RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING INDIA - CAPACITY BUILDING FOR INDUSTRIAL POLLUTION MANAGEMENT APPROVED ON JUNE 3, 2010

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1 Public Disclosure Authorized The World Bank REPORT NO.: RES29424 Public Disclosure Authorized Public Disclosure Authorized RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF INDIA - CAPACITY BUILDING FOR INDUSTRIAL POLLUTION MANAGEMENT APPROVED ON JUNE 3, 2010 TO THE REPUBLIC OF INDIA SEPTEMBER 13,2017 Public Disclosure Authorized ENVIRONMENT & NATURAL RESOURCES SOUTH ASIA Regional Vice President: Country Director: Senior Global Practice Director: Practice Manager/Manager: Task Team Leader: Annette Dixon Junaid Kamal Ahmad Karin Erika Kemper Kseniya Lvovsky Harinath Sesha Appalarajugari

2 ABBREVIATIONS AND ACRONYMS DEA IBRD IDA NMK MOEF&CC NPRPS PDO TEP Department of Economic Affairs, Government of India International Bank for Reconstruction and Development International Development Association Noor Mohammad Kunta Lake Ministry of Environment, Forest and Climate Change National Program for the Remediation of Polluted Sites Project Development Objective Technical Expert Panel

3 BASIC DATA Product Information Project ID P Original EA Category Full Assessment (A) Approval Date 03-Jun-2010 Financing Instrument Specific Investment Loan Current EA Category Full Assessment (A) Current Closing Date 15-Sep-2017 Organizations Borrower Ministry of Environment, Forests & Climate Change Responsible Agency Andhra Pradesh Pollution Control Board,West Bengal Pollution Control Board,Telangana State Pollution Control Board Project Development Objective (PDO) Original PDO The objectives of the Project are: (i) to build tangible human and technical capacity in selected state pollution control agencies of the Borrower for undertaking environmentally sound remediation of polluted sites; and (ii) to support the development of a policy, institutional and methodological framework for the Borrower to establish a National Program for Rehabilitation of Polluted Sites. Current PDO To strengthen the capacity of selected state pollution control agencies in the remediation of polluted sites and to support development of a framework to establish a national program for the remediation of polluted sites. Summary Status of Financing Ln/Cr/Tf Approval Signing Effectiveness Closing Net Commitment Disbursed Undisbursed IBRD Jun Jul Oct Sep IDA Jun Jul Oct Sep

4 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The project primarily supports implementation of two activities strengthening environmental institutions capacity for remediation (Component 1) and pilot investments in remediation of orphan hazardous waste dump sites (Component 2). 2. As part of the Component 1 activities: (i) three studies (inventory of polluted sites, remediation methodologies and review of regulations and institutions) have been carried out to inform the development of a framework for the establishment of National Program for Remediation of Polluted Sites (NPRPS) ; (ii) two of the three project states have procured laboratory equipment, that has strengthened their analytical ability to monitor hazardous substances; (iv) training programs and international exposure visits have been organized to build capacity of the project implementation agencies on remediation; (v) inventory of Hazardous Waste generators in all the three states is completed; and (vi) various sector studies on industrial pollution have also been carried out. 3. Component 2 activities (constituting about 60 percent of the project cost) involve piloting remediation activities at three identified sites in the Project States. While detailed remediation plans for all the three sites have been prepared, and approved by the Technical Expert Panel (TEP), actual implementation of remediation plans has commenced only in two sites (remediation of municipal solid waste sites in Kadapa, Andhra Pradesh and Dhapa, Kolkata, West Bengal). 4. Regarding the third pilot sub-project, remediation of Noor Mohammad Kunta (NMK) Lake at Hyderabad in Telangana, bid process for the main package to carry out dredging and containment activities was finalized in July, However, the contract could not be awarded due to a writ petition filed in the High Court of Telangana about the ownership of some portion of the lake land. Remediation activities for this sub-project can t be initiated until the uncertainty on the land ownership is resolved and the judicial process is concluded. 5. To date the project in its seventh year (last quarter) of implementation has disbursed US$12.26 million (about percent) of the total US$43.68 million Bank financing. While the achievement of Project Development Objective (PDO) is rated as Moderately Satisfactory, the implementation progress is rated as Moderately Unsatisfactory. Works and capacity building activities of about US$13 million (US$ 10 million works and US$3 million technical assistance activities) are committed. Given this scenario, disbursement of about US$18 million financing is uncertain. 6. The overall cost of the project at approval in June, 2010 was US$75.39 million, with US$38.94 million IDA credit, US$25.21 million IBRD loan and borrower s contribution of US$11.24 million. Considering the slow progress of project implementation and to account for the fluctuation of Indian Rupee against US Dollar, SDR6.5 million (US$10 million equivalent) were canceled in December 2013 from the IDA credit. Further in 2016, a Level 1 restructuring was carried out to (i) trigger safeguard policy on indigenous people (OP 4.10); (ii) revise PDO and results framework; (iii) include the state of Telangana formed due to the bifurcation of Andhra Pradesh; and (iv) drop Hooghly sub-project in West Bengal and cancel US$10.5 million IBRD financing to the project. The revised project cost after the above cancellations stands at US$51.28 million with US$28.97 IDA credit, US$14.71 million IBRD loan and borrowers contribution of US$

