of funds, these are not reported to be significant. 6. Funding of operation and maintenance (O&M) of rural water supply is meant to be done mainly through user charges, and GoP has introduced and implemented regular revision of user charges. Despite that, the total estimated billing levels are only about 25 percent of total O&M expenditure of about Rs.770 million per annum for the state as a whole. This is due to low levels of household connections in existing public schemes, very high salaries for the operational staff 26

33 in the DWSS, as well as the lack of scheme level tariff determination. With the transfer of SV schemes to GPs, however, this situation is likely to change. Source: Compiled by the D WSS based on internal records. 7. Key Sector Issues: Current institutional and financing arrangements present constraints and challenges in achieving service improvements and ensure long-term sustainability. In addition there are some critical issues in environmental sanitation at the village level that affect water quality and public health. Scheme Operations and Sustainability Issues: Poor Water Supply coverage: This is a two fold problem: (a) some 30 % of the habitations do not have access to public water system at all and are consuming unsafe drinking water from private shallow bore wells with hand pumps, and (b) the remaining 70 % villages having piped water system suffer from poor customer base with only 25 % of the households drawing water from these systems - mainly due to inadequate supply capacity and/ or poor distribution management. Poor communitv sanitation standards: most villages in Punjab have road side open drains provided to cany household sullage water to village ponds outside the village for disposal. Despite low quantities of water supply from public water systems, these sullage drains carry significant waste water quantities due to waste water generated from high level of private water sources used by households. Further, a good number of households have toilets with septic tanks and its highly charged effluents (high BOD and low DO levels) is let out into these open drains creating cess pools in the drains and disposal ponds. All this coupled with poor regime of drain cleaning is contributing to poor environmental conditions in the village and a serious health hazard. Poor O&M management standards: low distribution pressures, very short durations of supply (about 2 hrs per day), highly skewed distribution of available water amongst the households, leakages and wastages, erratic power supply, inadequate O&M budget to run stand by diesel generating sets, and a large number of illegal private connections, are all resulting into low O&M standards and poor customer satisfaction. 27

34 (d) (e) Poor O&M cost recovery: Despite a reasonable tariff structure, the Statewide O&M cost recovery is only about 20%. On one side the O&M expenditures are high due to high salary levels of DWSS operating staff, high power tariff and high number of operating staff per 1000 connections. On the other side, revenue is paid only by the 10% of the households who have private connections, while those drawing water from public stand posts do not pay any water charges at all (though official tariff is Rs.15 / month per household for PSP users). Poor accountability and incentive structures: The DWSS at the policy and higher management level rarely, if at all, are demanding accountability for poor quality service at the household level or for poor cost recovery. The attention of DWSS higher level management is focused on new constructions and capital expenditures and gets itself involved in review, approval and clearances of routine scheme engineering designs and bid award decisions of values as small as Rs.2 lakhs (US$4500). Thus there is a need for the higher level management (SE and above) to delegate approvals of routine designs, tenders and works contract management to the lower levels, and focus its own attention on monitoring and improving the quality of service delivery on the ground, and ensuring customer satisfaction. 9. Institutional and Sector Finance Issues: (f) (g) (h) Lack of separation of different roles: For delivery of rural water supply services the DWSS currently combines all hctions and roles ranging from policy/ planning and investment decisions, regulation, monitoring, design/ implementation and operation/ maintenance of water supply schemes - without adequate separation within the organizational arrangements. This makes it difficult to have effective monitoring and regulation in provision and operations. Limited decentralization and local capacities: Despite their professed role, GPs currently play only a limited role in provision of RWSS. There has also been limited success in implementing Swajaldhara with very low capacity of PMs and low GoP Priority at policy level to support decentralization. At the same time, there are some good examples from the field with better results that need to be drawn upon in scaling up and building panchayat capacity. Also, while the GoP has taken a major policy decision to transfer all SV schemes to GPs, its fill implementation needs to be accelerated and backed by capacity building support. Fragmented sector finances: Current system of financing through a number of different sources results in simultaneous implementation with different and conflicting rules through different programs in neighboring areas. This leads to different programs undermining each other, adversely affecting demand driven approaches requiring cost sharing by users (as in Swajaldhara Schemes). 28

35 (i) Highly centralized decision-making and approvals: The current process of design approvals is centralized with almost all technical approvals reaching the office of chief engineers. Current practices result in a majority of decisions being made in a very centralized manner at the headquarters. This is true even for smaller SV schemes and it affects efficiency in the use of resources. This process needs to be decentralized to DWSS division offices and GPs to improve efficiency and avoid undue time delays. 6) Weak monitoring systems: On paper there is monitoring of inputs, outputs and outcomes through different systems. However, input and output monitoring is fiagmented by sources of finance making it difficult to have an aggregated state level sector assessment. Further, a lack of reliable household level assessment of outcomes makes it difficult to realistically assess whether sector goals and targets are being achieved. While there is some follow up on the implementation of new schemes, focus on financial aspects of O&M of water supply schemes is generally missing and the scheme performance is never monitored. Recent studies on performance monitoring conducted by DWSS do suggest that such efforts on a regular basis to assess performance and sustainability would be very useful in identifying measures to improve service delivery. 29

36 Annex 2: Major related Projects Financed by the Bank and/or other Agencies INDIA: Punjab Rural Water Supply and Sanitation Project Sector Issue Project Latest Supervision (PSR) Ratings (Bank-financed projects only) Implementation Development Progress (IP) Objective (DO) Second Maharashtra RWSS (ongoing) Kerala RWSS (ongoing) MS S MS S Second Kamataka RWSS (ongoing) S S Uttaranchal RWSS (ongoing) NIA NIA Initiatives Project Karnataka RWSS (closed) Uttar Pradesh and Uttaranchal RWSS (closed) Maharashtra RWSS (Closed) AP DPIP (ongoing) Raj asthan DPIP (ongoing) I OED Rating - Satisfactory OED Rating - Satisfactory OED Rating - Marginally Unsatisfactory S S S S Watershed Development i Urban Water Supply and Sanitation Madhya Pradesh DPIP (ongoing) S S Karnataka Watershed (ongoing) Uttaranchal Watershed (ongoing) Madras WSS (closed) Tamil Nadu WSS (closed) Kerala WSS (closed) Gujarat WSS (closed) Hyderabad WSS (closed) Kamataka Urban Water Sector Improvement (ongoing) S S S S OED Rating - Satisfactory OED Rating - Satisfactory OED Rating - Marginally Satisfactory OED Rating - Marginally Satisfactory OED Rating - Satisfactory S MS DFID DANIDA The Netherlands Maharashtra RWSS State projects in Karnataka, Orissa, Tamil Nadu, Kerala State projects in Gujarat, Up, AP, Karnataka, Kerala Closed Closed Closed 30

37 Annex 3: Results Framework and Monitoring INDIA: Punjab Rural Water Supply and Sanitation Project 1. Monitoring and Results Framework PDO Assisting GoP in increasing access of rural communities to improved and sustainable RWSS services Results Framework Matrix I Outcome Indicators i) % of habitations in the rural areas of the state (and each district) who are FC ii) % of rural households in the state (and each district) with access to safe and adequate water throughout the year iii) % of participating habitations with satisfactorily performing community sanitation Use of outcome Information Assess achievement o f targets and determine whether program strategy and implementation plans are working Intermediate Results I Results Indicators for Each Component Component One: Progr rn Management Capacity of key sector iv) Participating habitations for new schemes institutions ( 9 s wing under SWAP as a % of total habitations with a NC of DWSS, SPMC and or PC status (cumulative habitations covered) DPMC) and other v) Participating habitations for performance Support Organizations improvements of existing SVIMV schemes as a % built in facilitating of total habitations planned to be covered demand responsive and (cumulative habitations covered) decentralized service vi) % of resources disbursed to GPs that are delivery in Punjab utilized in time Use of Results Monitoring Low levels would indicate the need to review projected demand, demand mobilization strategy, funds flow, procurement and expenditure approval procedures Capacity o f GPs and GPWSCs built in RWS service delivery Component Three: Infr Water supply and sanitation schemes built I upgraded at appropriate construction quality standards and with minimal cost and time overruns vii) % of participating GPWSCs with hgh or medium rating for operational sustainability of their schemes viii) % of participating GPWSCs meeting the full O&M costs through user charges ix) % of participating GPWSCs of MV schemes with a billing to collection ratio of >90% for bulk charges gtructure Development x) % of water schemes under SWAP completed withm planned time and costs xi) YO of participating GPWSCs achieving planned service improvements in existing schemes under SWAP measured 6 months after completion xii) %of new community sanitation schemes completed within planned time and costs Assess prospects for sustainability and whether program design is working as intended. Low levels would indicate need to strengthen capacity support mechanisms and IEC activities for GPs/GPWSCs during planning, implementation ando&mphases Low levels would indicate need to assess adequacy o f design, procurement and construction practices 2. Arrangements for Results Monitoring. The following table identifies frequency and institutional responsibilities for data collection and reporting. Performance on outcomes and intermediate results indicators would be included in annual Program Management Reports prepared for the SWAP Program. 31

38 3. The main responsibility for monitoring will be with SPMC and DPMC. A Program Operations Management Information System (POMIS) is being developed which will be aligned with the Financial Management Reporting system. POMIS will include: for each quarter achievements of physical output targets and financial utilization against planned annual budget for each subcomponent, as well as annually outcomes and component-wise results indicators. 4. For other outcome and intermediate results the main data collection tools, as also illustrated in the following table, include: Habitation survey (indicator 1): DWSS had carried out a habitation survey as per the Go1 guidelines in This will be updated towards the end of the program (year 5) to measure achievements and to provide a baseline for the next Program. It will be managed by the SPMC and DPMCs. Necessary additions will be made to the Habitation Survey to also include community sanitation. Sample household survey for access to and use of rural water supply services (indicator 2): In order to capture the household level information, a sample household survey will be carried out with appropriate sampling plan to ensure state and district estimates. SPMC will carry out a base line survey in the first year of the program and repeat the survey at mid-tern (year 3) and at program end (year 6) by outsourcing to independent research/ consultancy organizations. This will capture access and use of water for domestic purposes and household satisfaction. GP WSC Habitation annual checklist and sustainability assessment (indicators 3, 7, 8, and II): A simple checklist has been developed for habitation level information for sustainability assessment for all participating habitations to assess operational sustainability for water supply schemes and satisfactory performance for sanitation schemes. This will be done once a year to generate the relevant intermediate results. The quantitative information will be combined with PRA techniques for a rapid sustainability assessment in a smaller sample of habitations in each district. GPWSC Report on SV schemes (C2/C3) (indicators 4, 5, 6, IO and 12): These reports will be prepared quarterly and annually. DWSS Division Office MV Schemes Report (indicators 4, 5, 6, 9, 10 and 12): These reports will be prepared quarterly and annually. 32

39 I4 e.r e i.r c e 5 c m i P i b c U I : e er b a m W m m m N m 0 m m N 0 m r- N 0 b m.- C c z"

40 Annex 4: Detailed Project Description INDIA: Punjab Rural Water Supply and Sanitation Project 1. The SWAP Program will have three main components: Component A: Program Management, Component B: Community Development and; Component C: Infrastructure Building. Component A: Program Management (US$31.4 M) 2. Sub Component Al, Institutional costs (US$19.8M): This subcomponent will finance the costs of setting up and operating the state level and district level Project Management Cells (SPMC and 19 DPMCs). The investment costs will include procurement of computers, office equipment and vehicles and a range of consultancies for technical assistance (such as for program management, M&E, IEC, capacity building, audit, construction quality monitoring). Recurring costs will include individual consultant staff salaries, all staff travel costs, and SPMC and DMPC offices administrative and operating costs. Costs of DWSS head offices, circles, divisions etc and staff of other government departments supporting the project activities will not be financed from the program funds. 3. SPMC and DPMCs are not mandated for direct implementation and service delivery, but would act as facilitating and support units to Operations wing of DWSS, GPs and GPWSCs. SPMC and DPMC s composition, functions and operational procedures have been agreed as indicated in the PIP. All these offices will be equipped with computers, office facilities, and modem communication facilities and the professional staff would travel at least about 50% of the time every month to the project GPs and villages. GoP would ensure that status of SPMC and DPMCs as approving (with SWSM and DWSCs), facilitating and monitoring units is not compromised and only those decisions are referred to GoP which do not fall in SPMC s authority and mandate. 4. Subcomponent A2: Monitoring and Evaluation (US4.3 M): This subcomponent will finance investment and operating costs of procurement of goods, equipment and consultancies for the Program s M&E system. The main activities through this subcomponent will include: (i) the initial development of a management information system and its operations to support regular program implementation monitoring; (ii) two specific outcome monitoring surveys - household surveys for state wide coverage and outcome assessments and statewide habitation surveys; (iii) sustainability monitoring at habitation level using both community monitoring and external sustainability assessment techniques; (iv) documentation of good practices and periodic state and district level sector performance reports; (v) best GPWSC awards on the basis of regular performance monitoring; (vi) setting up and regular operations of the water quality surveillance systems 5. The sub-component will help DWSS to set up sector information, M&E system focusing both on program implementation monitoring as well as strategic monitoring to review program performance in envisaged outcomes related to the key development objectives. A monitoring and evaluation fi-amework and strategy has been prepared along with a set of golden indicators. 34

41 6. Water Oualitv Monitoring (US $2.2 million): The project will finance investment cost of goods and equipment for strengthening the existing laboratories and also supplying field testing kits to GPs / GPWSCs. The recumng cost of water quality testing done through outsourcing (that cannot be done by DWSS and outsourced) will be financed from the program. The cost of developing computerized water quality mapping and its regular updating will also be financed from the Program. The Program will carry out water quality testing of 100,000 samples in the state, over the project period. The testing will be more rigorous and regular in known water quality problem areas (about 20% habitations) and by purposive sampling in rest of the habitations. A detailed water quality monitoring and surveillance program has been designed - which will be managed by SPMC. Responsibility for ensuring supply of potable water to its consumers will rest with the GPs/ GPWSCs for all SV water supply schemes and with DWSS for MV schemes. SPMC will organize and manage independent water quality surveillance program through private sector consultants/ laboratories. It is expected that this rigorous monitoring will ensure that drinking water of the required quality alone will be supplied to the rural population of the state. 7. Subcomponent A3: Capacity Building (US$4.0 M): This sub-component will finance the costs of conducting 1,353 training programs designed under 44 modules: 6-Apex; 8- Strategic; 16-Intermediary; and 14 Grassroots Programs. The costs will mainly cover consultancy fees for resource institutions and resource persons; the cost of designing and multiplying training materials, and logistical costs of conducting the training programs (infrastructure rentals, travel and subsistence for trainees, etc.). Overall, the project will capacitate directly over 30,000 persons, a majority of them will be athelow the district level. This excludes capacity building of the village communities, wherein another 60,000 persons will be capacitated. 8. Capacity building (CB) needs of each stakeholder group have been identified based on learning requirements essential for performing their designated functions. Essentially, this will enhance / develop knowledge, skills and management practices such as to bring in a change and capacitate different stakeholders at different levels. e Apex level -- CB will aim at creating an enabling environment for formalizing the project's key principles and the targeted audience include administrators, policy makers, e e e political representatives and media. Strategic level -- target includes chiefly SPMC and other associated government departments who are expected to promote and facilitate in campaigning and mainstreaming the reform approach. Intermediary/Program level stakeholders comprise DPMC, DWSS, and consultants and Support organizations, who are to provide technical, social and management assistance to grassroots level agencies. Grassroots/project level target encompass GPs and user groups who will be capacitated such as to enable translate the project's approach into action -- designing, constructing, operating and managing, and monitoring the schemes. 9. The Capacity Building strategy and details of the specific programs have been developed and a detailed CB plan has also been prepared. Key themes include: Change Management, Decentralization, Public-Private Sector Partnerships, Gender, Equity & Empowerment, and Technological Excellence. The main training areas include: (i) Change Management comprising team building, staff retreats, cross-visits and study tours and orientation programs at all levels; 35

42 (ii) Knowledge enhancement as well as Decision Making and Best Practice Management programs at the village level; (iii) Engineering design and construction practices for engineers and consultants; (iv) Procurement and Contract Management, enabling better handling of SOs, consultants and contractors for project staff and GPWSC members; (v) Financial management covering book keeping, accounting and audit; (vi) computerized financial management system, MIS and M&E; and (vii) O&M management to ensure sustainability and equitable distribution for GPWSCs and DWSS Engineers. Specific programs have been designed for technical and institutional aspects of MV water supply schemes. 10. Guiding Principles- All programs have been designed on the following principles: (a) Participatory and field-based. Lecture mode will be as minimum as possible; (b) Ample opportunities will be provided for learning and sharing; (c) Attention will be paid towards interpersonal communication/ behavioral aspects such as motivation, leadership, team building, conflict resolution, time management, and stress management. (d) Virtues like empathy for the poor, SC/ST and women as well as mutual respect, learning to unlearn, careful observations, mentoring and attentive listening will be emphasized in all the programs; and (e) Special programs to address issues related to gender, Scheduled Castes and water quality affected areas. 11. Subcomponent A4: Information, Education and Communication (IEC) Campaign. (US$2.0 M): The main aim of this subcomponent is to enable the project to reach effectively, and bring in a change among the stakeholders at different levels - state, district, block and village. The campaign will help in accomplishing three purposes. One, at the apex/ state level, to ensure a buy-in from the public, in general, and in particular, from the policy makers and administrators. At the intermediary (district/ block) level this will help in bringing a change in management by the staff of the DWSS. Grassroots purposes include: disseminating the project rules and regulations, in general, and in particular, generating a demand for potable water supplies and sanitation. For this purpose, DWSS undertook a needs assessment study which together with media analysis, has enabled identifylng key messages to be communicated and a strategy to communicate the same. IEC will be implemented as a social marketing program and specific activities to be funded include: (i) Establishment of a Media Resource Group, essentially involving embedding media and other development professionals into the project; (ii) Designing, printing and disseminating across the state a Community Newsletter; (iii) Creating a Brand- Equity through high outdoor visibility; (iv) Designing and disseminating communication materials through mass media - print, folk programs and through electronic media such as radio, TV, cable network etc; and (v) Designing and adopting inter personal materials - brochure, flip charts, manuals, stickers. 12. The village and community level sanitation and hygiene promotion (SHP) will be an integral part of the larger lec campaign and would aim at promoting a total health perspective by achieving sustainable and equitable health and hygiene benefits across the community through improvements in water and environmental sanitation services. For this, efforts will be made at: (i) enhancing awareness about the prevalence of water pollution, its consequences and possible mitigatory measures; (ii) fostering understanding of complementarities between water, sanitation and health; (iii) increasing awareness of the benefits of improved WS&S facilities; (iv) creating a demand for safe water and sanitation; and (v) strengthening local capacities for a selfsustaining and gender sensitive sanitation and hygiene promotion program. 36

43 13. Subcomponent A5: Sector Development Initiatives (US$1.3 M): This subcomponent will support the development and pilot testing of new initiatives as they become relevant during the medium-term program period. Initially, some initiatives have been identified including: (i) strengthening the ongoing DWSS initiative for engaging private sector contractors for managing WS operations; (ii) development of district level water quality and resource maps; and (iii) development of base topographical information on all participating habitations using total station and engineering surveys. Component B: Community Development Support: (US$24.4 M) 14. This sub-component will mainly finance consultancy contract fees of the Support Organizations (personnel, other resources, travel, documentation, etc) towards their support services to DWSS, GPWSCs and project communities and the incremental operating cost of DWSS staff (travel and incidental expenses but not their salaries and allowances) for providing support to village communities. The DWSS staff will work with Village Support Teams and / or SOs to provide single window assistance to GPWSCs and communities in technical, financial and institutional aspects. Support Organizations equipped with social mobilization skills will provide support in operationalizing the agreed participation framework. Roles and responsibilities of the key stakeholders (GPWSCs, SOs and DWSS), hnds flow and procurement procedures will be captured in a tripartite agreement. In view of increasing work load, the DPMCs/ DWSS OPs wing will recruit engineering design consultants (firms/ individuals) to assist GPWSCs and DWSS OPs wing in engineering design and construction supervision aspects, on as needed basis. 15. The main activities of community development support will include: awareness creation, community mobilization, preparing engineering designs for technology options, assisting the GPs and GPWSCs to make informed decisions, assisting in procurement, construction supervision and contract management and in management of project finds. DWSS staff and SOs themselves will be capacitated initially to enable them to provide capacity support to their clients. Towards ensuring inclusion and participation of poorer GPs, a selection criterion with high weightage to SC population and the other special conditions has been agreed. The inclusion at village level will be ensured by establishing GPWSCs, vehicles of community participation, bye-laws of which provide for participation of all the sub-groups. The different sub-components are described below: 16. Subcomponent B1 (US$14.3 M): This sub component will mainly finance the contract fees of NGOs/ SOs providing village level social development and management support needed for implementing Components C1, C2 and C3. This will be done by Village Support Teams or by recruiting SOs to assist and work with the DWSS engineering staff in community mobilization and organization type of activities including: small workshops, focus group discussions, information campaigns, and participatory community action planning for forming the GPWSC and supporting its effective participation in the planning phase of the scheme cycle. For component C2, the support activities will be of shorter duration as the length of the scheme cycle would be less for already finctioning schemes. 37

44 17. Sub Component B2 (US$10.1 M): This sub component will finance consultant contract costs of engineering design / construction supervision support needed (through consultants) for implementing components C1, C2 and C3. Agencies like Punjab State council for Science and Technology will be recruited to prepare engineering designs for community sanitation schemes. Component C: Infrastructure Development: (US$205.6 M) 18. This component will finance works, goods and equipment for constructiod up gradation of water supply schemes in some 3000 NC/ PC habitations, rehabilitation and transfer of intravillage water systems in some 1600 habitations, and a few pilot projects of Reverse Osmosis, defluoridation, and portable water treatment plants. It will also finance works, goods and equipment for sullage drainage and ponds rehabilitation in some 1000 habitations and provision of underground small bore sewers / sewerage systems in 100 habitations. The three main subcomponents are described below: 19. Subcomponent C1: ConstructionKJpgrading of Water Supply Schemes in NC/PC habitations (US$131.7 M): GoP aims to achieve GoI s objective of ensuring that all habitations in the state will reach a FC status by Thus, this sub component will finance water supply schemes (new/ upgrading) for the remaining 3000 NC/ PC habitations in Punjab. 20. Traditionally, DWSS provides only piped water systems with two technology options: Deep tube well based schemes drawing upon ground water sources and canal based schemes drawing surface water from an extensive canal network - especially in the districts of Bhatinda, Mansa and Faridkot where the ground water is heavily polluted with high TDS, fluorides and nitrates. Both technology options support either SV schemes or MV schemes when local water sources are not of acceptable quality or do not guarantee adequate quantity. However, MV schemes in Punjab generally cover only about 2-4 habitations and are small enough for local management by communities and GPs. 21. The SV tubewell based schemes will typically have a deep tubewell fitted with a submersible pump, a pump house with disinfection unit, rising mains of short length, Overhead service Reservoirs (OHSRs) and small network of PVC distribution pipes running along the village roads. The water delivery points are either house service connections (with or without consumer meters) provided based on demand and public stand posts for serving the needs of the poor households that cannot afford installation and monthly tariff of house service connections. Water from deep tube wells being safe, only treatment provided is disinfection with chlorination units or recently with silver ionization units. In view of the erratic power supply fi-om the grid, standby diesel generating sets will be provided if their investment costs are fully financed by the GP/ communities - especially because of their higher operating expenditures that will have to be subsequently borne by the users. 22. The MV tubewell based schemes will have similar scheme components, except that the tubewell and the OHSR will distribute water to 3-4 adjacent habitations- with independent feeder mains to each habitation where needed for equitable distribution. The canal based schemes will consist of an outlet from the canal, a large water storage tank to hold water during canal closure periods (about 2 weeks), a filtration plant and a clear water reservoir. Water from the clear water reservoirs is pumped into a common OHSR and distributed to one or more habitations - leading to formation of a canal based SV or canal based MV scheme. 38

