PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2796 Project Name. Andhra Pradesh Rural Water Supply & Sanitation Project Region

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2796 Project Name Andhra Pradesh Rural Water Supply & Sanitation Project Region SOUTH ASIA Sector Water supply (50%); Sanitation (50%) Project ID P Borrower(s) GOVERNMENT OF INDIA Implementing Agency Panchayati Raj Engineering Department (PRED) Government of Andhra Pradesh L Block, Eighth Floor Secretariat Hyderabad, India Tel Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared January 15, 2007 Estimated Date of October 9, 2007 Appraisal Authorization Estimated Date of Board May 27, 2008 Approval 1. Key development issues and rationale for Bank involvement Sector and Country Context: AP RWSS situation generally mirrors the overall India situation. While India has achieved significant success in providing basic service level for drinking water supply (40 lpcd) to most of the rural population, the operational and financial sustainability of RWSS services has not been achieved. Depleting ground water table and deteriorating ground water quality are threatening source sustainability. The level of household sanitation in rural areas is extremely low and the rural population generally lacks an understanding of the linkages between lack of sanitation and unsafe hygiene practice, and diarrhea related diseases. Also, the lack of reliable household level information and weak monitoring systems make it difficult to realistically assess achievement of sector goals. GOI recognizes the need to improve the functionality and sustainability of the sector and has launched significant sector reforms since 1999, including: phasing out of supply driven programs; decentralizing service delivery responsibility to rural local governments and user groups; adopting integrated approach to water supply and sanitation and improving hygiene behavior; generating sanitation demand through awareness campaigns; eradicating water quality related problems; and seeking investment support and international knowledge from external support agencies to scale up reforms. The centrally sponsored Swajaldhara and Total Sanitation Campaign (TSC) programs clearly indicate the reform directions. The main challenge is to expand and spread the reform approach countrywide/sector wide in order to meet GOI s policy objectives and achieve sector MDGs. GOI also plans to work with States to move towards statewide implementation of RWSS reform. Establishing the necessary institutional arrangements, building institutional capacity, and bridging financing gaps in scaling-up are the key priorities. GOI s sector reform strategy is substantially drawn from successful models of implementing demand responsive decentralized service delivery models in three Bank assisted projects (UP, Karnataka and Kerala), other donor assisted projects, and implementation experiences of GOI s own sector reform pilots in 67 districts. 1

2 Lessons Learnt from RWSS Projects : The Bank s engagement in the RWSS sector and lessons learnt from Bank-funded RWSS operations (Uttar Pradesh, Kerala, Karnataka, Maharashtra) as well as project preparation experience from Uttaranchal and Punjab have contributed to the design of the proposed project. Access to safe and sustainable water supply to the rural communities has increased significantly under these projects. Besides the physical impacts, these projects have pioneered the piloting of decentralization of RWSS service delivery to the Panchayati Raj Institutions (PRIs) and user groups, with Gram Panchayats (GPs - the local self government) as the focal point. Some of the significant contributions of these projects are : pilots for decentralized service delivery with community empowerment and involvement in design and implementation of projects; reaching the tribals and poor households; improving safe sanitation facilities and improved hygiene practices; community contribution towards financing and maintenance of schemes; improving sustainability of schemes and periodic monitoring and evaluation. These projects have demonstrated that empowerment of the PRI institutions is a viable and sustainable option for scaling up the decentralized service delivery model. Based on the Sustainability Evaluation Exercises carried out under the Swajal project (Uttar Pradesh), one issue that affected the implementation and impact of Swajal was the existence of different policies for capital cost sharing, O&M responsibilities, and O&M cost recovery, depending on the implementing agency for the schemes. An important lesson is the need for consistent policy throughout the state, irrespective of the sources of financing. Also, the ownership of the project design at political, bureaucratic and operational levels is necessary for project success. Another important lesson is that the PRIs