Completion Report

Project Number: 41116-033 Loan Number: 2925 June 2021

India: Jammu and Kashmir Urban Sector Development Investment Program (Project 2)

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – Indian rupee/s (₹)

At Appraisal At Project Completion

15 March 2012 2 November 2017 ₹1.00 = $0.0200 $0.0154 $1.00 = ₹50.000 ₹64.935

ABBREVIATIONS

ADB – Asian Development Bank AEFS APFS

– –

audited entity financial statements audited project financial statements

CBIS – capacity building and institutional support DMF – design and monitoring framework DSC – design and supervision consultant EIRR – economic internal rate of return ERA – Economic Reconstruction Agency GAP – gender action plan HUDD – Housing and Urban Development Department km – kilometer lpcd – liters per capita per day MFF – multitranche financing facility mld – million liters per day NRW – nonrevenue water O&M – operation and maintenance OP – operational priority PHED – Public Health Engineering Department PMC – program management consultant PMU – project management unit PWD – Public Works Department SPS – Safeguard Policy Statement ULB – urban local body

NOTES

(i) The fiscal year (FY) of the Government of India ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2021 ends on 31 March 2021.

(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 Momoko Tada, Urban Development Specialist, SAUW, SARD

Team members Saswati Belliappa, Safeguards Specialist, SAUW, SARD Bhawna Kulshreshtha, Executive Assistant, India Resident Mission

(INRM), SARD Girish Mahajan, Senior Environment Officer, INRM, SARD Rodellyn Manalac, Operations Assistant, SAUW, SARD Suhail Mircha, Safeguard Officer, INRM, SARD Pradeep Kumar Pandey, Associate Operations Analyst, INRM, SARD

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

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. DESIGN AND IMPLEMENTATION 1

A. Project Design and Formulation 1

B. Project Outputs 3

C. Project Costs and Financing 5

D. Disbursements 5

E. Project Schedule 6

F. Implementation Arrangements 6

G. Technical Assistance 6

H. Consultant Recruitment and Procurement 7

I. Gender Equity 7

J. Safeguards 8

K. Monitoring and Reporting 9

III. EVALUATION OF PERFORMANCE 10

A. Relevance 10

B. Effectiveness 10

C. Efficiency 11

D. Sustainability 12

E. Development Impact 13

F. Performance of the Borrower and the Executing Agency 13

G. Performance of the Asian Development Bank 14

H. Overall Assessment 14

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 15

A. Issues and Lessons 15

B. Recommendations 15 APPENDIXES

1. Design and Monitoring Framework For Project 2, with Weighting Factors to Determine Effectiveness 16

2. Status of Action Plan for Institutional Reform Programs 21

3. Project Cost at Appraisal and Actual 24

4. Project Cost at Appraisal and at Completion by Financier 25

5. Disbursement of ADB Loan Proceeds 27

6. Contract Awards of ADB Loan Proceeds 28

7. Chronology of Main Events 29

8. Summary of Contract Details 30

9. Implementation of Gender Action Plan and Achievements 33

10. Safeguards Assessments 43

11. Status of Compliance with Loan Covenants 48

12. Economic and Financial Analysis 62

13. Contribution of Project 2 to ADB's Strategy 2030 Operational Priorities 74

BASIC DATA A. Loan Identification 1. Country 2. Loan number and financing source 3. Project title 4. Borrower 5. Executing agency

6. Amount of loan 7. Financing modality

India 2925, ordinary capital resources Jammu and Kashmir Urban Sector Development Investment Program (Project 2) India Economic Reconstruction Agency $110 million Multitranche financing facility

B. Loan Data 1. Appraisal – Date started – Date completed

2. Loan negotiations – Date started – Date completed

3. Date of Board approval

4. Date of loan agreement

5. Date of loan effectiveness – In loan agreement – Actual – Number of extensions

6. Project completion date – Appraisal – Actual

7. Loan closing date – In loan agreement

– Actual – Number of extensions

8. Financial closing date – Actual 9. Terms of loan – Interest rate – Maturity (number of years) – Grace period (number of years)

26 March 2012 13 April 2012

28 September 2012 28 September 2012

26 October 2012

16 May 2013

14 August 2013 19 August 2013 0

31 March 2017 30 May 2017 31 March 2017 30 May 2017 1

8 February 2018 London interbank offered rate (LIBOR)-based (floating) + 0.60% 25 years 5 years

a Unfinished works were completed with government funding in March 2020. March 2020 is the starting point for an 18-month period by the end of which this project completion report must be circulated.

ii

10. Disbursements

a. Dates

Initial Disbursement

26 September 2013

Final Disbursement

25 October 2017

Time Interval

50 months

Effective Date

19 August 2013

Actual Closing Date

30 May 2017

Time Interval

45 months

b. Amount ($ million)

Category Original Allocation

1a

Increased during

Implemen- tation

2

Canceled during

Implemen- tation

3

Last

Revised Allocation (4=1+2–3)

Amount Disbursed

5

Net Undisbursed Balance (6=4-5)

I Base Cost

Component A: Urban Infrastructure and Environmental Improvements

Water supply 14.81 0.00 0.00 14.81 9.40 5.41

Sewerage, drainage, and sanitation

14.90 0.00 0.00 14.90 20.75 (5.85)

Solid waste management

2.01 0.00 0.00 2.01 1.81 0.20

Transportation and urban roads

47.08 1.07 0.00 48.15 34.16 13.99

Resettlement and land acquisition

0 0.00 0.00 0.00 0.00 0.00

Subtotal (A) 78.80 1.07 0.00 79.87 66.12 13.75

Component B: Capacity Building, Institutional Development, Governance, and Investment Program Support

Training and workshops

1.00 (1.00) 0.00 0.00 0.00 0.00

Consultancy support

11.90 (3.41) 0.00 8.49 8.66 (0.17)

Incremental administration, including computers, and peripherals

5.10 (0.04) (2.00) 3.06 3.52 (0.46)

Subtotal (B) 18.00 (4.45) (2.00) 11.55 12.18 (0.63)

II Contingencies 13.20 3.38 (13.00) 3.58 0.00 3.58

III Taxes and duties 0.00 0.00 0.00 0.00 0.00 0.00

IV Financing charges during implementation

0.00 0.00 0.00 0.00 0.00 0.00

Total 110.00 0.00 (15.00) 95.00 78.30 16.70 a From periodic financing request and loan agreement. b The undisbursed balance of $16.70 million was canceled at project completion.

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C. Project Data 1. Project cost ($ million)

Cost Appraisal Estimate a Actual

Foreign exchange cost b … 2.28

Local currency cost … 148.70

Total 181.10 150.98

… = data not available. a No breakdown of foreign exchange cost and local currency cost was prepared at appraisal. b Includes interest and commitment charges.

2. Financing plan ($ million)

Cost Appraisal Estimate Actual

Implementation cost

Borrower financed 64.30 70.40

ADB financed 110.00 78.30

Total implementation cost 174.30 148.70

Interest during implementation cost

Borrower financed ADB financed

6.80 0.00

2.28 0.00

Total interest during construction cost 181.10 150.98 ADB = Asian Development Bank. Note: Numbers may not sum because of rounding.

3. Cost breakdown by project component ($ million)

Component Appraisal Estimate Actual

I. Base Costs

A. Urban Infrastructure Improvements

Water supply 18.73 17.65

Sewerage, drainage, and sanitation 18.86 38.93

Solid waste management 2.54 3.40

Transportation and urban roads 59.67 62.98

Resettlement and land acquisition 22.30 0.31

B. Capacity Building and Institutional Development

Consultancy support 14.80 15.39

Incremental administration, including vehicles, computers, equipment, and laboratory

6.40 10.04

Training and workshops 1.00 0.00

II. Contingencies 18.50 0.00

III. Taxes and duties 11.60 0.00

IV. Financing charges during implementation 6.70 2.28

Total 110.00 150.98

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4. Project 2 Schedule

Item Appraisal Estimate Actual

Date of contract with consultants

Project management consultants Q1 2013 Q2 2013

Design and supervision consultants Q1 2013 Q1 2013

Capacity building and institutional support consultants Q3 2014 Q3 2014

Nonrevenue water reduction consultants Q1 2014 Q1 2014

Civil works contract

Date of contract award Q1 2013 Q3 2013

Completion of work Q4 2016 Q4 2019

Equipment and supplies

First procurement Q1 2013 Q1 2014

Last procurement Q3 2013 Q3 2014

Completion of equipment installation Q3 2015 Q3 2017

Start of operations

Completion of tests and commissioning Q3 2016 Q1 2020

Beginning of start up Q3 2016 Q1 2020a

Q = quarter.

a Works under water supply, transport, and drainage subprojects were not completed before financial closure, but the unfinished works were eventually completed in March 2020 with state government funding.

5. Project Performance Report Ratings

Implementation Period Single Project Rating

From 1 August to 31 December 2013 Potential Problem From 1 January to 31 December 2014 On track From 1 January to 31 December 2015 On track From 1 January to 31 December 2016 On track From 1 January to 31 December 2017 On track From 1 January to 31 March 2018 On track

D. Data on Asian Development Bank Missions

Name of Mission Date No. of

Persons No. of

Person-Days Specialization of

Members

Contact 14–17 Jul 2010 2 8 a, e

Contact 24 Apr–7 May 2011 6 84 d, c, a, g, j, k

Loan review 3 23–28 Jan 2012 2 12 d, f

Loan review 4/fact-finding 26 Mar–16 Apr 2012 7 154 d, r, g, a, d, s, t

Midterm review 1 22–26 Apr 2013 2 10 d, l

Special project administration

1–10 Jun 2013 3 30 d, a, l

Loan review 5 11–14 Jun 2013 2 8 e, u

Special loan administration 22–26 Oct 2013 2 10 a, l

Special loan administration 19–22 Nov, Apr 2013 2 8 l, g

Midterm review 2 10–17 Feb 2014 3 24 a, l, f

Loan review 6 21–25 Jul 2014 2 10 a, l

Loan review 7 17–24 Nov 2014 4 32 a, d, l, s

Special loan administration 15–17 Apr 2015 2 6 a, l

v

Name of Mission Date No. of

Persons No. of

Person-Days Specialization of

Members

Loan review 8 7–9 Sep 2015 2 6 a, l

Midterm review 3

Loan review 9

Loan review 10

Loan review 11

16–21 Nov 2015

4–11 Apr 2016

21–22 Nov 2016

27 Feb–1 Mar 2017

7

5

3

3

42

40

6

9

d, b, a, l, t, j, f

d, l, s, t, s

d, a, c

d, a, s

Loan review 12 18–22 Jun 2018 2 10 d, v

Loan review 13 26–30 Nov 2018 4 20 d, s, w, x

a = project implementation officer, India Resident Mission, b = financial/administrative analyst, c = resettlement specialist, d = urban development specialist, South Asia Urban Development Division, e = urban economist, South Asia Urban Development Division, f = project analyst, India Resident Mission, g = safeguard specialist, j = environmental specialist, l = associate project analyst, r = project counsel, s = consultant project specialist, t = gender consultant, u = transport specialist, v = country director, India Resident Mission, w = principal portfolio management specialist, x = urban specialist, India Resident Mission. Source: Asian Development Bank.

I. PROJECT DESCRIPTION 1. The Jammu and Kashmir Urban Sector Development Investment Program was designed to expand and upgrade urban services in the major urban areas of the state to Indian national and state standards. The focus was on providing an improved living environment to the population including the poor and other low-income segments. The program aimed to enhance public access to water supply, sanitation, drainage, and road facilities for more than 2.4 million people living in the state’s two main cities and other selected towns. It also aimed to modernize and streamline the planning, operation and maintenance (O&M), and administrative functions of the responsible city departments.1 2. The Asian Development Bank (ADB) approved the program as a multitranche financing facility (MFF) on 31 May 2007 at an estimated cost of $485 million. 2 The ADB loan was $300 million, and the Government of India/state government contributed $185 million. The second loan under the MFF (Loan 2925-IND, project 2) was approved on 26 October 2012, signed on 16 May 2013, and declared effective on 19 August 2013. 3 The estimated project cost was $181.1 million, covered by an ADB loan of $110.0 million, and a government contribution of $71.1 million. 3. The expected impact of project 2 was an improved living environment in Jammu and Srinagar (the target towns). The anticipated outcome was improved urban services in the target towns. The planned outputs were (i) water supply infrastructure improved, (ii) urban transport infrastructure improved, (iii) drainage infrastructure improved, (iv) project management system operational, and (v) institutional capacity of Economic Reconstruction Agency (ERA) and urban local bodies (ULBs) strengthened.

II. DESIGN AND IMPLEMENTATION A. Project Design and Formulation 4. Project 2 was designed in accordance with government and ADB sector strategies at appraisal. The project was closely aligned with India’s Eleventh Five-Year Plan (2007–2012), emphasizing improvement and augmentation of economic and social infrastructure and improved municipal services in urban areas.4 It was also consistent with the state government’s strategies in the country’s Eleventh Five-Year Plan to achieve national service standards for critical indicators of quality of life, by narrowing poverty and regional disparities and providing basic

1 Because urban local bodies (ULBs) such as municipal corporations had limited technical and operational experience,

the responsibility for basic urban services was shared as follows: capital works financed by external funding sources, including the Asian Development Bank (ADB), were planned, designed, and implemented by the state’s Economic Reconstruction Agency (ERA) on behalf of ULBs. O&M responsibility lies with the state’s: (i) Public Health Engineering Department (PHED) for water supply systems, (ii) Housing and Urban Development Department (HUDD) for sewerage systems; and (iii) ULBs for solid waste facilities and transportation. Each entity is also responsible for billing and fee collection, but the revenues are passed on to the state.

2 ADB. 2007. Report and Recommendation of the President to the Board of Directors for the Proposed Multitranche Financing Facility to India for the Jammu and Kashmir Urban Sector Development Investment Project. Manila.

3 The first loan (Loan 2331-IND, project 1) under the MFF was approved on 4 June 2007; the third loan (Loan 3132-IND, project 3) on 18 June 2014.

4 Government of India, Planning Commission. 2007. Eleventh Five-Year Plan, 2007–2012. New Delhi.

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services.5 Project 2 also aligned with ADB’s country partnership strategy for India, 2009–2012 which highlighted the need to tackle interregional disparities; Urban Sector Strategy, 1999; and Strategy 2020 and its focus on poverty reduction and institutional strengthening.6 The project still aligns with Strategy 2030 and its operational priorities (OPs) by making cities more livable (OP4) with better access to urban basic services such as safe drinking water in national-standard quantity; strengthening governance and institutional capacity (OP6); addressing remaining poverty and reducing inequalities (OP1); accelerating progress in gender equality (OP2); and tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability (OP3).7 5. The program’s design reflected ADB’s learning from urban projects in India and from an earlier urban sector loan to the state, which covered only a part of the large medium-term requirements for urban development by the state.8 The MFF aimed to meet the remaining priority needs. Project 2 ($181.1 million of a total program cost of $485.0 million) continued to address the infrastructure gaps and the capacity constraints at the respective agencies. ADB’s experience in India’s urban sector had shown that project sustainability hinged on three main imperatives:9 (i) selection of subprojects through extensive consultation with a wide range of stakeholders and a demand-driven approach; (ii) institutional development to ensure that adequate O&M funds are mobilized from internal resources and gradually transferred from the state to the responsible entities; and (iii) capacity building in service-delivery institutions with a view to adopting corporatized or commercially oriented operations that include user fees. These imperatives guided the selection of subprojects and ensured wide public input and suggestions from stakeholders. The subprojects implemented were the same as those identified at appraisal. 6. The modality of projects under an MFF was appropriate and effective in facilitating a long-term relationship between ERA and ADB.10 It suited the complex works in urban areas, which required flexibility in scope and longer implementation periods to coordinate multiple stakeholders. Further, it allowed flexible ADB support that factored in a climate with severe winters and frequent monsoon flooding. At appraisal, the design and monitoring framework (DMF) was prepared with adequate quality, defining the outcomes and outputs with sound results chain.11 The reform targets, however, were rather ambitious considering the state’s capacity and the local context (para. 13). Achievements are detailed in Appendix 1. 7. During implementation, some changes in project scope took place. Number of overhead water supply tanks to be built were reduced from 10 to 8 because of poor contractor performance. Similarly, the length of drainage to be rehabilitated was reduced from 28.3 km to 26.6 km because

5 State government, Planning and Development Department. 2007. Eleventh Five-Year Plan (2007–2012). New Delhi.

Project 2 was also consistent with the sector road map developed by the state in conjunction with the Jawaharlal Nehru National Urban Renewal Mission, through which the Government of India fast-tracks reform-driven development planning to modernize 63 major towns of India.