45 23. About 80% of habitations are expected to have ground water as source (tube well) and remaining 20% would have surface water as source (Canals). Of the total 3000 habitations, some 1000 habitations are expected to be covered with SV schemes and the rest requiring MV schemes. In some districts (such as Bhatinda, Mansa and Faridkot) water supply schemes will need to rely on canals as the only source for piped water schemes (about 600 habitations out of total 3000 habitations). Selection of schemes will be done in a demand responsive manner at the district level with priority for the NC, PC and quality affected habitations. Of the 3000 NCPC habitations, schemes for some 1000 habitations are expected to be financed from GO1 funding and the rest from Bank financed stream. 24. Subcomponent C2: Performance Improvements in Existing Schemes (US$54.9 M): Under the demand responsive approach the main focus is on ensuring the principle of subsidiarity by having the management of all SV schemes and intra-village components of MV schemes transferred to the GPWSCs. In order to ensure sustained improvements in service quality (quantity and quality of water supply and its equitable distribution across all households) this subcomponent focuses on supporting the transfer process through investments for rejuvenation and service improvements. Each district has identified specific schemes and preliminary investment requirements. It is expected that about 1600 habitations will be covered under both SV & MV schemes, benefiting another 2.0 million population. 25. Specific activities to be funded include: (i) Rejuvenation (rehabilitation) and service improvements (such as metering, zoning) measures linked to the transfer of SV schemes to GPs; (ii) Rejuvenation (rehabilitation) and service improvements (such as metering, zoning) measures linked to the transfer of intra-village component of the MV schemes to GPs; (iii) Provision of bulk water meters in habitations served by all the existing MV schemes; (iv) A district level contingency fund to be managed by the DPMCs to meet any emergency requirements in GPWSC or DWSS managed schemes. All the above activities will be covered under Component C2 (a), estimated to cost about US$42.9 M. 26. Sub component C 2 (b) will finance installation of defluoridization and reverse osmosis plants and portable water treatment plants estimated to cost US $ 12 M. Financing of this sub component will be subject to condition of satisfactory implementation and operation of these schemes in about 5 habitations for each technology option over the first two years of the project. 27. Subcomponent C3: Community Sanitation (US$ 19.0 M): This sub component will finance works, goods and equipment for construction/ up-gradation of village drains and ponds rehabilitation in some 1000 habitations. In addition, it will finance works, goods and equipment for construction of small bore sewer/ sewerage schemes on a pilot basis in about 100 habitations. Since there is not sufficient expertise and experience in DWSS for such works, this sub component financing will be subject to condition of satisfactory implementation and operation of these schemes in about 5 habitations for each technology option over the first two years of the project 28. Under the proposed SWAP Program, the investment support to environmental sanitation component will only be for community sanitation schemes, since the household sanitation is already being implemented by GoP s Rural development department with financial assistance from GoI s Centrally sponsored program (Total Sanitation Campaign). 39

46 29. The possible options for village drainage are: (i) Open drainage: provision of open drains collecting only sullage water (except septic tanks effluent) without any treatment (not needed), (ii) Conventional underground drainage /sewerage system with sewers and manholes connected to both toilets and bathrooms of houses and led off to a treatment plant for disposal (iii) Small bore sewerage system which is designed to receive only the liquid portion of household wastewater- connected to the septic tank or interception chamber which will carry effluent from septic tank/ interception chamber (which retains solids) and led off to a treatment plant for disposal. 30. DWSS will work out cost effective versions of small bore sewers and conventional sewerage schemes appropriate for implementation in selected villages. In either proposals the design norms will be: (i) to use most economical pipe material either SWG, RCC, PVC or HDPE with no restriction of minimum size since smaller size of sewers will result in higher velocities and will prevent silting, (ii) treatment options to use existing ponds where available, (iii) not to include any household facility such as toilet, septic tank or interception chamber (which will need to be financed from households). DWSS will implement sewerage schemes in such villages which have at least 70% coverage of household toilets and disposal of sewage will flow by gravity. 31. Proposed MTP and SWAP Program: The component wise investment needs of the Proposed SWAP program and the allocations available for ongoing schemes included in the MTP are summarized in the next page. 40

47 Table : Medium Term Sector Program : Estimated Investment Requirement In US $ Million A B Component Total YO to total Program Management A1 Institutional costs (SPMC, DPMC) % A2 Monitoring and Evaluation % A3 Capacity Building % A4 ProgramIEC % A5 Sector development initiatives % Total- ProgramManagement % Community Development Support B 1 Community SUPPOI? - SOS % B2 Engineering Support % Total- CommunityDev. Support % C Infrastructure Building C1 Constructioflp gradation of Water Supply Schemes in NCPC habitations a NC Habitations b PC habitations C2 Performance improvements in WS (a) Performance improvement in existing schemes and transfer % 28% 8% 15% iv. Stabilizing transfer of SV schemes to GPs Transfer of MV intra-village components Bulk Metering in MV schemes District level contingency fund o o % 6% 1% 1% (b) Pilot Testing of New Technologies yo C3 Community Sanitation yo a Constructioflp-gradation of village drains & Ponds rkhabilitation % b Small bore sewerdsewerage % schemes Total - Infiastructure Buildinn % TOTAL - SWAP PROGRAM % Outside SWAP Program - Committed % schemes TOTAL - GoP Medium Term Sector % Program Notes: Costs include price and physical contingencies Totals may not add due to rounding 41

48 Annex 5: Project Costs INDIA: Punjab Rural Water Supply and Sanitation Project Table 1: Proposed SWAP Program : Cost Estimate In US $ Million Component-wise Base Costs Total SWAP Program A Program Management A1 Institutional costs (SPMC, DPMC) 18.0 A2 Monitoring and Evaluation 3.9 A3 Capacity Building 3.7 A4 ProgramIEC 1.9 A5 Sector development initiatives 1.2 Total - Program Management 28.7 B Community Development Support B 1 Community Support -SOs 13.6 B2 Engineering Support 8.5 Total - Community Dev. Support 22. I C Infrastructure Building C1 ConstructionAJp-gradation of Water Supply Schemes in NCPC habitations C2 Performance improvements in WS (a) Performance improvement in existing schemes and transfer (b) Pilot Testing of New Technologies C3 Community Sanitation 16.2 Total - Infastructure Building Base Costs - Total Program I Price Contingencies 24.9 Physical Contingencies 9.8 Total Project Costs Interest during construction 0.0 Front-end Fee 0.0 Total Financing Required Note: Totals may not add due to rounding 42

49 Table 2: Proposed SWAP Program: Component-wise Sources of Funds A Program Management A1 A2 A3 A4 A5 Component Total YO to Sources of funds In US $ Million GOI yo GOP % Comm yo Program SWAP GO1 GOP unity Comm Institutional costs (SPMC, DPMC) Monitoring and Evaluation Capacity Building Program IEC Sector development initiatives Total - Program Management B Community Development Support B 1 Community SUPPOI? - SOS B2 Engineering Support Total - Community Dev. Support C Infrastructure Building C1 ConstructionAJp-gradation of Water Supply Schemes in NC/PC habitations C2 Performance improvements in WS a) Performance improvement in existing schemes and transfer b) Pilot Testing of New o technologies C3 Community Sanitation Total - Infastructure Building TOTAL - SWAP PROGRAM Notes: *Bank will reimburse GoPS share of sector expenditure under the SWAP program up to the ceiling of US$154 M. Totals may not add due to rounding Table 3: Proposed SWAP Program: Expenditure Profile by Financiers In US $ Million Source of Funding Total YO to total Government of India 1.o % Government of Punjab (own fimds) % World Bank % community o % Total % Notes: *Bank will reimburse GoP s share of sector expenditure under the SWAP program upto the ceiling of US$I 54 M. Totals may not add due to rounding 43

50 Organization and staffing: Annex 6: Implementation Arrangements INDIA: Punjab Rural Water Supply and Sanitation Project 1. The institutional and Implementation arrangements have been presented in Section C2. The organograms of the overall institutional arrangements and that of the SPMC and DPMC are in Attachment 6 A. Further details are in the PIP. Overall Implementation Schedule: 2. The project will be launched from January 01, 2007 and close on March 31, However, the expenditures incurred by GoP during its current fiscal year (April 2006 to March 2007) adopting the new sector policy and implementation arrangements (mainly the pilot batch implementation) will be included in the proposed SWAP program. The overall implementation schedule over these six years is presented in one page Bar Chart in Attachment 6 B. Further details are in the PIP. Village Selection Criteria and Process: 3. Process: The prioritization / selection process will be initiated by SPMC/ DMPCs with support from OPs Wing of DWSS, District Administration and NGOs in each district through an awareness campaign using both mass media as well as village to village canvassing. An information pamphlet will be developed and disseminated to inform and encourage communities to submit applications for project support. The pamphlet will include a concise description of the project, rules and regulations governing participation, instructions on how to apply, and a sample application template to be filled in by the applicant. Following this, the project will invite applications from interested GPs. Applications will be called for once a year, before the commencement of each batch. Village level applications are analyzed at the district level and submitted to the state. District recommendations are collated and reviewed at the state level. 4. Village Selection: Technically, all the villages that are willing to adhere to the stipulated rules and regulations are eligible to participate in the program (except GPs where schemes are currently ongoing or were completed during the past 3 years will not be eligible). To ensure inclusion and targeting of the most needy and disadvantaged population - a transparent selection and prioritization criteria has been developed and agreed. The GP applications received will be ranked in a descending order starting with GPs scoring maximum marks at the top. The Lists will be prepared separately for each district and for each batch. Depending on the Program implementing capacity for each batch and district a pre determined number of villages at the top of the list will be selected. Applicant GPs will be prioritized based on marks assigned to: present levels of water supply (NCPC/FC); water quality affected habitations; extent of scheduled caste population; and past track record in terms of resource base (tax collection / revenue generation) as well as development activities. Higher marks are assigned for NC/ PC villages and villages having higher SC population and villages located in hilly terrain/ flood prone zones and those along the international border. Prioritization and selection will be done separately for NCPC and FC categories respectively in the ratio of 70:30. Further, the population identified as 44

51 disadvantaged will contribute less to the capital cost, thus enabling their participation. The details of scoring and ranking criteria are in Attachment 6 C. Project Appraisal Criteria 5. The schemes prepared by GPWSCI DWSS OPs wing will go through an independent appraisal and approval by committees in DPMC and by DWSC. A detailed list of Appraisal criteria and check list have been developed and agreed. These include compliance with project rules, techno economic feasibility and compliance with environmental and social safeguard as well as fiduciary requirement. Proposals for capacity building arrangements as well arrangements for post implementation O&M arrangements will also be reviewed. Towards ensuring optimal designs, water resources management and intra- as well as inter- village equity, capital cost ceiling norms will be adopted. For water supply, it will be Rs.15,000 per household. For Community sanitation schemes, the same will be firmed up after getting a first hand experience of the piloting. User Cost Sharing: 6. Rules for user cost sharing towards investment and O&M costs have been agreed and the details are in Attachment 6 D and in the PIP. Village Level Implementation Arrangements 7. - GP will be the grassroots institution for the program implementation. However, as the GP consists of only elected representatives and that it has other responsibilities too, a special purpose vehicle, a Water and Sanitation Committee of the GP (GPWSC) will be set up. The advantages of this are: one, it provides for participation of non-elected representatives and two, it enables an exclusive and dedicated attention to RWSS. However, the role and responsibility of a GPWSC depends upon the extent of habitation coverage. In the case of a scheme (s) developed for an intra-panchayat habitations, a Committee, GPWSC, will be the primary management unit and will be responsible for planning, designing, procurement, construction and O&M as well as management of funds for all Program habitations. 8. GPWSC shall be set up as a sub-committee under the Section 25 o f the Punjab Panchayat Raj Act and provides for broad based membership, both elected and non-elected. The GP s Sarpanch will be the Chairperson of the GPWSC and will have members depending upon the village population, with a maximum of 4 elected representatives. One third of the members shall be women and a fifth from Scheduled Castel Other Backward Caste. The non-elected members will be chosen from Gram Sabha. The Junior Engineer of the DWSS in-charge of the village will be the technical member cum convener of the GPWSC. 9. GoP has prepared a model byelaw which makes explicit the role and responsibilities as well as functions and powers of GPWSC as well as the linkages with GP and other institutions. Essentially, a participating GP will set up the committee through a resolution and empower them to perform RWSS functions on its behalf. The details of GPWSC composition, functions and powers are elaborated in the PIP. 45

52 10. Scheme Level Committee: In the case of MV water supply schemes, where in the scheme spreads across several GPs and requires higher engineering skills, it is thought fit to establish an apex body, Scheme Level Committee (SLC), comprising representatives of participating GPWSCs, to address issues related to the common facility viz., inter-village service delivery. It is proposed that the DWSS, SLC and GPWSCs will be the partners in a MV water supply schemes. DWSS will be responsible for overall planning; construction of common facility as well as providing technical assistance to SLC for its O&M. GPWSCs will manage intra-village activities. SLC will oversee the planning and construction, and subsequently, operate and maintain common facilities and provide water to GPWSCs on a bulk basis. 11. Village Support Team (VST): A rapid SO capacity assessment study indicates that Punjab does not have locally adequate number of quality SOs to meet the project s full requirement. To address this, the project has proposed the concept of a village support team (VST). This is a team comprising GP/ GPWSC representatives, local youth and the Junior Engineer of the DWSS, who would be trained specially as a team to undertake the community mobilization responsibility. Thus, VST will be a local level citizen body, transformed into a grassroots institution which shall perform the role of a SO. It will chiefly be responsible for capacitating and institutionalizing GPWSC. Support Organizations (SOs) 12. Typically, three types of SOs are expected: (i) those providing community mobilization and institutional support (SO-CD); (ii) SO-Eng, providing technical support; and (iii) SO-Mgt, providing management support. In such situations where the project finds difficult to secure SO- CD, then, the concept of Village Support Team (VST) will be adopted. 13. SO-Mgt will be chiefly consulting firms and/ or individual consultants deployed for providing Management Support to SPMC and DPMCs in steering the program as the DWSS will take time in building the required (non-engineering) skills internally. They would provide experienced personnel in managing community development interventions, as well as monitoring and evaluation including process monitoring and impact assessments. They will: (i) Support Program Director in developing and guiding implementation of capacity building, IEC, and communication; (ii) Assist the Program Director in the preparation of progress reports as well as in consolidating the key learning, document the same and disseminate it statewide; (iii) Assist in developing and disseminating alternative mechanisms to reach and work with the communities, viz. participatory management techniques and methodologies; (iv) Drawing strategies and implementation action plans for transparency, inclusion and accountability; (v) Designing and adopting change management approaches, in particular, and capacity building, in general; and (vi) Designing, rolling out and maintaining a web site reflecting status and progress in the RWSS sector in the state. It is expected that the DWSS will acquire/ learn the non-engineering skills within 2-3 years and thereon the same will be managed in-house by DWSS. SO-Enq will supplement/ complement chiefly the OPs wing of DWSS in areas such as total station survey, design engineering, water quality testing, construction quality surveillance etc. 46

53 Scheme/Tender Approvals 14. Whereas the overall annual plan approval (equivalent to administrative approval) rests with SWSM, most technical sanctions as well as Implementation Phase Proposal approvals are devolved to the district level. Similarly, a majority of the scheme tenders acceptance is devolved to the Village level. The District Annual plans for each year will be prepared by DWSC and approved by GoP/ SWSM before the end of the previous fiscal year and included in the state budget. This plan will have names of villages selected and line estimates only and it will be administratively approved by GoP before beginning of the next fiscal year. Thereafter, approvals of all detailed scheme reports and tender award decisions upto Rs.30 lakhs will be taken by GP/ GPWSC per scheme or tender for SV schemes and by DPMC for common infrastructure of MV schemes. SPMC will be responsible for approval of schemes and tenders of higher values. Procedures and powers at various levels for such approvals have been detailed in the Procurement Manual. Model Agreements/ MOUs etc 15. Towards operationalizing the proposed institutional model, the following instruments have been prepared: (i) GP Undertaking Note - reflecting a GP s demand for and willingness to participate in the program; (ii) Village Selection -- Eligibility criteria and village prioritization processes; (iii) GPWSC bylaws, defining its composition, role and responsibilities; (iv) Tripartite MOU to define relationship among DWSS, GPWSC and GP; (v) Scheme Cycle - Single and MV schemes along with responsibility matrix; (vi) Scheme Cycle - Scheme Transfers and Sanitation; (vii) Scheme Level Committee - byelaws, defining its composition, role and responsibilities; (viii) Quadrilateral MOU - outlining the role and responsibilities of the MVWSS partners, GP, GPWSCs, SLC and DWSS; (ix) Scheme (DSR) appraisal criteria - a brief check-list enabling appraisal from social, economic, institutional, environmental and technical perspectives. Community Development (Scheme) Cycle (CDC) 16. GoP has developed different scheme cycles corresponding to different time frame (and technological options) as found suitable to the communities. Typically, while, a SV ground water based scheme cycle will be of 21 months duration, it will be months for MV and other surface source based water supply schemes. In both the cases, a preliminary plan will be prepared within a period of two months, to decide on activities: (a) requiring urgent attention (repairs/ replacements); and (b) those requiring elaborate planning. The latter will be visualized in four distinct phases: (i) pre-planning; (ii) planning; (iii) construction; and (iv) post construction O&M. Separate Scheme cycle has been developed for SV and MV water supply schemes (included in the PIP). It describes the sequence of activities, processes, success/performance indicators, and roles and responsibilities of the key actors. A key principle of the proposed CDC is that it defines milestones which need to be achieved at the end o f each phase and will serve as performance indicators or triggers to move from one phase to the next one. In order to keep track of the quality of the CDC implementation process and successful achievement of the end of the phase milestones, the entire process will be closely monitored. 47

54 Outputs during the Scheme Cycle 17. DWSS-OPs Wing, SOs, GP/ GPWSCs will work together and generate the following outputs in the Planning, Implementation and Post-implementation Phases. Planning Phase Outputs 0 Amee to Do Report (ATD)- initially IEC and mobilization efforts culminating in village agreeing to participate hrther in the program. These include: community mobilized - Gram Sabhas held, GPWSCs formed, GP / WSC members trained, WSCs bank account for capital cost contribution and O&M opened, Project bank account of the GP opened, capital cost contribution plans developed and initiated; Baseline survey conducted, Social / Resource mapping done to depict the existing situation and to identify gaps (if any), choice of technology discussed with DWSS, proposed sanitation plan discussed, existing water supply and sanitation plan recorded, necessary assistance provided to DWSS to prepare Preliminary Scheme Reports (PSRs), GP level Agree-To-Do (ATD) meetings held and ATD report submitted to DPMC through DWSS. 0 Implementation Phase Proposals: A number of Community Action Plans (CAP) together will constitute an IPP that will be reviewed and approved by the DWSCs. These include : Water supply development Plan, capacity building plan, Women development Program Plan, Capital cost user contribution plan, O&M Plan and Communities own M&E plan Implementation/ Construction Phase Outputs 0 Award of Contracts - procurement of workshervices through prescribed contracting procedure (tenders invited, tender evaluation done, contract awarded). 0 Community Action Plans (CAP) implementation. 0 Implementation monitoring and quality assurance. 0 O&M Plan refined. Post-Implementation Phase Outputs a 0 O&M Plans firmed up on all aspects - technical, institutional and financial. O&M Budget worked out, tariffs fixed and mechanisms for tariff collection put in place. Conduct refresher training programs for the members of GPs and GPWSCs. Scheme stability support to GPs and GPWSCs. O&M back up support to the user communities. Assisting GPs and VWSCs in conducting sustainability monitoring exercises for the completed schemes. Follow up on disinfection methods, residual chlorine indicators & healthy home surveys, etc. 48

55 ~ I rovidc pxtltcy guide[irrcs..., I 1... :er Smnitation Committee... r-zg A... anchaynt * x GI WIIISC Sub Committce of GP (Sec.25) I_ I

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57 I I I 1 I I I I I I I Annex:6 Attachment 6 B

58 Annex: 6 Attachment 6 C Village Selection Ranking and Selection Procedures 1. GoP (SPMC) will place an advertisement in the local daily newspapers prior to the commencement of each batch, informing of the project and seeking an expression of interest from the willing GPs. Simultaneously, SPMC will also write individual letters to all the GPs along with a copy of the advertisement. As far as villages wherein SV schemes have been already transferred to GPs (about 876), DPMC will support their rehabilitation and complete the transfer processes. These villages need not apply. 2. Applications will be obtained from GPs in a standard form prescribed by SPMC which will include assurances regarding GPs commitment to adopting project's cost recovery and other administrative rules. Subsequently, each GP will be ranked based on the following criteria. I Quantity of Quality Criteria water water availability availability Indicators N PC F Fluori Othe 240% C C de rs I I I /PTDS I Score ( (35 I 10 I 15 I Implementation Efficiency 40% - <25% >60% >lo% of the 25% Utilization total Revenue is of plan From Own I funds I Resources ( 5 Selection Process 3. Once the rankings are done, GPs will be arranged in a descending order and the toppers will qualify for self selection on a priority basis. Towards ensuing adequate geographical spread, rankings will be done district wise. This district wise ranking will be reviewed and finalized by SWSM. Subsequently, toppers will qualify for participation. Actual selection in any batch will be made by the SWSM taking into account, resources allocated for different districts, implementation capacity and ensuring that needy ones do receive priority. District wise prioritization list as well as the final batch wise selected list will be put on website as well as shared with the district administration, and all relevant line departments. Prioritization and selection will be done separately for NCPC and FC categories respectively in the ratio of 70: 30. The process of ranking of GPs will be carried out at the commencement of each batch. GPsNillages not Eligible 4. Such villages who have had the financial assistance for a water supply scheme from the state in the last 3 years or those villages where implementation of water supply schemes is in progress (mainly NABARD assisted and ARWSP & Swajaldhara Schemes) will not be eligible to participate in the program. 52

