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Report and Recommendation of the President to the Board of Directors Project Number: 52028-004 July 2021 Proposed Loan India: Jharkhand Urban Water Supply Improvement Project Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB's Access to Information Policy.
CURRENCY EQUIVALENTS
(as of 5 July 2021)
Currency unit – Indian rupee/s (₹)
₹1.00 = $0.013
$1.00 = ₹74.485
ABBREVIATIONS
ADB – Asian Development Bank
COVID-19 – coronavirus disease
CRVA – climate risk and vulnerability assessment
EHS – environment, health, and safety
EMP – environmental management plan
FSSM – fecal sludge and septage management
GAP – gender action plan
GOJ – Government of Jharkhand
IEE – initial environmental examination
JUIDCO – Jharkhand Urban Infrastructure Development Company Limited
lpcd – liters per capita per day
O&M – operation and maintenance
PAM – project administration manual
PIU – project implementation unit
PMU – project management unit
SCADA – supervisory control and data acquisition
UDHD – Urban Development and Housing Department
ULB – urban local body
NOTES
(i) The fiscal year (FY) of the Government of India and its agencies, and the
Government of Jharkhand ends on 31 March. “FY” before a calendar year
denotes the year in which the fiscal year ends, e.g., FY2022 ends on 31 March
2022.
(ii) In this report, “$” refers to United States dollars.Vice-President Shixin Chen, Operations 1
Director General Kenichi Yokoyama, South Asia Department (SARD)
Director Norio Saito, Urban Development and Water Division (SAUW), SARD
Team leader Sanjay Joshi, Principal Urban Development Specialist, SAUW, SARD
Team members Deepa Ahluwalia, Senior Social Development Officer (Gender), India
Resident Mission (INRM), SARD
Achyutha Rao Aleti, Environmental Specialist, SAUW, SARD
Mikael R. Andersson, Financial Management Specialist, Portfolio,
Results and Quality Control Unit (SAOD-PR), SARD
Saswati Belliappa, Safeguards Specialist, SAUW, SARD
Dharmesh Dawda, Procurement Specialist, Procurement Division 1,
Procurement, Portfolio, and Financial Management Department
Donna Marie Melo, Operations Assistant, SAUW, SARD
Jaemin Nam, Urban Development Specialist, SAUW, SARD
Douglas Perkins, Principal Counsel, Office of the General Counsel
Rayhalda Susulan, Associate Safeguards Officer (Resettlement),
Office of the Director General, SARD
Elvie Jane Tirano, Senior Operations Assistant, SAUW, SARD
Vivek Vishal, Senior Project Officer (Urban), INRM, SARD
Sheryl V. Yanez, Associate Project Analyst, SAUW, SARD
Peer reviewer Ramola Naik Singru, Senior Urban Development Specialist, Urban
Development and Water Division, Central and West Asia
Department
In preparing any country program or strategy, financing any project, or by making any
designation of or reference to a particular territory or geographic area in this document, the
Asian Development Bank does not intend to make any judgments as to the legal or other status
of any territory or area.CONTENTS
Page
PROJECT AT A GLANCE
MAP
I. THE PROPOSAL 1
II. THE PROJECT 1
A. Rationale 1
B. Project Description 4
C. Value Added by ADB 5
D. Summary Cost Estimates and Financing Plan 5
E. Implementation Arrangements 7
III. DUE DILIGENCE 7
A. Technical 7
B. Economic and Financial Viability 8
C. Sustainability 8
D. Governance 9
E. Poverty, Social, and Gender 9
F. Safeguards 10
G. Summary of Risk Assessment and Risk Management Plan 11
IV. ASSURANCES 12
V. RECOMMENDATION 12
APPENDIXES
1. Design and Monitoring Framework 13
2. List of Linked Documents 16Project Classification Information Status: Complete
PROJECT AT A GLANCE
1. Basic Data Project Number: 52028-004
Project Name Jharkhand Urban Water Supply Improvement Department/Division SARD/SAUW
Project
Country India Executing Agency Urban Dev't & Housing
Borrower India Dep't, Gov of Jharkhand
Country Economic https://www.adb.org/Documents/LinkedDocs/
Indicators ?id=52028-004-CEI
Portfolio at a Glance https://www.adb.org/Documents/LinkedDocs/
?id=52028-004-PortAtaGlance
2. Sector Subsector(s) ADB Financing ($ million)
Water and other urban Urban water supply 112.00
infrastructure and services
Total 112.00
3. Operational Priorities Climate Change Information
Addressing remaining poverty and reducing inequalities GHG reductions (tons per annum) 8,640.000
Accelerating progress in gender equality Climate Change impact on the Medium
Tackling climate change, building climate and disaster resilience, and Project
enhancing environmental sustainability
Making cities more livable ADB Financing
Strengthening governance and institutional capacity Adaptation ($ million) 6.12
Mitigation ($ million) 4.54
Cofinancing
Adaptation ($ million) 0.00
Mitigation ($ million) 0.00
Sustainable Development Goals Gender Equity and Mainstreaming
SDG 1.4 Effective gender mainstreaming (EGM)
SDG 6.4
SDG 13.a Poverty Targeting
General Intervention on Poverty
4. Risk Categorization: Low
.
5. Safeguard Categorization Environment: B Involuntary Resettlement: B Indigenous Peoples: B
.
6. Financing
Modality and Sources Amount ($ million)
ADB 112.00
Sovereign Project (Regular Loan): Ordinary capital resources 112.00
Cofinancing 0.00
None 0.00
Counterpart 48.00
Government 48.00
Total 160.00
Currency of ADB Financing: US Dollar
Source: Asian Development Bank
This document must only be generated in eOps. 01072021141832493318 Generated Date: 05-Jul-2021 11:21:43 AMINDIA
JHARKHAND URBAN WATER SUPPLY IMPROVEMENT PROJECT
BIHAR
Sahibganj
GODDA SAHIBGANJ
Godda
UTTAR
Pakur
PRADESH
KODARMA PAKUR
HUSSAINABAD Deoghar DUMKA
Kodarma GIRIDIH
GARHWA JHUMRI TELAIYA Dumka
PALAMU CHATRA Chatra DEOGHAR
Giridih
Garhwa MEDININAGAR HAZARIBAGH
Hazaribagh JAMTARA
Jamtara
LATEHAR Dhanbad
JHARKHAND
Latehar Bokaro DHANBAD
RAMGARH BOKARO
Ramgarh
WEST
LOHARDAGA BENGAL
RANCHI
Lohardaga RANCHI
GUMLA
Gumla Khunti
CHHATTISGARH SARAIKELA
KHUNTI -KHARSAWAN
Saraikela Jamshedpur
Simdega
SIMDEGA Chaibasa EAST SINGHBHUM
WEST SINGHBHUM
ODISHA
N
State/Union Capital
0 50 100
District Capital
City/Town Kilometers (km)
District Boundary
State/Union Boundary This map was produced by the cartography unit of the Asian Development Bank.