6 ADB. 2009. Country Strategy and Program: India, 2009–2012. Manila, ADB. 1999. Urban Sector Strategy. Manila, ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020. Manila.

7 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila. 8 ADB. 2004. Report and Recommendation of the President on a Proposed Loan to India for the Multisector Project

for Infrastructure Rehabilitation in Jammu and Kashmir. Manila (Loan 2151-IND, for $250 million, approved on 22 December 2004). That loan covered such urgent investment needs as rehabilitating water supply systems, and project 1 expanded these investments.

9 Summarized in ADB. 2006. Special Evaluation Study on Urban Sector Strategy and Operations. Manila. 10 ADB recognized the benefits of longer-term relationships through its earlier long-term support to urban sectors in

Karnataka and Rajasthan. 11 Impact indicators for project 2 were set to match the outcome indicators of MFF, to follow the guideline at appraisal.

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of encroachment issues.12 The loan savings from these changes were partly reallocated in 2016 to the much-needed rehabilitation of 23 drainage pumping stations and 3.2 km of drainage (not a part of the project 2 at appraisal) damaged during the 2014 floods (para. 11).13 Also in 2016, as a result of currency depreciation, $15.0 million was canceled from the ADB loan.14 The skills training under the transport subproject was not implemented because of lack of interest from the affected households.15 While other due diligence was properly implemented, the design could have considered incorporating more comprehensive solutions, such as 24x7 water supply with O&M arrangements, into construction contracts. Also, the assessment at appraisal of the state’s capacity to implement the reform was rather optimistic, leading to delays in achieving some targets (para. 13).16 With these exceptions, the design was still relevant at completion since the development needs for basic urban services had not changed. No overlaps with interventions of other development partners emerged.17 B. Project Outputs 8. Of the 18 indicators for the 5 planned outputs of project 2, 14 were achieved, 2 were partially achieved, and 2 were not achieved.

1. Urban Infrastructure Improvements 9. Water supply. All four target outputs under this subproject were achieved or exceeded. Although only 50 km of distribution pipeline were rehabilitated by project completion, the remaining 17 km were completed with government funding in March 2020.18 The target of augmenting 23.5 million liters per day (MLD) potable water supply was substantially achieved—i.e., by 20.0 MLD—with the installation of 19 tube wells. The detailed design conducted during project implementation found that augmenting full 23.5 MLD was technically not feasible. The target of replacing 112 pumps and other electro-mechanical equipment was exceeded—project 2 replaced 148 pumps and other electro-mechanical equipment.19 The installation of 14 mobile water tankers and maintenance equipment was achieved as planned,20 and boosted the average water supply from 90 liters per capita per day (lpcd) to 135 lpcd (national standard).21 Also, an additional 10,200-people, against the target of additional 3,800 people, in low-income or poor households benefited from an increase in water supply from 20 lpcd to 70 lpcd (the national standard in areas without sewerage). Overall, project 2 gave 0.54 million people access to municipal water supply, albeit with delays.

12 As memo to approve these changes were not processed, the achievements are assessed against the original target. 13 Savings were also used to cover administration costs and to prepare subsequent projects under the facility. 14 Approved memo dated 15 February 2016. 15 The planned training (an output indicator) was to consist of workshops on artisanal and handicrafts work for 39

women members of shopkeeper households that had to be relocated during the flyover construction. The training needs assessment resulted in only four women expressing interest in livelihood training. The cost benefit analysis by ERA concluded that the training was not feasible to be conducted. Since no memo for this change of scope was prepared, this report assesses the achievement against the original indicator.

16 The state government’s capacity was gradually improved with capacity building throughout the MFF’s duration. 17 Project 2 was consistent with the sector road map developed by the state in conjunction with the Jawaharlal Nehru

National Urban Renewal Mission. 18 The works were not finished by the project’s completion despite the engagement of more subcontractors to expedite

the works due to inadequate contractor performance (para. 20). 19 While 7 additional pumps were also supplied, the replacement was not finished by project completion. 20 In addition, 2 pick-up or delivery vans, 1 suction-cum-jetting machine, and 1 backhoe loader were procured. One

package for 2 mobile water tankers and O&M equipment was terminated because of the supplier’s inability to execute the contract.

21 Government of India. 1999. Manual on Water Supply and Treatment. Delhi.

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10. Urban transport. The five target outputs under this subproject were mostly achieved, although with delays. The construction of one flyover, including the upgrade of 2.5 km of roads was achieved only in part (62%) by project completion because of poor contractor performance and local unrest during implementation; the remainder was finished with government funding in July 2019. The construction of another flyover, including the upgrade of 1.3 km of road, were also achieved, although 7% was completed with government contribution after project completion. The delay was due to poor contractor performance. The targets achieved within the project duration were the construction of one mechanized car parking facility, and separate male and female toilet blocks at the facility and in the two relocation complexes. Notwithstanding the delays, it is assessed that the flyover corridors contributed to substantial savings in vehicle hours per day and benefited about 1.4 million people (para. 31). 11. Drainage. The three target outputs under this subproject were achieved, although with delays. First, the target to rehabilitate 28.3 km of drains were substantially achieved with 26.6 km (para. 7). Similarly, the target of building 10 km of new drainage was substantially achieved with 8.5 km with delay in September 2018 using the government funds. The balance was not implemented because of slow works progress.22 All targeted awareness generation campaigns on health, hygiene, sanitation, and the management of drainage systems were conducted. In addition, 23 drainage pumping stations, and 3.2 km of drainage damaged by the 2014 floods were rehabilitated (with loan savings resulting from the delays in the water supply and drainage subprojects) and completed in May 2017. Despite the delays, the achievements helped reduce water logging incidences and benefited about 1.4 million people. 12. Solid waste management. While no output targets were set for solid waste management (SWM), project 2 included a relatively small waste management component, i.e., the procurement of 34 modern waste collectors and 10 dumpers, among other equipment.23 These were procured as planned and being used. Together with the land fill sites developed under project 1, project 2 contributed to improved solid waste management with increases capacity.

2. Project Management and Institutional Capacity Strengthening 13. The achievements varied when it comes to the outputs of the project management and institutional capacity development component. Of the 6 output targets, 3 were achieved, 2 were partly achieved, and 1 was not achieved. Regarding project management, the target of timely project completion was not achieved because the water supply, drainage, and transport subprojects were not finished by project completion.24 The target of providing training workshops for at least 50 project staff at ERA and line agencies, with 20% female participation, was achieved as planned. As regards institutional capacity building, the target of training 100 ULB representatives; ward members; and 100 municipal, ERA, and line agency staff with (with 20% of them women) on new business processes was achieved.25 The partly achieved targets were the

22 Part of the work was subcontracted, with ADB concurrence, to overcome the slow progress. The subcontractor was

also a main contractor in another package with relatively good performance. 23 Other goods packages were: 4 rear-end loader compactors with 300 bins; 2 hook loaders and 10 containers; and

1,000 hand carts and 300 cycle rickshaws. 24 The capacity building consumed 28% of the total consultancy support recruited to implement the institutional reform

programs that were a part of the loan covenants and to prepare the subsequent project. The support was required because the state had limited resources for capacity building and institutional reforms. The positions of project management consultant (PMC) and design and supervision consultant (DSC) were filled with engineers and other design staff members to better meet the transport sector needs, consuming 72% of the consultancy cost.

25 This target was exceeded by 4 training units with 200 participants, including PHED and ULB staff, and 25% female participation. Ward members did not participate because no municipal election took place during project 2.

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(i) adoption of accrual-based system by the municipalities, and published balance sheets from fiscal year (FY) 2015;26 and (ii) preparation and adoption of organizational development plans for semi-autonomous water supply entities by June 2013—achieved with delays in April 2015.27 The target of more efficient billing and collection by 2015 was achieved (although late) when the PHED introduced a computerized water billing system in 2019. 28 However, the target of procuring laboratory equipment for air and water quality monitoring by the State Pollution Control Board was not implemented as another source funded the equipment. Overall, it became evident that the reform targets were rather ambitious considering the state’s limited capacity and the local context, including frequent local unrest, which required a longer implementation period. Details of the institutional reform action plan are in Appendix 2. C. Project Costs and Financing 14. The estimated project cost at appraisal was $181.1 million, to be covered by an ADB loan of $110.0 million and a government contribution of $71.1 million. The cost of the water supply subproject at loan closure proved to be 37% ($5.4 million) less than the appraisal estimate, mainly because of slow works progress. The loan savings were partially reallocated to the drainage subproject to repair damages from the 2014 floods (para. 7), so the subproject required 39% or $5.8 million more funds than the estimated. The cost of the transportation subproject at loan closure proved to be 27% or $12.9 million less than the appraisal estimate because of unfinished works. Owing to currency depreciation, $15.0 million was canceled from the ADB loan; $16.7 million was committed but not utilized. This translated to a project cost of $150.98 million at completion, or an ADB loan of $78.3 million and a government contribution of $72.68 million. The main reason for the lower ADB loan amount was the depreciation of the rupee between the time of appraisal and the actual disbursement, with no contingency disbursement required. Estimate and actual project costs are shown in Appendix 3 and summarized by financier in Appendix 4. D. Disbursements 15. In the early stage of implementation, disbursement was slowed by the delays in procurement and works progress. The first disbursement was in August 2013 and by yearend, $4.7 million had been disbursed. In 2014, severe floods in the state limited the disbursement to $7.1 million against a projected $59.5 million at appraisal. Disbursement picked up to $16.3 million in 2015, rose to $21.8 million in 2016, and reached $28.4 million in 2017. On 8 February 2018 (financial closure), disbursement totaled $78.3 million or 82% of the revised loan amount of $95.0 million (71% of the original loan amount of $110.0 million). In December 2016, a reallocation of loan proceeds was approved to help ERA optimize the use of the loan amounts and to reduce the state’s anticipated financial burden from spillover works.29 At the financial closure in February 2018, the unutilized loan amount of $16.7 million was canceled. While the disbursement projection at appraisal was optimistic for the project start up (para. 16), the delay caused by the floods was unforeseeable.30 ADB received all withdrawal applications through the Controller of Aid Accounts and Audit of the Ministry of Finance, Government of India. The disbursement mechanism required

26 A double-entry accounting system was adopted and launched in the two ULBs. They prepared financial statements

until FY2017 but the practice did not continue after the consultant support ended at project’s completion in 2017. 27 While the state government issued an order in 2013 to transfer urban functions such as water supply and sewerage

to ULBs, a decision to create a semi-autonomous water board is still pending to date at the state legislature. 28 Other relevant improvements in the state’s efforts include the installation of bulk water metering and a supervisory

control and data acquisition (SCADA) system, computerized accounting at the PHED, approval of a new water tariff in 2020, and the formulation (with consultant support) of a revenue improvement action plan.

29 Approved memo dated 20 December 2016. 30 To mitigate the slow disbursement, the construction team took a sectional approach to the flyover works.

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statements of expenditure and documented claims.31 All disbursement-related qualifications by the auditors were duly addressed. Projected and actual loan disbursements are in Appendix 5. E. Project Schedule 16. The original project completion date of March 2017 was extended once to May 2017—the maximum loan availability of the MFF.32 Major reasons of delay were (i) late procurement caused by contractor’s limited interest in working in an unstable local context and in severe winter, and limited state capacity; (ii) the persistently slow progress of civil works, which delayed disbursement; (iii) occasional public unrest; and (iv) 100-year floods in 2014. Local unrest has continually affected implementation. There were also issues with (i) ERA and state staff being overloaded with work on multiple large projects; (ii) delay in implementing the resettlement plan because of the slow construction of the state-funded relocation complexes, which also delayed flyover construction;33 (iii) delay in obtaining permission for the relocation of structures; and (iv) an overlap period of project 2 with then-ongoing project 1 and concurrent appraisals of project 3.34 The original loan closing date of 31 March 2017 was extended once, and the loan was eventually closed on 8 February 2018. The extension was required to optimize loan utilization, enable the completion of ongoing works to maximize project outcomes, and reduce the state’s financial burden from spillover works. The full completion of outputs with government contribution was in March 2020. A chronology of main events is in Appendix 7. F. Implementation Arrangements 17. The project implementation arrangements were as specified at appraisal. They were generally adequate to achieve the envisaged outputs, although later than planned. The executing agency was ERA, guided by state-level inter-ministerial support, city committees and a works finalization committee chaired by the division commissioner. ERA established a project management unit (PMU) for project 2 and implementation units in the target towns. While the PMU and implementation units were assisted by a project management consultant (PMC) and two design and supervision consultants (DSCs), the PMU in particular was overloaded with tasks for other projects (para. 16). The DSCs supported the preparation of detailed designs and bidding documents, the bidding process, and construction supervision. Also in place was capacity building and institutional support (CBIS) for the PHED and ULBs, as well as consulting services for a plan to reduce nonrevenue water (NRW). Safeguard consultants were mobilized for environmental and social aspects, including an external monitor for resettlement.35 G. Technical Assistance 18. The preceding ADB-funded project (footnote 8) was accompanied by a $0.5 million project preparatory technical assistance (TA) grant to prepare a comprehensive investment

31 The project benefited from a simplified statement of expenditure process that did not require the submission of

supporting documents for individual payments up to $100,000. 32 Approved memo dated 26 January 2017. 33 Project 2 should have started before 2013, but the slow construction of state-funded rehabilitation complexes meant

that ERA did not proceed until after the loan signing. 34 These issues of work overload were partially mitigated by staff increases in the project implementation units, and by

strengthening interagency coordination and project monitoring (para. 39). 35 A social safeguards unit at the PMU headed by the director of safeguards was responsible for the preparation and

implementation of resettlement plans, with support from the PMC and DSCs. ERA used a collector’s office for the preparation of land acquisition documents and payment of compensation to the affected persons. The Divisional Level Committee was responsible for determining the value of land during private negotiations with titleholders, or for compulsory acquisition where private negotiations failed.