59 User Cost Sharing Rules and Procedure for Administration Annex:6 Attachment 6 D 1. Capital Costs. As an expression of their commitment to participation and ownership in the scheme, beneficiaries will contribute to the capital cost of the scheme. While the program will follow the GoI s Swajaldhara principle of 10% contribution from the users, relaxations have been made for some communities taking into account the socio-economic and geo-physical as well as spatial differentials. Some 1,500 habitations (a little over 30% of the total) are expected to be benefited out of this discounting. 2. O&M. The O&M cost for all SV schemes will include electricity charges, chemicals, oil and lubricants, staff for O&M, and insurance charges for source sustainability where applicable. O&M cost for MV schemes will in addition, include bulk water charges payable to DWSS on volumetric basis at tariff fixed by DWSS for such supplies. Detailed cost sharing rules are enumerated below: WATERSUPPLY I O&M A. WATER SUPPLY 1. New SV schemes 2. New MV Schemes 3. Transferred SV Schemes 4. Existing MV Schemes Cost Sharing Yo of total Costs 100 % by users 100% by users 100% by users 100% by users B. COMMUNITY SANITATION I 100% bv users (Open drains, small bore sewers, ponds rehab.) I1 Investments % of A. WATER SUPPLY Construction 1. All water supply Schemes for all Technology Options including SV and MV schemes and other technologies like Reverse Osmosis etc. costs 10 % by users subjectto a maximum of Rs.1,500 per household Remarks GPWSCs will set a tariff adequate enough to cover the full O&M cost from the users DWSS will make bulk supplies on volumetric basis and levy water charges to GPWSCs based on tariff for such bulk supplies to be fixed by DWSS from time to time. O&M cost may exclude the cost of staff deployed by DWSS which will be progressively phased out over a period of time Same as for new MV schemes but implemented progressively linked to new investments for scheme upgradations and transfer of intra-village distribution I responsibility to GPs/ GPWSCs I GPWSC shall recover from the users. O&M will be through a service contract. (a) Capital cost shall include common infrastructure from source to distribution pipes, but exclude the cost of house connections and consumer meters (b) Notified SC habitations, International Border Villages, and Hilly Villages - 5% (SC habitation is defined as per GoP definition of SC habitations) (c) Community contribution will not be met from other funds such as GP funds, MPLADs, NRIs, etc. (d) Household service connection will entail a minimum of Rs.500 /(250 for SC) as connection fee. (e) Actual cost of taking connection and meter will be borne by the respective household. (0 GPs will make available land for the facilities. Public lands will not be counted against contribution. g) In the case of MV schemes, the village offering land shall be compensated duly by other benefiting villages. The GP offering lands shall pay 30% less and the same shall be borne duly by the other GPs. 53

60 ~~ B. COMMUNITY SANITATION 2. Community Sanitation - Drainage Ponds rehabilitation, small bore sewerhewerage schemes. Yo of Construction costs 10% by users subject to a maximum of Rs.1,500 per household Remarks Annex: 6 Attachment 6 D Sanitation contribution will be separate from that for water supply. Program will finance only the common facility, and all household specific investments will be borne by the respective household. In the case of small bore sewers, scheme will not be taken up unless at least 70% of the households are ready with Inspection Chamber and ready for connection to the common facility. SC habitations, International Border Villages, and Hilly Villages - 5% Other finds such as GP s external funds, MPLADs, NRI donation etc. can be used to meet the contribution up to 30% of the total. GP s own revenue can contribute an additional 20%. Remaining 50% will be from the users. Installment Share (YO)* 1. 50% of the amount 2. 50% of the amount Time of payment At the time of giving written consent by GPWSC to join the project. (after initial round of project dissemination) Before invitation of the bids for construction of water supply and sanitation schemes. 54

61 Annex 7: Financial Management and Disbursement Arrangements INDIA: Punjab Rural Water Supply and Sanitation Project 1. The project has satisfactory financial management arrangements to adequately account for and report on the project expenditures incurred. 2. GoP proposes to implement the proposed project adopting a sector wide approach (SWAP) statewide, by which all future public funding for the sector supports a single sector policy and expenditure program under government leadership and adopts common approaches across the sector, irrespective of sources o f financing. From a financial management perspective while there are elements of a SWAP with GoP acceptance of harmonization of FM arrangements internal to project i.e. budgeting, funds flow, accounting & accounting policies, internal control, internal audit, concurrent audit & external audit and capacity building support in the area of Financial Management to GPWSCs irrespective of source of funding. There will, however, be no pooling of funds between Go1 and the Bank (with differences in timing, frequency and conditions for fund release) and there will be some differences in reporting requirements (to the extent not covered in the consolidated quarterly progress reports.) Financial Management Assessment: (PRIs and Country Issues) 3. A study on Review of Accounting and Accountability Arrangements for Panchayati Raj Institutions and financial management capacity of DWSS was undertaken. The review covered aspects relating to institutional arrangements, funds flow, accounting, internal controls, audits, transparency arrangements, staffing etc at the PRIs. At the DWSS level, the review in addition to covering the aspects mentioned above included an analysis of budget/ expenditure data for the past 5 years. Panchavat Level issues 4. Weak Capacity at Panchayat Level: The study identified (i) capacity problems affecting the maintenance of accounts at the GP level (with one Panchayat Secretary responsible for 5 to 8 GPs) and preparation of budgets; (ii) while accounting was generally carried out, principles varied; (iii) high level of cash withdrawals with inadequate control and accounting of such withdrawals; (iv) Audits of GPs were generally in arrears, generally upto 3 years, while in a few cases even longer with a very large number of audit observations pending clearance for long periods. In addition, in most GPs, Standing Committees, which provide a wider forum of consultation and deliberation, have not been formed. These are sought to be addressed (i) by the a development of Handbook for GPWSC s on Procurement & Financial Management (ii) financing of one accountant at each GPWSC by the project; (iii) audit of GPWSC by independent CA firms (in accordance with specific terms of reference) before every tranche release. D WSS 5. Accounting & financial systems at DWSS, compared to GPs, are much better organized. However the following country issues emerged: e Lack offinancial statements and audit opinion on the same. In this project specific efforts have been made to align the Banks financial reporting requirements with the mainstream 55

62 e e accounting system. This will facilitate generation of financial statement (statement of sources and uses of funds) on which the State AG would be able to provide an audit opinion. GoP s existing accounting system concentrates mainly on bookkeeping and transactional control over expenditures and FM information is not generally used for decision making. However, the project FM system, which builds on to the existing system, has been designed to support MIS information required by the M&E team for monitoring purposes. Delay in release of funds (Letter of Credit - LOC) from the Finance Dept: delay in release of bds (LOC) by the finance dept and possible utilization of LOC for one project being used for another. This is sought to be addressed by a specific covenant in the legal agreement that LOC will be issued for a quarter s fund requirement by the Finance Dept within two weeks of the request by DWSS. In addition informal controls exercised by the Treasury will be addressed by an administrative order. Public Financial Management & Accountability (PFMA) Issues 6. A recent World Bank study undertaken on the Punjab Financial Management (PFMA) systems has identified a number of weaknesses with the state s financial management systems. Some of the weaknesses related to the tight fiscal position faced by the State have eased in the last one year. The impact of the issues identified in the report on the project financial management systems was assessed and discussed with the state government. Considering that issues covered in PFM have a larger scope, these are sought to be addressed at three different levels. - A summary of this analysis, whereby the risks having an impact on the project were identified and specific mitigating measures built into the design of the project, is annexed to this assessment. (refer Attachment 7 A). - To enhance transparency in implementation of this project, a cross-cutting Disclosure Framework has been agreed which includes financial management aspects also. - Issues which were more of governance and systemic were taken up with GoP at state level. GoP is in the process of implementing longer term measures to improve financial management across the whole of Government and has developed and shared an action plan to implement the recommendations contained in the report, both in short term as well as in medium term. The Bank team will provide support as requested and monitor the implementation of these reform initiatives. 7. Significant Risks and Mitigation Measures Risk Funds flow: Risk of funds intended for the project being diverted for other pressing needs e.g payment of salaries and/ or delay in issue of LOC to the project and allocation of the same to various implementing units (40 Divisions and over 3000 GPs). Risk of delav in financial redorting due to large number of implementing units Risk Rating M i l M Risk Mitigation Measures incorporated into Project Design Wlule this remains as an lnherent risk, given the current fiscal situation of the GoP, the probability of the same is not lugh. In order to ensure that the funds are made available to the project in a timely manner a legal covenant has been included in the financing agreement which requires the GoP to make the funds available withm two weeks of the request of funds by the DWSS.Funds to the GPWSSC will be directly transferred from the DPMCs in tranches. Following CDD principles the tranche releases to GPWSSCs (based on MOUs and achievement of milestones) will be 56

63 consequently affecting disbursements eligible for reimbursement. Reliance being placed on govt. financial systems with respect to the Divisions of DWSS responsible for implementation of MV schemes. These have been assessed to be regular and timely in rendering of monthly accounts to the AG. Posting of a senior finance staff from the treasury and accounting service at the SPMC supported by a qualified chartered accountant. Weak FM capacities at GPWSCs GPWSCs are new structures responsible for most implementation activities at the GP level. Current FM practices at GPs of accounting, reporting, etc. have been found to be quite weak. Overall Risk Rating I - High, S - Substantial, M- Modest, N - Strengths S S egligible (i) The development of Handbook for GPWSSC s on Procurement & Financial Management; (ii) financing of one accountant by the project at each GPWSSC; (iii) audit of GPWSSC by independent CA firms (in accordance with specific terms of reference) before every tranche release. 8. Since the project proposes to use Govt. accounting systems for its accounting & reporting, this certainly will be one of the strengths of the program. This will be particularly useful, as the project can also extract information from the Govt. system on other schemes in the sector. FM arrangements in the DPMCs will be based on established FM arrangements of Divisions and the DWSS s current divisional accountants, persons who are well-versed with such established processes, will be overall responsible for financial management duties at the DPMCs. 9. Weaknesses and Action Plan Weakness Treasuw Overations: The project relies to a large extent on LOC system of treasury operations. Considering past experience of delays caused in fund-flow due to inefficiencies and informal controls in the treasury management. No internal audit system is in place. Resolution GoP has assured that Treasury operations have improved significantly in recent times with increase in computerization and currently all payments are honored within 4 days. Administrative orders will be issued to address informal controls at Treasury and delays in authorization of LOC. The TOR of internal audit requires this aspect to be reviewed.. The project design provides for regular internal audits for SPMC/ DPMCs by independent chartered accountant fm under a specific TOR approved by the Bank. Budgeting 10. The project would be budgeted component wise in GoPs budget with separate budget lines for Go1 funded schemes and Bank funded schemes. In addition, the funds to be transferred to the GPWSC s for the SV schemes will be budgeted as Grant in Aid. The project (SPMC) will be responsible for preparing and consolidating an Annual Work Plan by December 3 1 each year for the following financial year, in order to feed into GoPs budget cycle. Similarly on the receipt side the GoP will reflect the funds to be received from the Bank and GoI. Community contribution will only be reflected in the Annual Work Plan and not in the GoP State budget. Based on the discussions with the Finance dept it was confirmed that the Line Dept (DWSS) will 57

64 have the flexibility to re-allocate budgets between the components, if required and does not need to wait for legislative approval. Funds Flow - GoP to Project 11. Pooling of funds between Go1 and the Bank is not envisaged, with parallel funds flow arrangements from Goy Bank to GoP. Finance Dept. will issue LOC to SPMC based on its quarterly requirement of funds, which will in turn reallocate these funds (LOC), as per detailed budget to various DPMCs. DPMCs will be responsible for further release of funds to GPWSCs (for SV and intra-village component of MVs) and allocation of LOC to DWSS Divisions (MV Schemes, Community Sanitation Schemes). This is depicted in the following flow chart: Funds for the Program Management and Community Development Support will be retained at the SPMC and DPMCs. WoridBank k. I ' D v l A Dept. of Drinking Water, Goi ARWSP, Swajaldhara I State Project Management Cell (SPMC) of DWSS --, 1 I Dlstrict Project I :::EL: ~ l. " p ~ ~ ~ ~ ~ ~ ~ ~ M Cell. n(dpmc) a g e m e Divisions n t of DWSS B in tranches) of DWSS, l r ' & (I) SVS (ii)'in Village' (1) Proj. Mgt. (ii) Community *I) 12. In order to address the delays: (i) in the issue of LOC by FD and (ii) delay in issue of advice by the DTO to the Banks, the following procedure has been agreed with the GoP: (a) based on the approved budget and annual work plan (broken down quarterly), LOC for the first quarter's fund requirement will be issued by the FD. This will be on a lump sum basis and not broken down by components thereby giving the flexibility to the Line Dept to allocate the LOC as required. Such a request will be processed by FD within two weeks of the request by DWSS; (b) LOC for subsequent quarters would be based on the projected requirement adjusted for actual expenditure in the previous quarter. (c) Informal controls exercised by Treasury (such as requesting for approved pending bills) will not be exercised. (d) The Dept (SPMC/ DPMC and Divisions) will not open any Bank accounts to park funds especially at year end. (e) The timely issue of LOC by FD is a legal covenant. 58

65 Accounting & Internal Control SPMC, DPMC and Divisions of D WSS: 13. A Financial Management Manual (FMM) which builds on GoPs existing accounting systems and rules has been prepared for the project. The FMM captures aspects relating to budgeting, funds flow, accounting, internal control, financial & administrative delegation, internal and external reporting, staffing and audit arrangements. This will be applicable to all future funding in the sector irrespective of the source of financing. Books of accounts by the SPMC, DPMC and Divisions of DWSS will be maintained under the standard Government Accounting Systems and monthly accounts will be rendered to the AG and reconciled on a quarterly basis. Our assessment indicates that this system is functioning well and reconciliations are complete till June However information by project sub- components (for disaggregated financial reporting), movement in security deposit deducted fkondpaid to contractors and community contribution will be tracked by the project outside AG accounting system. The key issues that have been addressed in the design of the accounting systems are: e Tranche releases to GPWSSCs (net of community contribution) will be made directly by DPMC based on MOU and fulfillment of conditions of tranche release, recorded as Grant in Aid in the books and will be eligible for reimbursement consistent with guidance on CDD type projects. e Community Contribution towards capital cost of schemes will be accounted for by the DPMCs on a memorandum basis and reported to the SPMC as the same is not capable of being accounted in the AG s accounting system. 0 Funds (LOC) will be allocated by the SPMC to various implementing units i.e. DPMC and divisions of DWSS (for MVS) and no Bank accounts will be opened except at GPWSSC level. e SWSM will ensure that regular reconciliation takes place between AG and all expenditure incumng entities on a quarterly basis to ensure correctness of the accounts, which in turn will form the basis for the interim financial reports and disbursement claims. e While the AG accounting system will record project expenditures by components and source of financing, the implementing units will manually prepare monthly summary by project sub- components and submit the same to the SPMC for consolidation and financial reporting. GP WSC 14. A Handbook for GP covering community procurement, financial management (covering aspects relating to capital costs and 0 & M accounting) and disclosure and transparency requirements has been developed. The key arrangements are as under: e Bank Accounts - GPWSCs will maintain a separate Bank account for Capital and 0 & M funds. This will be operated under joint signatures of the GPWSC Chairman and Secretary. Funds will be released to GPWSCs by the DPMC in tranches on fulfillment of the conditions in the MOU. e Accounting - A simple, manual system of book-keeping (cash book) and reporting has been developed for the GPWSCs. This is responsive to their capacity and has been documented as GPWSC Handbook. Appropriate accounting procedures for community contribution have also been documented in the Handbook. 59

66 0 0 0 Staffing - An accountant will be recruited by the GPWSC (to be financed by the project) to take care of the accounting requirements at the GPWSC. Capacity Building - Adequate capacity building initiatives for Accounts Assistants, GP Secretaries and GPWSC members have been agreed as part of project design. This will include training on book-keeping, procurement procedures, reporting, banking, reconciliations, records retention, audit certification and social audit. Social Audit/ Transparency - Strong elements of Social Audit and Transparency will be built into the project design. Books of account as well as expenditure statements shall be available to all members for viewing. Information on scheme approval, funds received, payments made and balances, will be prominently displayed in the village at all time and updated regularly. Finance Staffing: 15. At SPMC a senior finance officer, at least of the rank of a Joint Controller, would be deputed from the Finance Dept. In addition a Financial Management Specialist, an experienced chartered accountant as per terms of reference and job descriptions acceptable to IDA, will be hired from the market on contractual basis. This team will be supported by one section officed superintendent level person. At each DPMC, a Divisional Accountant will be deputed to the Divisions. He will be supported by a Assistant Finance Manager as per terms of reference and job descriptions acceptable to IDA, hired from the market on contractual basis. They will be supported by two Finance Assistants, commerce graduate with experience of computer applications. 16. Internal & Concurrent Audit: The project will have an internal audit by an independent firm of Chartered Accountants who will review to ensure that the systems, procedures and rules as documented in the FM Manual are being adhered to at the project level i.e. SPMC, DPMC and divisions of DWSS. The TOR for internal audit has been reviewed by the Bank. The TOR provides for each DPMC (and a sample of divisions within the DPMC) to be covered at least once a year and the SPMC twice a year. 17. Since a significant portion of the funds is expected to be spent at level of the GPWSC, a concurrent audit by independent firms of Chartered Accountants as per TOR agreed to the Bank will be carried out before each tranche release, except the first. The TOR covers aspects of community procurement, financial management and community level transparency. Second (and subsequent) tranche of funds will be released to the GPWSC by the DPMC only on receipt of Interim Expenditure Statements duly certified by the GPWSC Auditors. 18. Financial Reporting: The financial reports for the project (covering all sources of funding) have been developed and agreed with DWSS. This has been merged with the Quarterly Progress Report (QPR). The financial reports will provide information by project sub components, with the overall expenditure reconciled with the expenditure report from the AG based on project components. In addition, separate reporting to GoI, to the extent the QPR and Financial reports do not capture the reporting requirements of GoI, will continue to be provided by the GoP to GoI. 60

67 External Audit 19. The Comptroller and Auditor General of India (C&AG) through its offices in Punjab will be the statutory auditor for the project. The C&AG s office will conduct an annual audit of the project financial statements (sources and uses of funds covering all sources of funds). The audit report will be sent to the Bank within six months of the close of each financial year. The Terms of Reference for the audit (along with the draft format of the financial statements and audit opinion) have been prepared and sent to the C&AG for their concurrence. Audit by the C&AG may include a sample review of the GPs implementing the project also. The following audit reports will be monitored in the Audit Reports Compliance System (ARCS): Implementing Agency Government of Punjab (DWSS) Department of Economic AffairdGoI Audit Project Audit Special Account Auditors Comptroller and Auditor General of India, Punjab Comptroller and Auditor General of India, New Delhi Financing & Disbursement Arrangements 20. The Bank will finance approx 75 % of GoP s contribution to meet the project expenditure (detailed in Annex 5) subject to a limit of USD 154 million equivalent. Funds from the World Bank will be made available to GoP (through the GoI) under the Standard Arrangements between Go1 and the States. The Bank will provide an initial advance which will be transferred by Go1 to the GoP estimated at US$5 million. The advance will be enhanced subsequently proportionate to the increased level of expenditure. Subsequent releases will be on reimbursement method based on actual eligible project expenditure reported by the project. This would be based on the interim expenditure reports (Component wise) from the AG s accounting system adjusted for movement in security deposit recovered paid to the contractors which is accounted division wise and not project wise by the AG. This will enforce discipline and ensure that the divisions are regular and timely in submission / reconciliation of monthly/ quarterly accounts to the AG. The funds (tranche release) transferred to the GPWSC will be eligible for reimbursement from the Bank. Supervision Plan 21. From a financial management perspective, the project will need intensive review looking at internal controls, fund flows, auditing arrangements, and training. This will be through a combination of periodic desk reviews and field visits. Special focus will be given to capacity building and training at the GPWSC level. 61

68 Summary of major PFM observations and Project Specific mitigation measures Annex - 7 Attachment 7 A S.No. Issues raised in PFMS report Relevance to Current status Project Specific Actions proposed the project 1. Large Committed Expenditure Large portion of committed and non-development expenditure covering the entire amount o f revenue receipts. Thus putting pressure on funds available for developmental expenditure. Revenue expenditures for were 118% o f the state revenue receipts. Large revenue expenditure can put constraints on availability of plan development funds, thus creating uncertainty over availability of counterpart contibution of the state. GoP s state revenues have increased from Rs 5910 crores in to Rs crores in Fiscal deficit has declined below 3% of GSDP compared to 7% Deficit on current account has also reduced from 24% to 7.3% of revenue receipts. GoP has achieved primary surplus of 1% of GSDP in In view of the improvement in the state s funding position this inherent risk has reduced. Tlus will be monitored during project supervision. Sources: Outcome Indicators of States Own Fiscal Correction Path; Assessment by WB Economic Consultant. 2. Diversion of earmarked funds More than Rs 4500 crores (approx. $900 million) received from FCI for repayment o f commercial bank credit diverted between There are possibilities that project funds provided by Bank could be diverted for other purposes. GoP has stated that the situation was resorted during the period when the state was facing extreme shortage o f funds, which even could have resulted in default in salaries. Since Apr O5 the said amount has been converted into loan, and the Govt. is making regular repayments. GoP has committed that the funds would be transferred to the project within 2 weeks. This will be monitored by (i) covenant on timely issue of LOC (ii) including review by project internal audit 3. Treasurv Management - Irregular cash management practices, including prioritizing payments, - Verbal instructions to treasuries to release individual payments - Telephonic instructions to stop sanctioned payments due to cash constraints - Large arrears o f payments with treasuries - Cash crunch resulting in delay I reduce release o f funds to development Since the project would rely on LOC system for all its payments (i.e. once LOC is issued it can issue cheques for all payments) hence the risk of irregular treasury transaction is limited to this extent. This was primarily due to the cash crunch faced by the state during the period till Since then the cash situation has improved. At present state has around Rs 1800 crores surplus with RBI. During the current financial year it has paid 93% o f all sanctioned payments. Modernization of Treasury operations All 19 district treasuries and 5 1 out of 67 subtreasuries have been 62 Considering the improvement in cash situation as well as the modernization of treasuries, the probability of the risk o f treasury operations being misused has somewhat reduced. Following mitigating steps will help ensure that these risks are firther minimized. Timely issue o f release of LOC as legal covenant Fixing o f standards for fund transfers between SPMC and other agencies and payment periods for bills presented. Monitoring arrangements through internal audits with specified TOR for