The boundaries, colors, denominations, and any other information shown on this
Boundaries are not necessarily authoritative. map do not imply, on the part of the Asian Development Bank, any judgment on
the legal status of any territory, or any endorsement or acceptance of such
boundaries, colors, denominations, or information.
210073 ABVI. THE PROPOSAL
1. I submit for your approval the following report and recommendation on a proposed loan
to India for the Jharkhand Urban Water Supply Improvement Project.
2. The project will support urban service improvement and policy initiatives of the
Government of Jharkhand (GOJ) to contribute to improved quality of life under the Jharkhand
Vision and Action Plan 2021.1 The project will complement ongoing efforts of the GOJ for water
supply infrastructure and service improvement and institutional reforms under various national
flagship programs. 2 The project will finance water supply infrastructure investments in four
project towns: the state capital of Ranchi, and the economically and socially backward towns of
Hussainabad, Jhumri Telaiya, and Medininagar. It will also address capacity and institutional
governance issues in the sector for sustainable urban service delivery.
II. THE PROJECT
A. Rationale
3. State economy and urbanization. Jharkhand state is rich in minerals and natural
resources, resulting in the presence of big industrial areas with the opportunity for further
development because of encouraging government policies. The state has seen strong and
steady growth since 2015. However, based on 2011 census data, it is less urbanized (24.05%)
than the national average (31.20%), although its urbanization rate is projected to catch up with
other Indian states after 2030. The state is categorized as a low-income state, as its per capita
income of ₹79,873 was less than the national average of ₹134,432 in fiscal year (FY) 2020. The
state’s multidimensional poverty index (percentage population in multidimensional poverty)
based on data for the years 2015 and 2016 was 46.5% compared to India’s 27.9%.3
4. Sector issues. The water supply services in Jharkhand are below national service level
standards because of low coverage, with intermittent and unsafe water supply. The weak
financial resources and human resource capacity constraints of urban local bodies (ULBs) are
the main limitations, leading to low investments in new and improved infrastructure, poor
operation and maintenance (O&M), and deterioration of assets.4 These result in poor quality of
life of inhabitants, constrained urbanization and growth, and low competitiveness of cities.
Access to basic services like water supply is critical to women and other vulnerable populations’
wellbeing, and the lack of this access exacerbates women’s drudgery and time poverty. The
project towns get on an average 3–4 hours of daily water supply at 10–35 liters per capita per
day (lpcd). The coverage of piped water supply is about 30% for Ranchi and less than 20% for
the other project towns. The nonrevenue water in currently limited project service area is
estimated at 45% because of physical and commercial losses. Urban infrastructure is at risk
from disasters caused by natural hazards and future climate change impacts, which include
increasing variances in temperature, and high-intensity storms, which may all disrupt intended
service delivery.
1 GOJ. 2014. Jharkhand Vision and Action Plan 2021. Ranchi.
2 The national flagship programs launched by the Ministry of Housing and Urban Affairs include the Atal Mission for
Rejuvenation and Urban Transformation, Smart Cities Mission, and Swachh Bharat Mission.
3
UNDP and OPHI. 2019. Global Multidimensional Poverty Index 2019.
4 On average, statewide coverage of piped treated water supply is below 25% (national average: 70%), the quantum
of water supplied is 56 liters per capita per day (lpcd) against a benchmark of 135 lpcd, daily water supply is 3.7
hours, and estimated nonrevenue water is 45% against a benchmark of less than 15%.2 5. Urban governance. The state has 43 ULBs, which includes four project towns, are governed by the Jharkhand Municipal Act of 2011.5 Only 57.8% of the urban population (or 13.9% of the total population) of the state that falls under these 43 ULBs, is governed by elected municipal administrations; the remaining population is governed by institutions appointed by the GOJ. ULBs are responsible for service delivery of all key functions such as water supply, sewerage, solid waste management, roads, urban planning, and building permissions. The Urban Development and Housing Department (UDHD) is the administrative department for the urban sector in Jharkhand and oversees the ULBs and other state-level entities in urban sector. Overall, Jharkhand’s institutional structure is harmonized, but key state institutions are new and would require support in building capacity in project design, implementation, and management.6 6. Financial situation of urban local bodies. The revenue base of ULBs mainly consists of property tax, user charges, and fees for renting out public space for advertisements. ULBs’ own sources of revenue in Jharkhand are much lower compared to those in other states of India in spite of significant property tax reforms undertaken in the state.7 The financial assessment of a mix of ULBs in Jharkhand for FY2017 indicates that the average per capita own-source revenue was ₹251, while the all-India average was ₹2,360. Similarly, the average per capita expenditure was ₹544, while the all-India average was ₹2,702.8 The reasons for low revenue are (i) low tax rates and user charges, (ii) low tax collection efficiency, and (iii) poor service coverage resulting in lower user charges. All ULBs have migrated to an accrual-based double-entry accounting system, and annual financial statements have been publicly disclosed since FY2013. The credit rating of 41 ULBs shows only Ranchi has received an investment-grade rating in the lowest slab.9 7. Urban institutional capacity. The ULBs in Jharkhand lack adequate permanent staff and rely mainly on a small number of contractual staff. Technical staff are limited to junior or executive engineers on deputation from other departments. Most of the services, including accounts, are outsourced through short-term service contracts. Lack of adequate municipal staff is also reflected in the poor utilization of funds. Also, ULBs do not use information technology in accounting, asset management, and service provision. There is low participation rate of urban females (6.6%) in the workforce, which is below the national average (14.7%).10 8. Government urban programs. The GOJ is committed to enhancing the quality of life of its urban inhabitants by developing sustainable cities that are spatially, economically, and socially inclusive (footnote 1). The UDHD has developed urban strategies and policies to provide 100% basic infrastructure to the urban population by 2030, thereby making cities efficient, productive, and inclusive. The key focus areas include providing access to safe 5 The 43 ULBs comprise the following: 7 municipal corporations, 2 notified area committees of Jamshedpur and Mango (which is in transition to become a municipal corporation), 1 municipality, 18 nagar parishads (city councils), and 15 nagar panchayats (town councils). 6 Jharkhand Urban Infrastructure Development Company Limited is the key state institution involved in urban infrastructure relevant to this project, which is responsible for implementing urban projects and handing over the completed assets to ULBs. 7 Property tax reforms consisted of (i) governance reforms by amendment in the Jharkhand Municipal Act (2011) and Property Tax Rules (2013), and introduction of Property Tax Collection and Recovery Rules (2017); (ii) introduction of public–private partnerships in tax collection and monitoring; (iii) integration of tax and nontax revenue; and (iv) spreading of awareness through continuous information, education, and communication campaigns. 8 ADB. 2019. Urban Sector Assessment Report. Consultant’s report. Manila (TA 9022-IND). 9 Ranchi received a credit rating of BBB– from CRISIL. 10 Government of India, Ministry of Statistics and Program Implementation. 2019. Women and Men in India: A Statistical Compilation of Gender-related Indicators in India (2018). 20th Issue. Delhi.