5 B. Rationale for Restructuring 7. Despite the challenges in the implementation of remediation sub-projects, the Ministry of Environment, Forest and Climate Change (MoEF& CC), continued its efforts in developing the framework for NPRPS and finalized Rules for the Remediation of Contaminated Sites. In addition, the implementing agencies have (i) commenced implementation of remediation plans at two polluted sites (ii) developed remediation plans for four polluted sites originally identified for implementation by the project, and additional five contaminated sites in West Bengal, two solid waste sites in Telangana and Andhra Pradesh; and (iii) augmented analytical capacity for hazardous substances through additional laboratory equipment procured through the project. These activities enable achievement of PDO and all four indicators. 8. During the tri-partite portfolio review meeting carried out by the Department of Economic Affairs (DEA), Government of India on June 21, 2017, it was agreed that the project would require additional time for the completion of activities that are already committed (more importantly, the two-ongoing remediation pilot sub-projects) and cancellation of funds that may not be spent by the project (IBRD and some portion of IDA). 9. The current restructuring is a follow up to this decision and based on MoEF& CC s request forwarded by DEA for cancellation of US$14.67 million (IBRD) and US$2.89 million (IDA) financing of the project; and extension of the project closing date to March 31, 2018, to enable completion of ongoing activities. The cancellation is primarily due to the uncertainty surrounding the implementation of remediation plan for NMK Lake pilot sub-project in Telangana (due to the ongoing judicial process) and reassessment of fund requirements for completion of ongoing activities, that ensure achievement of PDO. 10. A detailed action plan for activities for all the activities that need to be completed during the extended project period and a schedule for the finalization of framework that helps in the establishment of National Policy on Remediation of Polluted Sites (NPRPS), has been agreed with the implementing agencies. II. DESCRIPTION OF PROPOSED CHANGES 11. This restructuring paper seeks the approval of Regional Vice President to: (i) Cancel US$14.35 million (IBRD) and US$2.89 million (IDA) financing of the project; and (ii) extend the closing date from September 15, 2017 to March 31, While, DEA based on an assessment of MoEF& CC, requested for cancelling US$14.67 million IBRD and US$2.89 IDA financing, the available balance under IBRD allocation (after accounting for US$0.32 million disbursed so far) is only US$14.35 million. Hence, it is proposed to cancel US$14.35 million IBRD allocation (the available balance) and US$2.89 IDA financing (as per the request). 12. Other proposed changes to the project are: (i) dropping NMK Lake remediation sub-project in Telangana, which cannot be implemented due to the uncertainty in land ownership of some portion of the lake land; (ii) revision of cost allocations reflecting the above cancellation; and (iii) revision of results framework to reflect dropping of NMK lake sub-project and target dates for achieving the results. 13. The changes proposed are based on a request from the Government of India and reflect discussions and agreements reached between the Bank and the project counterparts over the last few months. 4