69 - S.No. - Issues raised in PFMS Relevance to Current status report the project schemes. BUD( - 5T MANAGEMENT 4. Poor Budget Execution. Lack of ownership of the budget by the line dept. 9 Large amount of expenditure is bunched towards the end of the year to avoid lapsing of grants. This would result in funds being parked in the form of PLAs, advances. It also results in poor implementation, as spending is done in a rush without - adequate planning. - ACC( LJNTING & FINANCIAL R 5. Reconciliation issues due to different set of accounts ~ INTE 6. Accounting at Govt. level is based on the concept that while line depts. prepare the bills, treasury makes the payment and AG undertakes accounting for the same. However this three layer process gives rise to its own problems mainly that of reconciliation between the records kept by these different levels and providing up to date information to the decisionmakers at various levels within the Govt. NAL, CONTROLS (includin Internal controls Although elaborate framework of internal controls exists through various codes, rules, regulations is in place. In practice compliance is low. Lack of involvement of he line dept. in preparing and receiving final plan with budget results in a situation where the emphasis by depts. is more on budget utilization rather than proper execution. 'ORTING Since it is a LOC based project with the books of accounts being maintained by AG (A&E), this problem is mitigated to some extent. Since the project will be implemented through different agencies, including GPs, DPMCs and SPMC, ensuring computerized. Remaining will be completed within next year. Data from all districts and sub-districts being stored at the Directorate. Budget execution is a much larger issue, involving budget ownership by the executing dept.1 agency, developing better mechanisms for monitoring, etc. This will be addressed as part of the action plan prepared by the GoP for taken actions on the PFMA report. AG (A&E) confmed that all the Divisional offices of the DWSS are timely in submission of monthly accounts and these have also been reconciled upto June The AG also confirmed that they would be in a position to provide monthly accounts (by components) to the project by the 25" of the following month (on a consolidated basis) The Divisional Offices are manned by divisional accountants posted by the AG (A&E) who are trained in works related accounting/ reporting and internal controls. Project Specific Actions proposed non-adherence to these standards. The Annual Work Plan (AWP) will be prepared by December each year for the following financial year. This will form the input from the project for GoP annual budget exercise. Since mainstream accounting system is timely and the program aims to work across the sector, the project would rely on mainstream accounting procedures as this would also facilitate receiving information on RWSS programs fhded through other sources. Adequate finance manpower at various levels of the project [including a senior officer (at least Finance Controller level) to be deputed by the Finance Dept. and a full-time experienced chartered accountant. Mechanisms to monitor timely reconciliation of accounts with AG, is part of TOR of the internal audit. A formal Financial Management Manual has been developed to ensure clarity and uniformity on internal control procedures among different implementing agencies. An integrated manual has also been developed for GPWSCs, covering both financial management and

70 Annex - 7 Attachment 7 A S.No. Issues raised in PFMS report Relevance to the project Current status Project Specific Actions proposed compliance to different codes and procedures would be necessary. procurement aspects. Inadequate internal audit No regular process o f internal audit for line departments which are primarily responsible for budget execution. Presently no internal audit process exists at the project. The SPMCs / DPMCsDOs would be covered by regular internal audits (with specified ToRs) by chartered accountant fm. GPs would also be subject to concurrent audits based on specific ToRs. Management action of issues identified during these audits will be reviewed during supervision ACC( JNTABILITY 7. External audits Large number of audit paras remains. Considering that there is no record for monitoring and follow up of outstanding paras at the Head Office is indicative of low priority given to clearance of audit paras which remain the responsibility of individual divisions. Under the project, it would be the responsibility of SPMC to ensure early resolution of all audit observations. These will be regularly monitored during Supervision - WEA Large Dendency o f audits Number of organizations not getting audited due to inadequate staff strength. Last report of AG available is for FY Project fmancial statements will be audited by CAG through its office of Punjab (AG). A project specific TOR will be agreed with AG to ensure that audit is taken on a timely basis to comply with the Bank s covenants. 8. Poor fmancial management at GPs There are weak accounting capacities at the large number of PRIs, who are illequipped to maintain complex scheme-wise accounting. Local Fund auditor is responsible for audits, but there are huge backlog of audits. The main strategy of the program is to rely on PRIs to be the main instrument of the implementation. Since PRIs were to be the main instrument of implementation, a AAA study was specifically undertaken to assess their capacities. The results o f the study are in line with conclusions arrived in the PFM study. Due to insufficient capacities at the PRIs, project has taken a mix o f Dept. approach with GPWSC (a subcommittee of the GPs), specifically constituted for implementation of Water & sanitation program. Additional measures include: - A separate bank account for GPWSC to ensure timely funds. - Asst. accountants will be engaged by GPWSC to provide accounting support. 64

71 Annex - 7 Attachment 7 A S.No. Issues raised in PFMS report Relevance to the project Current status Project Specific Actions proposed - firms of chartered accountants will be appointed to undertake audit of expenditure incurred by GPWSCs. - A Plan has been prepared for training GP fimctionaries and asst. accountants. - A transparency and disclosure framework has also been agreed with the project. 65

72 Annex 8: Procurement Arrangements INDIA: Punjab Rural Water Supply and Sanitation Project 1. The procurement to be made under the program will involve broadly the following: (a) New piped water Schemes; (b) Rehabilitation and up-gradation of existing piped water schemes; (c) Community Sanitation schemes like renovation of village ponds and development of Underground small borehewerage system; (d) Goods like office equipment, computers, bulk water meters; (e) NGO/Consultancy services for project management, MIS, quality assurance, capacity building, engineering design and supervision, accounts and book keeping etc; and (f) Training. Implementation Arrangements 2. The procurement under the program will be handled as under: a) DWSS Divisions will be responsible for procurement of common infiastructure of MV water supply schemes and Community Sanitation schemes under the Project. b) GP /GPWSC will be responsible for procurement of SV water supply schemes and, intra-village works for MV Schemes with technical support fiom DWSS; and c) SPMC/ DPMCs will be responsible for procurement of all goods mentioned in the paragraph entitled Goods under the Procurement Arrangements and consultancies under the project. 3. For procurement under the program, DWSS has developed a Procurement Manual. This Manual is acceptable to the Bank and all procurement under the project will be handled as per the provisions of this Manual. The Manual requires that procurement of all goods, works and services will be in accordance with the Bank Guidelines of May, Similarly, all Consultancy Services shall follow the Bank Consultant Guidelines of May The Manual also stipulates that for all procurement following NCB, the Bank s Standard Bidding Document as agreed with Go1 task force and as amended from time to time will be used as a base. For procurement following ICB and procurement of consultancy services, the Bank s SBD and Standard FWP will be used as a base and will be as agreed with New Delhi Office of the Bank. Procurement Arrangements 4. Goods: Goods to be procured under the program will generally be office equipment, computers, bulk water meters, goods and equipment for water quality testing laboratories, field kits, vehicles, IEC materials. Most of the procurement of goods will be small value and will follow NCB/Shopping procedures. However, Bulk Water Meters will be procured following ICB procedures in two packages. 5. Works: The works under the program will be procured as under-: Water Supply Schemes a) MV schemes: The procurement of these works will be handled by DWSS except that intra-village works of MVs will be procured by GPWSCs. Initially out of 5 water supply schemes under the pilot batch, there will be 3 MV Schemes, the procurement for which will be carried out by DWSS and the remaining 2 schemes, which are SV schemes, will be procured by GPWSCs. The DWSS will procure the complete scheme including works 66

73 related to tube well (or canal as applicable), pumps, rising mains and OHSR in a single contract package. The procurement will be done on a single responsibility basis wherein all materials and labor component will be arranged by the contractor. DWSS will not do any procurement of materials like cement, steel and pipes etc. for supplying to the contractor. The contractor will arrange all the materials on his own as per the specifications stipulated in the bid document. The distribution works for the MV Schemes will be procured by GPWSCs as a separate package. b) SV Schemes: The procurement of SV Schemes will be handled by GPWSC. GPWSC may engage a single contractor for carrying out all components of the scheme (except supply and laying of pipes for water supply distribution works which will be procured as a separate contract package). GPWSC will also have the option to procure the SV schemes in three slices [i] Boring and installation of tube well (or the canal related works of filtration plant, clear water reservoir etc.) [ii] Construction of OHSR and civil works and [iii] Providing and laying of water supply distribution system. In addition GPWSC will also have an option to implement water supply distribution works by procuring pipes separately and installing them either by awarding labor contract or through the community. 6. The procurement for the other remaining schemes under the project will continue as per the above mentioned arrangements. However the lessons learnt from the pilots will be incorporated in the procurement of the remaining schemes by DWSS and GPWSCs. Water Supply Rehabilitation and Community Sanitation Schemes: 7. The works for rehabilitation of water supply schemes and of the community sanitation schemes will be procured by DWSS Divisions (or GPWSC) following NCBBhopping Procedures. 8. Consultancies: These will include consulting services (national and international) for hiring of Support Agencies, specialist firms and individual consultants (management, HRD, social development, engineering, monitoring, finance, etc); training institutions; and for sector policy and other studies. The major consultancies will be: (a) NGOs/ Support Agencies for providing community development support to GPs through about 80 contracts, each of value of about US$80,000 and covering about 30 GPs each (total value US$6.4million); Another about 200 contracts of values ranging from US$lOOOO- US$ 20,000 for providing only leadership and guidance to Village Support Teams for community mobilization in about another 30 GPs each (total value of about US$4.0 M). (b) Engineering design support consultancy: about 250 contracts of values ranging between US$20,000 to US$40,000 each, (total value about US$7.5 M); One contract to Punjab Remote Sensing agency (value about US$lOO,OOO) for developing water quality and resource maps; about 30 contracts for independent construction and water quality monitoring of values less than US$lO,OOO each. (c) Management Support Consultancy: about 5 contracts of value ranging between US$lOO,OOO to US$200,000, each 67

74 (d) Chartered Accountancy firms to provide book-keeping and accounting support to project GPs (About 12 contracts each of value less than US$lO,OOO each)- total value US$O.OS million. The other services will include consultant studies for developing sector information management system, benchmarking and sector progress reports, monitoring and evaluation studies, research, water quality testing services, and financial and technical audits. The project will hnd services required for training, workshops and seminars. The training and workshops will be arranged at the State, District and Block level, and the expenditure would not exceed US$3,000 per training module. The total training cost would be US$4 million. 9. Short lists of consultants for services estimated to cost less than US$500,000 equivalent per contract may comprise entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 10. Operating Costs: This will cover the cost of operating project management units, one at the state level and one each in 19 Punjab Districts. The costs will include staff salaries (of only contract staff) and all staff travel, conveyance and subsistence costs and operating costs such as office rental and other expenses, vehicle rentals, equipment maintenance contracts, etc. The contract staff requirement is estimated to be about 5000 person months spread over 6 years. The project will finance only the contract staff (About 90 staff position in SPMC and DPMCs together will be filled in with contract value of each staff varying from US$15,000 to US$75,000 over 5 year period, but engaged in 2 years extendable contracts). Assessment of the agency s capacity to implement procurement Procurement Legal Framework The Constitution of India (Seventh Schedule) lists specific subjects in which the Union Government or the State Government alone can make laws and concurrent subjects in which both the Union and State Government can make laws. 11. Procurement of goods, works and services by the Go1 and the State Governments is regulated only by the contract governed by the Indian Contract Act and the Sale of Goods Act and, in special cases, by the Essential Commodities Act. 12. A CPAR was prepared in the year 2001 which provides an understanding of the national procurement system. Based on this assessment, the existing basic framework of rules and procedures in India requires open tenders, open to all qualified firms without discrimination, use of non-discriminatory tender documents, public bid opening and selection of most advantageous tender taking all factors (preferably pre-disclosed) into consideration. The weaknesses identified in the CPAR are: absence of a dedicated policy-making department, absence of a legal framework, absence of credible complaint/challenge/grievance procedures, absence of standard tender documents, preferential treatment in procurement and negotiation, delay in tender processing and award decision, and the two-envelope system. 68

75 Assessment of existing procurement procedures and capacity of DWSS and GPWSC 13. The review of existing procurement policies and procedures was carried out for the rural water sector of GoP to identify the area for strengthening and for allowing their use under the program. The assessment carried out suggests that the procurement adopted by PWD including DWSS originates from Punjab Financial Codes and Rules, PWD Code, Buildings and Roads Manual. All the codes and manuals are mandatory and some of them are outdated. Rules and executive instructions of the GoP now being followed have been drawn from these manuals and are documented. Standard practice is therefore to rely more on rules and executive instructions of the GoP rather than to Codes and Manuals which are not freely available and its interpretation is vague. 14. Some of the variations with respect to the practices acceptable to the Bank are, price variation permitted even for contracts of 6 months execution, no provision of insurance, defect liability period of only 3 months, DWSS reserving right to supply cement and steel and other materials like pipes etc. in execution of works, no provision to assess bid capacity, arbitration by department officials only, no RFPs for procurement of consultants. 15. Other items identified during the assessment are, excessive time taken for finalization of contracts, low delegation of powers, negotiation with the bidders, no single document which includes all rules, procedures and standard form to be followed. 16. The above deficiencies and the applicable deficiencies identified in the CPAR have been addressed by the following actions: (a) A Procurement Manual has been prepared which contains methods and procedures to be followed for procurement and are acceptable to the Bank. The provisions of the Manual applicable for GPWSCs will be translated in local language and will be issued to GPWSCs. (b) GoP has opted to use the Standard Bidding documents of the Bank as agreed with Go1 task force (and as amended from time to time) for all procurement under NCB. (c) For ICB procurement, the Bank s SBD will be used as a base and will follow the Bank s Procurement Guideline, May (d) For all procurement of Consultancy Services, the Bank s Standard RFP as agreed with the NDO will be used as a basis and will follow the Bank s Consultant Guidelines May (e) In addition, it has been agreed that for NCB procurement, the following will apply: i) Invitation to bid shall be advertised in at least one national daily newspaper, at least 30 days prior to the dead line for submission of bids ii) No special preference will be given to any bidder either for price or for any other terms and conditions when competing with state owned enterprises, small scale enterprises etc. iii) Except with prior concurrence of World Bank there will be no negotiations of price with the bidders, even with the lowest evaluated bidder. iv) Extension of bid validity will not be allowed without prior concurrence of World Bank: (a) For the first request for extension if it is longer than 4 weeks and; (b) For all subsequent requests for extension irrespective of the period v) Re-bidding will not be carried out without prior concurrence of World Bank vi) Rate contracts entered into by DGS&D will not be acceptable as a substitute for NCB procedures. Such contracts will be acceptable for any procurement under Shopping procedures. vii) The two or three envelope system will not be used 69

76 17. DWSS has specifically agreed that for procurement under the program, the materials like cement, steel and pipes will be in the scope of work of the contractor and DWSS or GPWSC will not procure these items separately to supply to the contractors. 18. However, for procurement to be done by GPWSCs, at their option, GPWSCs can separately procure pipes and get them installed through separate contracts. The works of tube well (or canal as applicable) and OHSR will however be executed by GPWSCs through contracts only and cement, steel etc. will be in the scope of the contractors and not separately procured by GPWSCs for issuing to the contractor. Methods of Procurement 19. Goods estimated to cost US$200,000 or more per contract and works estimated to cost US$l,OOO,OOO or more per contract will be procured following ICB procedures as per Section I1 of the Procurement Guidelines. Goods estimated to cost US$30,000 or more but less than US$200,000 per contract and works estimated to cost US$30,000 or more but less than US$l,OOO,OOO per contract will be procured following NCB procedures stipulated in the Procurement Manual which generally meet the requirement of Paragraph 3.3 of the Guidelines. 20. Goods and works estimated to cost less than US$30,000 per contract may be procured following Shopping procedures stipulated in the Procurement Manual which meet the requirement of Paragraph 3.5 of the Bank s Guidelines. 21. Goods and works estimated to cost less than US$l,OOO and up to an aggregate value of US$lOO,OOO and the goods and works which meet the requirement of Paragraph 3.6 of the Bank Guidelines may be procured following Direct Contracting Procedures. Works that meet the requirement of paragraph 3.8 of the Guidelines may be implemented, with prior clearance from the Bank following Force Account methods. 22. Consultancy Services will be procured following Least Cost Selection, CQ, Single Source, QBS and QCBS methods stipulated in the Procurement Manual and in accordance with the Bank s Guidelines. The services of individual consultants will also be procured as per the provisions stipulated in the Procurement manual and the Bank s Guidelines. Review by the Bank 23. First contracts for the five pilot villages to be implemented by DWSS, first three contracts implemented by GPWSCs on single responsibility basis, first three contracts for the three packages if awarded separately by the GPWSCs, contracts for works estimated to cost US$500,000 or more, all ICB contracts of goods and all contracts of US$lO,OOO and above awarded on Direct Contracting basis, will be subject to prior review by the Bank. In addition, first contract for procurement of computers following NCB and first contract for other goods will also be subject to prior review by the Bank. 24. Consultancy contracts to be awarded to firms and estimated to cost US$lOO,OOO or more, contracts award to individuals and estimated to cost US$50,000 or more, will be subject to prior review. Further sole source contracts to firms estimated to cost US$50,000 or more and to individuals estimated to cost US$lO,OOO or more will be subject to prior review. 70

77 25. All other procurement will be subject to post review. Further, in order to ensure fiduciary compliance, the following arrangements will be put in place: 26. The persons dealing with Procurement in GPWSCs will be trained by DWSS, either directly or by hiring support organizations like NGOdconsultants. Social oversight would be in the nature of requirement of approval of all schemes by the Gram Sabha, access to community of all documents relating to procurement, and suo-mot0 disclosure by the GPWSCs of contract award data and material procurement data, including cost of procurement, and labor employment at the place of work. Audit 27. Since a significant portion of the funds is expected to be spent at level of the GPWSC, firm of CAS (2-3 for the entire state) will be hired by SPMC/ DPMCs for Concurrent Financial Audit of the GPWSC expenditure. TORS of these firms will also include review for compliance with procurement Procedures. 28. For post review of the procurement to be done by DWSS and the GPSWCs, the project will hire a consultant, whose terms of reference will be agreed with the Bank. The report of this consultant will be made available to the Bank. The Bank will review the report of the consultant. In addition, the Bank may also carry out the post review of any contracts awarded by DWSS or the GPWSCs on sample basis and the sample will be decided by the Bank. 29. Further, in view of the findings in the PFM report for Punjab, prepared by the World Bank and forwarded to the GOP on May 19, 2006, a Risk Mitigation Action Plan and an Action Plan for Enhancing Transparency and Accountability has been agreed with GoP and included as Annex 8A and Annex 11 respectively. 30. The overall project risk for procurement is considered high in view of the changes in procurement procedures proposed for this project Procurement Plan 3 1. The Borrower, at appraisal, developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan has been finalized and agreed between the Borrower and the Project Team on October 25, 2006, and is available at New Delhi Office of the Bank. It will also be available in the Project s database and in the Bank s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. 32. Freauencv of Procurement Supervision: In addition to the prior review supervision to be carried out from Bank offices, supervision missions annually to visit the field to carry out post review of procurement actions are considered necessary. 71

78 1 2 Ref. No. Contract (Description) PRW Procurement SSPI ofbulk G-3 Water Meters PRW Procurement SSPI of Computer (3-21 (Server, Laptop) for DPMCs PRW Procurement SSPI ofbulk G-27 Water Meters Estimat Procurement P-Q Domestic Review Expected Commen ed Method Preference by Bank Bid- ts cost (yeslno) (Prior / Post) Opening Date USD ICB NA Yes Yes ,000 USD ICB NA Yes Yes ,000 USD ICB NA Yes Yes million (b) ICB Contracts estimated to cost above US$200,000 per contract and all contracts estimated to cost US$lO,OOO and above awarded on direct contracting will be subject to prior review by the Bank. 34. Consulting Services Ref. No. Description of 1 Estimated Selection Review Expected Comments Assignment Method by Bank Proposals Cost (Prior I Post) Submission Date -NIL- I -NIL- I -NIL- I -NIL- I -NIL- -NIL- 1 -NIL- (b) (c) Consultancy services estimated to cost above US$lOO,OOO per contract and Single Source selection of consultants (firms) for assignments estimated to cost above US$50,000 will be subject to prior review by the Bank. Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$500,000 equivalent per contract, may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 72

79 Rapid Procurement Review Report and Risk Mitigation Action Plan Annex - 8 Attachment 8 A 1. Based on Audit and Inspection Reports of AG for the periods December 2002 to October 2003, November 2003 to December 2004 and January 2005 to October 2005 for RWS Mohali Division and audit paras of November 28, 2005 and November 30, 2005 for Chief Engineer s office; Response of DWSS to some pending Audit paragraphs; and the Bank s observations as a result of review of some procurement related files, the risks identified and an action plan to mitigate these risks as agreed with GOPDWSS is as below: Sr. No Observation Head Lack of clarity on Public Procurement Processes Deficient Planning Monitoring, Evaluation and Reporting with respect to Projects. Weak implementation Risks Inefficient use of resources; High cost; Loss of confidence in the system; and Incorrect application of rules and practices resulting in possibility of collusions. Inefficient utilization or idling or waste of resources; Diversion of funds to expenditures not clearly identified or needed for the project; Loose controls and slippages; and Overall system failure to achieve targeted development. Poor quality of work or product; Delays in completion of work and cost overruns; Loss of end-user confidence on the system; and Accrual of undue exchequer loss. Suggested Mitigation Organize mentorship and training programs with emphasis on understanding and application of rules to real cases; and Periodically update the general appreciation of the procurement staff in global best practices. Establish clear relation between project objectives and procurement; Establish clear monitoring procedures and mandatory reporting requirements; and ensure timely compliance and follow up formats with clear responsibilities. Prepare implementation Manuals with clear guidelines on each stage of project implementation with emphasis on the Contractual provisions and Rights and Obligations of the parties; Establish training modules and ensure that all staff attends these sessions on a regular mandatory basis; and Engage the Technical (Executive) staff also to share experience on implementation issues across the state and corroborate the decisions with established experts in the field to amend, in future, mistakes if any made. Agreed Action GoP will arrange for adequate training on regular basis through dedicated structured modules for the state agencies. Provide structured training to the officials through reputed Institutions and improve the monitoring and reporting of the projects for stricter and proper coordination of project related procurement. Provide structured training to strengthen the departmental expertise on implementation aspects and develop procedures and formats for pre-audit by the supervising officials to obviate slippages on contractual matters. - 73