7

plan.36 The TA supported the preparation of the MFF and of sector plans and policies to promote cost recovery through tariff reform. To further support ERA in implementing the MFF, ADB approved a $0.4 million TA in December 2006.37 The advisory TA helped ERA, especially in the early stages of the MFF, to (i) improve ERA’s functionality, (ii) build its project management and implementation capacity, (iii) expedite contract award and execution by providing guidance to ERA on procurement-related issues, and (iv) assist in setting and achieving yearly targets for contract award and disbursement. H. Consultant Recruitment and Procurement 19. Consultants were recruited in accordance with ADB Guidelines on the Use of Consultants (2010, as amended from time to time). ERA followed the quality- and cost-based selection procedure to select the PMC and one DSC, and the CBIS and NRW consultants. The contract of the first PMC recruited under project 1 was not extended at its completion in December 2011 because of weak performance. The recruitment of a new PMC took 17 months until May 2013 because the government process delayed the startup of project 2.38 Similarly, the contract of one DSC finished in December 2013, but a new DSC was recruited only in July 2014.39 Local engineering firms qualified for the large consulting contracts for flyover and drainage works. The overall performance of consultants is rated generally satisfactory. The newly recruited PMC and DSC performed substantially better than their predecessors. However, the delivery of their services was hampered by site constraints, design changes, and a delay in finalizing the drawings. The performance of the CBIS and NRW consultants was generally satisfactory. 20. Procurement followed ADB Procurement Guidelines (2010, as amended from time to time) and was generally carried out as planned, although with delays because of limited contractor interest and state capacity. The civil works packages for the two flyovers and the rehabilitation of drainage were procured through international competitive bidding. Remaining works packages were estimated to cost $10 million or less, and were procured through national competitive bidding. All works contracts were bills of quantity based on item rates. The preparation of standard bidding documents, bids evaluation reports, and contract agreements was in line with ADB guidelines. ADB’s prior review of all stages of bidding was conducted in accordance with the Procurement Guidelines. The contractors’ performance was unsatisfactory in the works for water supply, flyover, and drainage, which had to be completed with government contribution (paras. 9–11). The works for water supply distribution network and drainage did not improve even when subcontracting was allowed to overcome the slow progress. Although the PMU and implementation units held regular meetings with contractors to resolve hindrances, the three contracts proceeded slowly with persistent low workers deployment. The contractors’ performance in all other six work packages was satisfactory. I. Gender Equity 21. Project 2 was categorized effective gender mainstreaming. Broadly, the gender action plan (GAP) covered the: (i) provision of urban services to poor households headed by women; (ii) creation of income opportunities for unemployed family members, especially women, who had to

36 ADB. 2004. Technical Assistance for Preparation of the Jammu and Kashmir Urban Infrastructure Development

Project. Manila (TA 4515-IND, for $0.5 million, approved on 21 December 2004). 37 ADB. 2006. Technical Assistance to India for Strengthening Urban Project Management in Jammu and Kashmir.

Manila (TA 4888-IND, for $0.4 million, approved on 2 December 2006). 38 The gap between the two PMC contracts was covered by the DSCs. The original projections for the contract award

could have been more realistic in factoring in the risks of delay. 39 The performance of the other DSC was generally satisfactory, so the contract was retained until project completion.

8

be relocated during flyover construction and expanded civil works; (iii) development of women-friendly civil amenities to promote the safety of women and girls in the public transport system, (iv) promotion of health and hygiene-related practices; and (iv) promotion of community-led water conservation initiatives and women’s leadership in water supply management. 22. The GAP and the gender-related targets of the DMF were supported by a dedicated consulting firm. A gender specialist led the team of consultants at the firm that supported the consultation and participation plan; gender-focused awareness-raising, behavior change communications, and training programs; and community-based solid waste management activities. Social and resettlement experts, supported by the social and resettlement specialist of the PMC firm, provided supervisory support. They also assisted municipalities and other line departments implementing awareness-raising, community-mobilizing, and capacity-building activities. The project team collected sex-disaggregated data and regularly submitted the reports on GAP progress. Overall, progress and results were monitored and reported adequately. 23. The project completed 9 of the 10 GAP activities (90%), and achieved 13 of 14 (93%) combined quantitative targets of the GAP and DMF. This successful implementation and the gender-equality features contributed to significant practical and strategic gender benefits. They helped reduce the time poverty of women and alleviated the safety risks of faraway water collection by women and girls. The benefit of the water pipeline improvements positively impacted 13% of low-income households and 8% households headed by women in the target area. Of about 90,000 people covered by this subproject, 48% are estimated to be women and girls. The rehabilitation and construction of drains as per DMF outputs helped reducing water logging and flood risk for the population in the coverage area, including women and girls. The sex-segregated toilets at the relocation complexes and the parking facility contributed to the safety of women and girls. The awareness generation events with 50% women participants increased people’s knowledge of risks and hazards, and how to manage household water and sanitation. The project provided employment opportunities to women and ensured wage parity between men and women in construction and maintenance work. The provision in the project for stringent compliance with the law on wage parity was seen as a silver line for women workers. The women residents acknowledged that the pre-project consultations had given them confidence to raise their voice. This led to the construction of the drains factoring in their problems and concerns. J. Safeguards

24. Project 2 was classified category B for environment, category A for involuntary resettlement and category C for indigenous peoples, as per ADB’s Safeguard Policy Statement 2009 (SPS). The safeguard categorization was unchanged during implementation. An environmental assessment and review framework, resettlement framework, and indigenous peoples planning framework were prepared for the MFF but revised during loan processing to be consistent with the SPS.40 Initial environmental examinations were prepared for the subprojects under project 2 (Appendix 10) in accordance with the SPS, and government requirements. No significant environmental impacts were observed. The examinations showed that the impacts during operation are generally beneficial, while the construction impacts were reversible in nature (including traffic, noise, and dust) and could be adequately mitigated through good construction management. The examination findings and the environmental management plans formed an integral part of the bidding and contract documents, and included a grievance redress and

40 The SPS applies to tranches under the MFF for which ADB approved periodic financing requests after 20 January

2010. The subprojects under project 2 required compliance with the SPS, whereas project 1 was implemented under the former ADB safeguard policies for environment, resettlement, and indigenous people.

9

monitoring mechanism, as well as provisions for occupational and community health and safety. 25. Significant resettlement impacts were noted as part of one flyover subproject, for which a resettlement plan was prepared in consultation with stakeholders, reviewed, cleared, and disclosed by ADB and ERA on their websites and to affected persons. The resettlement plan envisaged an impact on 285 shops (257 shops operated by tenant and 28 owner operated shops). During the plan’s implementation, the impact on 25 shops was avoided by changing the alignment and/or engineering design. In all, 260 shops were rehabilitated. Of these, 99 shops rehabilitated by the municipality, and 161 were allotted to the shop operators in the two relocation complexes.41 Divisional Level Committee took two key decisions during the implementation:42 (i) affected persons were paid ₹1 million for the loss of residence (apart from all other entitled compensation); and (ii) the owners of the commercial establishment whose shops were operated by the tenants were given an additional compensation of ₹0.25 million. The tenants of affected shops were provided with new shops to continue their business and trade as before. Thus, all titleholders and non-titleholders were compensated in line with the provision of the resettlement framework and resettlement plan, and with the SPS.43 26. For the storm water drainage subproject, at Digiana, Gangyal areas, 35 affected persons and 1 temple trust (common property resource owner) were identified to face the loss of strips of land and minor structures such as boundary walls. Land ownership could not be established and is under investigation by the District Authority. A complaint was received by ADB from one affected person regarding non-receipt of compensation. ERA agreed to implement a corrective action plan by July 2021 to ensure compensation payments to all affected persons under the subproject. For all other subprojects in the targeted cities, the resettlement plan was implemented as proposed,44 and no indigenous peoples were affected. The safeguard compliance management—including institutional arrangements, information disclosure, consultations, grievance redressal, capacity building of project staff, and regular submission of semiannual safeguard monitoring reports—was rated generally satisfactory.45

K. Monitoring and Reporting

27. Of the 62 loan covenants of project 2, 52 were complied with, 7 were partially complied with, and 3 were not complied with. The partially complied covenants concern (i) the compensation payment to affected persons in the drainage subproject, (ii) unfinished works and institutional reforms by the project completion, and (iii) ERA’s pending submission of the project financial statement for FY2018 for disclosure by ADB. The covenants not complied with concern (i) the setup of semi-autonomous water supply entities, where the state government’s decision is still pending; and (ii) financial reporting (para. 28). Notable achievements of reform-related covenants include the empowerment of municipalities to collect property tax. The geographic information system developed under project 1 is used for the collection, while the complete rollout is yet to be achieved. Bi-annual environmental and social safeguard monitoring reports, including

41 91 shops were relocated to the Jehangir Chowk shopping complex and 70 shops were relocated to the Rambagh

shopping complex. 42 The state government constituted the Divisional Level Committee in May 2011 to fast-track the implementation of

the resettlement plan/s for subprojects being executed by ERA under project 2. 43 ADB’s aide-mémoire dated 26–30 June 2017 directed ERA to pay all pending compensation to shopkeepers affected

by the flyover construction. ERA confirmed that all payments due as per the final resettlement plan were paid except for 1 payment to an affected person who could not be traced, which was deposited in an escrow account.

44 ADB. 2020. Social Monitoring Report (March–August 2019): Jammu and Kashmir Urban Sector Development Investment Program – Tranche 2. Manila.

45 ERA, supported by the PMC and DSC, ensured adequate safeguard monitoring and management.

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external monitoring reports on social safeguards, were submitted to ADB on time and duly disclosed. 28. The financial management arrangements of the borrower and executing agency were robust and counterpart funding was timely. Separate project financial accounts were maintained and audited by statutory auditors. Except for FY2018, audited project financial statements (APFS) were received, albeit with delays up to 3.6 months from the due dates but within the grace period of 6 months.46 The APFS for FY2018 were rejected because they included a combined audit report for all three projects despite the requirement for separate reports and opinions. Also, audited entity financial statements (AEFS) for fiscal yearend 2017 and prior years were combined with the APFS, all of which constituted noncompliance. Appendix 11 details the status of compliance with loan covenants.

III. EVALUATION OF PERFORMANCE A. Relevance 29. The project is relevant to government development objectives and ADB country and sector strategies, both at appraisal and completion (para. 4).47 Although the project predated ADB’s Strategy 2030, it is relevant to the strategy’s operational priorities (para. 4). At completion, the project remains aligned with the ADB policy focus for India on inclusive growth, infrastructure, and environmental sustainability. The project aligns with the government’s 5-year plans, the NITI Aayog’s 3-year action agenda (FY2018–FY2020), and the state’s Eleventh and Twelfth Five-Year Plans (FY2007–FY2018), which prioritized water supply in urban areas, wastewater management, and urban poverty alleviation.48 No development partner initiatives related to the project took place. 30. The MFF modality was appropriate considering the flexibility of moving outputs to other tranches without affecting the facility outcome, and the advantage of a longer engagement with the stakeholders. The DMF was ambitious in achieving reforms that were partly dependent on legislative engagement and capacity. The project results chain was nevertheless sound, and the indicators and the subprojects developed were generally appropriate to achieve the intended outcomes. While the project experienced delays in completion (para. 16), the state finished all the remaining works with its own funds49. The loan savings were utilized to respond to emerging needs such as the rehabilitation of the drainage pumping stations damaged by the historic floods of 2014, yielding enhanced outcomes. ADB loan proceeds were reallocated to maximize the outcome. B. Effectiveness

31. Project 2 is rated effective in achieving the outcome and output targets. Of the five outcome targets, four were achieved although with delay (para. 16) and one was not achieved. Weighing the indicators against the actual cost of each component, the degree of overall achievement of outcome targets was assessed at 87% (Table A1.2). The target towns benefitted

46 Late by 0.8 months for FY2014, 3.6 months for FY2015, 2.2 months for FY2016, and 2.9 months for FY2017. 47 Government of India, National Institution for Transforming India (NITI) Aayog. 2012. Twelfth Five-Year Plan, 2012–

2017. Delhi; and ADB. 2013. India: Country Partnership Strategy (2013–2017). Manila. 48 NITI Aayog is a policy think tank of the Government of India that provides directional and policy inputs. Government

of India, NITI Aayog. 2017. India Three-Year Action Agenda, 2017–2018 to 2019–2020. Delhi; and State government, Planning Department. 2012. Eleventh and Twelfth Five-Year Plans, 2007–2018. Delhi.

49 There was also weakness in project design (para. 7) that led to delays in achieving outputs.

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from the project with the increased (i) average water supply from 90 lpcd to 135 lpcd (national standard) as expected at appraisal; and (ii) access to potable water supply of 70 lpcd (national standard for areas without sewerage) for an additional 10,200 people against the target of 3,800 people. These contributed to the 14% weighted achievement of water supply outcome. (iii) Project 2 was also planned to increase volume of solid waste collected and disposed to 375 tons per day. While all the collection equipment were procured as planned and are being used, there is absence of data to verify the achievement, resulting to 0% weighted achievement. (iv) While not assessed quantitatively, it is assumed that the target towns also benefitted from reduced water logging. As per ERA’s validation, there was no reported incidence of inundation in the target areas.50 This contributed to 31% weighted achievement of drainage outcome. (v) The project was also expected to reduce travel time with average vehicle-hours saved per day by 8,600 and 4,326 in the flyover corridor of the two target towns. This was substantially achieved as communities confirmed that the travel time was reduced by around half and contributed to weighted achievement of transport outcome of 41%.51 These outcome achievements in all the urban infrastructure improvements were directly attributable to the subprojects’ achieved outputs. 32. As for the outputs, the weighted achievement of targets based on costs was 90% (Table A1.2).52 The weighted achievements per urban infrastructure subprojects are 13% for water

supply, 39% for transport, 25% for drainage, and 2% for solid waste management (paras. 9–12).53 These output achievements in all the urban infrastructure improvements directly contributed to the subprojects’ achieved outcome. Out of the 6 output targets for institutional capacity development and project management, 2 were achieved, 3 were partly achieved and 1 was not achieved (para. 13), resulting in the 10% weighted achievement. Safeguards were implemented effectively, and no adverse effect from the project was observed. Environmental safeguards mitigation measures were implemented effectively, and no adverse effect from the project was

observed (para. 24). Resettlement plans were prepared and implemented as planned (paras. 24–26). Gender action plans were satisfactorily implemented, and targets were substantially achieved

(paras. 22–23). C. Efficiency 33. Project 2 is rated efficient. The overall economic internal rate of return (EIRR) is above ADB’s threshold. The large implementation delays and associated cancellation of ADB loan are considered in the EIRR calculation. The EIRRs at completion of the major subproject components were recalculated against their appraisal estimate. The EIRRs at completion for the two water supply components were assessed at 12.2% for water supply system and 8.5% for PHED’s equipment for water supply, compared with the appraisal estimates of 13.3% and 13.0%.54 For the three drainage components, the EIRRs at completion were assessed as 14.1%, 22.1%, and

50 Constraints posed by the coronavirus disease (COVID-19) limited the gathering of data for this completion report. 51 A traffic volume survey was not conducted at the project completion given the challenges posed by COVID-19.

Alternatively, the contribution of flyovers to reduce travel time was confirmed by the communities through selected interviews.

52 Of 18 outputs in the DMF, 14 were achieved, 2 were partly achieved, and 2 were not achieved. 53 Captured in the weighted achievements of outputs are the goods provided to collect solid waste, such as waste

collectors and dumpers, which were not included in the DMF. 54 Field missions and discussions with households to update the willingness-to-pay survey were not possible because

of local unrest and travel restrictions imposed during the COVID-19 pandemic. In both subprojects, the intended benefits were realized, but the EIRR at completion is lower than at appraisal because of cost and time overruns.