6 PDO_IND_TABLE The World Bank I. SUMMARY OF CHANGES Changed Change in Results Framework Not Changed Change in Components and Cost Change in Loan Closing Date(s) Cancellations Proposed Reallocation between Disbursement Categories Change in Disbursement Estimates Change in Implementation Schedule Change in Economic and Financial Analysis Change in Implementing Agency Change in DDO Status Change in Project's Development Objectives Change in Disbursements Arrangements Change in Overall Risk Rating Change in Safeguard Policies Triggered Change of EA category Change in Legal Covenants Change in Institutional Arrangements Change in Financial Management Change in Procurement Other Change(s) Change in Technical Analysis Change in Social Analysis Change in Environmental Analysis IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators 5

7 Frame work for the establisment of NPRPS comprising inventory of polluted sites, remediation methodologies and policy and regulatory reviews developed Unit of Measure: Text Value Technical Review Committee has No recommended 'Rules for Yes - Final Framework Remediation of Developed Revised Contaminated Sites' for MoEF Approval Date 03-Jun Jun Mar-2018 Contaminated land managed or dump sites closed under the project Unit of Measure: Hectare(Ha) Value Revised Date 03-Jun Jun Mar-2018 Capacity of technical staff of the participating agencies strengthened to prepare, implement and monitor remediation plans Unit of Measure: Text 3 - Implementation 1 - Preparation capacity Value 0 and monitoring Revised developed capacity developed Date 03-Jun Jun Mar-2018 Direct project beneficiaries Unit of Measure: Number Value Revised Date 03-Jun Jun Mar-2018 Female beneficiaries Unit of Measure: Percentage 6

8 Supplement Value No Change Intermediate Indicators IO_IND_TABLE Inventory of Polluted Sites in India developed Unit of Measure: Text Value Yes - Inventory Yes - Inventory No No Change Developed developed Date 03-Jun Jun Sep-2017 Methodologies for remediation of polluted Sites in India developed Unit of Measure: Text Value Yes - Methodologies No Yes - Methodologies developed part of the Developed remediation No Change framework Date 03-Jun Jun Sep-2017 National guidelines for the remediation of polluted sites developed Unit of Measure: Text Value No Draft Guidelines ready Yes - Guidelines integrated in the remediation framework No Change Date 03-Jun Jun Sep-2017 Policy opitons for remediation of polluted sites developed based on a reveiw of existing legislations and international experiences Unit of Measure: Text 7

9 Value Yes - Policy options Yes - Policy options No No Change Identified report finalized Date 03-Jun Jun Sep-2017 Number of parameters that can be analyzed by the laboratories of Andhra Pradesh, Telangana and West Bengal Pollution Control Boards, increased Unit of Measure: Number Value Revised Date 03-Jun Jun Mar-2018 Online network of State Pollution Control Boards for remediation established Unit of Measure: Text Value steps for establishment Online network Nil Revised of network initiated established Date 03-Jun Jun Mar-2018 Remediation plans prepared based on risk based approach and ready for implementation in all the three participating states Unit of Measure: Percentage Value No Change Date 03-Jun Jun Sep-2017 Post-remediation monitoring system with appropriate infrastructure and approved indicators established for all the three remediation sites by the completion of remediation works Unit of Measure: Text Value No No - not yet due Post-remediation monitoring initiated Revised Date 03-Jun Jun Mar

10 OPS_DETAILEDCHANGES_COMPONENTS_TABLE OPS_DETAILEDCHANGES_LOANCLOSING_TABLE OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE The World Bank People with reduced direct exposure to pollution from sites remediated by the project Unit of Measure: Number Value Revised Date 03-Jun Jun Mar-2018 COMPONENTS Current Component Name Strengthening of Environmental Institutions: Building capacity for addressing pollution remediation Investments in Priority Remediation and Environmental Improvements: Rehabilitation of orphan hazardous waste sites and municipal dum psites Current Cost (US$M) Action Revised Revised Proposed Component Name Strengthening of Environmental Institutions: Building capacity for addressing pollution remediation Investments in Priority Remediation and Environmental Improvements: Rehabilitation of orphan hazardous waste sites and municipal dum psites Proposed Cost (US$M) Project Management 5.32 Revised Project Management 2.94 TOTAL LOAN CLOSING DATE(S) Ln/Cr/Tf Status Original Closing Revised Closing(s) Proposed Closing Proposed Deadline for Withdrawal Applications IBRD Effective 30-Sep Sep Mar Jul-2018 IDA Effective 30-Sep Sep Mar Jul