80 Annex - 8 Attachment 8 A Sr. Observation - No. Head 4. Non- transparency in decision making since the decision making is generally individual centric Weak procurement Audit and Vigilance Follow- UP Inadequate Record keeping Risks Experience gained are not institutionalized resulting in inconsistent decision making; Loss o f credibility in the process; and Possibility of inefficient procurement regime Loss o f confidence in the system. Loss o f confidence, non availability of documents when required by supervising agencies and audit and vigilance, delays in responses Suggested Mitigation Review and standardize Procurement process, including Disclosure Policy for procurement decisions; Establish and implement the Procurement Reforms Action Plan; and Include Civil Society oversight during the procurement and implementation phases to boost public confidence in the system. Ensure prompt response to, and effective follow-up of audit observations and effective monitoring of the pending Audit and Vigilance cases. Maintain all records duly catalogued and indexed in a manner and the form which facilitates the Right to Information under the RTI Act, 2005 and ensure that all records that are appropriate to be computerized are, within a reasonable time and subject to availability of resources, computerized and connected through a network all over the state on different systems so that access to such records is facilitated. Agreed Action To develop systems and procurement procedures consistent with international best practices, engaging renowned experts. Ensure oversight of independent observers during bid evaluation process and civil society during implementation phase o f the projects as confidence building measures, in addition to an elaborate disclosure policy and compliance to RTI Act, The pending audit and vigilance cases to be pursued to conclusion and hture cases to be closely monitored and followed-up with a time-frame for response and compliance. DWSS will maintain all records duly catalogued and indexed in a manner and the form which facilitates the Right to Information under the RTI Act, 2005 and ensure that all records that are appropriate to be computerized are, within a reasonable time and subject to availability of resources, computerized and connected through a network all over the state on different systems so that access to such records is facilitated. 2. Other specific mitigation measures which have been agreed are: A Procurement manual has been prepared. The procedures stipulated in the Manual address the requirements of transparency as under: a) FB to be published in at least one English daily; b) At least 30 days time to be allowed from IFB to date of bid opening; c) Bids to be opened publicly in the presence of bidders; d) Bid documents prepared by Go1 and agreed with the Bank will be used; e) Disclosure requirement as stipulated in the Bank Guidelines will be complied with. 74

81 Actions by State Annex - 8 Attachment 8 A 3. As some of the systems and procedures need to be amended, the state needs to review the procurement rules, procedures and practices for updating / modification inline with the latest acceptable international practices. This will ensure that the procedures are followed uniformly throughout the State. 75

82 Summary Economic Analysis Annex 9: Economic and Financial Analysis INDIA: Punjab Rural Water Supply and Sanitation Project Cost benefit NPV= US$78 million; ERR = 23% 1. Background: The economic analysis has been carried out for entire SWAP Program. A specially designed household survey covering about 2500 households for SVS and MVS was carried out to get baseline information, and an additional sample survey of 523 control households was undertaken to document data on the post-project scenario. The information from the control households has been used for assessing the likely benefits due to improved water supply and sanitation services. The cost side information is based on a representative sample of schemes selected across 84 villages (17 districts) on the basis of sources of water supply and the types of proposed technology: Cluster 1: SV Scheme tube well - NC category; Cluster 2: SV Scheme tube well - PC category; Cluster 3: SV Scheme canal; Cluster 4: MV Scheme tube well - NC category; Cluster 5: MV Scheme tube well - PC category; Cluster 6: MV Scheme canal source. 2. The economic analysis has been carried out separately for each of the above six schemes and for the program as a whole, using the likely technology mix and the proposed phasing of the program. 3. Project Benefits: The entire SWAP is justified on the basis of direct benefits to more than 659,000 households in 3000 NC/ PC villages. The rate of growth of population is considered to be 1.2% per annum. Based on the survey data and secondary sources of information, the likely quantifiable benefits due to the proposed project interventions are: 0 Value of time saved in water collection; 0 Value of incremental water supply; 0 Value of saving in recurring and capital cost (cost incurred to maintain the existing supply of water in the without project situation); 0 Value of health benefits due to reduction in incidence of diarrhea, gastroenteritis and malaria; 0 Value of travel time saved due to shift from open defecation to household toilets; 0 Value of improved quality and yield of cattle milk; 0 Value of time saved in water collection for cattle; 0 Value of fish sold due to renovation of pond and fish breeding. 4. The time spent on water collection has been obtained from the household survey data, with appropriate weights for dry and wet seasons. The expected time savings is about 0.38 hrs / household / day after the project implementation. An assumption of 60% households preferring domestic connections and 40% preferring stand posts is considered for the analysis. The time saving has been valued at the opportunity cost of labor, based on the number of days of gainful employment. 76

83 5. Incremental (additional) water will be available for consumption to the project beneficiaries due to improvements in the existing service level. The incremental water consumption is estimated as the difference between the designed supply and present water consumption, after the schemes are operational. In the absence of a detailed demand curve, the average demand price (approximated by the average of the current and future cost of water) has been used to value the incremental water. The value of incremental water is separately calculated for 65% households who are expected to completely shift from the existing source to a new source (at average demand price) and remaining 35% households who are expected to continue using the existing and the new source (at future value of incremental water consumption). 6. The capital cost saved i.e. cost saved due to periodic rehabilitation or replacement of the existing schemes, has been valued by taking the cost of prevailing technology options (Hand pump, Motorized Hand pump and Submersible Pump) for the analysis. This cost will be avoided due to the project schemes delivering improved services. The saving of this capital cost works out as Rs.7010 per household saved once in ten years. The corresponding saving in O M cost works out as Rs per household per year. 7. The benefits from reduced incidence of malaria, diarrhea and gastroenteritis diseases have been considered and the following three types of benefits quantified: 0 Reduction in treatment related expenses: Based on household survey and field data, the average expenditure incurred on medication per incidence of diarrhea (Rs.250), gastroenteritis (Rs.300) and malaria (Rs.350) are taken for the economic analysis. The reduction in expenditure on medication of diarrhea (21%), gastroenteritis (39%) and malaria (37.5%) are taken as benefit from the project. 0 Reduction in mortality and loss of direct man days: The Disability Adjusted Life Years (DALYs) information on morbidity and mortality for India is used for assessing benefits from reduced incidence of above diseases, valued at the opportunity cost of labor. 0 Reduction in loss of indirect man days: Based on household survey and field data, the number of indirect person days lost has been determined for the attendant, usually the female household member. It is assumed that indirect man days lost are 3 days for gastroenteritis, 2 days for diarrhea and 5 days for malaria, per incidence of the disease. The reduction in indirect person days lost is valued at the opportunity cost of labor. 8. The travel time saved due to shift from open defecation to household toilets is considered as a benefit, and it is assumed that the post project travel time spent by households with toilets is nil. This effective time saving has been valued at the opportunity cost of labor. It is assumed that 30% of total rural households will construct toilets and the expected time saving is 0.70 hrs/ household day after the project. 9. The benefits from improved quality and yield of cattle milk have been considered as a result of improved water supply services to the rural households. Data from the Department of Animal Husbandry and field survey shows that on an average each household in a village of Punjab has 3 cattle, split in an overall ratio of 25 % cows and 75% buffalos. Out o f the cattle owned by villagers, about 24% cows and 34% buffalos produce milk and about 61% cow s milk and 46% buffalo s milk is sold in the open market. Based on the data gathered, it is assumed that improved water supply in the villages will result in 5% increase in milk production along with improvement in the quality of milk, benefiting 40% of the villagers. 77

84 10. The benefits due to time saved in water collection for cattle will accrue to about 30% of the cattle for whom considerable time is currently spent in taking the cattle to the water source. In 20% of such cases, water is fetched from a distance of 100 meters and time taken is 20 minutes per trip, with 2 trips being taken in a day. For the rest 10% cases, water is fetched from a distance of more than 100 meters and the time taken is 35 minutes per trip. The time saved is valued at the opportunity cost of labor. 11. The benefits from selling offish due to renovation of pond are also considered for the economic analysis. The annual revenue generation through sale of fish from one hectare pond is 2.5 Rs.30/-per Kg. This benefit will accrue to 1000 habitations / ponds. 12. Apart from the above benefits, other benefits expected from the proposed project include environmental and institutional strengthening and capacity building benefits. But these benefits have not been quantified. 13. Project Cost: The total proposed project cost including the water supply and environmental sanitation is Rs crores for the entire SWAP. The average unit cost (Rupees) of capital investment per capita for SVS tube well (NC); SVS tube well (PC); SVS canal; MVS tube well (NC); MVS tube well (PC); MVS canal are: 1893, 1284, 1381, 1019, 2000 and 1750 respectively. A wide variation in cost is expected across villages, depending on the number of households in the village, new schemes to be provided, and the extent of augmentation of existing water supply schemes. The O&M cost depends on the type of scheme and varies from Rs.2 to Rs.5 per kilo liter of water (includes bulk water and intra-village O&M cost for MVS). The above costs are extrapolated for the entire Program, based on the following phasing of schemes: 3 % of schemes expected in the first year, 7%, 29%, 30% and 32% in second, third, fourth and fifth year respectively. The software cost (including capacity building and program management) are extrapolated based on the projections for six years: 1.7%, 5.1%, 19.9%, 29.3%, 31.2% and 12.9% in first, second, third, fourth, fifth and sixth year respectively. The overall benefit-cost analysis is based on the phasing and mix of schemes as given above. 14. ERR and Sensitivity Analysis: The ERR of the SWAP program is estimated to be 23%. Sensitivity analysis based on assessed risks indicate that the program is able to absorb negative impacts and still generate positive ERR: a Significant decrease in benefits or increase in total costs: A 54% increase in total costs or a 36% decrease in total benefits, or a combined 21% increase in total costs and decrease in total benefits reduces the project ERR to 12%; a Delay in implementation : If benefits are delayed by 3 years, the ERR falls to 12%; 0 Significant decrease in benefits or increase in water supply costs: A combined 26% increase in water supply cost and decrease in benefits reduces the project ERR to 12%; a Failure of schemes: If 50% of water supply schemes fail after 10 years the ERR reduces to 18.5% 78

85 the COSZS and Decrease tu Be 79

86 Fiscal Impact of Punjab RWSS Project on GoP Rudget Source of Funds 'l'otal

87 expenditure will be more in the first three years, due to the completion of ongoing and committed schemes. However, even during these years, this represents an increase of only about 15% from the current levels of RWSS sector allocations by the GoP from its own Plan Allocations. The net impact of this on the GoP budget is not expected to be substantial. Table 2: GoP - Plan and Non-Plan Budget Source: based on GoP s Budget documents 17. Besides the counterpart funding and debt servicing, no additional recurrent O&M costs are expected to be borne by GoP since these would be met through user charges collected by the GPWSCs. In addition, it is also expected that with the successhl implementation of the SWAP Program, it will be possible for the DWSS to reduce its current non-plan allocations (US$7.5 million per annum) on operations and maintenance of existing water supply schemes as schemes are transferred to GPs and reduction in staff costs because of curtailment on new recruitment and gradual rationalization of bulk water charges for MV schemes. 81

88 Annex 10: Safeguard Policy Issues INDIA: Punjab Rural Water Supply and Sanitation Project Introduction: 1. The program is not expected to have significant adverse environmental and social impacts and has been classified as a Category B project. However, the program does have the potential to offer significant opportunities to hrther environmental and social development objectives. Safeguards Management Planning has been prepared following Social and Environmental Assessments by independent consultants. Key Stakeholders and Consultation 2. Key program stakeholders were identified and consultations held to seek their views and incorporate the same into designing of the program. Grassroots level stakeholders include: (i) benefiting households (including women, poor, Scheduled Castes, and the hamlets); (ii) GPs (men and women elected representatives), (iii) Junior Engineers of DWSS, and (iv) other community based organizations. Block/ district and State level stakeholders are: the respective Panchayat Raj Institutions; other concerned line departments such as health, rural department, power, irrigation; district/ block administration; the DWSS; and non-governmental organizations, contractors/ suppliers and consultants. Departments of Finance, Drinking Water Supply & Sanitation, Rural Development and Panchayat Raj, Science and Technology, Irrigation, Health, political leaders, NGOs and consultants. There have been consultations throughout the project preparation both by the Bank Missions as well as by the GoP. Social and Environmental Assessments 3. Social Assessment comprised: (i) Beneficiary Assessment (BA), (ii) Stakeholder Analysis (SA), (iii) Institutional Analysis; (iv) Impacts Assessments; and (v) Risk Analysis. BA enabled building socio-economic profiles at the national, district, Upazilla, union and village level; the project beneficiaries assessment on the current status of research/extensiodmarketing; and their linkages with governance/management mechanisms. SA resulted in identifying stakeholders at different levels and mapping the key expectations, issues and concerns as related to each stakeholder and the sub-groups thereof. Institutional analysis led to documenting and analyzing the existing institutional arrangements, conducting a SWOT exercise, and formulating inputs into designing of the decentralized extension delivery system in consultatiodcollaboration with the stakeholders. This was followed by impact assessments and risk analysis. The results helped in designing the delivery system and addressing safeguards, thus ensuring positive and sustainable impacts. 4. DWSS, with assistance of consultants, has conducted an Environmental Assessment (EA) study, which comprised an assessment of the current status of rural water supply and sanitation in the state, status of the water resources availability for sourcing of drinking water in terms of quantity and quality, identification of baseline environmental issues pertaining to rural water supply and sanitation, institutional and policy assessment, expected environmental impacts of the proposed project interventions and proposed mitigation measures, development of an Environmental Management Framework (EMF), and institutional arrangements for implementation of the EMF. 82

89 5. As a part of this environmental assessment, DWSS has also carried out a water quality sampling in 40 villages across the state, whereby the quality of the drinking water available in the village was tested both from the private sources as well as from the DWSS schemes. The quality was assessed in terms of the standard physical, chemical and bacteriological water quality parameters, and supplemented by other tests (like pesticides and heavy metals concentrations) where warranted. 6. The findings of the EA study indicate that while the proposed project interventions are expected to result in overall environmental and public health improvements in the state, potential adverse impacts could occur if the schemes are not properly designed, sited, implemented, and maintained. To this end, an environmental management framework (EMF) has been developed for identifying and addressing any possible adverse environmental impacts of the project interventions. Institutional arrangements for the implementation of the EMF have been agreed with the GoP. Social Issues: 7. The program recognizes that Punjab is quite diverse on socio-economic, geo-physical, and strategic fronts. Major issues relate to: (i) inclusion and equity - ensure fair and equal opportunities for participation in, and derive benefits from, the program by all the communities and their subgroups such as scheduled caste, women, women headed households, residents of international border villages; (ii) decentralization - devolving the decision making along with control over resources to the local self governments and user groups; (iii) customer base and demand generation - marketing the program and deriving home the health and hygiene benefits; (iv) capacity support/ building - not only government agencies need to transform themselves into facilitators, but arrange support and capacitate the LSGs and user groups. Environmental Issues 8. Water Availability: Shallow groundwater has traditionally been the major source of water for drinking, irrigation and industrial uses in Punjab. Owing to large-scale extraction of groundwater for irrigation, combined with increasing demands in other sectors due to population and industrial growth, the shallow aquifers in large parts of Punjab are in the state of overexploitation, resulting in a significant ongoing decline in groundwater levels. For a large number of rural households which are not covered by public water schemes and which are dependent on private sources like the shallow hand-pumps or tube-wells, the declining groundwater levels have adversely affected the water supply. 9. Although about 80% of the current and proposed DWSS schemes in Punjab are based on groundwater supply, the water is sourced from the deep aquifer layers, ranging in depth from M. This water supply for drinking water from the deep aquifer is quite abundant from the perspective of ensuring long-term source sustainability. About 20% of the water supply schemes in Punjab are based on canal-water supply, and in some cases the water supply is adversely affected during the periods of canal maintenance shutdown. 10. Water Quality: The groundwater quality in many parts of Punjab is poor owing to natural presence of salinity and fluoride at concentrations exceeding the permissible levels for drinking water use. In addition, the water quality of groundwater may also indicate bacteriological or chemical contamination due to inadequate treatment and disposal of sullage, effluent from septic 83

90 tanks or industrial discharges. According to DWSS estimates, about 44% of the total 12,278 villages in Punjab suffer from poor water quality conditions. Specifically, (a) Salinity is a significant problem in districts of Bathinda, Sangrur, Faridkot and Firozepur; (b) Prevalence of fluoride in groundwater is indicated in Ludhiana, Faridkot, Bathinda, Sangrur, Jalandhar and Amritsar; (c) Nitrate is present in Patiala, Faridkot, Firozepur, Bathinda, Sangrur and Muktsar; (d) In addition, isolated pockets of Ludhiana and Bathinda have been reported to have presence of heavy metals and pesticides, respectively, in shallow groundwater. 11. Due to its higher depth and relative hydro geological isolation from the shallow aquifer, deep groundwater is expected to be free from the presence of bacteriologicalkhemical contaminants. 12. Environmental Sanitation: 49% of the rural households in Punjab have household sanitation coverage, and the main factors affecting the status of sanitation in the villages are the following: (i) Wastewater generated by the households, including the wastewater from cattlesheds, flows into open surface drains leading to stagnation in the lanes and by-lanes (ii) Without adequate arrangements for treatment and disposal, the wastewater often seeps into hand pumps, open dug wells and pipelines, and the water quality of the village ponds has deteriorated leading to loss of productive uses and contamination of the shallow aquifer. (iii) Incidences have been reported of effluent overflowing from the septic tanks and finding its way to the village drains. (iv) The presence of stagnant water in the villages is linked to the incidence of malaria and other vector-born diseases. (v) Due to a combination of poor environmental sanitation and poor personal hygiene, diarrheal diseases, cholera and typhoid cases have been commonly reported in the rural areas. 13. Plans have been made to identify, develop, pilot and adopt several innovative sanitation measures to address the issue of sullage water disposal as well as solid waste management. Safeguards Management Social Safeguards: 14. No lands will be acquired involuntarily and hence OP 4.12 is not triggered. So is OP 4.12 as there are no tribal (indigenous peoples) habitations in Punjab.. The program, however, does need lands and mechanisms of securing the same are detailed below. 15. Land Availability: Land requirement arises for four purposes: FOR (i) water source; (ii) water treatment plants; (iii) construction of ground level or overhead tanks (G/OHT) or cisterns; and (iv) Water transmission and distribution pipelines as well as sullage/ storm water drains. Water sources could be either ground water or imgation canal based. The ground water sources do require land and so is the case with WTPs. In the case of tanks, if they are constructed in a place other than that of the source, separate land will be essential. Transmission and distribution lines are laid mostly in public land or along public streets and no land needs are to be secured. In a few cases, pipelines may have to pass through private agriculture fields. Since the pipeline are laid at least 90 cms below ground elevation, no land acquisition is needed, but permission fiom the land owner is taken. If such permission is not forthcoming, then alternative pipe routing is used, even if it is more expensive to do so. This means, lands are required for SI No (i), (ii) and (iii). For these, it is a tradition in Punjab that, the respective GP and/ or communities should make lands available, else, no construction is planned. Most villages have some public lands and 84

91 the same are made available. The same tradition will continue in respect of the program construction too. 16. In the case of MV water supply schemes, the village which houses the source and WTP will need to make available lands much more than the other participating villages. Then, the village offering land shall be compensated duly by other benefiting villages. The GP offering lands shall pay 30% less of the required capital cost contribution and the same shall be borne duly by the other GPs. Environmental Safeguards: 17. OPBP 7.50 (Proiects on International Waterways) Based on a technical consideration of the proposed project interventions, the hydro geological characteristics of the deep aquifers, the state policy on provision of canal water for rural water supply schemes, and in the context of the Bank s determination of the applicability of OPBP 7.50 (International Waterways) on a case-bycase basis, it has been determined that the proposed project activities do not trigger OPBP This determination is based upon the provision that no bore-wells will be installed within 1 km of the line demarcating the international border between India and Pakistan. 18. OPN (Cultural Propertv) The mission deliberated extensively on this policy in the context of RWSS Projects/ schemes in India in general, and Punjab, in particular. In addition, experiences from the Bank assisted RWSS projects in the last decade-and-a-half (across the states) were also taken into cognizance. In Punjab, the Department of Drinking Water Supply and Sanitation (DWSS) itself has constructed some 2,000 deep tube wells so far. Further, it is estimated that number of tube wells dug for irrigation could be close to a million. Moreover, the Bank too has financed some 7 RWSS projects in India accounting for about 7,000 groundwater based schemes in the last decade and a half. So far, the issue of cultural property has not arisen. Based on all these, a decision is made not to trigger the policy. 19. Water Ouantitv. Source selection will be conducted with due regard to ensuring yearround adequacy of water supply and long-term sustainability of the resource. More specifically: a The current DWSS design practice ensures that water supply for ground-water based schemes is sourced from deep aquifer, with depth ranging from 75 M-300 M. The EA study, supplemented by inputs from regional groundwater experts, indicates that the current and expected future drinking water abstractions from the deep aquifer are small compared to their estimated sustainable yield, and therefore source sustainability for deep groundwater-based schemes is ensured. a In areas where deep aquifers are saline, canal-based schemes will be implemented, if adequate year-round supply can be guaranteed through storage or other measures. 20. Water Oualitv. The sitting, planning, design, and operation of the schemes will ensure that source selection is conducted with due regard to water quality of the source, and that water quality at household delivery level meets the drinking water norms. More specifically: a Due to its higher depth and relative hydro geological isolation from the shallow aquifer, deep groundwater is expected to be free from the presence of bacteriologicallchemical contaminants. Conventional water quality parameters for DWSS s deep groundwaterbased schemes indicate acceptable water quality for drinking purposes. a However, in view of the traditional emphasis on shallow groundwater quality and due to emerging concerns regarding possible presence of industrial or agricultural chemicals in 85

92 0 0 some locations, the project will commence and support a systematic assessment of deep groundwater quality in the state. Effective and regular disinfection, as well as preventive and corrective maintenance of water distribution systems will be ensured. A protocol for regular water quality testing and control has been developed, which will be implemented through the operations phase of the water supply schemes. 21. Sanitation. The project will support interventions on environmental sanitation to ensure that the benefits of improved water supply are not compromised by poor personal hygiene standards, and inadequate drainage, sullage/wastewater treatment and disposal. More specifically: (i) The project will support sustained IEC campaign to create and enhance awareness on hygiene aspects pertaining to hand-washing, water collection, storage and handling practices (ii) The project will support, on demand basis, drainage improvement schemes for improving sullage drainage, addressing effluent overflow from septic tanks into village drains, installing small-bore sewers / sewerage systems and undertaking ponds rehabilitation. 22. In addition, the EMF prescribes measures to ensure that: (i) no borewells are installed within 1 km of the line demarcating the international border between India and Pakistan, to prevent the possibility of cross-border groundwater impacts. (ii) the temporary adverse environmental impacts associated with construction-stage activities are systematically addressed in the project-sponsored schemes.(iii) appropriate environmental monitoring indicators are integrated in the overall project M&E systems (iv) adequate resources are provided for environmental awareness and capacity building in village communities, GPs and DWSS staff (v) adequate resources are provided for a thorough assessment of the water availability and quality in deep aquifers Implementation Arranpements: 23. Safeguards implementation and oversight arrangements have been developed keeping in view that the proposed program will adopt a sector wide approach (SWAP) irrespective of hnding sources. Essentially, the safeguards management will form an integral part of the overall scheme cycle including sub-project appraisals and monitoring implementation. Towards ensuring this, DWSS will re-define its role, changing from builder /provider to that of a facilitator/ partner and will shoulder responsibility for state wide leadership, collaboration and management of RWSS sector including undertaking IEC, safeguards, arranging capacity support, Quality Assurance as well as monitoring and evaluation of outputs and outcomes. To enable this transformation, the exiting DWSS structure has been re-organized such as to provide for two, rather independent, channels - one, the Program Facilitation and Monitoring Wing, and the other, Operations Wing. The former, with an unitary structure (through the district), a State Water and Sanitation Program Management Cell (SPMC) and a District PMC, will be responsible, among others, for safeguards management. The operations Wing will be largely the current DWSS set-up with Regional Chief Engineers and the existing offices of Circles, Divisions and Sub-divisions. They will be responsible for providing technical support, including safeguards management, to the GPs and communities. The DPMCs will be guided by a District Water Supply and Sanitation Committee (DWSC) headed by the President of the Zilla Parishad. Grassroots level management decision making including construction fund management and procurements will rest with GP and the associated sub-committee, GPWSC. 86