3 drinking water supply, improving urban sanitation, providing good quality of transport facilities, and strengthening urban governance. The budgetary allocation for the urban sector in the state’s budget has more than doubled since FY2016, which reflects the state’s prioritization of the urban sector.11 Private investment in the sector is unlikely because of the lack of benchmark data on water supply system performance and low tariffs for cost recovery. However, the project is designed for short- to medium-term private sector engagement in O&M of the assets. 9. Alignment with ADB and country priorities. GOJ is investing significantly in urban infrastructure including strengthening of urban institutions and building staff capacities under national flagship programs. GOJ is seeking additional support for these activities from the Asian Development Bank (ADB) and other multilateral agencies.12 The project will be ADB’s first urban project in the state and aims to develop urban infrastructure for improved service delivery and address capacity and institutional governance issues. The project targets critical investments in select towns, as increasing water supply service coverage more rapidly is the topmost priority of the GOJ during the coronavirus disease (COVID-19) pandemic.13 The state is already taking steps to improve sanitation in the project towns and has requested ADB’s continued support in a subsequent loan for sewerage and fecal sludge and septage management projects, which are under planning stage. 14 The project will support the operational priorities (OPs) of ADB’s Strategy 2030 for making cities more livable (OP 4), and strengthening governance and institutional capacity (OP 6).15 The project also contributes to addressing remaining poverty and reducing inequalities (OP 1) and accelerating progress in gender equality (OP 2) by improving water supply in economically and socially backward areas. The project supports building climate and disaster resilience and enhancing environmental sustainability by designing water supply infrastructure with climate resilient features (OP 3). The project is closely aligned with ADB’s country partnership strategy for India, 2018–2022, which envisages inclusive growth of low- income states.16 10. Lessons. ADB will bring its experience in implementing physical infrastructure development, institutional capacity building, and urban sector reforms in other states of India and other countries to develop sustainable infrastructure. Considering that Jharkhand is a low- income state with limited capacity, the project will build upon ADB’s experience and lessons through (i) ensuring high project readiness with contracts worth 50% of the project cost already awarded, and the balance contracts are in advanced stages of tendering; (ii) incorporating a 5-year O&M period in all construction contracts to ensure continuous operation by the private sector while staff members of ULBs get trained on sustainable 11 The budgetary allocation for the urban sector was ₹14 billion for FY2016, and ₹29.7 billion for FY2020. 12 The World Bank approved the Jharkhand Municipal Development Project on 12 December 2018 with a commitment amount of $147 million. Dhanbad and Khunti towns are covered under this project. 13 The state has a moderate number of COVID-19 cases (about 1% of the total cases in the country as of June 2021). However, the state experienced significant economic impacts because of lockdown in 2020 and slow economic recovery thereafter. 14 The sewerage system is under construction in part of Ranchi. Fecal sludge and septage management (FSSM) is tendered out in Jhumri Telaiya. Consultants are engaged for the preparation of detailed project reports for sewerage and/or FSSM system in other towns. As per Jharkhand’s FSSM Policy (2017), a comprehensive sewerage system is planned for eight big towns (including Ranchi), while FSSM projects are planned for state’s other towns, including the other three project towns. 15 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila. 16 ADB. 2017. Country Partnership Strategy: India, 2018–2022—Accelerating Inclusive Economic Transformation. Manila.
4
operation, and (iii) complementing infrastructure investments with strong capacity building
support to the staff involved in project implementation and operation.
11. Relevance to pandemic mitigation. The project is highly relevant to mitigating the
causes of epidemics and pandemics similar in nature to the COVID-19 pandemic, as it will
establish a water supply system essential for safe sanitation and hygiene.17 Public awareness
campaigns and focus group discussions will be conducted under the project through behavior
change activities focusing on water conservation, sanitation, health, and hygiene. As the GOJ
and ULBs are looking to the post-COVID-19 pandemic recovery efforts, the project will provide
employment opportunities for both unskilled and skilled labor, including for the poor and
vulnerable during construction and O&M, and will also stimulate the local economy. High project
readiness, a 7-year implementation period, and sufficient contingencies provide an adequate
cushion for potential implementation delays and cost increases associated with COVID-19.
B. Project Description
12. The project is aligned with the following impact: sustainable cities that are spatially,
economically, and socially inclusive developed (footnote 1). The project will have the following
outcome: water supply services and urban governance in project towns improved.18
13. Output 1: Water supply infrastructure in four project towns improved. The project
will finance water supply infrastructure investments in four project towns. The investments
involve construction and 5 years of performance-based O&M of piped water supply systems in
project towns comprising (i) four water treatment plants with a combined capacity of 275 million
liters per day, meeting the Indian drinking water quality standard (IS:10500); and (ii) 940
kilometers of water distribution network connected to about 115,000 households to provide
continuous water supply, with the share of nonrevenue water reduced from the current level of
45% to 20%. The water supply will have universal coverage, including households (a) below
poverty line, (b) comprising scheduled caste and/or scheduled tribe members, and (c) with
persons with disabilities in the project areas.