11 CANCELLATIONS Ln/Cr/Tf Status Currency IBRD IDA Disburs ing&re paying Disburs ing&re paying Current Amount Cancellation Amount Value Date of Cancellation New Amount USD 14,710, ,346, Aug , XDR 19,206, ,057, Aug ,149, Reason for Cancellation BORROWER' S REQUEST FOR COUNTRY REASONS BORROWER' S REQUEST FOR COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Allocation Actuals + Committed Proposed Allocation Financing % (Type Total) Current Proposed IBRD Currency: USD ilap Category Sequence No: 1B Current Expenditure Category: GDS,WRKS,CS,TRNG,WS,IOC - PART 2 14,646, , , Total 14,646, , , IDA Currency: XDR ilap Category Sequence No: 1A Current Expenditure Category: GDS,WRKS,CS,TRNG,WS,IOC - PART 1 7,008, ,441, ,008, ilap Category Sequence No: 1B Current Expenditure Category: GDS,WRKS,CS,TRNG,WS,IOC - PART 2 9,763, ,175, ,706, ilap Category Sequence No: 1C Current Expenditure Category: GDS,WRKS,CS,TRNG,WS,IOC - PART 3 10

12 2,156, ,214, ,156, ilap Category Sequence No: 2 Current Expenditure Category: PPF REFINANCING 277, , , Total 19,206, ,108, ,149, OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed ,608, ,608, , , ,771, ,771, , , , , ,000, , ,000, ,375, ,780, ,489, V. APPRAISAL SUMMARY A. Economic and Financial Analysis 14. The economic analysis for the project has been updated, since two pilot remediation sub-projects have been dropped and the total project cost has been reduced from US$75million (at approval) to US$30.71 million due to various challenges faced during the project implementation. A summary of the updated economic analysis is provided below and a detailed description of economic analysis is provided in Annex The project includes both capacity building and investment component to pilot remediation activities. The economic analysis, focuses on quantifying in monetary terms the benefits derived from these pilot sub-projects. It however needs to be 11

13 noted that the analysis provides an indication of the economic benefits likely to be generated by one component of the project and the potential benefits that the remediation initiatives can generate, for future such initiatives. 16. Component 1 of the project supports capacity building of environmental institutions at the state level. Improving environmental monitoring and enforcement will generate substantial social benefits. The preparation of the NPRPS, development of hazardous waste inventory, e-waste inventory, number of sectoral studies and capacity building activities will not generate direct economic benefits by itself. However, the implementation of the program will improve the efficiency and performance of participating agencies (the state pollution control boards) and generate long term environmental and social benefits. These benefits will be mainly associated with a reduction in air, water and soil pollution and hence an improvement in human health and quality of life of the Indian citizens. Similarly, the benefits of developing the framework for NPRPS will extend well beyond the project life. 17. Component 2 of the project supports remediation and restoration of two polluted sites (municipal solid waste dump sites). Economic analysis has been carried out for both these sites. The objective of the analysis is to illustrate the potential economic benefits that can be generated from the cleanup and rehabilitation of polluted sites. 18. The analysis was based on the inputs from the detailed remediation plans and the environmental and social assessment carried out prepared for each of the sub-project. In addition, necessary secondary data has been used and identifiable benefits have been quantified. A summary of the analysis for each sub-project is presented below and more details of the analysis is provided in Annex 2. (a) Economic Analysis for Closure and Containment of Kadapa Municipal Solid Waste Site, Andhra Pradesh (i) (ii) The years of uncontrolled dumping of waste at Kadapa site has resulted in gross pollution of water, soil and air. The proximity of the dump to residential areas poses a serious health hazard, in addition to odor, insects and visual disturbance. By rehabilitating the dumpsite, the project will result in significant environmental and health benefits to nearby localities as well as global benefits, through the reduction of greenhouse gas emission. The benefits generated by such action include (i) employment generation especially to unskilled labors, (ii) improvement in health, aesthetic and recreational value to nearby residential areas (this benefit has been estimated using the hedonic property price method during a rapid onsite survey), (iii) reduction in greenhouse gas emissions and (iv) marginal agricultural benefits. The total estimated cost of rehabilitating the Kadapa site is US$ 3.45 million. The economic analysis indicates that the benefits of the project are expected to be through employment (US$1 million), economic (US$0.48 million), agriculture (US$ 0.05million) and GHG emission reduction (US$0.34 million). The net present value of remediation is estimated at US$0.66 million and the overall benefit cost ratio is estimated at (b) Economic Analysis for Closure and Containment of Dhapa Municipal Solid Waste Site, Kolkata, West Bengal: (i) (ii) Dhapa municipal solid waste disposal site is the designated disposal site for the city of Kolkata in West Bengal. Spread over an area of about 28 hectares, the site receives about 3500 to 3700 tons of municipal solid waste daily. The site is divided in two parts and one part of the site, spread over an area of 8.12 hectares was closed in The project supports closure and containment of this disposal site. Similar to Kadapa sub-project, uncontrolled dumping of waste at Dhapa has resulted in number of environmental issues related to water, soil and air pollution. These issues further get sensitive, as the site is part of the East Kolkata Wetland. The total estimated cost of rehabilitating the Dhapa site is US$ 9.08 million. The economic analysis indicates that the benefits of the project are expected to be through employment (US$2.49 million), economic (US$