need to be well integrated into the institutional design of the project and organic links between user committees and GPs are essential for institutional sustainability. These projects clearly demonstrate that partial financing of capital cost by the users as well as user management and financing of O&M is a viable development concept. A major lesson learnt is that the sustainability issue is best addressed by emphasis on beneficiary involvement and empowerment, and capacity building of state/local governments and communities, along with promotion of cost recovery. AP RWSS Sector Issues. Based on the 2003 habitation survey, about 51 percent of the habitations in the State of Andhra Pradesh (AP) 1 are Fully Covered (FC) with drinking water facilities, implying that they have access to a water source able to yield 40 liters per capita daily (lpcd), located within a radius of 1.6 kilometer from the center of the village and within an elevation of 100 meters from the village. The FC status thus still implies that many households have to travel long distances to fetch water. In addition, 36 percent of the habitations are Partially Covered (PC), implying that they have access to a source that does not meet the above criteria and 13 percent of habitations are either Not Covered (NC) or do not have access to a safe source of water supply. About 75 percent of the rural water schemes are dependent on groundwater sources and nearly half of these schemes currently tap over-exploited, critical and semi-critical aquifers; the situation has deteriorated recently, with a succession of droughts. Nearly 3 percent of the habitations rely on water sources with excess fluoride and/or salinity. About 30 percent of the habitations (or 11 million people) rely solely or mostly on hand pumps, 60 percent of the habitations (33 million people) on Single Village Schemes (SVS) and 10 percent of the habitations (11 million people) on Multi Village Schemes (MVS); there is an increasing demand for piped water supply and household connections. Access to infrastructure however does not guarantee access to service: inadequate operation and maintenance (O&M) due to shortage of funds and technical expertise is resulting in a continuous slippage of FC habitations to PC and NC categories. About 20 % of the schemes, including most schemes for which O&M has been transferred to Gram Panchayats (GPs) are not fully operational and require rehabilitation or augmentation. About 50 percent of the households have individual toilets, but only half of these households use them regularly, with the remainder 75 percent continuing with open defecation practices. 1 Andhra Pradesh has a rural population of 55 million out of 70 million total population. 2

3 Existing Institutional Arrangements. The Panchayati Raj Engineering Department (PRED) is currently responsible for planning, design and construction of SVS and MVS and O&M of common facilities of MVS. A significant step recently taken by the GoAP is the devolution of O&M responsibility of SVS and intra-village facilities of MVS to the GPs, which can access PRED technical expertise. Further, the GoAP has also established a State Water & Sanitation Mission (SWSM) for policy formulation and planning, and District Water & Sanitation Missions (DWSMs) in all districts for implementing the centrally sponsored Sector Reform Project (SRP), Swajaldhara program and the Total Sanitation Campaign (TSC). These three programs, which are demand driven with community participation and are to some extent decentralized, represent about 10 percent of the total funds available to the RWSS sector in AP. The GoAP would like to scale up these reform programs and is genuinely committed to decentralizing the delivery of RWSS services (see below) across the state. As a first step, the responsibility for O&M of about 300,000 handpumps and 41,000 SVS has been transferred respectively to the block level (Mandal Parishad MP) and the village level (Gram Panchayat GP). Cost Recovery and RWSS Service Delivery. The RWSS sector relies heavily on GoAP subsidies for construction and for O&M. For example, the MPs rely on State grants for maintenance of hand pumps. Also the GPs subsidize the O&M of SVS from their own resources. As a result of shortage of funds and technical expertise, the RWSS infrastructure and the quality of RWSS service placed under the MP and GP responsibility have been deteriorating. Collection and disposal of wastewater, also under the responsibility of local governments, are neglected and require attention. Improving the performance and sustainability of the RWSS service provided by MP and GP is a priority for GoAP. Further, the current system of financing through a number of different RWSS programs 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). Building on the success of Sector Reform and Swajaldhara pilots, the GoAP is keen