14. Output 2: Institutional capacity for sustainable urban service delivery and urban
governance improved. The physical investments will be complemented with targeted
institutional and financial reforms and capacity building to create an institutional framework for
the ULBs in Jharkhand to replicate and follow. These include:
(i) a sustainable water sector asset management strategy, including a volumetric tariff-
based user charges policy prepared and implemented in project towns;19
(ii) an urban reforms policy on strengthening own-source revenues of ULBs prepared
with three key actions implemented in project towns;
(iii) information technology-enabled systems for water service delivery and
administration adopted in Ranchi through the use of a supervisory control and data
acquisition (SCADA) system for water supply operation; and mapping of assets,
properties, and revenue database on geographic information system;
(iv) training of relevant staff on (a) design and implementation of urban services,
including response to climate risks; (b) institutional development, urban governance,
17 World Health Organization. 2020. Water, Sanitation, Hygiene, and Waste Management for SARS-CoV-2, the Virus
That Causes COVID-19: Interim Guidance. Geneva.
18 The design and monitoring framework is in Appendix 1.
19 The water sector asset management strategy would also evaluate possible public–private partnership in select
ULBs in future. Preparation of user charge policy under the project is restricted to water supply services only.5
revenue generation, financial planning, and operational dimensions; and (c) inclusion
of gender equality and inclusive social features in urban services;20 and
(v) improved awareness on (a) water conservation, health, sanitation, and hygiene; (b)
the spread of epidemics or pandemics such as COVID-19; and (c) opportunities for
prospective jobs in construction and O&M. The project will provide vocational training
for employable job skills in construction and O&M of water supply assets to at least
100 community members (including 50 women).
C. Value Added by ADB
15. The project will introduce innovative technologies, such as recycle of filter backwash
water in water treatment, use of a SCADA system for water supply operation and geographic
information system-based asset management in Ranchi for efficient service delivery. These
interventions will be introduced for the first time in a state where water supply service delivery is
at a nascent stage. The proposed institutional strengthening and governance improvement
activities are aligned with the reforms being undertaken through national flagship programs
(footnote 2) and other development partners (footnote 12). The project will support the
preparation of a sustainable water sector asset management strategy, including a user charges
policy for O&M cost recovery across ULBs in Jharkhand. 21 The project will further support the
preparation of an urban reforms policy framework to enhance own-source revenues and
resource mobilization by ULBs in Jharkhand. There will be a growing focus on providing tap
water for all households by 2025 under recently launched national flagship program (Jal Jeevan
Mission). The project will establish a model for continuous water supply with policy reforms and
a contractual framework for sustainable operation, which will be documented and disseminated
for replication by Jharkhand and other low-income states in India under Jal Jeevan Mission.22
The service level benchmark and revenue data, coupled with institutional and governance
reforms, will pave the way for future private sector participation in urban services, including the
opportunity for ADB’s involvement in the next phase of investment.
D. Summary Cost Estimates and Financing Plan
16. The project is estimated to cost $160 million (Table 1). Detailed cost estimates by
expenditure category and by financier are included in the project administration manual
(PAM).23
Table 1: Summary Cost Estimates
($ million)
Item Amounta
A. Base Costb
1. Water supply infrastructure in four project towns improved 132.4
2. Institutional capacity for sustainable urban service delivery and urban governance improved 5.5
Subtotal (A) 137.9
B. Contingenciesc 16.8
C. Financing Charges During Implementationd 5.3
Total (A+B+C) 160.0
20 At least 70% of staff of JUIDCO, State Urban Development Agency, four project urban local bodies, and Jharkhand
Urban Planning and Management Institute (50% of whom are women staff).
21 ADB will explore engagement of individual international consultants under ongoing technical assistance to review
these outputs and provide value addition. ADB. 2019. Technical Assistance to the Government of India for Urban
and Water Projects Support Facility. Manila.
22 Capacity Development and Resource Center of India Resident Mission will support in knowledge sharing activities
of good practices and project outputs across various states in India.
23
Project Administration Manual (accessible from the list of linked documents in Appendix 2).6
a Includes taxes and duties of $16.3 million to be financed from state government resources by cash contribution.
b In early 2021 prices; an exchange rate of $1.00 = ₹73.20 is used (date of exchange rate: 11 June 2021).
c Physical contingencies are computed at 5.0% for civil works and equipment. Price contingencies are computed at
1.6%–1.8% on foreign exchange costs and 4.0% on local currency costs; includes provision for potential exchange
rate fluctuation under the assumption of a purchasing power parity exchange rate.
d
Includes interest and commitment charges. Interest during construction for the ordinary capital resources loan has
been computed at the 5-year United States dollar fixed-swap rate plus a spread of 0.5% and a maturity premium of
0.1%. Commitment charges for the ordinary capital resources loan are 0.15% per year to be charged on the
undisbursed loan amount.
Source: Asian Development Bank estimates.
17. The Government of India has requested a regular loan of $112 million from ADB’s
ordinary capital resources to help finance the project. The loan will have a 24-year term,
including a grace period of 7 years; an annual interest rate determined in accordance with
ADB’s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of
0.15% per year, and such other terms and conditions set forth in the draft loan and project
agreements. Based on the straight-line method, the average maturity is 15.75 years, and the
maturity premium payable to ADB is 0.10% per year.
18. The summary financing plan is in Table 2. ADB will finance the expenditures in relation
to (i) civil works, equipment and goods, and consultants; (ii) O&M costs during the first 3 years
of the O&M period (excluding power costs); 24 and (iii) physical and price contingencies. The
F
GOJ will provide $48 million to the investment costs of the project to finance (i) taxes and duties,
(ii) incremental recurrent costs, (iii) financing charges during implementation, and (iv) part of the
civil works and contingencies and will provide the loan and counterpart funds to the
implementing agency as a grant. The GOJ has assured ADB that it will meet any financing
shortfall to support the full achievement of the project outputs.