14 million), agriculture (US$ 0.06million) and GHG emission reduction (US$5.78 million). The net present value of remediation is estimated at US$0.66 million and the overall benefit cost ratio is estimated at The higher benefits for Dhapa site is primarily due to the large quantity of waste accumulated at the site and associated increase in GHG emission reduction (2.4 million tons of CO 2 in Dhapa, as against 0.14 million tons of CO 2 in Kadapa). 19. Analysis of both the sub-projects indicate that the benefits of remediation of municipal solid waste sites (direct and indirect) are significant (about 3 to 5 times the capital costs). The major benefits being employment generation, GHG emission reduction and economic improvements. 13

15 Annex 1: Revised Results Framework ly PDO Level Indicators* PDO Indicator: Framework for the establishment of NPRPS comprising inventory of polluted sites, remediation methodologies, and policy and Regulatory reviews developed PDO Indicator: Contaminated Land Managed or dump sites closed under the project PDO Indicator: Capacity of technical staff of the participating agencies strengthened to prepare, implement and monitor remediation plans PDO Indicator: Direct project beneficiaries (number) of which female (%) Core UoM Baseline Status June 2017 Yes /No No Technical Committee has recommended to MoEF &CC FY Frequency Ha Semi Annual Data sources and methodology Yes Annual Review of technical studies and recommendations Review of technical inspection report upon completion of works Score Annual Assessment by independent experts Number (%) ,362 (45%) Annual Independent Assessment Intermediate results Component 1: Strengthening of Environmental Institutions Building Capacity for addressing pollution remediation IR Indicator: Inventory of Polluted Sites in India developed Yes /No No Yes Yes Annual Review of technical studies and recommendations IR Indicator: Methodologies for remediation of polluted sites in India developed IR Indicator: National Guidelines for the Yes /No No Yes Yes Annual Review of technical studies and recommendations Yes /No No No Yes Annual Review of technical studies and Responsibility for data collection Description / comments Three basic studies on Inventory, Methodological and Policy & Institutional studies are completed. Pilot sub-projects in Andhra Pradesh (4.2 ha) and West Bengal (12.10 ha) Assessed based on three aspects of capacity. 1. Preparation 2. Implementation 3. Monitoring Total project beneficiaries from pilot sub-projects (Kadapa , Dhapa - 131,693) NMK dropped Inventory study has been approved by MoEF& CC. Methodology study has been approved by MoEF& CC. Draft Guide lines as part of Methodology 1

16 ly remediation of polluted sites developed IR Indicator: Policy options for remediation of polluted sites developed based on a review of existing legislations and international experiences IR Indicator: Number of parameters that can be analyzed by the laboratories of Andhra Pradesh, Telangana and West Bengal Pollution Control Boards, increased IR Indicator: Online network of State Pollution Control Boards for remediation established Component 2: Investments in Priority Remediation and Environmental Improvements IR Indicator: Remediation plans prepared based on risk based approach and ready for implementation in all the three participating states IR Indicator: Post-remediation monitoring system with appropriate infrastructure and approved indicators established for all the three pilot sites by the completion of remediation works IR Indicator: People with reduced direct exposure to pollution from sites remediated by the project recommendations Yes /No No Yes Yes Annual Review of technical studies and recommendations Number Semiannual Yes /No No No Yes Semiannual Percentage Semiannual Reports from the laboratories of the two pollution control boards on the parameters analyzed Report on staff accessing network for information on remediation Review of technical studies and recommendations Yes/No No No Yes Annual Review of technical reports on postremediation monitoring Number Annual Independent Assessment have been approved by MoEF& CC Policy options as an output of the legal and regulatory review study have been identified Laboratory capacity increased from 26 to 76 Andhra Pradesh has been included in the indicator Remediation Plans for all the pilots prepared Post remediation monitoring system as recommended in the TEP approved remediation plan, is established. Total estimated from pilot sub-projects (Kadapa , and Dhapa ) NMK excluded 2