93 24. The SPMC and DPMC staff will include Environmental-cum-Social Development Coordinator charged with the overall responsibility of ensuring the implementation of the environmental and social development aspects. DWSS being chiefly an Engineering Department, non-engineering skills necessarily needs to be supplemented. For this, the Cell will outsource professional management consultants, at the state as well as district levels. These consultants will: e Provide experienced personnel in managing community development interventions including safeguards, as well as monitoring and evaluation including process monitoring and impact assessments. e Support Program Director in developing and guiding implementation of capacity building, IEC, and communication. e Assist the Program Director in the preparation of progress reports as well as in consolidating the key learning, document the same and disseminate it statewide. 25. The consultants will, in particular, assist the SPMC in: (i) developing and disseminating alternative mechanisms to reach and work with the communities viz., participatory management techniques and methodologies as well as safeguards; (ii) drawing strategies and implementation action plans transparency, inclusion and accountability; (iii) designing and adopting change management approaches, in particular, and capacity building, in general; and (iv) designing, rolling out and maintaining a web site reflecting status and progress in the RWSS sector in the state. It is expected that the DWSS will acquire/ learn the non-engineering skills (supplemented by PMC) within 2-3 years and thereon the same will be managed in-house by DWSS. 26. Additionally, a state level environmental resource agency will be contracted to provide environmental capacity building, to conduct environmental audits and to provide technical support as and when required. Similarly at the district level, each of the 18 DPMC will include an Environmental/ Social Development Specialist in their staff, who will be responsible for providing environmental support and supervision to each project-scheme in the district. In addition, a panel of environmental experts will be constituted in each district to provide technical support on as required basis. At the village level, the awareness and capacity for environmental management in the local GPWSC and SO would be enhanced through a targeted training and capacity building program. 87

94 Annex 11: Action Plan for Enhancing Transparency and Accountability INDIA: Punjab Rural Water Supply and Sanitation Project 1. The recent enactment of the Right to Information Act (RTI) has created additional opportunities for enhancing transparency and accountability. Arrangements under this project will make use of this opportunity to enhance disclosure of information facilitating civil society oversight resulting in increased accountability. Enhancing disclosure will require a change in mind-set and behavior that can be encouraged with incentives and remedies. The agreed action plan builds upon the numerous actions that have been agreed under this project to enhance transparency and accountability actions for procurement and other activities under the Project. 2. The key elements of this strategy include the following: a) Enhance disclosure of information; b) Facilitate civil society oversight; c) Develop a creditable system to handle comments, suggestions and grievances; d) Define clearly incentives and remedies available; e) Develop monitoring indicators for compliance to the above agreements and for impact on outcomes a) Enhanced disclosure of information 3. The project has developed the following outline of a disclosure policy that will be further fine tuned and details developed during implementation based on the experience gained. Outline of the Disclosure Policy and Action Plan 4. The intent of the disclosure policy is total compliance with the RTI Act both for ondemand disclosure and suo mot0 disclosure. This enhanced disclosure of information to the citizens is expected to facilitate civil society oversight. However, the information needs to be maintained and provided in a manner that will maximize the utility of the information. The following table details the suo mot0 disclosures by DWSS/ GoP. Topics Project Scope Community and Infrastructure Development Environmental Management Documents to be disclosed Project Appraisal Document of the Bank Financed Project. Village selection 1. No. o f applications received 2. No. o f Prioritized villages 3. List of Implementation phase proposals approved by SWSM and DWSC with salient features o f the scheme. 4. Scheme completion report for each scheme. Status o f coverage o f habitations. User satisfaction surveys Environment Assessment Summary Frequency Once when Project Agreement is signed for each batch I scheme Yearly Once in every 2 years Draft final report has been disclosed. Complete EA report finalized after appraisal would be disclosed and remain Mode. DWSS website. DPMC & ZP office notice board /DWSS website. DWSS website. DWSS website 1 World Bank s Info shop. 2 Punjab Environment Information system s website. 3 DWSS website 88

95 Topics Financial Management Procurement Documents to be disclosed Database on District wise water resource maps including water quality of each dnnking water resource. Periodic report of water quality including testing for heavy metal & pesticides. At Proiect level i) Project Financing Plans ii) Budgetary allocation for the project iii) Progress report (financial and physical) iv) Financial Management Guidelines At GPWSC level iv) Approved Cost and financing plan of individual schemes v) Different stages o f contract award (bids, offers, evaluation, selection, award) vi) Expenditure statement vii) Gram Sabha meeting notices Contracts awards for ICB [and LIB if applicable] containing following information: [a] Name of each bidder who submitted the bid [b] bid prices as read out at bid opening [c] name and evaluated prices o f each bid that was evaluated [d] name of bidders whose bids were rejected and the reasons for their rejection; and Frequency available throughout the entire project cycle. A systematic assessment o f deep ground water quality & canal based resources from each water supply scheme in the state is being conducted once in the entire project cycle as district wise assessments are completed the database would be made available to public through website. Water quality monitoring including testing for heavy metal & pesticides would be conducted. Annual updates would be made available to public through website Before the start o f the project Yearly Quarterly/ Annually Before the start o f the project Before the scheme is officially launched As per the need Monthly Prior to notice period requirement of calling a Gram Sabha Within 2 weeks o f receiving the Bank s no objection to the recommendation of contract award Mode 1 Punjab Environment Information system s website. 2 DWSS website 3 Office of SPMC & DPMC 1 Punjab Environment Information System s website. 2 DWSS website 3 Office of SPMC & DPMC DWSS website throughout the life and updated regularly. DWSS website. DWSS website. DWSS website throughout the life. Displayed on a Sign board at Sites I GPs Displayed on a Sign board at Sites IGPs Displayed on a Sign board at Sites IGPs Displayed on a Sign board at Sites IGPs UNDB online, dg Market and website o f DWSS. In this publication DWSS shall specify that any bidder who wishes to ascertain the grounds on which its bid was not selected should request an explanation from DWSS. The DWSS shall promptly provide an explanation of why such bid was not selected either in writing or in a debriefing meeting, at the option of DWSS. 89

96 Topics Documents to be disclosed [e] name of the winning bidder, and the price it offered, as well as the duration and summary scope of the contract awarded Frequency Mode If after publication of results of evaluation DWSS receives protests /complaints from the bidders, and if as a result of analysis of such protests DWSS changes its contract award recommendation and the Bank accepts such changes, then the revised contract recommendations containing all the above details shall be published. Within 2 weeks of receiving the Bank s no objection to the revised recommendation of contract award UNDB online, dg Market and website of DWSS. Contract awards for National Competitive Bidding: Publication of results of evaluation and the award of contract consisting of the same information as mentioned above for ICB and LIB. Within 2 weeks of completion of evaluatiodreceiving the Bank s no objection to award. DWSS website. Contract awards for Direct Contracting containing the following information: [a] Name of contractor [b] Price [c] Duration; and [d] Summary scope of the contract Quarterly in the format of a summarized table covering the previous period UNDB online, dg Market, DWSS website Contract award for consultancies containing the following information: [a] the names of all consultants who submitted proposals; [b] the technical points assigned to each consultant; [c] the evaluated prices of each consultant; [d] the final point ranking of the consultants; [e] the name of the winning consultant and the price, duration, and summary scope of the contract. The same information shall be sent to all consultants who have submitted proposals. After award of the contract. UNDB online, dg Market, DWSS website. Contract awards for selection based on the Consultants Qualifications and single source selection containing the following information: [a] name of the consultant to which the contract was awarded [b] theprice [c] duration and [d] scope of the contract Quarterly in the format of a summarized table covering the previous period UNDB online, dg Market, DWSS website. Overall project procurement plan including its updates. After the Credit is approved. Bank s website, DWSS website. 90

97 Topics Documents to be disclosed Frequency Mode GPN, IFB, EO1 Procurement Manual after approval by World Bank As applicable. Dec 06 UNDB online, dg Market, DWSS website, Local Newspapers. DWSS website b) Facilitate civil society oversight 5. Civil Society Oversight is in-built into the project s resources allocation as well as decision making both at grassroots and apex levels of implementation and the same are described below : i). Village Selection. Villages are not selected by any external body. GPs desirous of participating in the project would select themselves and initially seek an endorsement from the Gram Sabha and subsequently apply to participate in the project. Applicant villages will be prioritized based on 5 key parameters and the same will be used for selection. ii). Citizen Bodv. Control over resources and decision making in respect of planning, procuring, find managing, implementing and operating and maintaining, rests with a Village level Citizen Body, GPWSC, a broad based institution with their members selected elected from the Gram Sabha. Due representation to women, scheduled castes and other influential persons have been made. GPWSC will display the project details including financial particulars prominently on a notice board and update the same on a monthly basis. iii). Social Audit. Provision for Bi-annual social audits from GPWSCs and other citizens, with assistance from NGOs have been provided for. iv). NGO Participation. Project provides for enlisting the services of NGOs for providing community development support to the GPWSC and communities as well as build their capacity such as to enable them exercise due diligence and ensure quality/ cost control. VI. Tender Management. GPWSC members form an integral part of a committee responsible for tendering processes and award of contract handled by themselves as well as DWSS. All payments will be made subject to approval from GPWSC (in the case of SV schemes) and concurrence from Scheme Level Committee (SLC) in the case of MV schemes. vi). MOUs. A MOU will be signed among GPs, GPWSCs, SLCs and DWSS in respect of each scheme outlining role and responsibilities of each actor. vii). DWSC. At the district level, a DWSC is set up, headed by Zilla Parishad Chairperson and with representation from GPs, Block Panchayats, district administration, RWSS experts, district civil surgeon, and representatives of the departments of Education, Information and Publicity as well as Members of Legislative Assembly and that of the Parliament. This committee will oversee the program and be responsible for endorsing village prioritization, annual plan reviews and implementation phase approval. This committee will also address grievances (if any). 4 Develop a creditable system to handle comments, suggestions and grievances 6. A system will be developed to handle comments, suggestions and grievances. This system will include the following features: establish a comments, suggestions and grievance handling system in DWSS with clearly defined responsibilities and procedures 91

98 establishing a monitoring system database** to monitor adherence to the standards listed in the Procurement Manual. This database would be online with restricted access. updating the Procurement monitoring data base on a monthly basis listing and discussing all cases received and actions taken in the monthly report agreeing a standard protocol with appropriate triggers for carrying out investigation by appropriate agencies including and actions to be taken ** The database should specifically allow: (i) complete and adequate record keeping and retrieval of all cases; (ii) cases received, responses sent and actions taken by dates; (iii) monitor response time and compare against an agreed response standard, and (iv) publish a monthly, quarterly and an annual report based on an agreed format Transparency / Disclosure aspect A system needs to be developed to handle comments, suggestions and grievances, which will have clearly defined responsibilities and procedures. Action to be taken AN ACTION PLAN 1) A comments, suggestions and grievances handling system, which includes maintaining a project log and filing to monitor status o f follow up of each received comments, suggestions and grievances, will be established by the DWSS. The mechanisms will include provision for follow up investigations of substantial complaints by the internal Auditors, or third party audit to ensure independency and reliability of the system. 2) A comments, suggestions and grievances handling component will be included at the DWSS web site 3) Updating the database & tracking of the status of investigations and measures taken will be reported in monthly reports to management and the Bank. Complaints deemed possible serious infringements may be further investigated by the Bank. Time line June, 2007 Sei 2007 Dec, 2007 and then annually Action By SPMC SPMC SPMC d) Define clearly incentives and remedies available 7. If as a result of any such information provided by the member of the public, cost savings are achieved or charges of misconduct and misappropriation are proven, such members of the public will be awarded some recognition such as a certificate of excellence or felicitation at a public ceremony with or without a monetary reward, DWSS will formulate general policy in this regard and after due approvals of the GoP, announce these to the public as aforementioned. Simultaneously strict disincentives will be announced for the erring members of the departments. 8. DWSS will establish the remedial actions and sanctions for cases of fraud and corruption that are reported and for which evidence is found and charges established after due process of investigation. This will include sanctions to government staff proven to be involved in such cases. 9. Information regarding such cases, where lessons are learned and finds are retrieved, will be widely published for information of the members of public. Strict procedures to ensure anonymity of informants will be enforced. 92

99 Transparency I Action to be taken Time line Disclosure aspect Disclosure on 1 A policy describing incentives and June, 2007 incentives and sanctions will be developed. sanctions available 2 Publishing the policy. Sept, 2007 Action By DWSS DWSS e) Develop monitoring indicators for compliance to the above agreements and for impact on outcomes 10. The Bank will monitor implementation of these elements, through inter alia: Disclosure of information will be supervised mainly through (a) checking the frequency and comprehensiveness of website updates and, (b) checking the distribution of materials to key participating civil society groups & Panchayats (c) checking the comprehensiveness of information available at Public information Kiosks. Civil society oversiht will be supervised through reviewing the reported inclusion of Civil Society Organizations (CSOs) in project activities, particularly their roles in monitoring procurement and construction. More precise indicators shall be developed during the first year of project implementation phase. The complaints handling system and the system of sanctions and remedies will be supervised mainly through (a) periodic review of statistics based on records kept on the website of DWSS and (b) field level checks to ensure that problems are being reported and acted upon. 93

100 Annex 12: Decentralization and role of PRIs INDIA: Punjab Rural Water Supply and Sanitation Project Decentralization and Role of Panchayati Raj Institutions in Punjab' 1. Following the 73'd and 74th Constitutional Amendments, decentralization efforts in the country have received increased emphasis in several states. Decentralization to Panchayati Raj institutions (PRIs) in Punjab is also gathering momentum. For rural water supply and sanitation, involvement of local communities in planning, implementation and O&M management is critical, and therefore, direct and effective participation of GPs and even lower tiers at the habitation level, through GPWSCs, is a necessity. This provides an opportunity under the proposed Punjab Rural Water Supply and Sanitation Program to strengthen the lowest tier of PR institutions in the state. 2. Key Legislative Landmarks on Decentralization in Punjab. The village Panchayats in one form or other existed very early in the villages of Punjab. The three tier Panchayati Raj System was introduced in the state in The existing Act governing the Panchayati Raj Institutions is the Punjab Panchayati Raj Act 1994 which replaced the earlier Acts. The first State Finance Commission (SFC) to make recommendations regarding principles for distribution of net proceeds of taxes levied by the State Government between the State and Panchayati Raj Institutions was appointed in July 1994 and its recommendations covered the period of 5 years from to The second State Finance Commission was set up in September 2000 and recommendation covered the period up to The Organizational Set-up of the Three Tier PR System in Punjab. In Punjab, the PRIs are within the mandate of Department of Rural Development and Panchayats (DRDP). The three-tier organization set-up of the Panchayati Raj Institution in Punjab is shown in figure GPs - The bottom tier of PRI is the Gram Sabha comprising of every person who is entered as voter in the electoral role prepared by the State Election Commission pertaining to any revenue village or group of contiguous villages having population not less than More than one Gram Sabha can also be constituted with in the boundaries of the same revenue village if the population is above 500. Each year every Gram Sabha shall hold two general meetings one in the month of December after the harvesting o f Swani crop called the Swani meeting and in the month of June after the harvesting of Hari crop called the Hari meeting. The quorum for the Gram Sabha is one fifth of the total number of members. The development plans and budget estimates of the GPs are discussed and approved in Swani meeting. The development plans of the previous year and statements of accounts are taken up in Hari meetings. A schedule for the Gram Sabha meetings for each of the village in the entire Block will be prepared in advance and published. The dates for the meetings are thus permanently fixed and prominently displayed in the village. BDPOs give wide publicity to the schedule of the Gram Sabha meeting. A representative of the BDPO will attend the Gram Sabha meeting. The Punjab Panchayati Raj Act provides that in the event of the Sarpanch failing to hold two consecutive General Meetings of the Gram Sabha, the Sarpanch shall automatically cease to hold office7. This note is slightly modified version of the note prepared by the DWSS and the Project Management Consultant. 6 As per 2001 census the rural population of Punjab is lakhs living in 12,278 inhabited village comprising of 14,605 habitations. There are 12,447 GPs in the State. 7 Section 5 (2) of the Punjab Panchayati Raj Act 94

101 5. Each Gram Sabha elects from its members (Single constituency) a GP consisting of a Sarpanch and Panches (Multi member) based on the population*. The GP is the Executive Committee of Gram Sabha and is the body corporate. Chairpersons of Panchayat Samitis in the district ctly elected numbers of the ZP including Officer of the rank of District Development and Panchayat Officer as Deputy Chief Executive Officer Panchayat Samiti Nos. Block level Source: Statistical Abstract of Punjab, The Panchayat Secretary is in-charge of the office of the GP and performs the roles under the control of the Sarpanch and is responsible to the GP. The GPs in a Panchayat Samiti area are organized into Panchayat Circles of 3 contiguous GPs. One Panchayat Secretary is in-charge of a circle. When the GPs are small, 5 GPs constitutes one Panchayat Circle. The Panchayat Secretary convenes the GP meetings under the direction of Sarpanch, records proceedings, and maintains account books such as the cash book and stock register. The Panchayat Secretary also acts as the link between the GP and Panchayat Samiti. The Junior Engineers are attached to the BDPO and work under the supervision of Sub-Divisional Engineers. The Junior Engineer assists the GPs in preparing technical estimates, inspecting the works implemented and in issuing utilization certificates. 7. Section 25 of the Punjab Panchayati Raj Act, 1994 provides for constitution of Amenities Committee to perform functions in respect of education, public heath, public works and other finctions of GP. The Sarpanch is the ex-officio member and chairman o f the committee which can have co-opted members as well as the prescribed number of women and Scheduled Caste members. 8. Punchuyut Samiti - The Panchayat Samitis are constituted for every block and consist of members directly elected from the territorial constituencies in the Panchayat Samiti area. The Block Development and Panchayat Officer (BDPO) is the ex-officio executive officer of the Panchayat Samiti. For Population 200 to 1000 five Panches, 1001 to 2000 seven Panches for population 2001 to 5000 nine Panches, 5001 to eleven Panches and exceeding thirteen Panches. 95

102 9. The BDPO office has two branches, General Branch and Accounts Branch. The General Branch to which Panchayat Secretaries are attached with are the employees of the Panchayat Samitis and is under the direct administrative control of Panchayat Samiti. The Accounts Branch consists of accountant, Gram Sewaks, two Junior Engineers etc. and are treated as on deputation to the Panchayat Samiti. The Panchayat Samiti also has some staff from other departments like Industries department, planning department etc. 10. Zila Parishad - Zila Parishad (ZP) is the highest tier having jurisdiction over the entire district excluding the areas of municipality, cantonments area or notified area. The ZP consists of one member each directly elected from temtorial constituencies of the district, all chairpersons of Panchayat Samitis, members of Lok Sabha and members of State Legislative Assembly representing a part or whole of the district The ZP Chairperson and Vice-chairperson are elected from the directly elected members of Zila Parishad including Chairpersons of the Panchayat Samitis. The chairman of the Zila Parishad is also the Chairman of the DRDA. 12. The Additional Deputy Commissioner (Development) is the Ex-officio Chief Executive Officer of the Zila Parishad and Officer of the Department of the Rural Development and Panchayats not below the rank of a District Development and Panchayat Officer is the Deputy Chief Executive Officer. The staffing pattern except the post of CEO and Deputy CEO differ from district to district. Some districts have less than 10 numbers while some other have up to 100 staff in the Zila Parishad. 13. Transfer of Functions to PRls. As per the Punjab Panchayati Raj Act the GPs are empowered to construct, repair and maintain community assets based on the availability of funds at its disposal. While Zilla Panchayats do not have any specific related functions, the Act stipulates the establishment, repairs and maintenance of rural water supply schemes, prevention and control of water pollution, and implementation of rural sanitation schemes as duties of the Panchayat Samitis. However, these may be overridden by the State Government through general or specific orders. The hnctions relevant to the water and sanitation sector for GPs include: 0 any public place including its sanitation and drains; 0 wells, water-pumps, baolies, springs, ponds and tanks for the supply of water for drinking, washing and bathing; 0 supply of water for domestic use and for cattle; 0 prevention and control of pollution; 0 cleaning of public roads, drains, tanks, wells and other public places; 0 construction and maintenance of public latrines; and 0 Management and control of washing and bathing ghats. 14. Punjab Council of Ministers decided in 2003 to transfer the functions of several departments to the PRIs. In spite of this major policy decision, the other departments are functioning independent of the PRIs with their own organizational structure. Departments like Agriculture, Horticulture and Animal Husbandry are totally outside the PRI structure. Each of these departments has its own offices and manages their program through their own deconcentrated offices at district or lower levels. 15. To implement the decentralization policy approved by the Council of Ministers, the GoP has devolved the functions and responsibilities for implementing the schemes and programs of the following six departments of the state to the PRIs: 96

103 e e e e e e Department of Social Security, Women and Child Development Department of Welfare of Scheduled Caste and Backward classes Department of Water Supply and Sanitation Department of Rural development and Panchayats Department of School Education Department of Health and Family Welfare 16. DWSf - GoP has taken the decision to transfer 876 SV rural water supply schemes being run by the DWSS to the GPs. Out of the 774 schemes handed over to the GPs about 308 are operating the schemes. DWSS is studying the experience and is in the process of drawing up detailed guidelines for smooth transfer and successful O&M of the scheme by the GPs. 17. Department of Rural Development and Panchayats -The three tier PRIs implements various schemes like Swaranjayanti Gram Swarozgar Yojna, Sampuran Gramin Rozgar Yojna, Indira Awaas Yojna, Pradhan Mantri Gramodaya Yojna, Rajiv Gandhi Pendu Jan Sehat Kalyan Yojna and Consolidated Rural Development Scheme. 18. Transfer of Functionaries to PRIs. Consequent to the transfer of functions, the deployment of corresponding staff to the PFUs for the effective and efficient delivery of the various services is being attempted. GoP is looking at the deployment of staff to the PRIs both from re-deployment of those already working in various line departments and those to be recruited fresh. GoP has prepared a detailed proposal to be implemented in a phased manner and has been circulated among the departments for their consideration, acceptance and implementation. The powers of minor punishment to the employees transferred will be vested with the PRIs for effective control and management. 19. Finances of PRIs. The Govt. of Punjab has accepted the recommendations of the second Punjab SFC on the transfer of financial resources to the PRIs as below: 4% share of net proceeds of all state taxes to be allocated between PRIs and ULBs in the ratio of population; the share of GPs is 67.5%. The ZPz and PSs will not receive any share of this as they are entitled to a share on the auction money of country liquor and excise duty on IMFL which was considered as adequate to meet their expenditure needs. The allocation of share of state taxes to PRIs in various districts is done using the following criteria: Criteria - Rural population of the districts as per 2001 census - Short fall of per capita own income of the GPs in the districts as compared to per capita own income of all the GPs in the state - Population of Scheduled caste in rural area of the districts - Rural population in the sub-mountainous areas of the district Weight age 65% 15% 15% 5% m I These funds are to be spent for development works in the village for purposes like disposal of Sullage water, rural sanitation, bio-gas plants, solar street lights, cleaning of ponds with duck weed technology, construction of community halls etc. Rs. 50 Crores per year from to out of the total auction money of country liquor and additional excise duty on IMFL to be released to PRIs. Earlier known as Department of Public Health. 97