12

9.8%, compared with the appraisal estimate of 22.0%, 13.6%, and 15.4%.55 For the two flyover components, the EIRRs at completion were assessed at 15.6% and 14.1%, compared with the appraisal estimates of 13.9% and 14.9%.56 For solid waste management subproject, the EIRR at completion was assessed as 24.7%, higher than the appraisal estimate of 17.8%. For the parking facility, the EIRR at completion was assessed at 13.4%, slightly above the appraisal estimate of 13.1%. Except for one drainage component and the PHED’s equipment for water supply, all other re-evaluated subprojects have EIRRs near or above the benchmark of 12% at completion, justifying the investments. The EIRRs of the drainage and PHED equipment components fell below the threshold for economic viability at appraisal because of cost overruns and implementation delays. Several indirect and direct benefits, such as an improved environment and better quality of life, could not be quantified and were not captured in the analysis. However, the qualitative assessments demonstrate the direct or indirect contribution to an improved urban environment and better quality of life. The overall EIRR for project 2 at completion was assessed at 17.3%, although it was not assessed at appraisal. The economic net present value of all the completed subprojects was positive, except for one drainage and one water supply component, when applying the 12% discount rate. The undisbursed ADB loan amount was $16.7 million at project completion. The institutional efficiencies and the grievance redress mechanisms developed by ERA reduced transaction costs and improved transparency and governance accountability while significantly augmenting ERA’s administrative capacity. The project experienced delays due mostly to uncontrollable factors as severe weather conditions and public unrest. There was only one extension (March 2017 to May 2017) to optimize loan utilization to complete ongoing works, thus reducing state’s burden from spillover works. These factors are considered in the economic analysis. Details are given in Appendix 12. D. Sustainability 34. Project 2 is rated likely sustainable. The Constitution of India mandates the states to allocate the funds required to maintain their functions and sustain service delivery.57 Since the operating entities are not recovering the operation and maintenance (O&M) costs as planned, the standard approach to computing the financial internal rate of return adopted at appraisal, was not considered appropriate at project completion. Instead, a financial sustainability analysis of the operating entities was carried out to evaluate their capacity to meet the O&M costs required to manage the project 2 assets. The responsibility for the O&M of infrastructure assets lies with the PHED (water supply), Public Works Department (PWD, transport), Housing and Urban Development Department (HUDD, drainage), and ULBs (solid waste management and parking). Their responsibilities include billing and fee collection, and remitting the revenues back to the state, which is responsible for financially managing these assets and services. For ULBs, finances are structured through fiscal transfers from the state as grants and transfers from the central finance commissions and state finance commissions.58 Since the project was not designed for capital cost recovery, the operating ratio of the state government in the past 5 years was calculated to assess the project sustainability.59 The ratio averaged 0.95, meaning that the

55 For all three components, the intended benefits were realized. For one component, the EIRR at completion is higher

than at appraisal thanks to cost reductions. In two other components, it is lower than at appraisal because of cost and time overruns. In one component, 1.3 km of new drains were built even though this was not in the original scope.

56 The intended benefits of both flyovers were realized. In one case, EIRR at completion is higher than at appraisal because of lower costs. In the other case, it is lower than at appraisal because of cost and time overruns.

57 Constitution of India. Article 243 Schedule X and XII. 58 The Central Finance Commission transfers for 30%–40% of ULB finances, of which up to 90% may be used for the

O&M of municipal assets. 59 Ratio of operating receipts to operating expenditures. The cost recovery calculation does not include the depreciation

of assets.

13

operating revenues are sufficient to meet the O&M expenses.60 A similar review of the overall finances of the PHED, HUDD, PWD, and the ULBs indicates their ability to meet the O&M cost through state budgetary allocations.61 The analysis assumed the timely release by the state of the requisite O&M funds since the provision of these services is a fundamental duty of the state government. The details of the financial re-evaluation are in Appendix 12. 35. Institutional capacities, including on social and gender dimensions, were strengthened by the ongoing reforms and implemented under the MFF, such as door-to-door collection of municipal solid waste, O&M of (i) the parking facility by a ULB;62 (ii) new water treatment system by the PHED; (iii) flyovers by the PWD; and (iv) drainage improvements by HUDD. Billing and collection of water supply were also improved through online payment system. While the PHED, PWD, and HUDD have sufficient human resources and technical institutional capacities for O&M, the ULBs of the target towns require continuous strengthening of human resources and institutional capacities for better asset management and governance. E. Development Impact 36. The development impact of project 2 is rated satisfactory. It benefited 0.54 million people with access to municipal water supply services, contributing to the MFF’s target of 2.2 million people.63 The functional drainage system benefited 1.4 million people and contributed to the facility’s target of 2.0 million people. Access to better road infrastructure benefited 1.4 million people and contributed to the facility’s target of 2.4 million people. The sanitation component for a sewage treatment plant was not pursued, and therefore did not contribute to the facility’s planned target of 1.0 million people.64 The implementation of the GAP resulted in some strategic gender benefits in the core area of gender equality in human capital development. The project contributed to stronger financial management by the ULBs and the PHED. Contributions to ADB’s Strategy 2030 are listed in Appendix 13. The project’s environmental and involuntary resettlement impacts are as assessed in paras. 24–26 and Appendix 10.

F. Performance of the Borrower and the Executing Agency 37. The performance of the borrower and the executing agency is rated satisfactory. The borrower, represented by the Indian Department of Economic Affairs, provided timely guidance and decisions to the state government and undertook regular tripartite review meetings with ADB, the state government, and ERA. This helped identify bottlenecks, resolve issues, and monitor progress. The state government gave ERA strong support, including timely counterpart funding, not least to complete the unfinished works after the project’s completion. 38. The PMU continued its overall project management and implementation structure from project 1. To mitigate the work overload (para. 17), project implementation staff was increased during project 2. Interagency coordination, monitoring, and progress reporting from the field was also strengthened. These efforts partially improved the disbursement (para. 15). The floods in 2014 hampered project implementation, but ERA worked efficiently to restore the ongoing works.

60 The state allocates a percentage of net tax proceeds to local governments to support financially weaker local bodies. 61 ERA confirmed that the state has been allocating necessary O&M budget in a timely manner in the past. 62 For the parking facility, the operating agency is collecting the car parking charges at ₹20 per hour or ₹1,000 per

month. This contributes to the recovery of O&M costs. 63 In the target towns, population benefited from potable water supply reached 2.4 million in 2017, while this is due to

the MFF as well as other government projects. The state government. 2020. Digest of Statistics, 2017–18. Jammu. 64 The sewerage treatment plant was nor pursued under project 2 as it was not part of the master plan for larger

wastewater issue in the town and lacked a viable O&M plan.

14

The PMU handled safeguard compliance and monitoring requirements well and submitted timely monitoring reports to ADB. Other than the pending compensation payment to land and asset owners under the drainage subproject, no major issues arose through the complaint mechanisms. Minor concerns related to construction were handled in a timely manner. The PMU successfully constructed two relocation complexes and relocated 161 shops (para. 25). The APFS for FY2018 were rejected for having a combined audit report for all three projects. This was noncompliant with loan covenants and indicates that ERA financial management was less than satisfactory. With two exceptions (incomplete institutional reforms and incomplete compensation payment), all other loan covenants were complied with (Appendix 11). G. Performance of the Asian Development Bank 39. ADB’s performance is rated satisfactory. ADB missions for regular review, midterm review, and special project administration were undertaken to assess progress, provide advice for resolving outstanding issues, and facilitate minor changes in scope, optimizing the utilization of project 2 loan amount through reallocation of loan proceeds. ADB monitoring, capacity building, and guidance through 20 missions and 12 tripartite reviews throughout the project cycle helped define processes, address issues through time-bound actions and targets, and expedite project implementation. ADB provided training on procurement guidelines, disbursement, and safeguards. On the other hand, the project implementation schedule during appraisal and processing proved to be overly ambitious and should have more realistically considered the time required to implement ADB financed projects especially given the lessons from the previous ADB loans in the state. ADB’s financial management was less than satisfactory in that ADB could have followed up with ERA on compliance with APFS and AEFS requirements. H. Overall Assessment 40. Project 2 is rated successful. It was relevant to government development objectives and ADB policies at appraisal, and was still relevant upon completion. Changes to components were timely and appropriate. The project is assessed effective because weighted achievement of the overall outcome targets was assessed at 87%. The project is rated efficient with an overall EIRR assessed at 17.3%. The project is rated likely sustainable, because O&M costs for project assets are met through statutory transfers from state and central finance commissions, municipal taxes, and user charges.

Table 1: Overall Ratings

Criteria Rating

Relevance Relevant

Effectiveness Effective

Efficiency Efficient

Sustainability Likely sustainable

Overall assessment Successful

Development impact Satisfactory

Performance of the borrower and executing agency

Satisfactory

Performance of the Asian Development Bank

Satisfactory

Source: Asian Development Bank estimates.

15

IV. ISSUES, LESSONS, AND RECOMMENDATIONS A. Issues and Lessons 41. The following important lessons emerged from the project. First, enhancing readiness at loan approval by having detailed designs, would help deliver projects in a timelier manner.65 Second, the establishment of a land acquisition collector’s office within the PMU proved extremely beneficial in coordinating involuntary resettlements. Third, MFFs impose a burden on executing and implementing agencies in the initial years as they prepare for subsequent tranches while also being responsible for implementing the ongoing project, which requires sufficient implementation support. Fourth, the ambitious reform agenda required more time given the local context and the state’s capacity. Fifth, continued budget transfer from the state to the line departments for the O&M cost is necessary for sustainability until the line departments can recover the O&M cost through its operation. Sixth, the project schedule should be realistic in terms of consultant recruitment, detailed design development, and contract periods. Seventh, the subprojects' scope should be more outcome-oriented, including end-to-end solutions, such as 24x7 water supply or 5–10 years O&M arrangement in construction contracts, subject to the capacity of the asset operator. Finally, ADB should monitor compliance with APFS and AEFS submission requirements.

B. Recommendations

42. Specific recommendations for project implementation are as follows. First, the PMU should be supported by consultants specialized in reforms and policy formation to push the agenda. Second, a robust assessment of circumstances is needed at appraisal—how achievable are the planned institutional reforms and how much time needs to be allotted in light of government capacity and local context (para. 16). Third, ADB interact closely with executing and implementing agencies to ensure that robust financial management systems are maintained throughout project implementation (para. 28).66 The inclusion of an ADB financial management staff member in the team that monitors and supports the executing and implementing agencies—even with missions where necessary—is key to improving financial management performance and ensuring that funds are used for the purposes intended. Fourth, to sustain the good practices in promoting gender inclusive in urban development, ERA should take forward the similar practices in the design and implementation of their projects. 43. General recommendations for MFF and project preparation are: (i) the project scope and implementation period should be realistic in projects with multiple stakeholders and extreme weather conditions; (ii) initiatives to strengthen the financial management capacity of the executing and implementing agencies and systems should be defined clearly to ensure the agencies’ ability to use, monitor, account, and report ADB’s funds; and (iii) social and gender targets on beneficiaries based on empirical baseline surveys should be included, and mid-course adjustments on the targets should be carried out, in the face of the changes on the ground.

65 Land was identified for construction of the two rehabilitation complexes prior to loan approval. ADB funding for the

construction may have been explored for better monitoring and faster completion of the facilities. 66 While letters or official communications from ADB to the executing agency were forthcoming for every financial report

received (annually), it is important for the project team to closely monitor and follow up the executing agency’s response to the recommendations and comments, to confirm that these were understood by the appropriate units preparing the reports, including the auditors, and that they will be acted upon or applied to their subsequent reports.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK FOR PROJECT 2, WITH WEIGHTING FACTORS TO DETERMINE EFFECTIVENESS

Table A1.1: Design and Monitoring Framework for Project 2

Design Summary

Performance Targets and Indicators

with Baselines Project Achievements of Project 2a

Impact Improved living environment in Jammu and Srinagar

By 2020: Increased population coverage of infrastructure and services;b 2.2 million people with access to municipal water supply scheme

By 2020: A total of 2.4 million people had access to municipal water supply scheme through the MFF intervention; of which 540,000 directly benefited from project 2.

1.0 million people with access to proper sanitation

The sanitation component (online sewerage treatment plant) was not pursued under project 2.c

2.0 million people served by a functional drainage system

1.4 million people are served by functional drainage system.

2.4 million people with access to better road facilities

1.4 million people had access to better road facilities.

Outcome Improved urban services in Jammu and Srinagar

By the end of investment program: Average water supply increased to 135 lpcd from 90 lpcd (target: 13% of low-income/poor HHs [incl. all FHHs]) (Baseline= 90 lpcd for 120,000 households in 2011)

By the end of the investment program: Achieved. Average water supply increased to 135 lpcd from 90 lpcd for 120,000 households, or 13% of poor and other low-income HHs including all FHHs.

Additional 3,800 people in Srinagar (target: 13% of low-income/poor HHs [incl. all FHHs]) have access from potable water supply of 70 lpcd. (Baseline = 20 lpcd supply in 2011 for project area)

Exceeded. 10,200 people in the target town (13% of low-income/poor HHs [incl. all FHHs]) benefitted from having access to potable water supply of 70 lpcd.

Increased volume of solid waste collected and disposed to 375 metric tons/day (Baseline= 250 MT in 2011)

Not achieved. All the goods were procured and being used as planned. However, in the absence of data of the volume of solid waste collected, the achievement is assessed as not achieved,

Water logging reduced to 0.5 hours for 2 days/year in the project area of Jammu and 0.3 hours for 1 day/year in the project area of Srinagar (Baseline = In Jammu-2.5 hours for 10 days in a year, and in Srinagar – 2 hours for 30 days in a year).

Achieved. Per confirmation from ERA, there was no incidence of inundation since project completion.d

Appendix 1 17

Design Summary

Performance Targets and Indicators

with Baselines Project Achievements of Project 2a

Vehicle-hours saved per day to average 8,600 with the Srinagar flyover corridors and 4,326 with the Jammu flyover corridor (Baseline:13,656 vehicle-hours per day in Srinagar and 7,843 in Jammu in 2011)

Substantially achieved. With the construction of flyovers, the vehicle-hours (travel time) for users were reduced by half.d

Outputs 1. Improved water

supply infrastructure

By December 2016: 1. 67 km water pipelines rehabilitated

(coverage area includes 13% low-income/poor HHs [incl. all FHHs])

1. Achieved with delay in March 2020. 67 km

of water pipelines were rehabilitated, of which 50 km were completed under ADB financing and the rest were rehabilitated using state funds. Coverage area included 13% of low-income HHs, including all FHHs.

2. 23.5 MLD potable water supply augmented

2. Substantially achieved. Augmentation by 20 million liters per day was achieved by developing 19 tube wells, replacing 148 pumps and other electro-mechanical equipment, and providing 14 mobile water tankers.

3. 112 pumps and other electro-mechanical equipment replaced

3. Exceeded. 148 pumps were replaced, as was other electro-mechanical equipment. 7 additional pumps were supplied, not fully before the project closure.

4. 14 mobile water tankers and maintenance equipment installed

4. Achieved. 14 mobile water tankers were supplied as planned, as was other maintenance equipment.

2. Improved urban transport infrastructure

By December 2016: 1. 1 elevated expressway /flyover

constructed and 2.5km roads upgraded in Srinagar

1. Achieved with delay in July 2019, with 38%

being completed by the state fund after loan closure.