17 Annex 2: Economic and Financial Analysis (Revised) A. Overview 1. The project includes both capacity building and investment components. The economic analysis here focuses on quantifying in monetary terms the benefits derived from the pilot investments. While caution should be used in the interpretation of the analysis, as it only provides an indication of the economic benefits generated by one component of the project, it nevertheless provides an important indication of the benefits that the project is expected to generate not only from its investment, but by enabling national and state authorities to undertake future such investments. B. Assessing the benefits and costs of rehabilitating Kadapa Dumpsite, Andhra Pradesh 2. Kadapa is a town in the Rayalseema region of Andhra Pradesh and is one of the oldest municipalities in India. It has an area of about 164 km 2 with a population of 344,078 (2011 census). The town generates an estimated 206 metric tons (MT) of solid waste per day amounting to 75,190 MTs per year. This waste has been dumped in an open dumping area of 5 hectares, known as Ukkayya Palli or Kadapa landfill. The dumpsite is located about 5 km from the city, but human habitation is found within 0.5 km of the dumpsite. 3. This landfill has been operating since Under compressed conditions, the total waste matter at the dump site is estimated at 0.16 million cubic meters. This accumulated waste has created pollution of ground and surface water, soil and air (through open burning of waste) in the neighborhood the dumpsite. Part of the waste collected from the town was burnt regularly at the site to make place for more waste. Surface water runoff and the percolation of the leachates from the land fill could result in the pollution of ground water and nearby surface water bodies with arsenic, mercury, lead, phosphorous and other pollutants. (a) Estimates of Benefits and Costs of Rehabilitating Kadapa dumpsite (i) (ii) (iii) The closure and containment of Kadapa dumpsite, through the project, would provide benefits to residents (by improving their overall living conditions, decreasing pollution levels, providing employment opportunities) as well as generate global benefits (by reducing CO 2 emissions). The analysis below provides an overview of the costs and benefits generated by the closure and containment of Kadapa dumpsite. These estimates are based on the data from the remediation plan prepared by the project, environmental and social assessment carried out and the secondary data or information collected during a field visit conducted by the project team. The analysis uses appropriate economic valuation techniques based on the type of information available. Cost of Rehabilitating Kadapa dumpsite: Based on detailed field investigations, engineering surveys and analysis of various alternatives, the technical consultants for the Kadapa sub-project, have recommended a closed balance option. The option involves excavation and partial recycling of waste material, slope stabilization and reshaping of the dump, closure and containment measures to ensure control of leachate and landfill gasses and development of remediated dump site as a public space / park. The total estimated cost of these measures about US$3.45 million. Employment generation to unskilled labor: The rehabilitation of Kadapa dumpsite requires employment of unskilled labor for earth moving activities (which represents about 86 % of total rehabilitation costs). Engineering estimates suggest that almost 67 % of such costs could be paid to unskilled labor. A study 1 on shadow prices of unskilled labor in different states of India and shows that the opportunity cost or shadow price of unskilled labor employment on developmental projects forms 39 % of project wage rate in Andhra 1 Murty and Goldar (2007). 1