104 The funds released to PRIs as per the second SFC are given in Table 1. Table 1 - Fund Releases to PRIs as per Second SFC Recommendations (Rs. In Lakhs) Financial Recommended Year by SFC Actual Allocation Actual Release Nil Nil 21. The PRI own resources include: local taxes, income from Panchayat land, shops, fishponds etc. All the rights of the Shamlat land is vested with GPs and is a permanent source of recurring income to them. Besides Shamlat lands some portion of Mustarka Malkan lands are also placed under the management and custody of GPs. The details of own income of PRIs are given in Table During the year , the total own income of the PRIs from leasing of land was Rs lakhs and Rs lakhs during As per the Punjab Pachayat Raj Act, GPs are also empowered to levy a water rate, where arrangement for supply of water for drinking, irrigation or any other purpose is made by the GP in its jurisdiction. Financial Year Tax collected Income from Panchayati land, shops, ponds etc The funds released to the PRIs are tied to different developmental purposes and released to the Panchayat Samitis and GPs through the District Development and Panchayat Officer. The Zila Parishads directly receive h d s from the State Government; though the Go1 finds are routed through the DRDA. The Zila Parishads release funds to Panchayat Samitis and GPs. During the Panchayats expended an amount of Rs lakhs for various activities as given in Table 3. Village Common Lands (Regulation) Act, Note prepared by Deptt. of Rural development and Panchayats. 98 lo l1

105 Source: Annual Administrative Report of the Department of Rural Development and Panchayats, Source Amount (Rs. Lakhs.) Percentage Grants from the Government Grants for local institutions Donations Income from disdosal of refuge Income from auction of fish ponds Income from Shamlat lands Income from house tax Income from profession, octroi and other taxes Income from voluntary contributions Other Total Recent Policy Initiatives to Strengthen PRIs. GoP has taken various reforms initiatives to strengthen the PRIs to improve their functioning. Its vision is to provide basic amenities for good living and human growth to all rural citizens to bring about a visible improvement in the living conditions of the rural population in a time bound manner. While GoP will be providing, enabling technical and administrative support, the PRIs will be in-charge of execution of the programs and the policies. The focus of attention for the PRIs in the Punjab will be to build adequate basic rural infrastructure for education, health care, water supply, sanitation and hygiene promotion, village roads etc. 25. Enhanced powers to PRh to Execute Development Projects - The GPs are now authorised to sanction and execute works up to Rs. 10 lakhs. The corresponding limit for Panchayat Samiti is Rs. 20 lakhs. Zila Parishads can take up works of any amount. 26. Panchayat Secretaries made Accountable to GPs - The disbursement of salaries to the Panchayat Secretaries has been linked to the GP certification of their attendance. 27. Registrar ofbirths & Deaths - The Panchayat Secretaries have been designated as the Local Registrars of Deaths and Births in place of SHO of the Police Stations Enhanced cheque signingpower at the village Panchayat - The cheque signing limits at the GPs level has been enhanced for the smooth operation of the bank account and timely flow of funds. The earlier and amended limits13 are formalized by the Government Orders. l2 Punjab Registration of Blrths and Deaths Rule Circular number 5/22/ /7058 dated of Director, Rural Development and Panchayats, Govt. of Punjab. 99

106 29. ZP Chairperson made chairperson of DRDA - The chairperson of ZP is also made the chairperson of the DRDA. This will bring in direct supervision and control of funds from Govt. of India on centrally sponsored schemes by the Zila Parishad. 30. Constitution of District Planning commit fee^'^ - District Planning Committees will be set-up in every district to consolidate the plans prepared by the Panchayats and Municipalities in the districts and to prepare draft development plan for the district as a whole. The DPC will have 15 to 40 members depending upon the population in the district. GoP has nominated the Chairperson of the ZPs to chair the DPC. Four fifth of the total number of members in the DPC will be elected by and from amongst the elected members of the Panchayat at the district level and of the Municipalities in the districts. The proportion of the elected members between the Panchayat and Municipalities will be decided by the ratio between the population of the rural and urban areas in the district. The GoP from the Members of Legislative Assembly and others will nominate one fifth of the total number of members of the committee. The Deputy Commissioner of the district is the ex-officio Secretary of the committee. The Additional Deputy Commissioner (Development) of the district will be the Additional Secretary of DPC The existing District Planning and Development Board in the state have been replaced by DPC and DPC have the following key functions: (a) To prepare the draft District Development Plans (b) To prioritize schemes and programs (c) To take measures for proper implementation of developmental programs (d) To encourage Panchayats and Municipalities to take up and expedite developmental programs (e) To make efforts to generate additional resources for developmental work. 32. Capacity building of PRIs. Based on a SWOT analysis of the PRIs in Punjab the main areas of capacity building support required include: Human resource capacity: rn Capacity building programs for elected representatives including orientation programs, interactive and feed back sessions and exposure visits etc. rn Training programs for re-deployed and newly recruited officials of the PRIs. rn Information, education, orientation programs and campaigns for the village community. Institutional capacity: Provision of office building, community centers, information centers etc. especially to the GPs. rn Developing and instituting systems and procedures for planning, monitoring and governance. This may include developing and implementing accounting and financial management systems, participatory planning methodologies, developing guidelines etc. including preparation of manuals. Financial capacity: The grant-in-aids and other find flows to the PRIs need to be timely and streamlined. The flexibility to plan for local needs and priorities of the village communities can be achieved only by increasing the untied portions of grants to the PRIs, which is currently filly tied to state level and central schemes. The Punjab District Planning Committees Act (Number 22) of 2005 vide Punjab Government Gazette, 14 Extraordinary, Published by authority. 100

107 33. The DRDP has two training centers to impart pre-service and in-service training to officials of the department: State Institute of Rural Development, Nabha, Patiala district and the Community Development Training Centre, Batala, Gurdaspur district. 34. GoP is engaging NGOs and other professional organizations such as the Institute for Development and Communication (IDC), Centre for Research in Rural and Industrial Development (CRRID) for under taking information education and communication campaigns, to conducting capacity building programs for the elected representatives of the PRIs advice on capacity building issues etc. A capacity building project worth Rs.5 Crores has been implemented for building the capacity of elected representatives. The capacity building programs covered areas like powers and responsibilities of the elected members, accounting and financial management, Panchayati Raj Act and legal provisions etc. 101

108 I Introduction Annex 13: Social Assessment INDIA: Punjab Rural Water Supply and Sanitation Project 1. This note reflects the proposed project s social assessment based efforts towards building the elements of decentralized RWSS service delivery. Initially, social development issues and concerns related to decentralization of RWSS service delivery are identified based on beneficiary assessment, stakeholder analyses and social impact assessments. These are supplemented with the issues emanated from: (i) Performance Assessment Studies (PAS) conducted as a part of understanding and appreciating the investment requirements; (ii) experiences of piloting the program, currently underway; and (iii) external evaluation study sponsored by the National Bank for Agriculture and Rural Development (NABARD). A discussion on the issues and concerns form a basis for designing the delivery system. The results are presented in six sections. Section I serves as an Introduction; Section I1 on the beneficiary assessment, presents the characteristics of the prospective benefiting community groups and sub-groups. Results of the PAS and NABARD evaluation studies as well as piloting experiences are presented in Section 111. Section IV covers the identification of stakeholders, their key perceptions/ expectations about/ from the project, potential benefits/ risks/ impacts and conflicts of interests (if any) in respect of each of the sub-groups. Major issues to be encountered and the design features of the proposed project addressing the same are presented in Sections V and VI. I1 Beneficiary Assessment A. Socioeconomic Profile of Puniab State 2. Punjab covers an area of 50,362 Sq Km, amounting to 1.5 % of the total surface in India. The state has a population of about 24.3 million (census 2001) with 66% of the population living in rural areas. Literacy is close to 70% and the sex ratio is 874. Scheduled Caste persons account for about 30% of the total population and 80% of them live in rural areas. As per 2001 census there are 12,278 inhabited villages in the state comprising of 14,605 habitations and 2.8 million households. Population living below poverty line is about 6%. 3. Topographically, the state is mostly a plain and can be divided into three regions: Majha, Doaba and Malwa. The rivers flowing through the state mark the boundaries of these regions. Overtime, each region has developed into distinct regions, separate in their physical environment, economic structures, social organizations and cultural pattern. Majha, locally called the Upper Bari Doab (l7% of the total area) region has a long international boundary adjoining Pakistan. Doaba is the tract of land between the rivers Beas and Sutlej, is a cultural buffer zone and adjoins the neighboring state of Himachal Pradesh through Shivalik hill ranges. This has a ravine-ridden belt in the area bordered by the Shivaliks called the Kandi. Malwa forms the largest region (65% of the total area and the political center of the state. While interregional differences are quite high, a region has some uniformity in geography, climate, vegetation, soils, drainage, livelihood and cultural environment. l5 Data are drawn from: Statistical Abstract of Punjab, Government of Punjab, 2005, and the state s official website

109 4. The state s geographical area is about 5.3 million hectares, and 80% of which are under cultivation. Punjab is recognized as the food basket or the granary of India, as it contributes to percent of Rice and percent of Wheat to the India s Central Pool. The state produces 20 percent of wheat, 9 percent of Rice and 14 percent of Cotton of the total country s production. Punjab has been at the forefront of India s green revolution, which dramatically transformed the state economy. However, this was followed by a tumultuous period of Naxalite inspired militancy and subsequently, hard core religious militancy in the 1980s which impacted substantially the life of the people. The state jumped back to normalcy during the 90s and has recorded high levels of economic development. It ranks the highest in the country in terms of per capita income (Rs26,OOO per annum ), energy consumption (almost 2.5 times the national average), 100% rural electrification, and most villages having Pucca road connectivity. 5. The impact of the green revolution had differing impacts on the three regions. While inmigration of agricultural laborers increased many times, out-migration of Punjabis to the western countries, in particular, from the Doaba region too became quite significant. Money remittances from overseas communities were invested in the construction of houses, purchase/ develop lands and to buy agricultural implements. Recruitment in the army has always been an important adjunct to the agricultural economy, adding on to the remittances. However, the trend of supplementing agricultural income from other sources was unevenly spread through the different regions. The Doaba region was foremost in this trend, followed by Majha and, only a part of the Malwa region. One area where the impact of the Green Revolution was least felt was the Kandi region which continues to remain backward on social and economic fronts. 6. The economic transformation of rural Punjab is thus chiefly due to green revolution led agricultural development. However, this had its impacts on social front resulting in dilution into caste rigidities and the emergence of the middle and rich peasants as the dominant peasantry in the state. A significant feature of the agrarian society in Punjab is the numerical preponderance of Jat Sikhs (owner farmers) in rural areas. Equally good in numbers are the Scheduled Castes (SC) who form the major labor force. The traditional joint family system started vanishing, to be replaced by the nuclear family which has led to more usage of hired laborers and consequently in-migration. Political equations too changed, and the power base shifted from the urban rich to the rural elites. With the result, agriculture became the focal point of attention. But, agriculture currently has reached an asymptote, and environmental degradation has set in (nearly half of irrigation water used for agriculture is found to be polluted), economic returns are not only lower but associated with risks and social issues (very high proportion of labor class in the society, in- and out-migration, international border conflicts affecting adversely the border villages etc). 7. Literacy and Gender. As per Census of India 2001, overall literacy rate is about 70% (male-75%; female -65%), doubled in the last 3 decades. The same in respect of SCs is lower (56% overall, and 48% female). However, the absolute number of illiterates remains still quite large. Punjab society consists of hierarchies based on caste, class and communities. In addition, there is another dimension - gender. Gender discrimination is more pronounced in the state than others. Punjab has shown a consistently an adverse sex ratio over time. While the country s overall sex ratio works out to 933 females per 1000 males, it is 874 in Punjab. This is despite high levels of economic development, in fact, it ranks quite high in terms of Human Development Index (HDI)16. Punjab ranks 5th in Human Development Index in the country, but l6 Government of India 2001, National Human Development Report, Planning Commission, New Delhi - abstracted from the Human Development Report, UNDP, HDI is 103

110 it is as low as 16 h in Gender Equality Index (GEI). Inter-district GEI differentials too are also high. The declining sex ratio, rising rates of female infanticide and foeticides, the poor workforce participation of women, restriction of women in the informal sector where there is a high incidence of exploitation, the high rates of crimes against women and continued exclusion of women from the public sphere, indicates that the overall quality of life is yet to catch up with the high economic prosperity in the State. B. Water Supply and Sanitation Scenario - Puniab State 8. Punjab has a variety of water sources from which people draw water for domestic purposes. Some are public, and others privately owned. Each source has a definite potential in terms of service it can deliver and the extent of household coverage. Performance of the hnctioning however depends upon several factors, some external (like power supplies) and others internal to the service provider. Salient features and coverage status as on December 3 1, 2005, of the state s water supplies are presented below: i iv. V. vi. vii. viii. ix. X. Of the 14,605 habitations, 6262 (about 43%) are fully covered (FC)17; 4082 (28%) Partially Covered (PC); and the remaining 29% not covered (NC). Hand pumps are the main stay - a third of them mechanized - used by as high as 78% of the households. Rural Water Supply investments have been made for the last 3 decades under several schemes - Minimum Needs Program (MNP) by GOP; Accelerated Rural Water Supply Program (ARWSP) by GOI; Rajiv Gandhi Sub-Mission Program (by GO1 and GOP); Loan Assistance from NABARD; Swajaldhara -I and 11. Department of Water Supply and Sanitation DWSS), Government of Punjab, manages 3,148 schemes and cover 8,300 villages - 85% of which are tubewell based and most of it are MV water supply schemes. The remaining 15% draw water from imgation canals. DWSS supplies water through public stand posts and private household connections. The latter accounts for the bulk of it. About 50% of the designed population is being served, indicating very low efficiency/ utilization. In terms of the delivery levels, 72% of the DWSS schemes deliver up to 40 lpcd. Following GOP s decision in 2003,858 SV water schemes have been transferred to Gram Panchayats for operation and maintenance. Of these, 774 were taken over by GPs; 29 returned back; and 749 are actually managed by them. Some 100 schemes are still being managed by DWSS. This means, the transfer management mechanisms are yet to be formalized. The performance of the GP taken over schemes have been mixed (nearly 30%) schemes are fully on their own recovering 100% expenses through user charges, and 2 19 (25%) recovering nil. The remaining 45% fall in between. About half the rural households possess and use latrines. A third of them seem to have pit latrines. Hygienic and safe disposal of sullage as well as human faeces is a major problem. Dairying being an important occupation, upkeep of cattle shed and disposal of animal and agricultural wastes compound the sanitation problem in the rural areas. useful in assessing the performance and progress of a nation/ statel district at any given point of time as well as comparisons over time. The composite ranking is arrived at by aggregating achievements on income, education and health. 17 FC: Public Supplies catering 40lpcd and above; PC; Public Supplies catering up to 40 lpcd; and NC: no public supplies within a reasonable distance 104

111 xi. I11 Waste water generated by households as well as cattle shed overflow into open surface drains leading to stagnation in all the lanes and by lanes of the village. This contaminated water seeping into the shallow aquifers (hand pumps), open dug wells and pipelines has been very high, with the result, water quality has assumed significance. Performance Assessments 9. DWSS In-house Study. DWSS, GOP undertook a performance evaluation of 34 best performing fully covered water supply schemes covering 68 villages, as a part of the project preparation. The results have been unique and instructive. Low Customer Base - Only 25% of the households had availed water connections officially. Ths apart, as high as 33% do draw water from the public supplies, but unofficially, either through stand posts or sharing with neighbors. Thus, despite availability, over 40% still prefer their own hand pumps. 0 While Tube Well based schemes account for 30% of the households in a village, it is quite low (15%) in canal based schemes. Coverage was particularly lower in MV water supply schemes (being managed by DWSS). Swajaldahra. In contrast, schemes covered under GOI s sector reform project (community based interventions), coverage is significantly higher (as high as 80%). Equitable Distribution -Water supplies distribution are highly skewed. Some 20% secure water as high as 15 times the requirement, and the remaining suffer for want of water. 0 Non-Revenue Water - comprising un-billed authorized consumption (metered non-metered); apparent losses (unauthorized consumption and metering inaccuracies); and water losses (transmission losses, leakages and overflows)--works out to as high as 80%. 0 Major reasons for less than expected coverage are: one, cumbersome procedures involved in securing household connection, and lack of trust/ reliability in supplies and quality of service. 10. Pilot Batch Experiences DWSS had launched a pilot batch in October 2005, covering 5 GPs in each of the 19districts, for: (i) familiarizing and gaining experience in adopting a demand driven, decentralized, participatory planning approach, and (ii) assessing, as well addressing, operational implications - policy, procedures and human resources. Of the 95 villages identified for piloting, 45% were NC habitations and the remaining 55% PC habitations. Five non-government support organizations (SOs) had been deployed to supplement the non-engineering skills of the DWSS, and provide community development support to the GPs and villagers. Out of 95 villages where piloting was initiated, 7 got dropped and it is continuing in the remaining 88 villages. Of these, community mobilization (as indicated through capital cost contribution) has been very good in a little more than half the villages. Mobilization, however, is yet to commence in 8 villages. On the technical front, so far, DSRs have been completed in 54 villages and it is neming completion in another 24 villages. Some major experiences drawn from the piloting are presented below. 0 Communi@ ResDonse. Huge response for the program intervention was visible as evident from endorsement by Gram Panchayats for participation and agreeing for the draft rules of engagement. 0 Common/Mutual understanding. A common understanding of the project rules of engagement among all the key stakeholders including communities, engineers and SOs is hghly essential. Adequate and appropriate capacity building and IEC campaigning too are required to ensure that DWSS (public sector) joins hands with SOs (private sector) and GPs and their representatives (communities) and accomplish the objective. Pe$ormance Enhancement. Enhancing operational efficiency in the functioning of the existing scheme delivery which may require modest investments was found highly needed. Detailed performance evaluation of existing facilities and rehabilitation needs should receive greater attention. 105

112 Equitable Distribution. Operational adjustments for ensuring equitable supplies were the need o f the hour. Water Oualitv Tests - marketing tool. Demand for DWSS supplies primarily due to poor quality water from private sources (which seems to have serious adverse impacts on human and cattle health). Towards making this as a marketing tool, it is essential that water quality tests are done and the results disseminated widely. Moreover, private water supplies (particularly power driven hand pumps) are becoming too costly (capital as well as O&M) and program offers a low cost alternative. Enaineerina Support. Full fledged participation and extending capacity support by the grassroots engineers holds the key for success. The engineers need to enmesh with communities and help in undertaking a diagnostic analysis of the existing situation, identify issues, offer options and decide on the most appropriate one. NABARD Sponsored RWSS Evaluation 11. A gist of an external evaluation of water supply schemes sponsored by NABARD is provided to reinforce the beneficiary assessments. a 0 e a a e a IV Half of the total household water supply connections belong to higher income group households with an annual income of more than Rs.60000/-. 64% of the households are satisfied with the quality and quantity of the piped water A third of the respondents felt that piped water reduced the frequency of water borne diseases in their families. Majority of the households were not aware of diseases like diahorrea, jaundice, cholera etc caused by contaminated water. A good number of the households felt that the Panchayts are not in a position to take the O&M responsibility of the water supply schemes. The reasons cited are: i) the panchayats were not involved in different stages of implementation of the scheme in the past (ii) lack of hnds (iii) factional politics (iv) reluctance of the line department to co-operate and coordinate with the Panchayats and (v) lack of training and capacity building. 56 per cent of the total households are also using piped water for cooking, bathing, washing of clothes, besides drinking purposes. In addition 30.88% of the total households were using the water for toilet and kitchen garden purposes % were using for bathing Cattle and as drinking water for Cattle. Some households started anew Dairy activities, particularly rearing milch cattle, after taking water connections. Milk production, with water supply connections, is reported to have increased in the households having cows Stakeholder Analysis 12. Identification of stakeholders. A stakeholder is defined as an individual or agency who can either impacted by, and/ or impact on, the project. Impacts could be positive or negative and the intensity can vary, from high to low. Accordingly a stakeholder is mapped into one of the four categories - Positive and High; Negative and High; Positive and Low; and Negative and Low Impact Groups. From an administrative perspective, stakeholder mapping is done at different levels: village, GP, Block, District, State and country. The mapping is presented below: LEVEL Village Block Stakeholders Gram Panchayats - men and women members, Villagers - men, women, SCs, poor and landless, Households with / without own sources of water and or latrines. Junior Engineers, Gurudwara Committees Block Panchayat, Block Development Officer, Sub-Divisional Engineers 106

113 ~ ~~~ LEVEL District State National Stakeholders Zilla Panchayat, District Administration, DRDA, Line Departments, Consultants, Contractors, NGOs, Suppliers and Traders. DWSS- Executive Engineers, Media GOP- Departments o f WSS, Finance, Rural Development and Panchayat Raj, Irrigation, Ground Water, Power/ Electricity Boards, Agriculture, Science and Technology, Health and Education, Consultants, NGOs, Citizen Bodies, Professional Bodies, Suppliers, Media. DWSS- Chief/ Superintendent Engineers GOI- RGDWM, DEA; World Bank, NABARD Kev Expectations, Impacts & Issues and Concerns 13. Each stakeholder has an expectation and associated with it are the issues and concerns. A summary of the same in respect of key stakeholders are presented below: DWSS: Principal Secretary, Chief Engineers and Superintendent Engineers DWSS - Executive Engineers DWSS- SDE/ JEs GOP- Rural Development Department GOP- Punjab State Council for Science and Technology / Health Department Media Change is essential to bring in improvements into service delivery. Capital cost contribution by communities could be a major hurdle. Poor, SC, other disadvantaged may be left out Synergy between DWSS staff and GPs need to be designed appropriately. An excellent welcoming opportunity, but highly skeptical about the changes. Work Load will increase many times and quality control could be an issue. Rehabilitation of the existing schemes as well as dual supplies should receive due attention Objective criteria for the selection o f villages is a must to avoid external interference Ambitious project, tasks are challenging. New demands will be made, capacity building required. Explicit instructions providing household connections, billing, etc are highly essential to improve operational efficiencies. Appropriate measures to curb illegal connections are to be drawn. Proposed project will be the first ever venture at decentralizing the service delivery on a significant scale in the state. Project could prove to be a vehicle for capacitating and empowering GPs A proper plan to make use of the existing technical manpower in the department needs to be prepared. Interface between RDD and DWSS on community sanitation needs to be viewed seriously. Project could offer innovative mechanisms for addressing community sanitation issues. Need to market the project in terms of safe water and safe sullage disposal (including pond rehabilitation) should be high on agenda. Proper manpower planning should be done and recruitments for JE/ SDE should be made at appropriate intervals, else state will be wanting for RWSS expertise. Sanitation should be a key activity. Disinfection should receive high priority. School sanitation should be integrated into the program. Awareness program to curb abuse o f water essential. Transparency and Accountability measures to be inbuilt into the program. Zilla Parishadl Panchayat Samiti Decentralization should be real, not merely on paper. Objectivity in selection of villages is essential. Capacity Building of Panchayats is critical. DWSS should be accountable to the users. Consultation between DWSS and RDD should be regular and agenda based. High cost schemes should be avoided. Decision making should be faster in the department. Community contribution could be both in kind and labor 107