Table 2: Summary Financing Plan
Amount Share of Total
Source ($ million) (%)
Asian Development Bank
Ordinary capital resources (regular loan) 112.0 70.0
Government of Jharkhand 48.0 30.0
Total 160.0 100.0
Source: Asian Development Bank estimates.
19. Climate mitigation is estimated to cost $5.64 million (use of energy-efficient pumping and
physical loss reduction in water distribution system), and climate adaptation is estimated to cost
$7.548 million (use of flexible expansion joints along selected segments of the distribution
network to enhance network stability in the event of extreme flood, control of volume of water
through instrumentation and automation, use of flow meters, recycle of filter backwash water
and institutional capacity development to raise awareness on climate change). ADB will finance
$4.54 million of mitigation costs and $6.115 million of adaptation costs. The use of energy-
efficient pumping and physical loss reduction in water distribution system is expected to reduce
electricity consumption from pumping requirements, resulting in reduced greenhouse gas
emissions.25
24 If the 5 years performance-based O&M coverage is crossing the loan closing date due to delayed construction,
then ADB loan financing of O&M cost will be less than 3 years.
25 The estimated greenhouse gas emission reduction of 8,640 tons of carbon dioxide per year was calculated using
the International Financial Institutions Technical Working Group’s harmonized grid emission factor of 673 grams of
carbon dioxide per kilowatt-hour for India.7
E. Implementation Arrangements
20. The UDHD, acting through Jharkhand Urban Infrastructure Development Company
Limited (JUIDCO), will be the executing agency, responsible for overall strategic planning,
guidance, and management of the project. JUIDCO, as the implementing agency, will establish
a project management unit (PMU) and four project implementation units (PIUs) with fulltime staff
to monitor project implementation. 26 JUIDCO has appointed consultants for construction
supervision and project management. A separate consulting firm is engaged under the project
(as a PMU consultant) for carrying out overall reporting and monitoring compliance with ADB
policies and regulations, including safeguards.
21. The implementation arrangements are summarized in Table 3 and described in detail in
the PAM (footnote 23).
Table 3: Implementation Arrangements
Aspects Arrangements
Implementation period June 2021–May 2028
Estimated completion date 31 May 2028
Estimated loan closing date 30 November 2028
Management
(i) Oversight body Empowered committee
Development commissioner (chair)
Heads of Finance Department, Planning Department and UDHD of
GOJ (members)
(ii) Executing agency UDHD acting through JUIDCO
(iii) Implementing agency JUIDCO
(iv) Implementing unit One project management unit in Ranchi (16 staff)
Four project implementation units (29 staff)
Procurement Open competitive bidding 1 contract $76.00 million
(internationally advertised)
Open competitive bidding 4 contracts $52.70 million
(nationally advertised)
Request for quotations 10 contracts $0.80 million
Consulting QCBS (80:20) (3 742 person-months $1.87 million
services contracts) 504 person-months $0.50 million
378 person-months $1.60 million
Individual consultants (20) 551 person-months $1.00 million
Retroactive Advance contracting is for the procurement of works and consulting services under the project.
financing and Retroactive financing will apply to up to 20% of the loan amount for the above contracts incurred prior
advance to the effectiveness of the loan agreement but not earlier than 12 months prior to the signing of the
contracting loan agreement.
Disbursement Disbursement of the loan proceeds will follow ADB's Loan Disbursement Handbook (2017, as
amended from time to time) and detailed arrangements agreed between the Government of India,
GOJ and ADB.
ADB = Asian Development Bank, GOJ = Government of Jharkhand, JUIDCO = Jharkhand Urban Infrastructure
Development Company Limited, QCBS = quality- and cost-based selection, UDHD = Urban Development and
Housing Department.
Source: ADB.
III. DUE DILIGENCE
A. Technical
22. ADB conducted technical due diligence for all subprojects, including review of the
detailed project reports, design parameters, and cost estimates to ensure that these subprojects
26
The PIUs are to be located in Hussainabad, Jhumri Telaiya, Medininagar and Ranchi.8 are feasible and that there are no significant risks during implementation.27 ADB also reviewed the designs of the subprojects to minimize environmental and social safeguards risks, and maximize project benefits. All the cost estimates of the subprojects have been updated to 2021 price level. The water supply system for project towns incorporates house service connections, including installation of water meters. The project design has incorporated climate- and disaster- resilient measures based on a climate risk assessment and disaster maps for the state and project areas. The water treatment plants are equipped with an online quality monitoring system, which tracks various stages of the treatment process and is connected to the SCADA system. All the civil and mechanical and electrical work installations are designed considering high flood levels, as well as extreme dry seasons because of climate change impacts. B. Economic and Financial Viability 23. Economic analysis. The economic rationale for the government’s intervention is sound, as the project aims to provide stronger and more sustainable urban basic services focusing on water supply. The economic analysis evaluated the economic viability of interventions proposed under the project.28 The estimated economic internal rates of return of the subprojects ranged from 10.4% to 22.2%, while the combined economic internal rate of return was estimated at 13.3%, higher than the economic opportunity cost of capital estimated at 9.0%, indicating significant economic returns. Sensitivity analysis also revealed satisfactory results, except under the scenario of all downside risks occurring together, i.e., (i) capital cost overrun of 20%, (ii) O&M cost overrun of 20%, (iii) decline in estimated benefits of 20%, (iv) 1-year delay in implementation, and (v) a change in benefit composition to non-incremental at 80% and incremental at 20%. The project is expected to further increase its economic viability if unquantifiable benefits like environmental improvements are considered. 24. Financial analysis. The ULBs will own the water supply assets, and new assets created under the project will be handed over to respective ULBs for O&M. Financial analysis was conducted for the project in accordance with ADB guidelines.29 The analysis revealed that the project will not generate enough revenues for full O&M cost recovery through the existing tariff structures.30 All project town ULBs receive revenues from taxes, user charges, and external grant resources. The revenue enhancement for provision of sustainable water services in the long run is proposed to be through (i) implementation of volumetric water tariffs, (ii) periodic revisions of water tariffs, (iii) improved tariff collection efficiency, and (iv) overall enhancement of own-source revenues. The revenue gap until full O&M cost recovery is achieved will be filled with other sources of revenue and the GOJ’s financial support. C. Sustainability 25. The poor financial health and weak staff capacity of the ULBs are common issues that apply to Jharkhand as well, and they pose a high risk for the project’s financial sustainability. The ULBs of the project towns were evaluated on their own-source revenues, collection efficiency, and dependence on GOJ support. This analysis took into consideration the financial resources required to operate and maintain the existing assets, incremental funds required to operate and maintain the additional assets created under this project to deliver the services at 27 The subprojects include: (i) Hussainabad water supply, (ii) Jhumri Telaiya water supply, (iii) Medininagar water supply, (iv) Ranchi intake works, and (v) Ranchi water supply. 28 Economic Analysis (accessible from the list of linked documents in Appendix 2). 29 ADB. 2019. Financial Analysis and Evaluation: Technical Guidance Note. Manila. 30 Financial Analysis (accessible from the list of linked documents in Appendix 2).