2. 1 elevated expressway /flyover constructed and 1.3km roads upgraded in Jammu

2. Achieved with delay in May 2018, with 7% completed using state funds after loan closure.

3. 1 off-street mechanized car parking facility constructed in Srinagar

3. Achieved. 1 off-street mechanized parking was developed that can accommodate 288 light motor vehicles at a time.

4. At least 1 separate male and female toilet blocks in every shopping complex at relocation sites and mechanized car parking facility

4. Exceeded. 10 male and female segregated toilets were constructed in the two shopping complexes at relocation sites. Also, 1 toilet block each for males and females was constructed at the mechanized car parking facility.

18 Appendix 1

Design Summary

Performance Targets and Indicators

with Baselines Project Achievements of Project 2a

5. Conduct 5 skills training workshops on artisanal and handicrafts work for women family members of shopkeepers relocated due to flyover construction at Jehangir chowk (target: 39 women from 39 families)

5. Not achieved. Efforts were made but the trainings could not be conducted as not many women family members relocated by flyover construction showed interest in receiving it.

3. Improved drainage infrastructure

By December 2016: 1. 28.3 km of drains rehabilitated

(coverage area includes 13% low income/poor HHs)

1. Substantially achieved. 26.6 km of drains

was rehabilitated in a coverage area that includes 13% of poor and other low-income HHs. Balance 1.7 km was not implemented due to encroachment.

2. 10 km of new drains/drainage channel constructed.

2. Substantially achieved with delay in September 2018. 8.5 km of new drains and a drainage channel constructed including around 3.3 km completed by the state fund.

3. At least 6 awareness generation campaigns focused on spreading key messages on the links between health, hygiene, sanitation and the management of drainage systems conducted (target: 3 campaigns for Jammu and Srinagar each; number of trained: female=100, males=100 for each Jammu and Srinagar)

3. Achieved. Six campaigns were conducted, 3 in each in target town. (Exceeded the number of participants, with 270 female and 270 male participants in each target town).

4. Institutional capacity of ERA and ULBs strengthened

By December 2016: 1. 100 ULB representatives, ward

members and 100 municipal, EA and line agencies staff trained on new business processes or joined exposure trips (target 20% women)

1. Achieved. 4 workshops were

organized with 200 participants in total, of which 50, or 25%, were women from ULBs and line agencies.

2. Accrual-based accounting system adopted by project municipalities and balance sheets published from the fiscal year of 2015

2. Partly achieved. Double entry accrual-based accounting commenced in the municipal corporations. They finalized the annual financial statements to FY2017, not followed in subsequent years.

3. Organizational Development Plans for semi-autonomous entities for water supply developed by June 2013 and adopted and more efficient billing and collection system is established by 2015

3. Achieved with delay. Organizational development plans were developed and adopted, though delays to April 2015. The Public Health Engineering Department developed and implemented developed a computerized water billing system, though delays to 2019 but now operating smoothly. A new water tariff was approved in 2020.

Appendix 1 19

Design Summary

Performance Targets and Indicators

with Baselines Project Achievements of Project 2a

4. Equipment for 12 laboratories and 8 air and water quality monitoring stations, 6 mobile monitoring vehicles, and e-governance hardware and software procured by 2014

4. Not achieved. These were funded by another government project.

5. Project management system operational

By December 2016: 1. Project completed on time and

within the budget.

1. Partly achieved. Three subprojects for

water supply, drainage, and transport were not completed by the loan closure.

2. Training workshops conducted for at least 50 project staff of EA and line agencies in Jammu and Srinagar (target: 20% women)

2. Achieved. Two training workshops organized for 50 project staff in the executing agency and line agencies, of whom 12 or 24% were women.

ADB = Asian Development Bank, DMF = design and monitoring framework, ERA = Economic Reconstruction Agency, FHH = female-headed household, FY = fiscal year, HH = household, km = kilometer, lpcd = liters per capita per day, ULB = urban local body. Note: The fiscal year (FY) of the Government of India ends on 31 March. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2021 ends on 31 March 2021. a Sourced from the project management unit of the MFF, Economic Reconstruction Agency. b Impact indicators in this table are for the MFF as a whole (the same as the DFM outcome indicators). This project

completion report assesses the contribution of project 2 toward these impact indicators. c While the sewerage treatment plant was part of the MFF, it was not pursued in project 2 as it was not part of the

master plan for larger wastewater issue in the town and lacked a viable operation and maintenance O&M plan. d The coronavirus disease (COVID-19) pandemic posed constraints in gathering data for this completion report. e No traffic volume survey was conducted at project completion given the challenges during the impact of COVID-19

pandemic. Alternatively, the contribution of flyovers to reduced travel time was confirmed through selected interviews in the communities (Total 16 residents were interviewed. They are frequent users of the flyovers.).

Source: Asian Development Bank estimates.

Table A1.2: Weighting Factors to Determine Effectiveness

Project Outcomes Actual Cost ($ million) Weight

Outcome Achievement

Outcome Weight in

Achievement

1. Improved water supply infrastructure

9.40 0.14 100% 14%

2. Improved urban transport infrastructure

34.16 0.53 100% 52%

3. Improved drainage infrastructure 20.75 0.32 100% 31%

4. Improved solid waste collection 1.81 0.03 0% 0%

Total 66.12 1.00 - 87%

Project Outputs Actual Cost ($ million) Weight

Output Achievement

Output Weight in

Achievement

1. Improved water supply infrastructure

9.40 0.12 104% 13%

2. Improved urban transport infrastructure

34.16 0.44 90% 39%

3. Improved drainage infrastructure 20.75 0.27 95% 25%

4. Improved solid waste collection a 1.81 0.02 100% 2%

5. Institutional capacity of the Economic Reconstruction Agency and

12.18 0.16 67% 10%

20 Appendix 1

urban local bodies strengthened, and project management system operational

Total 78.30 1.00 - 90% a Project 2 provided goods to collect solid waste, such as vehicles, although this was not included in the DMF. Source: Asian Development Bank, South Asia Department project completion report team.

Appendix 2 21

STATUS OF ACTION PLAN FOR INSTITUTIONAL REFORM PROGRAMS Action Objective Year Outputs Support from the

MFF Status

Semi-autonomous entities such as boards or other suitable institutional mechanisms established to become responsible for water supply in the target towns

Operate the water supply system efficiently using commercial principles.

2014 • Issue notification of setting up a suitable institutional mechanism

• Government order on transfer of 18 mandatory functions to ULBs issued on 1 April 2013

• No final decision from the state on institutional arrangements

2015 • Carry out “as is” assessment of current water supply operation

• Finalize business plan and reform strategy

• Organize trainings for capacity building

• Develop water billing software

• Design determination model with tariff norms, principles, and a transparent subsidy mechanism

• Finalize organizational structure and service standards

• Frame rules and regulation

• Prepare revenue improvement action plan

• Consultant supporting the design stage

• Discussions with PHED for approval of institution and computerization reforms

• MOU drafted and discussed with concerned agencies

• Trainings

• “As is” assessment completed

• Business plan and reform strategy prepared and submitted in April 2015

• Six training courses for PHED conducted

• CBISC drafted a proposal for computerized billing system with online payment facility and grievance redress system. PHED is reviewing the MOU to implement it.

• Discussions held with SWRRA; separate consultants appointed by SWRRA worked on tariff determination

• Organizational structure prepared for new semi-autonomous entities

• Revenue improvement action plan prepared and submitted to PHED for approval and implementation

2016 • State government to approve separate entity for water supply operations in target towns

• Budget and human resources allocated to the newly created entity

• Trainings for capacity buildings

• Consultant support for implementing of business plan and reform

• Procurement of hardware and development of software

• Trainings

• The state is expected to decide whether to establish a water board

• Decision still pending

• Trainings conducted by municipal capacity building consultants

22 Appendix 2

Action Objective Year Outputs Support from the MFF

Status

• Commission water billing software

• Continue implementing revenue improvement plan

• Implementation of revenue improvement action plan including awareness campaign

2017 • Complete handover of water supply operation to new entity

• Consultant support for implementation of business plan

• Not achieved

Property tax reform

Ensure financial sustainability of ULBs

2014 • Design property tax system

• Establish property tax departments in ULBs

• Consultant support for design stage

• Municipal Corporation Act and its amendment empower municipal corporations to collect property tax

• Property Tax Board constituted

• No property tax department established

2015 • Set up GIS-based property tax register and IT-enabled billing and bill collection system

• Conduct training

• Consultancy support for implementation of plans

• Procurement of hardware and development of software

• Trainings

• Awareness campaign

• GIS based mapping already completed under project 1

• Trainings completed on the use of GIS-based tax register and online billing and collection

• Revenue improvement action plan prepared by CBISC for ULBs, to be endorsed by the state.

2016 • Complete rollout of property tax system

• Consultant support during operation stage

• Election of ULB approved by state cabinet which is the first step in implementing property tax system; system to be rolled out after election, for which no date is set.

• Property tax system not yet implemented

NRW reduction

NRW reduction 2015 • Assessment of NRW in 20 selected DMAs

• Contractor completed assessment of selected DMAs.

• Performance-based NRW reduction contract in force

Appendix 2 23

Action Objective Year Outputs Support from the MFF

Status

• MOU between the executing agency and PHED signed

2016 • Preparation of NRW reduction action plan for 30,000 households

• Consultant support

• Upgrading water supply network to reduce f NRW

• A Contractor executed works for the supply, installation, and removal of domestic water meters and portable flow meter in 20 DMAs, completing the plan

2017 • Reduce NRW from 45% to 15%

• Consultant support

• Upgrading water supply network to reduce NRW

• NRW reduction continues

CBISC = capacity building and institutional support consultants, DMA = district metered area, GIS = geographic information system, IT = information technology, MOU = memorandum of understanding, NRW = nonrevenue water, PHED = Public Health Engineering Department, SWRRA = State Water Resource Regulatory Authority, ULB = urban local body. Source: Asian Development Bank.

24 Appendix 3

PROJECT COST AT APPRAISAL AND ACTUAL

($ million) Appraisal Estimate a

Actual

Item Total Cost

Foreign Exchange

Local Currency Total Cost

A. Base Cost 1. Component A: Urban Infrastructure and Environmental Improvements

a. Water supply 18.73 0.00 17.65 17.65

b. Sewerage and drainage 18.86 0.00 38.93 38.93

c. Solid waste management 2.54 0.00 3.40 3.40

d. Transportation and urban roads 59.67 0.00 62.98 62.98

e. Resettlement and land acquisition 22.30 0.00 0.31 0.31 Subtotal (A) 122.10 0.00 123.27 123.27

2. Component B: Capacity Building, Institutional Development, Governance, and Investment Program Support

a. Training and workshops 1.00 0.00 0.00 0.00

b. Consultancy support 14.80 0.00 15.39 15.39

c. Incremental administration including computers and

peripherals 6.40 0.00 10.04 10.04

Subtotal (B)

22.20 0.00 25.43 25.43 B.

Contingencies b

18.50 0.00 0.00 0.00 C.

Taxes and Duties c 11.60 0.00 0.00 0.00

D. Financing Charges During Implementation 6.70 2.28 0.00 2.28

Total 181.10 2.28 148.70 150.98 a Based on mid-2011 unit prices. Breakdown into foreign exchange and local currency was not prepared for appraisal. b Contingencies were not required because of rupee depreciation. c The Finance Act, 1994 (Act No. 32 of 1994) regulating such indirect taxes as service tax on works and consultancy additive taxes, did not apply in the state

because of its special status as per Article 370 of the Constitution of India. Sources: Project Administration Manual for Project 2. The actual loan utilization is from the Asian Development Bank Loan Financial Information System; and Asian Development Bank estimates.

Appendix 4 25

PROJECT COST AT APPRAISAL AND AT COMPLETION BY FINANCIER ($ million)

Item Appraisal Estimatea At Completion

ADB Financing

% of Cost Category

State Financing

% of Cost Category

Total Share (%) ADB

Financing % of Cost Category

State Financing

% of Cost Category

Total Share (%)

A.

Base Cost

1. Component A: Urban Infrastructure and Environmental Improvements

a. Water supply 14.81 79.1% 3.92 20.9% 18.73 10.3% 9.40 53.3% 8.25 46.7% 17.65 11.7% b. Sewerage and

drainage 14.90 79.0% 3.96 21.0% 18.86 10.4% 20.75 53.3% 18.18 46.7% 38.93 25.8%

c. Solid waste

management 2.01 79.0% 0.53 21.0% 2.54 1.4% 1.81 53.3% 1.59 46.7% 3.40 2.3%

d. Transportation

and urban roads 47.08 79.0% 12.59 21.1% 59.67 32.9% 34.16 54.2% 28.82 45.8% 62.98 41.7%

e. Resettlement and

land acquisition 0.00 0.0% 22.30 100.0% 22.30 12.3% 0.00 0.0% 0.31 100.0% 0.31 0.2%

Subtotal (A) 78.80 64.5% 43.30 35.5% 122.10 67.4% 66.12 53.6% 57.15 46.4% 123.27 81.6%

2. Component B: Capacity Building, Institutional Development, Governance, and Investment Program Support

a. Training and

workshops 1.00 100.0% 0.00 0.0% 1.00 0.6% 0.00 0.0% 0.00 0.0% 0.00 0.0%

b. Consultancy

support 11.90 80.4% 2.90 19.6% 14.80 8.2% 8.66 56.3% 6.73 43.7% 15.39 10.2%

c. Incremental

administration including computers and peripherals

5.10 79.7% 1.30 20.3% 6.40 3.5% 3.52 35.1% 6.52 64.9% 10.04 6.6%

Subtotal (B) 18.00 81.1% 4.20 18.9% 22.20 12.3% 12.18 47.9% 13.25 52.1% 25.43 16.8%

B.

Contingenciesb 13.20 71.4% 5.30 28.6% 18.50 10.2% 0.00 0.0% 0.00 0.0% 0.00 0.0%

C.

Taxes and Dutiesc

0.00 0.0% 11.6 100.0% 11.60 6.4% 0.00 0.0% 0.00 0.0% 0.00 0.0%

D. Financing Charges During Implementation

0.00 0.0% 6.70 100.0% 6.70 3.7% 0.00 0.0% 2.28 100.0% 2.28 1.5%

Total 110.00 60.7% 71.10 39.3% 181.10 100.0% 78.30 51.9% 72.68 52.8% 150.98 100.0%

ADB = Asian Development Bank. Note: Numbers may not sum precisely because of rounding.

a Based on mid-2011 unit prices.

26 Appendix 4

b Contingencies were not required because of rupee depreciation. c Finance Act, 1994 (Act No. 32 of 1994) regulating indirect taxes like service tax on works and consultancy (additive taxes) was not applicable in the state because

of its special status and as per Article 370 of the Constitution of India. Source: Project Administration Manual for Loan 2925. ADB portion is from the ADB Loan Financial Information System for actual loan utilization. The state government portion is from Economic Reconstruction Agency.

Appendix 5 27

DISBURSEMENT OF ADB LOAN PROCEEDS

Table A5.1: Annual and Cumulative Disbursement of ADB Loan Proceedsa

Projection Actual

Annual

Disbursement

Cumulative

Disbursement

Annual

Disbursement Cumulative

Disbursement

Year Amount

($ million)

% of Total

Amount

($ million)

% of Total

Amount

($ million)

% of

Total

Amount

($ million)

% of

Total

2013 10.69 9.7 10.69 9.7 4.70 6.0 4.70 6.0

2014 59.53 54.1 70.22 63.8 7.06 9.0 11.76 15.0

2015 16.82 15.3 87.04 79.1 16.33 20.9 28.09 35.9

2016 16.70 15.2 103.74 94.3 21.81 27.8 49.90 63.7

2017 6.26 5.7 110.00 100.0 28.40 36.3 78.30 100.0

Total 110.00 100.0 110.00 100.0 78.30 100.0 78.30 100.0

ADB = Asian Development Bank. a Includes disbursements to advance accounts. Source: Asian Development Bank.