to adopt uniform cost recovery policy across the sector. GoAP RWSS Sector Vision. The RWSS Sector Vision and Policy Note has been issued by GoAP in October 2006, mainly to clarify its objectives for ensuring access to a reliable (defined as 40 lpcd), financially and environmentally sustainable and affordable RWSS service to the entire rural population. Key elements of GoAP s Vision are: (i) devolution of funds, functions and functionaries to the PRIs; (ii) enforcement of full recovery of O&M costs and sharing of capital costs from user charges (taking into consideration affordability, particularly by disadvantaged groups); and (iii) improvement of the accountability framework by clarifying the roles and responsibilities of the various actors of the RWSS sector at the state, district and village level, including responsibilities for policy formulation, financing, regulation, construction, operations and maintenance 2. The two significant changes introduced by the Vision are the transfer of the responsibility for planning, design and construction of the RWSS infrastructure and for operating the RWSS service to the PRIs and communities; and the evolution of the role of the PRED to that of a provider of technical assistance to the PRIs. The GoAP envisaged distribution of responsibilities between key agencies is summarized below: (i) State Level Panchayat Raj and Rural Development (PR &RD): overall RWSS policy formulation; definition of RWSS sector program objectives and implementation arrangements; SWSM: RWSS program planning and management including detailed policy formulation, approval of annual plans and budget allocations; capacity building coordination; monitoring and evaluation (M&E), channeling of funds to GPs and VWSCs; 2 The GoAP is planning a series of consultations with the PRIs and sector agencies to prepare a charter of roles and responsibilities. 3

4 PRED: planning and implementation of complex MVS; operator of complex MVS under contract with served GPs; provider of technical assistance and engineering services under contract with PRIs and/or VWSCs. (ii) District Level DWSM: (reporting to SWSM) review and implementation of RWSS sector program, approval of schemes proposed by VWSCs and GPs, channeling of funds to VWSCs; capacity building of GPs and VWSCs, M&E. (iii) Gram Panchayat (GP) and Community Level Gram Panchayat: capacity building of VWSCs; approval of RWSS schemes, account management, account auditing, conflict resolution, O&M and cost recovery of RWSS schemes; M&E; VWSCs: RWSS scheme planning, design, procurement of works, construction supervision, with assistance of engineering consultant or PRED under contract; O&M of SVS, setting of user charges (capital and O&M), accounts management. SWSM and PR&RD will clarify the timetable for implementing the cost sharing principles for full recovery of O&M costs from user charges and user contribution to capital costs. Criteria will be developed to determine affordable contributions, in particular by socially backward and disadvantaged groups. The GoAP subsidies for O&M costs will be limited to cases where there is a gap between cost and the affordability level. For household and community sanitation, the policies of the central government s program on Total Sanitation Campaign (TSC) will apply. GoAP has requested Bank assistance for developing a comprehensive RWSS Sector Program based on the above principles, and ensuring that the various programs financed by GoI or GoAP implement it. GoAP has suggested that it applies its new policies gradually during the period to all new investment, while the ongoing RWSS programs are being phased out. Rationale for Bank Involvement. The main reasons for the Bank to support the proposed project are: (i) it would assist the GoAP in pursuing its own goal of building capacity of the PRIs for implementing decentralized service delivery systems; (ii) it would help scale-up the demand responsive approach with policy principles consistent with the Swajaldhara program and the Bank rules of engagement; and (iii) it would build on the experience accumulated in designing and implementing state wide RWSS projects supported by the Bank in India (Kerala, Karnataka, Maharashtra, and Uttaranchal) and other parts of the world. The project is fully consistent with the proposed CAS and is included as one of the Bank deliverables. GoAP is currently preparing a comprehensive document to further clarify its updated RWSS sector policies, new procedures to be followed, institutions to be reformed and/or supported, and capacity building programs primarily aimed at local governments. GoAP has advanced significantly in the preparation of various initial documents. 2. Proposed project development objective(s) The project development objective will be to assist GoAP in increasing access of rural communities to reliable, sustainable and affordable RWSS services. The key outcome indicators will be: (i) percentage habitations with improved drinking water and sanitation services; (ii) percentage rural households with access to safe and adequate water supply throughout the year; (iii) percentage rural households adopting 4