9
predefined benchmark levels, and fiscal assessment of the GOJ to support the ULBs with gap
funding until full O&M cost recovery is achieved. The financial projections show that the
project ULBs would need the GOJ’s support to cover their O&M expenditure for the initial period
until the policy reforms bear tangible results. The project will therefore finance O&M of physical
infrastructure during the initial 3 years of operation. Similarly, the capacities of ULB staff will be
developed during the initial 5 years of O&M period for subsequent sustainable operation. As
part of institutional strengthening and governance reforms, a sustainable water sector asset
management strategy, including volumetric tariff-based user charges policy for O&M cost
recovery, will be prepared. An action plan will be developed with measurable and progressive
milestones to help monitor improvements in fiscal performance of the ULBs and the GOJ.
D. Governance
26. A financial management assessment has been conducted for JUIDCO in accordance
with ADB’s guidelines. 31 The assessment found that JUIDCO has adequate financial
management capacity to (i) record the required financial transactions, (ii) provide reliable annual
financial reports, and (iii) safeguard the financial assets. The assessed pre-mitigation financial
management risk is substantial mainly because of the following: (i) JUIDCO has no experience
in implementing ADB-financed projects, (ii) some accounts staff positions are still vacant in the
PMU and the PIUs, (iii) noncompliance issues were identified in the entity’s external audit, and
(iv) there is scope for improving the efficiency of JUIDCO’s internal audit function. These risks
will be mitigated through (i) filling the vacant accounts positions in the PMU and PIUs, (ii)
providing continuous training on ADB’s financial management requirements and disbursement
procedures, (iii) ADB financial management staff will be part of ADB project implementation
team to monitor the financial management action plan and financial covenants included in the
loan agreement, (iv) including comprehensive financial information in the quarterly project
progress reports submitted to ADB, and (v) strengthening JUIDCO’s internal audit function.
27. All procurement of goods, works and consultant services will adhere to the ADB
Procurement Policy (2017, as amended from time to time) and the Procurement Regulations for
ADB Borrowers (2017, as amended from time to time). Value for money shall be achieved using
the contract modality with 5 years of performance-based O&M built into the works contracts.
The use of electronic procurement shall promote transparency and efficiency in the procurement
process.
28. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed
with the GOJ and the UDHD. The specific policy requirements and supplementary measures
are described in the PAM (footnote 23).
E. Poverty, Social, and Gender
29. The project design is pro-poor, socially inclusive, and gender responsive. The project
aims to provide universal, safe piped water supply through connections to 115,000 household,
including below poverty line and vulnerable households. These include households in the
project area with scheduled caste, scheduled tribe members, and persons with disabilities. The
project will give preference to poor and vulnerable persons, including women, in project
construction work and O&M-related activities. A stakeholder consultation and management
support consultant will be responsible for helping to organize skill training and consultations,
31
ADB. 2015. Financial Management Technical Guidance Note: Financial Management Assessment. Manila.10
and public awareness campaigns during project implementation. A separate budget is allocated
in the loan for these activities. The strategy for water charges for O&M cost recovery will be
developed considering affordability for the poor and vulnerable.
30. Gender. Gender analysis carried out by ADB reveals that women and girls are primarily
responsible for water collection, management, and household sanitation, and that they spend
more time than men on water management, which constrains their ability to engage in skills
development and income-generating, social, and leisure activities. Through the household
connections, the project will directly address the water crisis in the project towns and women’s
time poverty in fetching poor quality water from bore wells, hand pumps, and tankers. The
project is categorized effective gender mainstreaming, and a gender action plan (GAP) has
been prepared, which includes a monitoring framework supported by adequate human and
financial resources for implementation. Responding to the gender equality issues identified, the
GAP aims to (i) provide certified vocational training for community members; (ii) raise
awareness of the benefits of household water supply for residents, including women; (iii)
leverage the capacities of women’s self-help groups representing the poor living in slums as
communication and change agents; and (iv) build capacities of JUIDCO, PMU, PIUs and ULBs
on gender in urban infrastructure and impact assessment. The GAP is in the PAM (footnote 23).
F. Safeguards
31. In compliance with ADB’s Safeguard Policy Statement (2009), the project’s safeguard
categories are as follows.32
32. Environment (category B). Subprojects are mostly located in and around urban areas
where there are no notable environmentally sensitive areas or physical cultural resources.
JUIDCO has conducted initial environmental examinations (IEEs) and prepared five IEE reports
for subprojects including corresponding environmental management plans (EMPs). The IEEs
will be further reviewed once detailed site studies and engineering designs are completed. The
IEEs will be disclosed in language and form understandable to stakeholders and project
communities. Findings of the IEEs demonstrate that subprojects are not likely to cause
significant adverse environmental impacts that are irreversible, diverse, or unprecedented. The
environmental impacts during construction and operations are site-specific, short in duration,
and can be avoided and/or mitigated through design considerations and by measures identified
in the EMPs. Stakeholder engagement and consultations were carried out during project
preparation and will be continued throughout implementation. Environmental grievances will be
handled following the grievance redress mechanism as explained in PAM (footnote 23). The
staffing to address environmental safeguards compliance comprise of one full-time manager
(environment) already appointed in PMU, and one full-time assistant manager (environment) are
being appointed in PIUs. All statutory clearances and no-objection letters will be obtained prior
to award of contracts. The safeguards and EHS orientation will be provided to the contractors
before start of construction. The contractors are required to submit site-specific EMPs, and
appoint environment, health, and safety officers prior to commencement of works to ensure
compliance with local laws, and regulations on labor and workers. The PMU will prepare
semiannual environmental monitoring reports for ADB’s review and disclosure.