Figure A5.2: Projected and Actual Cumulative Disbursement of ADB Loan Proceeds ($ million)

ADB = Asian Development Bank. Source: Asian Development Bank.

-

15.0

30.0

45.0

60.0

75.0

90.0

105.0

120.0

2013 2014 2015 2016 2017

$ M

illio

ns

Cumulative Disbursement Projection Cumulative Actual Disbursement

28 Appendix 6

CONTRACT AWARDS OF ADB LOAN PROCEEDS

Table A6.1: Annual and Cumulative Contract Awards of ADB Loan Proceeds

Projections Actual

Annual

Contract Awards

Cumulative

Contract Awards

Annual

Contract Awards

Cumulative

Contract Awards

Year Amount

($ million)

% of Total

Amount

($ million)

% of Total

Amount

($ million)

% of Total

Amount

($ million)

% of Total

2013 106.7 97.0 106.7 97.0 49.9 63.7 49.9 94.3

2014 2.8 2.6 109.5 99.5 19.9 25.4 69.8 97.9

2015 0.5 0.5 110.0 100.0 4.3 5.5 74.1 97.9

2016 0.0 0.0 110.0 100.0 4.2 5.4 78.3 100.0

2017 0.0 0.0 110.0 100.0 0.0 0.0 78.3 100.0

Total 110.0 100.0 42.2 100.0 78.3 100.0 78.3 100.0

ADB = Asian Development Bank.

Note: Numbers may not sum precisely because of rounding.

Source: Asian Development Bank estimates.

Figure A6.2: Projected and Cumulative Contract Awards of ADB Loan Proceeds ($ million)

ADB = Asian Development Bank. Source: Asian Development Bank estimates.

-

15.0

30.0

45.0

60.0

75.0

90.0

105.0

120.0

2013 2014 2015 2016 2017

$ m

illi

on

Cumulative Awards Projection Cumulative Actual Awards

Appendix 7 29

CHRONOLOGY OF MAIN EVENTS Year Date Major Events

2012 2013

26 Oct ADB Board approval of the project 25 Mar First contract signed under project 2 (drainage). 2 April First contract signed in one target town for construction of car parking 22–26 Apr ADB midterm review mission 23 Apr Contract signed for construction of one flyover 7 May Contract signed for construction of the other flyover 30 May Contract signed for replacement of worn-out pipeline and construction of 10

overhead tanks 16 May Agreement signed for tranche 2

1–10 Jun ADB special project administration mission 11–14 Jun ADB loan review mission 20 Jun Contract signed for construction of tube wells lots 1 and 2 2 Aug Contract signed for construction of drainage system 13 Oct Contract signed to replace worn-out machinery and electrical equipment 22–26 Oct ADB special loan administrative mission 19–22 Nov ADB special loan administrative mission

2014 10–17 Feb ADB midterm review mission 21–25 Jul ADB loan review mission 7–26 Sep Heavy flooding 14 Oct Contract signed for construction of drains 17–24 Nov ADB loan review mission

2015 2016

9 Feb Contract signed for supply, installation and removal of domestic water meters and portable flow meters

13–20 Apr ADB loan review mission 7–9 Sep ADB loan review mission 14 Sep Contract signed for uplifting and upgrading 27 pumping stations 16–21 Nov ADB midterm review mission 4–11 Apr ADB loan review mission 8 Jul– 16 Nov Local unrest 21–22 Nov ADB loan review mission

2017

27 Feb–1 Mar ADB loan review mission 31 Mar First subproject completed

31 Mar Original date of loan closing 17 May Car parking completed 31 May Revised and final date of loan closing 30 Sep Contract closing for PMC and DSC 30 Sep 24 Nov

Contract closing for DSC except for transport component 8 pumping stations completed and handed over to UEED

2019 May–Oct Signed contracts for all the equipment in lots 1–11

7 April 6 pumping stations completed and handed over to UEED 18–22 June ADB follow-up mission 11 May First 1.5 kilometer link A3–A2 opened for traffic 20 Sep Ramp A6 200 meters towards Natipora opened for traffic Nov ADB loan review mission

ADB = Asian Development Bank, DSC = design supervision consultant, PMC = project management consultant, UEED = Urban Environmental Engineering Department. Source: Asian Development Bank.

30 Appendix 8

SUMMARY OF CONTRACT DETAILS

PCSS No.

Category No. Supply and Install Turnkey Contracts

Contract Amount with

ADB Financing ($)

Actual Disbursed

($)

0005 01 Construction of tube wells under water Supply, 2,371,457 2,371,457

0006 01 Replacement of worn-out pipeline and construction of 10 overhead tank

1,833,773 1,833,773

0011 01 Sewage network in Bhawani Nagar, Sherikan, and Paloura

2,659,912 2,659,912

0015 01 Construction of tube wells under water supply, lot 2

1,292,520 1,292,520

0023 01 Executing of works to supply, install, and remove domestic water meters and portable flow meters in 20 district metered areas

276,045 276,045

0002 01 Construction of expressway corridor from Jehanigir Chowk to Rambagh and Natipura

22,769,186 22,769,186

0003 01 Construction of Bikram Chowk flyover and widening and strengthening of road from Bikram Chowk to Convent School

8,539,291 8,539,291

0007 01 Construction of multistoried mechanized parking facility on M.A. Road near Lal Chowk

2,853,344 2,853,344

0004 01 Rehabilitation and channelization of storm water drains in Channi Himmat

1,750,524 1,750,524

0008 01 Construction of storm water drainage system and pump houses along NH1A, Athwajan–Pantha Chowk

3,408,053 3,408,053

0022 01 Rehabilitation and channelization of stormwater drains in Digiana and Gangyal

14,274,911 14,274,911

0028 01 Procurement of works for upgrading and uplifting of existing drainage pumping stations in Lot A: pumping stations on left bank of Jhelum River)

829,349 829,349

0029 01 Procurement of works for upgrading and uplifting of existing drainage pumping stations in Lot B: pumping stations of right bank of Jhelum River)

489,575 489,575

0012 02 Procurement of mobile water tankers and O&M equipment, lot 4

41,542 41,542

0013 02 Procurement of SWM equipment for municipal corporation, lot 1

250,482 250,482

0014 02 Procurement of SWM equipment for municipal corporation, lot 4

150,468 150,468

Appendix 8 31

PCSS No.

Category No. Supply and Install Turnkey Contracts

Contract Amount with

ADB Financing ($)

Actual Disbursed

($)

0017 02 Procurement of SWM equipment for municipal corporation, lot 2

262,719 262,719

0018 02 Procurement of SWM equipment for municipal corporation, lot 3

369,308

369,308

0021 02 Procurement of SWM equipment for municipal corporation, lot 5

400,961 400,961

0024 02 Procurement of mobile water tankers and O&M equipment, lot 3

37,685

37,685

0025 02 Procurement of mobile water tankers and O&M equipment, lot 5

57,207

57,207

0026 02 Procurement of mobile water tankers and O&M equipment–Lot 1

504,394 504,394

0031 02 Supply and delivery of equipment for use in PHED, lot 1

36,572 36,572

0032 02 Supply and delivery of equipment for use in PHED, lot 2

90,985 90,985

0033 02 Supply and delivery of equipment for use in PHED, lot 3

79,841 79,841

0034 02 Supply and delivery of equipment for use in PHED, lot 4

37,165 37,165

0035 02 Supply and delivery of equipment for use in PHED, lot 5

97,211 97,211

0036 02 Supply and delivery of equipment for use in PHED, lot 6

27,851 27,851

0037 02 Supply and delivery of equipment for use in PHED, lot 7

0 0

0038 02 Supply and delivery of equipment for use in municipal corporation, lot 8

52,514 52,514

0039 02 Supply and delivery of equipment for use in municipal corporation, lot 9

87,436 87,436

0040 02 Supply and delivery of equipment for use in municipal corporation, lot 10

103,366 103,366

0041 02 Supply and delivery of equipment for use in municipal corporation, lot 11

90,659 90,659

0001 05 Project management consultancy services 23,40,168 23,40,168

32 Appendix 8

PCSS No.

Category No. Supply and Install Turnkey Contracts

Contract Amount with

ADB Financing ($)

Actual Disbursed

($)

0016 05 Consultancy services to assess NRW and prepare NRW reduction action plan

8,84,382 8,84,382

0030 05 DSC 2,096,160 2,096,160

0019 05 Consultancy services for DSC services 1,804,597 1,804,597

0020 Capacity building and institutional support consultancy services for PHED

15,30,074 15,30,074

0009 04 Incremental administration support to ERA 3,518,731 3,518,731

Total 78,300,418 78,300,418

ADB = Asian Development Bank, DSC = design supervision consultant, ERA = Economic Reconstruction Agency, O&M = operation and maintenance, PMC = project management consultant, PCSS = procurement contract summary sheet, PHED= Public Health Engineering Department, NRW = nonrevenue water, SWM = solid waste management, UEED = Urban Environmental Engineering Department.

Source: Asian Development Bank estimates.

Appendix 9 33

IMPLEMENTATION OF GENDER ACTION PLAN AND ACHIEVEMENTS A. Introduction 1. The MFF Investment Program was designed to help the state government address the state’s low percentage of households with access to safe drinking water, which reaches only 34.7% of 2.4 million people; lack of piped systems for sewage collection; and need for sewage treatment capacity. The 2011 census recorded 52% of households with toilets and 24% connected directly to drains; 17% had to defecate in the open. The annual average of waterlogging or flooding in the city centers was 2 hours in 30 days in one target town and 2.2 hours in 10 days in the other target town. Though 74% of the solid waste was collected in one target town and 100% in the other target town, most houses in the congested parts of the target towns discharged their wastes into open surface drains endangering public health and water quality in streams, rivers, and lakes. The investment program sought to expand basic urban infrastructure to foster economic growth in the state to address these problems. 2. Project 2 under the investment program covered mainly water supply, drainage, and urban transport, which were appraised as essential to meet investment program objectives. The expected impact was improved living environments in the target towns, as indicated by increased coverage of infrastructure for municipal water supply and drainage services, functional drainage systems, and better roads. The expected outcome was improved urban services in the target towns as manifested in greater numbers of people benefiting from water supply subprojects, reduced hours of waterlogging with drainage improvement, and saved travel hours from flyover construction. 3. The project was categorized effective gender mainstreaming (EGM). To mainstream gender in the project, performance indicators and targets for gender equality and women’s empowerment were incorporated into the project design and monitoring framework (DMF), and a gender action plan (GAP) was prepared and implemented. B. Gender Issues 4. A socioeconomic survey conducted during the project design found anemia affecting 52% of married women aged 15–49 in urban areas of the state.1 Anemia compromised their immune systems, making them highly vulnerable to waterborne diseases that spread through poor sanitation. While women themselves suffered compromised immunity, their traditional caring roles obligated them to take care of other household members, especially children and the sick, and elderly. With these obligations and other household tasks, only 42% of women had paid work. Women’s lack of time for paid work was exacerbated by the need to fetch water outside their homes. The female workforce participation rate in urban areas of the state was only 15%, significantly lower than 25% in the rest of India. Only 54% of women were literate, substantially lower than men’s literacy rate of 78%. Among girls aged to be in class I–X, 53% had dropped out of school. Low literacy constrained girls and women from developing their cognitive skills and self-confidence and kept many women from participating meaningfully and productively in economic activities. Weak labor markets and limited job opportunities for women exacerbated women’s high unemployment rate of 11% (footnote 1). While the state performed well in bringing down poverty levels compared with other states in India, it ranked 28 in 35 states and union territories on the

1 Asian Development Bank. 2007. Report and Recommendation of the President to the Board of Directors: Proposed

Multitranche Financing Facility to the Government of India for the Jammu and Kashmir Urban Sector Development Investment Program. Summary of Poverty Reduction and Social Strategy (Appendix 7). Manila.

34 Appendix 9

gender development index and 33 in terms of gender equality measures. C. Project Gender Features 5. The GAP was designed to create equal opportunities for women to participate in and benefit from the project. The following are its key features:

(i) Gender in urban infrastructures and services:

(a) Focus on poor households headed by women for the provision of urban services, transport infrastructure, sewerage, water supply, and solid waste management.

(b) Create income opportunities and provide enterprise development support for the unemployed, especially women, in the households of shopkeepers relocated by flyover construction and the expansion of civil works.

(c) Develop women-friendly civic amenities to promote the needs, safety, and privacy of women and girls in the public transport system.

(d) Promote improved health and hygiene practices among women living in subproject areas or zones of influence of drainage construction in the target towns.

(e) Promote community-led water conservation initiatives and women’s leadership in water supply management in subproject areas in one target town.

(ii) Enabling measures:

(a) Raise awareness of gender issues and behavior change with initiatives on solid waste management in communities in the target towns, including poor and other low-income households and those headed by women.

(b) Include clauses in all bidding documents requiring contractors to adopt gender equality targets and adhere to core labor standards, including equal wages for work of equal value.

(c) Develop capacity in urban local body (ULB), municipal, and project staff on key gender concepts and the different roles played by women in the contexts of water, sanitation, hygiene, and health, as well as on good practices in gender-inclusive urban development.

(d) Use a gender lens—a focus on the gender aspects of the project—in project management and monitoring, including promoting women’s participation in the prioritization and monitoring of project activities.

D. Implementation, Monitoring, and Reporting Arrangements

6. The executing agency adequately arranged for GAP implementation, monitoring, and reporting. The GAP and gender-related targets of the DMF were implemented by a dedicated consulting firm mobilized under the project. A gender specialist led the team of consultants at the firm and provided supervisory support. ULBs and other line departments were tapped from time to time to provide operational support for awareness-raising, community mobilization, and capacity development. Social and resettlement experts in the target towns, supported by the social and resettlement specialist of the project management consultants team, also supervised GAP implementation. The project provided a budget of $260,000 to implement gender and social activities—workshops, community consultation meetings, skills training, and the preparation of training modules, brochures, and pamphlets—included in the GAP. The project collected sex-disaggregated data and regularly submitted progress reports on GAP implementation.

Appendix 9 35

E. GENDER ACTION PLAN ACHIEVEMENTS

7. As shown in Table A9, 90% of 10 GAP activities were completed, and 93% of 14 quantitative targets in the GAP and DMF were achieved. As such, GAP implementation was assessed as successful. The practical gender benefits of GAP implementation are as follow:

(i) Reduced time poverty and safety risks from remote water collection and use. The time women spent collecting water was reduced by the improved water supply through new or rehabilitated water pipelines to homes in one of the target towns, 13% of them low-income and 8% headed by women. This allowed women more time for social and recreational activities. By correcting a lack of water supply and sanitation facilities, the project mitigated exposure to safety risks for vulnerable people, including women and girls.

(ii) Safety and convenience improved in public places. The provision of 10 sex-segregated toilets serving the Rambagh and Jehangir Chowk shopping complexes and attached mechanized parking facilities contributed to public safety and convenience, especially for women and girls. The facilities enable women’s mobility even at odd hours as they are equipped with all modern safety amenities, including adequate lighting and closed-circuit television cameras.

(iii) Increased knowledge of risks, hazard response, and household water and sanitation management. The equal participation of women in information, education, communication, and awareness campaigns for project communities and residents—as women were 50% of the 542 participants—informed them on the role of user communities in the effective management of household and community drains, on household water treatment, and on sanitation and hygiene, enabling women to manage risks and health hazards caused by fetching water outside of their homes.