18 Pradesh. Therefore, 61 % of wages paid to unskilled labor for the dumpsite remediation could be considered as benefits to local households supplying unskilled labor. Therefore, this project provides significant employment benefits to local unskilled laborers especially during its construction period. The present value of these benefits is estimated at Rs million (US$1 million). (iv) (v) (vi) (vii) Reduction in Greenhouse gases: Landfill gas is produced in landfills by the decomposition of organic materials. The primary components of landfill gas are methane (50%) and carbon dioxide (48%). Landfill gas is a threat to human health and global warming. Flaring of landfill gas converts methane to carbon dioxide and water vapor. Given that methane's global warming potential is 21 times that of carbon dioxide by weight, this conversion results in a significant positive benefit to the global atmosphere. With 206 MT of municipal solid waste per day, and various assumptions on waste composition, the avoided tons of CO 2 emissions were estimated. At a value of $6.9 per ton of CO 2 the net present value is estimated at Rs million ($0.34 million). Health, aesthetic and recreational benefits using the hedonic price method: Air and water pollution around the dumpsite can cause health and amenity losses to households living nearby the site. One method available to estimate these damages is the hedonic property prices method 2. This method consists at analyzing the house location choices made by households and captures their willingness to pay for houses located in a less polluted environment. An attempt has been made under this economic analysis to capture households willingness to pay for a two-bedroom apartment (with more or less similar characteristics) located at different distance from Kadapa dump site. The table below summarizes the information found. One can notice an increase in monthly rent as the distance form Kadapa sites increases. At the exception of the village of Kondayyapalli, this is not on the wind direction from Kadapa and is safely separated from the landfill by a wellbuilt road. During the course of the survey it was observed that a two-bedroom apartment in a locality free of pollution in Kadapa town could be worth Rs 3,000 in monthly rent. Therefore, it was conservatively assumed that the rehabilitation of the Kadapa dumpsite can lead to an increase in rent of an average apartment to RS. 2,000. The gain in annual rental value due to the rehabilitation of Kadapa site in the four affected villages is estimated at a present value of Rs million (US$ 0.48 million). Price variation of two-bedroom apartments located at different distance from Kadapa dumpsite Municipality Ward Distance from Landfill (Km) Number of households Average monthly rent (Rs) Ukkayyapalli Masapet ,500 Sankarapuram ,000 Kondayyapalli ,500 Source: Survey conducted during the preparation of the project (viii) Agricultural benefits: Based on interviews with local farmers, it was observed that about 100 acres of agricultural land remained uncultivated due to the landfill. However, land located at the tail end of Kadapa- Karnool irrigation canal and not affected by the dumpsite, was receiving water and producing one crop a year. It was therefore assumed that the rehabilitation of the dumpsite could lead to the cultivation of the surrounding 100 acres of at least one paddy crop in a year after. Recent estimates of incomes resulting from the cultivation of one crop of paddy in India show that on the average an acre of farm land provides a net 2 Murty, M.N., S.C. Gulati, and A. Banerjee (2003). Hedonic Property Prices and Valuation of Benefits from Reducing Urban Air Pollution in India. Working paper no. E 237/2003, Institute of Economic Growth, Delhi. 2

19 income of Rs 3,891 per year 3. The net present value of stream of benefit is estimated at Rs.3.5 million (US$0.05 million). (ix) Estimate of benefit cost ratio and net present value: The remediation of Kadapa dumpsite provides both local and global benefits justifying the proposed investment. Local benefits include improvement in public health, overall quality of life as well generation of employment and agricultural revenues. Global benefits include the reduction in CO 2 emission. As the table below indicates, the net present value, using a 10 % rate of discount 4, was estimated at Rs million (US$ 1.2 million) and the benefit cost ratio at Even with conservative assumptions using only immediately quantifiable benefits, the resulting benefit cost ratio is high and justifies the investment in the rehabilitation of the dumpsite. Estimates of Present Value (PV) of Benefit and Cost Flows of Kadapa Landfill Rs. million (2017 Prices) US$ million (2017 Prices) Benefits to local households (PV) Employment benefits (PV) ,00 Agricultural benefits (PV) Reduction in GHG (PV) Total Benefits (PV) Cost of rehabilitation (PV) Net present value Benefit cost ratio 2.84 C. Assessing the benefits and costs of rehabilitating Dhapa Dumpsite, Kolkata, West Bengal 4. Kolkata is one of the four metropolitan cities of India and is the capital of West Bengal state. The city is spread over an area of about 187 km 2 and houses a population of 4.48 million (2011 census). The city generates about metric tons (MT) of solid waste per day, amounting to about 1.30 million tons annually. This waste has been dumped in an open dumping area of 28 hectares at Dhapa, located in East Kolkata Wetlands. The site is located at about 10 km south east of the city, but human habitation is found next to the dumpsite. 5. This landfill has been operating since Under compressed conditions, the total matter at the dump site is estimated at 8.5 million cubic meters. This accumulated waste has created pollution of ground and surface water, soil and air (through open burning of waste) in the neighborhood the dumpsite. Surface water runoff and the percolation of the leachates from the land fill could result in the pollution of ground water and nearby surface water bodies with arsenic, mercury, lead, phosphorous and other pollutants. (a) Estimates of Benefits and Costs of Rehabilitating Dhapa dumpsite (i) The closure and containment of Dhapa dumpsite, through the project, would provide benefits to local residents (by improving their overall living conditions, decreasing pollution levels, providing employment opportunities) as well as generate global benefits (by reducing CO 2 emissions). The analysis below provides an overview of the costs and benefits generated by the closure and containment of Dhapa dumpsite. These estimates are based on the data from the remediation plan prepared by the project, environmental and social 3 See Murty and Goldar (2007) 4 A study commissioned by the Planning Commission, Government of India has recommended 10 % rate of discount for the economic evaluation of public investment projects in India (Murty and Goldar, 2007) 3