5 improved hygiene and sanitation practices; and (iv) improvements in cost recovery (contributions to capital and O&M cost) and collection efficiency. 3. Preliminary project description The proposed project would contribute to GoAP s RWSS sector program mostly by: (i) implementing new sector policy and institutional framework; and (ii) financing a substantive portion of its investment program for the next five years. The project would include the following components: (i) Policies, Institutional Reforms and Capacity Building: (a) development and implementation of updated procedures for new RWSS projects by PRIs, financing application, project appraisal and GoAP fund channeling; (b) development and implementation of standard memoranda of understanding and contracts between the various actors to enhance the accountability framework; (c) reorganization of PRED and transformation into a provider of technical assistance and contracted engineering consultant and operator; (d) building capacity of the PRIs in the field of community mobilization, RWSS project formulation, RWSS project implementation (including procurement, construction supervision and financial management), sanitation and hygiene, O&M operations and setting of user charges; (e) building capacity of the other key actors such as the new PRED, private engineering consultants and operators of WSS services; (f) pilot programs on groundwater management, research and development and related sector studies. (ii) Investment: (a) augmentation, rehabilitation or construction of SVS and MVS, including improvement of water sources in about 15,000 habitations located in about 7,000 GPs, and representing a total population of about 12 million 3 ; (b) improvement of operational performance of all SVS and MVS schemes; (c) sanitation and environmental sanitation programs including liquid and solid waste management. (iii) Monitoring and Evaluation (M&E): (a) independent M&E of outputs (rehabilitated and new RWSS infrastructure) and of outcomes (reliability, financial and environmental sustainability and affordability of the RWSS service); (b) monitoring of water quality; (c) management information system (MIS). 4. Safeguard Policies that might apply Environmental Assessment (OP/BP 4.01). A Sector Environmental Analysis (SEA) will identify the environmental issues related to the project and recommend appropriate measures to address these. The proposed project is expected to bring about positive health and environmental benefits by supplying safe drinking water from sustainable sources and creating sanitary conditions in villages. However, if the project is not designed /implemented properly, it could result in some adverse impacts. For this reason an Environment Management Plan will be prepared and implemented along with Performance Indicators, according to the Bank guidelines (OP/ BP 4.01). Indigenous Peoples (OP 4.10). While the project interventions will not adversely affect the indigenous people (Tribals), these groups may require special attention from the view point of ensuring inclusion and equity. Further, need to take account of the Indian Constitutional Provision as applicable to the Tribal Areas (5th Schedule Area) is essential while designing the institutional arrangements. A Social Assessment study identifying all the stakeholder groups and developing a framework for ensuring 3 The GoAP current safeguard and fiduciary systems would be reviewed and an agreement on the minimum strengthening requirements to meet Bank standards would be reached prior to appraisal. 5

6 inclusion, participation and involvement of the key stakeholders, is planned as part of the project preparation activities and would provide directions on the preparation of an Indigenous (Tribal) People Development Plan (IPDP). The project design will be consistent with the Bank safeguard policy (OP 4.10) relating to flow of benefits to tribal communities through their informed participation. Involuntary Resettlement (OP 4.12). Lands are required for construction of water supply facilities. Normally, they are not acquired involuntarily as the lands to be secured are relatively small and not location specific. However, it may not be the case in AP. Hence, a decision to trigger or otherwise OP 4.12 will be made after a review of the existing practices as well as the nature and extent of lands required. 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 100 INTERNATIONAL DEVELOPMENT ASSOCIATION 150 Total Contact point Contact: Smita Misra Title: Senior Economist Tel: Fax: smisra@worldbank.org Location: New Delhi, India (IBRD) 6