8. The strategic gender benefits are as follow:

(i) Creation of spaces for women’s voices to be heard. With the introduction of

participatory community consultations and mandatory quotas for involving women in the planning, design, management, operation, and maintenance of urban infrastructure and services, women in one of the target towns could raise their voice and their concerns regarding water supply, sanitation, and solid waste management, specifically in the drainage component of the project. This gave hope to women who have long been constrained from contributing to the development agenda and raising their voices as they have been precluded from many development-oriented conversations in the state (Box 1).

(ii) Better understanding of the relationship between gender and transport. The urban development department recognized that sustainable urban development was incomplete without integrating women in urban transport.

(iii) Enhancing institutional capacity in gender mainstreaming. Through rigorous training, orientations, and cross-learning programs, service providers—including project staff, stakeholders, and public representatives—improved their understanding of gender equality issues in urban infrastructure. This is a strategic benefit as better equipped service providers to address problems affecting project planning and implementation, including practical

36 Appendix 9

ways to ensure the meaningful participation of women, and set a precedent for their urban infrastructure development programs (Box 2).

Box 1: Women’s Voice and Agency

Sunita Devi and Poonam Kumari discuss the subproject: Rehabilitation and Channelization of the Storm Water Drain at Digiana, Gangyal, Ashram, Thangar and Tributary of Thangar, one of the target towns. (Loan 2925) “We are women residents of Shankar Colony Gangyal, adjacent to storm water drains rehabilitated by the government. The drains were all previously constructed of dired mud bricks for a huge catchment area. Before the reconstruction of the drainage system, during the rainy season, water from higher areas would gush down and immerse our houses up to 3 or 4 feet deep. Every year, the floods posed health risks, especially for the elderly, children, and women. During flash floods, these vulnerable groups had to respond to the ordeal themselves because the men were at work. We also incurred losses from our relocation to temporary shelters or relatives. Our houses would be damp and full of mud for at least 10–15 days. Also, they became breeding grounds for several vector-borne diseases, causing skin infections, cholera, and diarrhea outbreaks.” “The government department consulted us on our issues and priorities before starting the construction of the drainage. We were initially hesitant to share our concerns in the presence of our male counterparts, but the project staff and officers motivated us to raise our voices. At first, we had only a frail hope that we would be heard. Now, we are happy that the construction of the drains was synced with our issues, priorities, and concerns. The new drainage system has indeed brought social, economic and health benefits and provided us with a sense of safety, stability, and dignity.” Source: Focus group discussion on 9 January 2020. One of the target towns.

Box 2: Enabling Institutional Environment and Capacity Toward Gender Mainstreaming

“Our association with ADB goes back to 2005. We have supported the social and gender elements of the program. ADB provided the staff and stakeholders with a plethora of capacity building opportunities through training workshops. These workshops and the implementation of gender action plans helped break the ice on gender equality issues in water supply, sanitation, solid waste management, and urban transport. We now witness that our team is more open to involving women in community consultations and awareness campaigns, providing them with space to express their priorities and concerns on, for instance, women’s preference on the timing for water supply and their role in operation and maintenance. We have come to understand that women’s participation in dealing with water loss, water management, the disposal of solid waste, and awareness of health hazards is critical to sustainable urban development, including urban planning and implementation.” “We are now better equipped to apply the participatory and responsive approach to the needs of the poor. It acknowledges that women have primary roles in the collection, transport, use, and management of water and the promotion of sanitary practices.” Source: Focus group discussion on 8 January 2020 with the project directors for one of the target towns and safeguards, project managers for transport and hydraulics, and the nodal officer for gender action plan implementation.

Appendix 9 37

Table A9: Gender Action Plan Achievements Matrix

Activities and Targets Achievements Assessment

Gender-focused awareness-building and social mobilization activities  

Activity 1. Build awareness of gender issues and ensure women’s participation in the prioritization and monitoring of project activities and in all decision-making processes and structures.  Target 1. Develop partnership with resource agencies to conduct gender awareness and social inclusion workshops for project staff and government officials, including ULBs and municipalities, targeting four workshops, two in each target, with 20% of women staff.

(i) Partnerships were developed with (a) state departments for roads and buildings, public works, public health engineering, irrigation and flood control, municipal corporations, social welfare (represented by the National Mission for Empowerment of Women and Integrated Child Development Service), maintenance and rural electrification, power development, labor welfare, and a special tribunal; (b) the Development Authority and Housing and Urban Development; (c) university departments of sociology; and (d) selected media.

(ii) Three workshops were organized, two in one target town and one in the other, with 312 participants, of whom 78, or 25% were women.a 

(iii) Topics included: (a) gender equality issues in urban infrastructure services and amenities, (b) practical ways to ensure the meaningful participation of women in prioritization and monitoring of project activities, and (c) women in decision-making processes. 

Activity 1 completed

Target 1 achieved 

Activity 2. Ensure all bidding documents include a clause requiring contractors to adopt gender targets and the provision of core labor standards (including equal wages).  Target 2. Ensure that all bidding documents contain provisions for core labor standards.    Target 3. Conduct 10 sensitization workshops, 5 in each target town, for contractors on gender-responsive targets and core labor standards. 

(i) Eight bidding documents, or 100% with provisions on core labor standards. Provisions were covered in general conditions of the contract under 6.1 (Engagement of Staff and Labor), 6.2 (Rates of Wages and Conditions of Labor) 6.4 (Applicability of Labor Laws), 6.5 (Working Hours), 6.6 (Facilities for Staff and Labor), 6.7, (Health and Safety) 6.14 (Supply of Water), 6.19 (Funeral Arrangements), 6.20 (Forced Labor), 6.21 (Child Labor), and 6.24 (Non-discrimination and Equal Opportunity including equal wages for work of equal value). 

(ii) 11 workshops were organized (five in one target town and six in the other) with 338 participants, including 8 contractors, 95 construction managers, sites workers and laborers, 6 women staff in the PMU, and design supervision and project management consultants staff. The assistant labor commissioner and district labor officers also participated as resource persons in three of 11 workshops. b  

Activity 2 completed

Target 2 achieved 

Target 3 achieved

38 Appendix 9

Activities and Targets Achievements Assessment

Activity 3.   Implement behavioral change initiatives in solid waste management for communities in the target towns, including poor and other low-income households and those headed by women. c Target 4. Conduct behavior change communications (BCC) campaigns and training focused on improved intra- and inter-household health; the reduce, reuse, and recycle strategy; hygiene; sanitation; and environmental protection behavior. (Target: 100 female, 100 male)    Target 5. Develop and distribute 5,000 pamphlets, leaflets, posters, and flex-banners on key behavior change messages, particularly in relation to hygiene and sanitation. 

(i) Four BCC campaigns were organized with 285 participants, of whom 175, or 62%, were women. 

(ii) Topics of the campaigns were: (a) the identification of potential behavior factors; (b) the measurement and determination of behavior factors; (c) the identification and selection of behavior change strategies; (d) popular behavioral change techniques; and (e) the applicability of the reduce, reuse, and recycle approach, particularly in solid waste management.d 

(iii) 11,000 pamphlets, leaflets, and posters carrying BCC on hygiene and sanitation disseminated. The BCC materials included messages on (a) sanitation practices; (b) links with maintaining storm water drainage; (c) personal and community hygiene and health; (d) prevention of disposal of solid waste in storm water drains, including improved intra-and inter-household health’ and ‘environmental protection behavior; and (e) basic knowledge on sewerage systems and their operation and maintenance.   

Activity 3 completed

Target 4 achieved

Target 5 achieved

Output 1. Improved water supply infrastructure 

Activity 4. Promote community-led water conservation initiatives among households in the water supply subproject area of one target town.     Target 6.  Conduct one social mobilization campaign focused on involving communities, including women, in the use and conservation of water resources, targeting 100 females and 100 males.

(i) Four social mobilization campaigns were organized with 288 participants, including students, teachers, and other residents, of whom 187, or 65% were women.

(ii) The topics of the campaigns were (a) project scope and benefits for the coverage area, (b) communities’ role in water conservation and management, and (c) basic information on community-led water conservation approach and initiatives.   

Activity 4 completed

Target 6 achieved 

Target 7. DMF Output 1.1 (not in the GAP).  67 km of water pipelines rehabilitated, their coverage area including 13% of poor and low-income households and all households headed by women.

(i) 67 km of water pipelines were achieved with delay in March 2020, of which 50 km were completed under ADB financing and the rest were rehabilitated using state funds to benefit 90,000 people from Channi Himmat Secs 1, 2, and 3, Channi Rama; Sainik Colony Secs D, and F; Shakti Nagar; Part Paloura; and other locations.

(ii) Improved water pipelines are projected to benefit 100% of households in the coverage areas, 13% of them poor and other low-income households and 8% of them headed by women. e 

Target 7 achieved

Output 2. Improved urban transport infrastructure 

Appendix 9 39

Activities and Targets Achievements Assessment

 Activity 5. Create income-generating opportunities for unemployed family members, especially women, in the households of low-income shopkeepers relocated by flyover construction in one target town, up to one per household.  Target 8. Conduct five skill training workshops on home-based artisanal and handicraft work and establish partnerships with marketing agencies for buying stock, targeting 39 women in 39 families. 

(i) Women family members in the households of shopkeepers to be relocated by flyover construction were reluctant to receive livelihood training. The cost benefit analysis by the executing agency concluded that the training was not feasible.

Activity 5 not completed

Target 8 not achieved

Aligned with DMF Output 2.5.  Conduct five skills training workshops on artisanal and handicraft work for women family members in the households of shopkeepers to be relocated by flyover construction at Jehangir Chowk, targeting 39 women in 39 families.

Activity 6. Develop women-friendly civic amenities to promote the needs, safety and privacy of women and girls in the public transport system in one target town.  Target 9.  Construct at least one sex-segregated male and female toilet block serving in each shopping complex at relocation sites and the mechanized car parking facility.

(i) 10 sex-segregated toilets were constructed: 6 in Rambagh shopping complex and 4 in the Jehangir Chowk shopping complex. All of them are functional.   

(ii) A multilevel mechanized car parking near Jehangir Chowk was developed with two toilet blocks, one of them for women.

Activity 6 completed

 Target 9 achieved 

Aligned with DMF Output 2.4. At least one sex-segregated male and female toilet block serving in each shopping complex at relocation sites and the mechanized car parking facility. 

Output 3. Improved drainage infrastructure 

Activity 7. Promote improved health and hygiene practices among households living in the subproject area and zone of influence of drainage construction in the target towns.   Target 10. Conduct at least six awareness-generation campaigns to spread key messages on the links between health, hygiene, sanitation, and the management of drainage systems, targeting three campaigns in each target town and 100 males and 100

(i) 10 awareness-generation campaigns were organized, seven in one target town and three in the other target town. 

(ii) 542 participants, of whom 271 or 50%, were women, attended from the project zone of influence of drainage construction in the target towns. 

(iii) The topics of the campaigns were: (a) the role of user communities in the effective management of households and community drains, household water treatment, and sanitation-linked hygiene; (b) understanding best practices and time-tested participatory

Activity 7 completed

Target 10 achieved 

40 Appendix 9

Activities and Targets Achievements Assessment

females in each town. methods on community participation; and (c) women’s role in sanitation management.   

Aligned with DMF Output 3.3. Conduct at least six awareness-generation campaigns to spread key messages on the links between health, hygiene, sanitation and the management of drainage systems, targeting three campaigns for each target town and 100 males and 100 females in each town.

Output 4. Institutional capacity of ERA and ULBs strengthened 

Activity 8. Conduct capacity development initiatives on good practices in urban development for line agencies, ULBs, and elected representatives.    Target 11. Organize at least four exposure visits for 200 ULBs, line agencies, and elected representatives to urban development projects with good practices in mobilizing communities around social and gender issues, targeting 20% women. 

(i) Four exposure workshops were organized with 200 participants from ULBs and line agencies in the target towns, of whom 50, or 25%, were women.  

(ii) The topics of the exposure workshops were: (a) the importance and needs of community mobilization and key social and gender equality issues in the project-influence areas in the target towns; (b) approaches and tools to mobilize communities to identify water supply, sewage management, trash collection, and drainage as social issues; and (c) new business opportunities and processes.

(iii) The DMF provided flexibility to choose between the exposure visit and training program. The 2014 floods, prolonged civil unrest, and non-functionality of the ULB for 5 years had a detrimental impact on organizing exposure visits. The activity was envisaged for participants from the target towns, but continued disruption hit plans for one of the target towns. ERA therefore resorted to organizing training programs along the same lines that the activity had envisioned.

Activity 8 completed

Target 11 achieved 

Aligned with DMF Output 4.1.  Strengthening institutional capacity in ERA and ULBs, with 100 ULB representatives and ward members and 100 municipal, executing agency, and line agency staff trained on new business processes or joining exposure trips, targeting 20% women.

Output 5. Project management system operational, with gender-sensitive project management and monitoring support 

Activity 9. Ensure that communities provide monitoring support to project activities.  Target 12. Hold semiannual participatory and community-based monitoring consultation meetings and exercises with equal participation of women, targeting 2 meetings per year for 5 years and 50 female and 50 male participants.  

(i) 10 semiannual consultation meetings were organized with 100 participants, of whom 50 were women. 

(ii) The representatives from community-based organizations were consulted under the project and involved from time to time in implementing civil works under the water supply, drainage, and flyover component of the project. They participated in project implementation when required through regular meetings during construction.

Activity 9 completed

Target 12 achieved 

Activity 10. Ensure effective project management and Activity 10

Appendix 9 41

Activities and Targets Achievements Assessment

monitoring support using a gender lens.  Target 13. Conduct two training workshops, one in each target town, for staff on project management and monitoring. 

(i) Two training workshops organized for staff, one in each target towns with a total of 50 participants, of whom 12, or 24%, were women. 

(ii) The topics of the training workshops were (a) project management and monitoring aspects; (b) awareness on gender issues and ensuring women’s participation in project benefits, monitoring, and decision-making processes; and (c) how to ensure adherence to core labor standards in civil contracts, including equal wages for work of equal value.

completed

Target 13 achieved

Aligned with DMF Output 5.2.  Conduct training workshops for at least 50 project staff in the executing agency and line agencies in the target towns, targeting  20% women. 

Target 14. DMF Output 3.1).  Rehabilitate 28.3 km of drains rehabilitated with a coverage area that includes 13% of poor and other low-income households.

(i) Drain rehabilitation scope was reduced to 23.4 km, with 19.2 km of drains actually rehabilitated.

(ii) Drains were rehabilitated or constructed in one target town to benefit residents from Channi Himmat, Trikuta Nagar Extension, Nanak Nagar, Preet Nagar, Sanjay Nagar, Digiana, Dashmesh Nagar, Gangyal, Ashram, Nai Basti, and Airport.  

(iii) Drains are projected to benefit 100% of the households in the coverage areas, including 13% poor and other low-income households and 8% of those headed by women.f 

Target 14 achieved 

Overall GAP Assessment: Successful

BCC = behavior change communication, DMF= design, and monitoring framework, ERA=Economic Reconstruction Agency, GAP = gender action plan, PMU = project management unit, ULB = urban local body. a In September 2014, the region suffered disastrous floods, in the aftermath of which government agencies and local communities were heavily involved in rehabilitation.