20 (ii) (iii) (iv) (v) (vi) (vii) assessment carried out and the secondary data or information collected. The analysis uses appropriate economic valuation techniques based on the type of information available. Cost of Rehabilitating Dhapa dumpsite: Based on detailed field investigations, engineering surveys and analysis of various alternatives, the technical consultants for the Dhapa sub-project, have recommended remediation of the site with an impermeable cover and passive gas control arrangement along with leachate treatment facility. The total estimated cost of these measures about US$9.08 million. Employment generation to unskilled labor: The rehabilitation of Dhapa dumpsite requires employment of unskilled labor for earth moving activities (which represents about 86 % of total rehabilitation costs). Engineering estimates suggest that almost 67% of such costs could be paid to unskilled labor. Similar to the assumptions made for Kadapa site, the shadow price of unskilled labor employment has been considered as 39 % of project wage rate. Therefore, 61 % of wages paid to unskilled labor for the dumpsite remediation could be considered as benefits to local households supplying unskilled labor. Therefore, the Dhapa project provides significant employment benefits to local unskilled laborers especially during its construction period. The present value of these benefits is estimated at Rs million (US$2.49 million). Reduction in Greenhouse gases: With about 8.5 million tons of waste disposed at the site, and based on waste characteristics, the avoided tons of CO 2 emissions were estimated. At a value of $6.9/ ton of CO 2 the net present value is estimated at Rs million ($5.78 million). Health, aesthetic and recreational benefits using the hedonic price method: Based on hedonic property prices method, that analyses the house location choices made by households and captures their willingness to pay for houses located in a less polluted environment, the gain in annual rental value due to the rehabilitation of Dhapa site in the project area is estimated at a present value of Rs million (US$ 0.22 million). Agricultural benefits: Based on interviews with local farmers, it was observed that the rehabilitation of the dumpsite could lead to the improvement in cultivation of the surrounding areas. The net present value of stream of this benefit is estimated at Rs.4.09 million (US$0.06 million). Estimate of benefit cost ratio and net present value: The remediation of Dhapa provides both local and global benefits justifying the proposed investment. Local benefits include improvement in public health, overall quality of life as well generation of employment and agricultural revenues. Global benefits include the reduction in C O2 emission. As the table below indicates, the net present value, using a 10 % rate of discount, is estimated at Rs million (US$ 6.82 million) and the benefit cost ratio at The higher benefits for Dhapa site is primarily due to the large quantity of waste accumulated at the site and associated increase in GHG emission reduction (2.4 million tons of CO 2 in Dhapa) and justify the investment in the rehabilitation of the dumpsite. Rs. million (2017 Prices) US$ (2017 Prices) Benefits to local households (PV) ,791 Employment benefits (PV) ,496,514 Agricultural benefits (PV) ,929 Reduction in GHG (PV) ,786,469 Cost of rehabilitation (PV) ,753,891 Net present value ,818,812 Benefit cost ratio 4.89 Estimates of Present Value of Benefit and Cost Flows of Kadapa Landfill 4