114 Grama Panchayati Community Women Scheduled Caste Welcome the intervention from a quality and quantity perspective. Timely execution and quality are paramount important. Social Audit is to be designed. JE (DWSS) job description should be clearly defined. Electricity Supplies is a major concern. Poor and disadvantaged should not be left out. Household connections manual essential. Frequent water quality testing is a must. Choice - water supply vs. sanitation- should be with the communities. Primary clients - suffer the most and program demand emanates from them. Skeptical about provision for their participation. Demand safe water at their door steps Safe water disposal and pond rehabilitation are very important. Women headed household needs to be shown due consideration. Higher service levels essential to take care of entire domestic requirements including cattle. Concerned that they may be left out. Always used to subsidies, and hence contributions will be new. V Punjab Rural Water Supply and Sanitation -Issues 14. Major social development issues that emanate from the beneficiary assessments, performance assessments and stakeholder analyses are: The program recognizes that Punjab is quite diverse on socio-economic, geo-physical, and strategic fronts. Major issues relate to:. i) ii). iii). iv). VI* vi). vii). Diversity - Punjab is quite diverse on many counts - socio-economic, geo-physical and strategic. Inclusion and equity - Diversity generates several sub-groups with differing capacities. Hence, the project designing should ensure fair and equal opportunities for participation in, and derive benefits from, the program by all the subgroups, in particular the poor and vulnerable such as scheduled caste, women, women headed households, residents of international border villages. Decentralization - devolving the decision making along with control over resources to the local self governments and user groups. Ownership, Transparency, and accountability - Devolution necessarily have to be associated with accountability - both downward and upward which is possible only when strong sense of ownership is developed among the communities. Customer base and demand generation - Currently, customer base, viz., demand for public water supplies seem to be quite low. For this to enhance, not only operational performance has to improve, but also supplementing with efforts at marketing the program and deriving home the health and hygiene benefits. This means designing an appropriate IEC campaign to reach stakeholders effectively. Women Participation - Women are the primary managers of RWSS and hence the success of interventions depends upon the provision the program makes for their participation. Capacity support/ building - to enable stakeholders perform the desired role. This includes Change management, enabling transforming the government department into a facilitator and promoting partnerships. 108

115 15. Design elements addressing a majority of these issues have been dealt in the section on these issues in Annex-6, Implementation Arrangements. However, the issue of ownership, transparency and accountability is elaborated hereunder. 16. Towards ensuring Ownership, transparency and accountability, every GPWSC will be enabled to prepare a PRA/SARAR based GP Water & Sanitation Plan (GPWSP). This will form an attachment to a Memorandum of Understanding signed by the three principal actors -- GPWSC, GP and DWSS (in the case of SV schemes) and in addition, SLC, in the case of MV water supply schemes. Once approved by signatures, this will not only be the basis for implementation but also would enable comparative assessments in future. The elements of such a plan will include the following Community Action Plans (CAP): GP Water S udv and Sanitation Plan (i) Community Mobilization, comprising (a) Social Mobilization details relating to GPWSC formation as well as opening of the bank account; and (b) Socioeconomic survey for a social mapping; (c) water sources mapping; and (d) superimposing social map on water resources map, on a top sheet, to depict the existing situation and identify gaps (if any). (ii) Community Contribution Mobilization plan detailing household-wise cash and labor shares. (iii) Detailed technical project report (DPR) with details about choices considered and the discussions thereof as well as the cost particulars related to water supply and drainage improvements. (iv) Operation and Management (O&M) Plan including the llkely tariff, income and expenses. (v) Sanitation and Hygiene Promotion -- Enhance people s understanding about pure and safe drinking water and change the perception of the people regarding safe dnnking water and sanitation. Enhance personal and social skills of the people regarding better handling and storage of drinking water. (vi) Women Development Initiatives (WDI) will spell out how women have been mobilized, the process of their deciding on the choice of activities; financing mechanism; expected outputs and the SO support. (vii) Environmental Management Plan. EMP prepared. GP level initiatives for liquid waste management, solid waste management and remolding of Ponds, usage of treated wastewater etc., and provision of such other initiatives are to be included. (viii) Capacity Building Initiatives will include the programs planned (class rood lecture mode as well as field based), likely participants, scheduling, SO support implementation arrangements, the post implementation follow-up. (ix) Implementation schedule, including schedule for delivery of inputs and services, schedule for monitoring of the progress, success indicators and capacity enhancements. (x) Community Monitoring. Besides implementation, benefits likely to accrue to different subgroups as well as to the community as a whole will be monitored by the community. Simple indicators, as identified and articulated by the community themselves, will be deployed for the purpose. (xi) Mutual obligations and responsibilities on the part of all the three signatories -- GPWSC, GP and DWSS will be detailed out in resdect of each of the activitv in the scheme cvcle. 17. In the case of MV water supply schemes, there will be two major Plans - one related to the Common Facility (Inter-Village) plan and the other, Intra-Village Plans. 109

116 Annex 14: Engineering Aspects INDIA: Punjab Rural Water Supply and Sanitation Project Existing Water Supply Systems and Management 1. DWSS of GoP is in charge of planning and implementing Rural Water Supply Schemes and of O&M management including billing and revenue collection of user charges. Over the past two years, DWSS has been progressively transferring O& M management responsibility of SV schemes to GPs. In addition, DWSS is progressively utilizing private sector service contracts for O&M of SV and MV schemes. 2 Type of Schemes: Barring the few villages covered by hand-pumps or dug wells, over 95% of the villages covered till date in Punjab have piped water supply, with the source being either tube-wells or canals. Tube-wells form the main source for rural water supply schemes in Punjab. About 10 % of the villages are covered through SV schemes while the balance 90 % villages were covered by multiple-village schemes. 3 Status of Water Quality: About 16 percent area of the state mostly in the south-western districts face water quality problems including 8.5 percent area having shallow aquifer s water quality totally unfit even for agricultural use. In the northern and central districts of the state, water available in shallow aquifers is not potable due to its contamination from industrial and irrigation operations. Majority of the water quality problems in shallow aquifers are due to excess salinity, fluoride & nitrate content in the ground water, total dissolved solids or bacteriological problem. 4 Ground water Status: Reports of Department of Water Resources and Environment indicate that the ground water table in Punjab is falling rapidly and that the quality of shallow ground water is also rapidly changing with over extraction and extensive use of fertilizers and pesticides. Discussions were held with Director Water Resources and Environment, Govt. of Punjab, Central Ground Water Board (CGWB), Chandigarh, and Director Punjab Remote Sensing Centre, (PRSC) Ludhiana. Status of ground water in Punjab that emerged from these discussions is: (i) Irrigation and most of the industries are extracting water from shallow unconfined aquifers, (ii) DWSS is the only consumer extracting water mostly from deeper confined aquifers; few large irrigation farmers and Industries are also using tube wells with such extraction, (iii) In areas north of Sutlej river good potential exists in the deep confined aquifers, (iv) In areas south of Sutlej river water is not available in deep aquifers, (v) water from shallow unconfined aquifers is to be extracted in southern districts for water supply also - however the number of tube wells have to be increased so that the extraction is limited to prevent ingress of salinity and tube wells have to be dispersed to avoid interference. 5. Disinfection of Drinking Water: Disinfection facilities are provided for the water supply schemes and bleaching powder is supplied by DWSS. Review of Water quality analysis of samples collected fiom source and user end for 40 village water supply schemes shows that considerable number of samples are showing that the water is bacteriologically affected probably due to lack of disinfection. As an alternative to disinfection with bleaching powder, DWSS has assessed the performance of silver ionization disinfection plants and based on the assessment about 20 such plants are so far installed and functioning successfully. DWSS is closely monitoring the performance and maintenance of these plants so as to use them extensively in the project water supply schemes. 110

117 6. Water Quality Monitoring: DWSS has a central state laboratory and 4 other testing laboratories in the entire state which have been able to test about 1300 water samples in a year as against about 4000 sources. Seven more laboratories are to be set up in near future-with Go1 funding support. 7. Detailed Engineering and preparation of Cost estimates: DWSS does in house the field surveys, preparation of designs and estimates. At present the hydraulic calculations and the drawings are prepared manually. Design norms followed by DWSS are as follows: (i) design period 30 years, (ii) design population 150 % of present population with per-capita consumption of 70liters, (iii) Capacity of overhead tanks will be worked out at 50 % of design requirement. (iv) 8 hours of pumping for SV schemes, (v) 24 hours pumping for MV Canal Based water supply schemes, (vi) required residual head 7 meters, (vii) single tap public fountain one number for every 250 population, (viii) Minimum size of 63 mm OD PVC pipes are used for Distribution system. 8. Powers of Engineers: The cost of SV water supply scheme is on an average of about Rs 25 lakhs. In view of limited powers of the Executive Engineers and the Superintending Engineers, invariably all estimates including SV water supply schemes require Technical sanction of the Chief Engineer. 9. Inviting Tenders and Award of Works: As in the case of technical sanction powers the power of the DWSS engineers for award of works is also limited and hence is leading to delays in the award process. 10. Contract Packaging: Present practice in DWSS is to procure centrally and provide to contractors free of cost all materials like, pumps, pipes, valves, cement steel etc. 11 Time for Planning and Implementation: There are substantial time overruns in planning and completion of the water supply schemes due to delays in approvals, sanctions, allocation of funds and statutory approvals from other departments like forest, Building & roads etc. 12 Performance Assessment of Existing SV and MV Schemes: A few of the rural water supply systems have become inoperative due to various reasons. DWSS had undertaken a perfonnance study at supply level for delivery of quantity of water at OHSRs of the villages and at user end about the service standards regarding the reliability, pressures, quantities and quality of water as perceived by the users. A household survey was done in the study area during supply hours to assess the service standards. 13. Indicators for assessment of performance in the Villages / habitations: DWSS has adopted the following indicators in the performance study. i) Delivery of water at OHSR s and availability of water at source, ii) whether all households are getting the required quantity, iii) whether the residual chlorine is present in the water at consumer end, iv) whether adequate pressure is available as indicated at the households located in highest elevation and absence of pit taps, v) reliability of water supply - interruptions and timely supplies, vi) type of interruptions and duration or time taken for rectification, vii) position of power supply, viii) whether GP is self sufficient in O&M, ix) whether timely and effective technical support is available to the GP for O&M. 14. Performance of SV schemes: DWSS has undertaken the performance evaluation including user end service levels of about 34 existing SV, MV schemes of both tube well based and canal based water supply schemes. Mostly these schemes were selected from best performing fully covered water supply schemes. The salient conclusions are: (a) sources are generally adequate 111

118 though acute shortage of power results in unpredictable water supply timings, (b) accounted coverage of households was 25.2 %, (c) A few households fetch water from their neighbors, (d) few households have illegal connections, (e) majority of households use water from DWSS taps provided in common places, (f) unequal distribution of water- some households get water several times more than their intended service level which results in other households getting far les than the service level, (8) those who are not using the DWSS water are having their own shallow hand pumps or submersible pumps though the water is not potable. 15. Engineering Desirn Issues: The engineering issues (i) At present DWSS is not monitoring the water levels and water quality of tube wells developed by them. There is a need to undertake Water quality analysis of all the existing about 4000 sources and proposed about 2000 sources including bacteriological quality at least once in a year, (ii) Lack of prompt disinfection leading to considerable number of water samples showing that the water is unwholesome. (iii) Arbitrary location of OHSR and fixing of reservoir capacity without considering the actual pumping and supply hours, leading to unequal distribution of water resulting in inadequate pressures and quantity. (iv) Perpetual shortage of power which affects the pumping hours, (v) Economical designs are not adopted for pumping main and distribution system, (vi) Need for improving the quality of field survey, preparation of designs and drawings, (vii) Structural designs of OHSR s not in conformity with latest codal provisions for water retaining structures and for seismic and wind loads. (viii) Absence of bulk water meters, which leads to inaccurate assessment of service levels and hence classification of coverage as FC, PC etc. (ix) Need for simplification of procedures in sanctions to cut down delays in approvals and sanctions of water supply schemes. (x) Lack of single contract responsibility leading to delays and problems in quality assurance. Proposed Water Supply Systems and Management 16 Water Supply Schemes: Apart from usual provisions the project will have the following specific provisions: (i) In order to overcome the power problem, DWSS will carry out cost effective study on a case to case to basis for provision of diesel generating sets in the canal based schemes wherever the power supply situation is not adequate and if the community can afford to bear the O&M expenses of the same. (ii) To ensure prompt disinfection silver inoisation plants will be provided (iii) Bulk water meters will be installed in all schemes to enable water audit, (iv) The components for the service improvements and rehabilitation of existing water Supply schemes may include augmenting the source, repairs and replacement of leaking pipes, tanks, repairs of motors, disinfection unit, automatic control of pumping operations, introducing distribution zoning, extension of pipelines, fixing of bulk meters, etc. (v) There is now a limited demand for private connections (about 25% of households); however the project will aim at including coverage of more households with individual house connections. Improve their operational performance. The project will also have provision for installation of pilot defluoridization, reverse osmosis plants etc. 17. Improvements in Detailed Engineering: With a view to enhance the quality of detailed engineering, DWSS has started using computer oriented procedures for survey, preparation of plans and designs. During project preparation DWSS has adopted the following improvements in detailed engineering: (i) Location of OHSR will be decided to ensure equitable distribution of water, (ii) capacity of OHSR will be decided on the basis of mass curve to balance the pumping hours and supply hours, (iii) Realistic peak factors will be used in the design of distribution system to conform to the actual supply hours, (iv) DWSS has also acquired from the World Bank the Software for design of distribution system, (v) DWSS has acquired standard software for design of Overhead Service reservoirs (OHSR) conforming to latest BIS requirements for water retaining structures with 112

119 earth quake resistance & wind loadings and required Concrete proportions. With this software DWSS has produced typical designs for various capacities of the OHSR s with various staging heights. (vi) DWSS has developed in-house software for design of economical size of pumping mains. (iv) DWSS has outsourced survey operations for preparation of digitized village road maps for the Pilot batch water supply schemes, (vi) DWSS is adopting Auto Cad for preparation of drawings of various components of the Pilot batch water supply schemes. 18. Technical Manual: DWSS has now developed a detailed technical manual covering design criteria, guidelines on sound engineering practices, standard drawings and cost estimates, specifications for construction materials, goods, equipment and civil works. The manual contains among other topics, (i) Computer aided procedures for surveys - preparation of road maps of villages with levels wherever possible linked to MSL, designs with standard software, drawings on auto CAD and estimates on excel formats, (ii) Rational approach for fixing capacity of reservoirs and design of distribution system, (iii) use of standard software for economical size of pumping main and distribution system, (iv) type designs for the OHSR is to be in conformity with the latest BIS codes for RCC and water retaining structures and earth quake and wind loads. 19. District wise Drinking Water Quality and Water Resource maps: DWSS has decided to acquire data and monitor the changes in water table and water quality in the sources of Water Supply Schemes with Deep Tube wells and canal based sources. DWSS has outsourced to Punjab Remote Sensing Centre (PRSC) the work of preparation of digitized water resource and quality maps on GIS for each district on an appropriate scale. These maps will indicate habitation wise location of DWSS tube wells and show the litho-logical details, depth of water table, yield and water quality. A data base will be created for monitoring the tube wells quality and levels. DWSS with the help of PRSC will procure the required software and hardware to establish a water resource and water quality mapping facility for creating and updating the data and monitoring the water quality and water levels of the existing and new tube wells used by DWSS 20. Capacity Buildinn of Engineers: The quality of designs and drawings will be enhanced and planning time will be saved by adopting total station methods for survey with digitized village road amps, standard software for hydraulic designs, auto CAD and GIS for preparation of plans and estimates. Hence the DWSS engineers will require refresher courses on the use of the above tools for survey, design, preparation of designs, drawings and estimates for the water supply schemes. 21 Engineering Support in Planning and Implementation: DWSS has started preparing the detailed scheme reports for the pilot Batch using the using computer oriented procedures for survey, preparation of plans and designs. DWSS has outsourced the activities of survey and proposes to outsource the activities of finding safe bearing capacity of OHSR and treatment plant sites and resistivity surveys for location of tube well sources. DWSS engineers will prepare the designs and estimates for pilot batch and will be in charge of day to day monitoring of construction quality of the project works. In view of inadequate staff DWSS will be able to prepare Water Supply Detailed Scheme Reports (DSRs), designs etc for only about 50% of villages for further batches. Hence the project provides for recruitment of Consultants for providing external Engineering support to the GP s in planning and implementation of water supply Schemes. 22. Procedures for approval and award: DWSS will constitute committees at various levels which will have full powers to sanction the DSRs and award the works for the project which will result in cutting down the delays in approvals. DWSS will adopt single contract responsibility for implementation of the project works, which will ensure timely completion of works of the required 113

120 quality. All the in village works such as source. development, power pumps overhead tank and distribution system, will be implemented by the GPWSC adopting the approved bid documents. However for the common facilities of MV Schemes the normal procedure for estimation, tenders etc will be followed by DWSS duly adopting bank procurement guidelines. 23. Independent Construction Oualitv Surveillance Consultants (ICQSC): DWSS engineers will assist the GPs in the day to day monitoring of the works and materials procured by GPs. Additionally DWSS will retain independent construction quality surveillance consultants to monitor the quality of supervision of the works and also ensure the quality of the materials procured and construction quality of works. Provision for Independent construction quality surveillance consultants is made on the basis that about 25 % of the total schemes will be selected by the ICQSC as sample for visits and about 4 visits for each such scheme will be required in a year. 24. Water Oualitv Monitoring and surveillance: In this project a three tier Water Quality Monitoring and surveillance program will be used for rural water supply schemes. These three tiers are; state level by DWSS state laboratory, district level through DWSS district laboratory and Village level through GP. Project will have provision for distribution of about 4000 test kits and chloroscopes to all GP s and or schools and habitation Committees. In view of the large number of water samples (about 100,000 in the project period) to be sampled and analyzed; DWSS apart from analysis in their own labs will outsource the work of sampling and analysis. 25. Independent Water Oualitv Surveillance: The project has made provision for Independent water quality Surveillance for the following: (i) Water samples from sources of first ten schemes in each district will be tested for presence of pesticides and heavy metals, (ii) In subsequent years 100 samples in each year will be tested for presence of pesticides and heavy metals, (iii) Water quality sampling ( about 200 samples every year) and analysis in the sources developed in the project for other parameters ( other than pesticides and heavy metals) Proposed Community Sanitation Schemes and Management 26. Household sanitation: The rural development department of GoP is implementing the provision of toilets for village households by hnding from GoI. Hence this project will not have provision for household toilets. 27. Status of Village Sanitation: The wastewater generated from various households overflows into the open surface drains and is ultimately disposed into the village ponds, thus making them highly polluted. Sometimes cow dung also contributes to the pollution of ponds. Sewage from Toilet soak pits and effluent from septic tanks also flows into the open drains resulting in stagnant pools and finally reaches the village ponds. Polluted and clogged open drains are leading to poor sanitation and unhygienic conditions in the village. The communities are exposed to high risk of infection due to water borne diseases like cholera, hepatitis, malaria, diarrhea etc. Health risk also arises where villagers are using their own shallow hand pumps and power pumps located near the ponds or soak pits for drinking water. 28. Options Available for village drainage: The options for village drainage are,(i) Open drainage: provision of open drains collecting only all water (except septic Tanks effluent) with connectivity to drain off the sullage without any treatment options- since sullage water without septic tank effluent is amenable to disposal without treatment, (ii) Conventional underground drainage /sewerage system with sewers and manholes connected to both toilets and bathrooms of houses and led off to a treatment plant for disposal, (iii) Small bore sewerage system which is 114

121 designed to receive only the liquid portion of household wastewater- connected to the septic tank or interception chamber which will carry effluent from septic tank/interception chamber (which retains solids) and led off to a treatment plant for disposal. 29. Perfomance of Small Bore sewerage systems: The project has provision for providing sanitation with small bore sewers or conventional sewerage. GoP has already implemented a few small-bore sewerage schemes with technical support of the Punjab State Council for Science & Technology (PSCST). From a field review of three small bore sewers the observations are: (I) Investment is required to construct toilets, septic tanks/ Interception chambers in the householdcost is increasing due to cost of interception chambers and use of HDPE Pipes (ii) delay in the users connecting the bath room and other wastewater, (iii) severe shortage of power is resulting in stoppage of sewage pumping from last collection point resulting in back up of sewage and also non functioning of aeration devices where provided, (iv) households are not paying promptly the O&M cost which is as much as Rs. 50 per household and they may not be able to pay the enhanced O&M cost if diesel generating set is provided to overcome power shortage (v) village ponds are used as duckweed and fish ponds, (vi) the difficulty in finding the equipment and the high cost there of for de-sludging the filled up septic tanks and interception chambers. There is a range of technical design and O&M issues that need to be addressed and piloted before taking up full-scale implantation of this component. The project will support proposals for sewerage either with small-bore sewerage or conventional sewerage as per the option of the community. 30. Renovation of Village Ponds: The existing ponds in the villages were used to store storm water run off and catered for the many needs of the villagers such as swimming, cattle bathing and a gathering place for the villagers. These ponds also provided an opportunity to charge the ground water. However over a period of time, water quality of these ponds is deteriorating due to: (a) indiscriminate discharge of sullage / sewage, (b) encroachments, (c) run off from cattle dung dumps around the ponds, (d) growth of aquatic weeds due to nutrient enrichment. The project has provision for renovation of about 1000 such ponds and uses them for bio management of the village wastewater by using them as duckweed ponds or by construction of wetland. At present PSCST / DWSS are preparing proposals with use of the ponds as sewage treatment pond. Instead, DWSS will also prepare pond renovation proposals to restore the ponds original status for which provisions will include: Dewatering, silt removal, deepening, partitioning, side bunds, screening chamber, settling tank, plantation, culverts, diversion drains, repair of existing street drains leading to the pond (drainage improvements), etc. 115