33. Involuntary resettlement (category B). Following ADB’s Safeguard Policy Statement,
JUIDCO has prepared a resettlement and indigenous peoples plan for Ranchi’s water supply
32
ADB. Safeguard Categories.11 subproject. Due diligence reports have been prepared for four subprojects, where no potential involuntary impacts are expected. All these documents will be disclosed to affected persons in the local language. The land required for construction of various subproject components is government owned. The GOJ’s Land Revenue Department will transfer the land ownership to the UDHD, and a no-objection certificate will be provided to JUIDCO for utilizing the land for all subprojects before the commencement of civil works. Temporary livelihood impacts to 49 shopkeepers during construction are expected in Ranchi. JUIDCO will provide compensation for temporary loss of income and assistance prior to the start of civil works. The social safeguards documents will be updated during the final detailed design and detailed measurement survey. The proposed mitigation measures and safeguard planning documents are adequate to address the assessed temporary livelihood impacts. The PMU will prepare semiannual social safeguard monitoring reports for ADB’s review and disclosure. The social safeguards staffing consists of a fulltime social safeguards officer appointed at the PMU and four fulltime social safeguards officers being appointed in the PIUs. Capacity building will continue to be provided to safeguards staff of the PMU and PIUs. 34. Indigenous peoples (category B). The project shall have positive impacts on the scheduled tribes. All scheduled tribe households will benefit from the project and requirements for meaningful consultation will be ensured. Only five shopkeepers from scheduled tribes will experience temporary loss of income during pipe laying and road construction for a maximum period of 15 days in Ranchi, and compensation will be provided accordingly. According to 2011 census data, Jharkhand had a population of 32.99 million, of which 8.65 million were members of scheduled tribes.33 A scheduled tribe population of 218,798 in the project towns will benefit from the project. The indigenous peoples impacts have been assessed as positive and the combined resettlement and indigenous peoples plan document for Ranchi is prepared.34 35. Disasters and climate change. A comprehensive climate risk and vulnerability assessment (CRVA) has been carried out to assess associated potential risks of climate change impacts and vulnerability of project components.35 The project has a climate risk category of medium, with potential contributions to climate adaptation and mitigation finance. Based on the CRVA findings, mitigation measures to address climate change-related impacts are built into the design. The project infrastructure is subjected to climate change from variation in temperature and precipitation. Additionally, floods from storm surges and potential inundation may also impact service delivery, and the design takes into account enhancement of the stability of water distribution system through use of flexible expansion joints. The CRVA confirmed that the project water source is adequate to meet the future water demand and is not threatened by impacts of climate change. G. Summary of Risk Assessment and Risk Management Plan 36. Significant risks and mitigating measures are summarized in Table 4 and described in detail in the risk assessment and risk management plan.36 33 The proportion of the scheduled tribes are (i) 0.27% in Hussainabad, (ii) 0.45% in Jhumri Telaiya, (iii) 1.66% in Medininagar, and (iv) 20.21% in Ranchi. 34 Resettlement and Indigenous Peoples Plan for Ranchi (accessible from the list of linked documents in Appendix 2). 35 Climate Change Assessment (accessible from the list of linked documents in Appendix 2). 36 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).
12
Table 4: Summary of Risks and Mitigating Measures
Risks Mitigation Measures
Low financial capacity of ULBs constrains The GOJ and project ULBs will prepare and implement strategic plans
sustainability of the services for full O&M cost recovery, including the adoption of a volumetric tariff,
an increase in collection efficiency, and a reduction in nonrevenue
water. The GOJ is committed to providing gap funding where shortfalls
exist and the quantitative targets for collection efficiency and operating
ratio are covenanted.
Weak technical capacity of ULBs in O&M The water supply contracts include 5 years of O&M. The project
of the assets includes capacity development of ULB staff for O&M of the assets.
The financial management arrangements Timely implementation of financial management action plan by JUIDCO
require strengthening, and there is a lack of will be monitored on quarterly basis with the help of ADB’s financial
experience with JUIDCO in ADB’s financial management staff. Training will be provided on ADB’s financial
management requirements and procedures management procedures and systems.
Lack of permanent staff in ULBs could The new municipal staff organization is created. Staff will be recruited
delay implementation of institutional with specific responsibilities assigned, and training will be provided to
capacity development to sustain water relevant staff.
service delivery
Construction delays because of works in Civil works contracts worth 50% of project cost have been awarded. In
highly urbanized areas, and a sudden price addition, 7-year implementation period is provided, and provision of
increase in materials results in cost sufficient contingencies is made to cover unexpected cost overruns.
overruns and construction delays
ADB = Asian Development Bank, GOJ = Government of Jharkhand, JUIDCO = Jharkhand Urban Infrastructure
Development Company Limited, O&M = operation and maintenance, ULB = urban local body.
Source: ADB.
IV. ASSURANCES
37. The government and the UDHD (acting through JUIDCO) have assured ADB that
implementation of the project shall conform to all applicable ADB requirements, including those
concerning anticorruption measures, safeguards, gender, procurement, consulting services,
financial management, and disbursement as described in detail in the PAM and loan
documents.
38. The government and the UDHD (acting through JUIDCO) have agreed with ADB on
certain covenants for the project, which are set forth in the draft loan agreement and project
agreement.
V. RECOMMENDATION
39. I am satisfied that the proposed loan would comply with the Articles of Agreement of the
Asian Development Bank (ADB) and recommend that the Board approve the loan of
$112,000,000 to India for the Jharkhand Urban Water Supply Improvement Project, from ADB’s
ordinary capital resources, in regular terms, with interest to be determined in accordance with
ADB’s London interbank offered rate (LIBOR)-based lending facility; for a term of 24 years,
including a grace period of 7 years; and such other terms and conditions as are substantially in
accordance with those set forth in the draft loan and project agreements presented to the Board.
Masatsugu Asakawa
President
8 July 2021Appendix 1 13
DESIGN AND MONITORING FRAMEWORK
Impacts the Project is Aligned with
Sustainable cities that are spatially, economically, and socially inclusive developed (Jharkhand Vision and Action
Plan 2021)a
Data Sources and Risks and
Reporting Critical
Results Chain Performance Indicators Mechanisms Assumptions
Outcome By 2029:
Water supply a. 115,000 households in project areas provided a–b. Annual reports A: Infrastructure
services and with 135 lpcd continuous treated piped water of JUIDCO, state will withstand
urban supply that meets country standards (2020 and national impacts of natural
governance in baseline: 17,840 households have some access governments’ hazards (e.g.,
project towns to water supply for an average 3.7 hours per day, annual economic major floods,
improvedb and are provided with 56 lpcd) (OP 4.1) reports, earthquakes)
UDHD service level within design
b. Four ULBs in project towns with nonrevenue benchmarks data, parameters
water reduced to 20% (2020 baseline: 45%) (OP and annual reports
4.1.1) of the Ministry of R: Prolonged
Housing and Urban impact of the
c. At least two ULBs in two project towns recovered Affairs COVID-19
100% of O&M cost of water supply from user pandemic on the
charges (2020 baseline: Not applicable) (OP 4.2) c–d. ULB’s annual state’s economy
financial could hamper full
d. Per capita annual own-source revenue of four statements and implementation of
ULBs in the project towns increased by 50% annual reports, and user charges
(FY2018 baseline: Average ₹700 per capita per State Finance policy and own-
annum for four towns) (OP 4.2, OP 4.1.1, OP 6.1) Commission annual source revenue
reports generation
Outputs By 2028:
1. Water 1a. Four water treatment plants with a combined 1a–b. Semiannual R: Construction
supply capacity of 275 million liters per day progress reports, delays because of
infrastructure commissioned (2020 baseline: 0) (OP 3.2.5, OP periodic ULB works in highly
in four project 4.1.2)c records, and urbanized areas,
towns household data and a sudden
improved 1b. 940 kilometers of water distribution network with collated through price increase in
climate-resilient features constructed and connection materials results
connected to 115,000 households (including application forms in cost overruns
100% of households below the poverty line, and construction
households with scheduled caste and scheduled delays
tribe members, and households with persons
with disabilities) (2020 baseline: 0) (OP 3.2.5,
OP 4.1.2)
2. Institutional By 2028:
capacity for Water sector asset management
sustainable 2a. A sustainable water sector asset management 2a–b. Copy of R: Continued
urban service strategy, including a volumetric tariff-based user approved water political and social
delivery and charges policy for Jharkhand, prepared and asset management protests (despite
urban approved by the UDHD, and implemented by strategy, user public
governance four ULBs in four project towns (2020 baseline: charges policy, and consultation)
improvedd No policy) (OP 4.2, OP 4.2.1, OP 4.2.2, OP 6.1)e urban reforms delay revisions in
policy framework, taxes, user
Urban policy reform and UDHD annual charges, and
2b. Urban policy reforms on strengthening own- reports on ULB other urban
source revenues of ULBs in Jharkhand approved performance reforms
by the UDHD, with three key actions
implemented by four ULBs in four project towns R: Lack of
(2020 baseline: No policy) (OP 4.2, OP 4.2.2, OP permanent staff in
6.1) ULBs could delay
implementation of14 Appendix 1
Data Sources and Risks and
Reporting Critical
Results Chain Performance Indicators Mechanisms Assumptions
2c. Information technology-enabled systems for 2c. Project institutional
water service delivery and administration management capacity
(including SCADA and GIS) adopted by the ULB information system development to
in Ranchi (2020 baseline: Not applicable) (OP sustain water
6.1)f service delivery.
Institutional capacity building
2d. At least 70% of relevant staff of JUIDCO, SUDA, 2d–f. Pre- and
four project ULBs, and JUPMI (50% of whom post-training survey
are women staff) reported improved knowledge assessment
on (i) design and implementation of urban (through data
services, including response to climate risks; (ii) collected from the
institutional development, urban governance, questionnaires)
revenue generation, financial planning, and
operational dimensions; and (iii) integrating
gender equality and social inclusion features in
urban services (2020 baseline: 0) (OP 4.2, OP
4.3.2, OP 6.1, OP 6.1.1)
Community awareness and training
2e. At least 500 community members (50% women)
reported improved awareness on (i) water
conservation, health, sanitation, and hygiene; (ii)
the spread of epidemics or pandemics, such as
COVID-19; and (iii) opportunities for prospective
jobs in construction and O&M (2020 baseline: 0)
(OP 1.1.1, OP 2.1.1)
2f. At least 100 community members (50 women)
received vocational training for employable job
skills in construction and O&M of water supply
assets (2020 baseline: 0) (OP 2.1.1)
Key Activities with Milestones
1. Water supply infrastructure in four project towns improved
1.1 Process procurement for five works contracts and contract awards (September 2019–July 2021)
1.2 Construct, test, and commission infrastructure facilities (June 2021–May 2025)
1.3 Operate and maintain water supply infrastructure facilities in all project townsc (June 2025–May 2028)
1.4 Monitor service delivery parameters (January 2027–May 2028)
2. Institutional capacity for sustainable urban service delivery and urban governance improved
Sustainable water sector asset management
2.1 Appoint strategy consultants (April 2021–December 2021)
2.2 Develop strategic action plans for sustainable water supply and sanitation operations in different categories of
ULBs, including evaluation of possible public–private partnerships (January 2022–September 2022)
2.3 Review user charges policies for water supply services and prepare volumetric tariff-setting and revision
mechanism (April 2022–December 2022)
Urban policy reform
2.4 Appoint individual urban institutional consultants (January 2022–December 2022)
2.5 Review financial information of ULBs and identify areas for improvement (by December 2023)
2.6 Prepare plans for next phase on urban investments linked to urban reforms (by December 2023)
2.7 Develop financial plans, set revenue targets (including standardization of assets management), and implement
financial management processes in project towns (by June 2024)
2.8 Operationalize SCADA and preparation of GIS database for water supply assets by the contractor in Ranchi
(July 2023–June 2024)
Institutional capacity building
2.9 Identify, finalize, and design appropriate training programs (June 2022–December 2022)
2.10 Organize training programs for JUIDCO, SUDA, JUPMI trainers, and project ULBs in three batches: (i) design
and implementation of urban services, including response to climate risks; (ii) institutional development, urbanYou can also read