In this context, the executing agency decided to make the first workshop in Feb 2014, a combined one, as it had already achieved the target of 100 participants.  b In one target town, two workshops on 26 December 2013, one on 16 December 2014, one on 22 January 2016, and one workshop on 13 June 2016. In the other target

town, one workshop on 8 February 2014, two on 11 May 2015, two on 12 May 2015, and one on 31 March 2016.   c This activity and its targets are added here from GAP Output 4. Improved solid waste infrastructure, which has no equivalent output in the DMF. It is considered related

to this overall GAP output.  d In one target town, on 29 March 2016 at Islamic Model High School, Burzulla; on 25–27 May 2016 at Rawalpora, with 66 participants, 50, or 76%, of them women; ii.

total 40 local resident, .18 (45%). Women’s representation in both programs was 64%. In the other target town, on 28 January 2016 at Bakshi Nagar near Gurudwara, with 53 participants, 33, or 62.26%, of them women, and on 1–4 June 2016 at Mandalik Nagar, with 55 participants, 26, or 47%, of them women. 

e According to Census 2011, one target town had 154,908 households. The project did not provide household connection baselines and end-of-project surveys. The interventions were expected to benefit 20,138 households below poverty line and 12,393 households headed by women. 

f The Asian Development Bank suggested conducted a willingness survey during the Review Mission (Aide-mémoire , 4–11 April 2016, para. 39 p 17). g Nine of 10activities were completed, and 13 of 14 of the combined quantitative targets, or 93% were achieved.

42 Appendix 9

F. LESSONS LEARNED 9. Women’s participation in other urban development projects in the state was formerly limited for lack of a gender-mainstreaming mechanism or institutional focus on gender equality and women’s empowerment, as well as restrictive social mobility norms. To re-enforce and upscale the results achieved in the project, similar and more advanced initiatives have been included in the design of a subsequent tranche of the facility. For the sustained promotion of gender equality and women’s empowerment, a required course of action is for the implementing agency, and other line departments, government schemes, and programs, to plan effective convergence of initiatives to promote gender equality and women’s empowerment beyond the MFF.

Appendix 10 43

SAFEGUARDS ASSESSMENTS

1. Safeguards categorization. Project 2 was classified environment category B, involuntary resettlement category A, and category C for indigenous peoples as per the Asian Development Bank (ADB) Safeguards Policy Statement, 2009.1 These safeguard assessments were unchanged during implementation. 2. Safeguard implementation arrangements. An officer of the rank of chief engineer was deputized as the director of safeguards in the Economic Reconstruction Agency (ERA) and was supported by four environmental and resettlement experts responsible for implementing safeguard requirements. Two officers from the state Revenue Department were posted as land acquisition officers. In addition, safeguard experts from the program management consultant and two design and supervision consultants provided support toward effectively implementing safeguard requirements and monitoring implementation. Civil works contractors had designated environment officers at their worksites. An external resettlement monitor was also mobilized by the ERA, as per the provision of resettlement framework for project 2.2 The state government constituted a senior committee called the Divisional Level Committee (DLC) in May 2011 to fast-track the implementation of resettlement plans under subprojects being executed by ERA under project 2. Further, a sub-committee of the DLC was constituted to negotiate with affected people. The decisions made during these negotiations were referred to the DLC for endorsement, as further negotiations in cases not successfully by the sub-committee. Regular training programs were conducted for ERA and contractor staff on safeguard implementation and monitoring. Institutional arrangements for managing safeguards were assessed to be adequate.

A. Social Safeguard Assessment

3. During loan processing, ADB approved a resettlement framework, an indigenous peoples planning framework, and resettlement plans for seven subprojects: one for water supply, three for transport, and three for drainage. Significant resettlement impacts were envisioned as part of one contract package to build an elevated expressway corridor and flyover from Jehangir Chowk to Rambagh, for which a resettlement plan was prepared reviewed, cleared, and disclosed by ADB and ERA. Other contract packages of project 2 did not have any significant resettlement impacts. Two subprojects required the acquisition of private land: (i) 6,034 square meters (m2) of private land was required for the construction of flyover from Jehangir Chowk to Rambagh,3 and (ii) 1,229.10 m2 of private land was required to rehabilitate Gangyal Digiana storm water drainage. Two shopping complexes for the rehabilitation of the affected shops were constructed at Jehangir Chowk and Rambagh.

4. During resettlement plan preparation for the elevated expressway corridor and flyover from Jehangir Chowk to Rambagh, impact was envisaged on 285 shops, 257 of them operated

1 Project 1 of the multitranche financing facility was categorized and implemented as per ADB. 2002. Environmental

Policy of the Asian Development Bank. Manila; ADB. 1995. Involuntary Resettlement. Manila; and ADB. 1998. The Bank’s Policy on Indigenous Peoples. Manila.

2 External monitoring was conducted by qualified firms through competitive bidding. Qualified nongovernment organizations with resettlement and rehabilitation experience were not available in the state.

3 The subproject required the acquisition of 18,293 m2 of land—6034 m2 of it private and the rest government owned—to construct the proposed flyover and 9,097 m2 of land to construct the two rehabilitation complexes. Of the 9,097 m2 needed for rehabilitating shops, only 4,740 m2 at Rambagh was acquired, the land belonging to the erstwhile Post & Telegraph Department, now the state-run Bharat Sanchar Nigam Limited and the Department of Posts. All the land required for constructing the rehabilitation complex at Jehangir Chowk was state-owned, Work on both complexes has been completed and they are opened to the public. Source: Semiannual Social Monitoring Report for project number: 41116-033 in March–August 2019 submitted in April 2020.

44 Appendix 10

by tenants and 28 owner operated, and 60 structures, 24 of them owned by the government, 28 privately owned, and 8 encroached upon only temporarily. The 285 shops were housed in 28 structures, 4 government owned, 16 private, and 8 temporarily affected. During implementation impact on 25 shops was avoided through changes in alignment and engineering design. Finally, 260 shops were rehabilitated, 99 of them rehabilitated by the municipal corporation, and the remaining 161 allotted shops in the rehabilitation complexes, with 91 shops relocated to the Jehangir Chowk shopping complex and 70 shops to the Rambagh shopping complex.4 For one property, ERA adopted in DLC meetings the principle of paying replacement cost and additional support of ₹1 million to people affected when they lost their residence as compensation in lieu of replacement land. This amount was additional to compensation for the land and structure. Similarly, the owners shops operated by tenants were provided additional compensation of ₹0.25 million for lost income from the shops. The tenants of those shops were provided with new shops to continue their business and trade, as before the project. Thus, title holders and non-title holders alike were compensated as provided under the resettlement framework and resettlement plan based on Safeguard Policy Statement, 2009. One grievance was registered by shopkeepers at Solina Bazar regarding compensation for temporary loss of income. It was examined by the grievance redressal committee and the disruption was found to be for reasons beyond the control of the project and therefore ineligible.

5. For the storm water drainage subproject at Digiana, Gangyal, 35 affected people and one temple trust holding common property were identified as losing strips of land and minor structures such as boundary walls. Land ownership could not be established and is under investigation by the district authority. ADB received a complaint from one affected person regarding non-receipt of compensation. The issue was discussed with the PMU, which informed ADB that a joint site visit and verification survey was conducted by a team comprising of the state revenue department and PIU staff. The report from the revenue department is still pending. Irrespective of the site visit report, a corrective action plan was agreed for ERA implementation by July 2021 to ensure compensation payment to all affected people, including the complainant

under the subproject. 5 The PMU confirmed that there were no other pending complaints regarding subprojects implemented by ERA. All other subprojects in the targeted cities

implemented the resettlement plan as proposed.6 6. Indigenous Peoples. No impacts on indigenous peoples were identified at project appraisal or later in the project cycle. 7. Information disclosure and grievance redress. Information disclosure and consultation for safeguard implementation were effectively carried out, including (i) the distribution and dissemination of safeguard summaries and related information through public information brochures in Urdu and Hindi to affected households, (ii) regular consultative meetings with affected households and other stakeholders during project implementation, (iii) monitoring, (iv) the disclosure of safeguards documents, and (v) site visits to the shopping complexes constructed

4 A property marked S-15A, was affected by a family dispute in court, so ERA deposited full compensation in an escrow

account numbered 0110010100000846 and in the name of land acquisition collector of ERA. 5 The subproject did not cause any physical displacement or livelihood loss to the people identified as affected,

including the complainant who filed for compensation payment. Shiv temple, a common property in Gangyal at the edge of the drain, suffered minor impact as a strip of land measuring 40 m2 and boundary wall along the drain was required for widening the drain at this location. The temple continues to be operational in the same location without any hindrance, as before the project.

6 ADB. 2020. Social Monitoring Report (March–August 2019): Jammu and Kashmir Urban Sector Development Investment Program–Tranche 2. Manila.

Appendix 10 45

to rehabilitate shops affected by the Jehangir Chowk subproject, along with meetings with affected people and all concerned officials including from line departments. A grievance redress mechanism was set up in accordance with the agreed frameworks. 8. Monitoring and reporting. Internal safeguard monitoring reports adequately captured the status of safeguard implementation and were submitted periodically. External monitoring of social safeguard requirements was undertaken during project implementation. ERA is expected to report about the outstanding issue regarding payment of compensation to affected people under the drainage subproject (para. 5, Appendix 10). This issue was mentioned in the last semiannual social safeguard monitoring report submitted by ERA. Biannual environmental and social safeguards monitoring reports, were submitted to ADB in a timely way and duly disclosed. 9. Implementation challenges. Project 2 faced some implementation challenges affecting social safeguards because of urban complexities and the magnitude of construction, all of which were successfully managed.

(i) Shifting all utilities, boundary walls, and other structures prior to contract award would have helped deliver projects in a timely, responsive, and efficient manner. However, safeguard team established communication channels with multiple stakeholders, used the DLC platform during project execution, and successfully settled all such issues.

(ii) Shop operators were apprehensive about the preferential treatment regarding the allotment of new shops at the shopping complexes, but this was transparently handled by drawing of lots in presence of state administrators. All shops were allotted as per the drawing of lots.

(iii) The impact from restricted traffic movement, and the loss to shops of clientele in certain sections during flyover construction, was mitigated through prior information in local newspapers and night work at marketplaces. This helped sustain business activity without affecting the construction schedule.

(iv) Payment of non-title holders was an issue, as the State Land Acquisition Act, 1990 (1934 AD) did not recognize their entitlement. The resettlement framework and loan covenants were successfully invoked through the DLC platform, and non-title holders were paid compensation.

10. Lessons learned. The project provided important lessons regarding the implementation of a project rated category A for involuntary resettlement.

(i) Resettlement impacts were reduced by making small alignment and design modifications during implementation in line with a key ADB principle to avoid and minimize resettlement impacts.

(ii) The land was acquired as per the State Land Acquisition Act 1990 (1934 AD), which permitted the affected people and the ERA to negotiate privately. This got a better deal for the landowners, who were compensated for land based on actual market price and replacement costs.

(iii) The formation and active participation of the senior DLC, made decisions regarding payment of compensation more timely, transparent, and acceptable to all.

(iv) ERA should have utilized the DLC platform more frequently and judiciously to make payments people affected by the storm water drain subproject at Digiana, Gangyal.

(v) The construction of the shopping complexes from the early stages of the project at two locations and involving shopkeepers in the process created positivity

46 Appendix 10

around the project and displayed the credibility and commitment of the executing agency, which smoothed the relocation of shops.

(vi) Establishing a land acquisition collector office within the PMU proved to be extremely beneficial for dealing with involuntary resettlement under category A.

(vii) Timely reviews, suggestions and guidance provided by ADB missions from time to time were crucial for adherence to safeguard policy requirements and compliance with loan covenants. Suggestions were implemented by the PMU, which supported the proper implementation and documentation of safeguard policy requirements.

11. Pending issues and corrective actions. They are as follow:

(i) ERA has agreed to complete the payment of compensation to people affected by the Gangyal drainage subproject and provide evidence of such compensation payment to ADB.

(ii) A joint site visit and verification survey was conducted by a team comprising the state revenue department and PIU staff to check the status of the complaint and the impact on other properties. The survey findings will inform a joint site verification report to be prepared and shared, and compensation will be paid accordingly to affected people.

(iii) The corrective action plan is provided in Table A10.

Table A10: Social Safeguard Corrective Action Plan Action Responsibility Timeline

Payment of compensation to 35 identified affected people and the Shiv temple under Gangyal drainage subproject package

Economic Reconstruction Agency, the state

July 2021

Source: Asian Development Bank.

B. Environment Safeguard Assessment

12. ERA environmentally assessed all subprojects, prepared reports, and obtained approvals from ADB. During loan processing, ADB approved an environmental assessment review framework and initial environmental examinations for seven subprojects: one for water supply, three for transport, and three for drainage. Environmental management plan objectives were achieved, and no outstanding issues were reported. Project environmental safeguards were implemented as envisaged, helped by (i) strong safeguard implementation arrangements in the PMU, project management consultant, and design and supervision consultants; and (ii) a systematic approach to developing awareness and building environmental awareness and action. The project introduced a process to certify environmental compliance as part of every contractor’s progress claim, which facilitated and promoted environmental performance. Where construction firms failed to adhere to agreed provisions in environmental management plans, appropriate payment amounts were withheld until environmental performance improved. Deducting a percentage of the billed amount, rather than withholding the entire amount, provided an incentive to improve environmental performance, without unduly stressing cash flow in smaller contractors. This practice was followed in projects 1 and 2 and will continue in the subsequent tranche. ERA established an in-house monitoring mechanism for testing environmental parameters. ERA procured two vans and converted them into mobile monitoring stations, equipped to monitor ambient noise and air water quality. It also engaged through the PMC, technical personnel for

Appendix 10 47

analysis in the mobile stations and in a laboratory established in ERA premises. Subsequently, the mobile monitoring stations were used by other line departments. ERA developed best practices that stimulated regular environmental monitoring. 13. All subprojects under project 2 were categorized environmental category B as defined in the ADB Safeguard Policy Statement, 2009. All subprojects were environmentally assessed, reports were prepared, and approvals were obtained from ADB. A few scheduled trees were cut down for the Jehangir Chowk flyover subproject, for which a certificate of no objection was obtained from regulatory authorities. Environment management plan objectives were adequately achieved, and no outstanding issues were reported. The project has the potential to improve environmental and health conditions with well-maintained facilities. 14. Conclusion and lessons learned. Extensive consultations with stakeholders conducted during project implementation enabled its success. Suggestions and guidance provided by ADB missions from time to time on environmental aspects were implemented by project authorities, which supported the proper implementation and documentation of safeguard policy requirements. The practice of issuing environmental certification improved the environmental performance of contracts and was carried over into subsequent tranches. Other projects should consider the novel practice of establishing in-house monitoring mechanisms that deploy well-equipped mobile monitoring stations and trained staff.

48 Appendix 11

STATUS OF COMPLIANCE WITH LOAN COVENANTS Covenants in Loan Agreement

Covenant

Reference in Loan Agreement,

Project 2 Status of Compliance

Particular Covenants (a) The Borrower shall cause the State to carry out the Project with due diligence and efficiency and in conformity with sound administrative, financial, engineering, environmental and urban development practices. (b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed by the State and the ERA, all obligations set forth in Schedule 5 to this Loan Agreement and the Project Agreement.

Section 4.01 of Article IV

(a) Partially complied. The APFS in

2018 was a combined report for all the three projects under JKUSDIP.

(b) Complied with delay in some items (see below).

The Borrower shall make available, or cause to be made available, promptly as needed, the funds, facilities, services, as required, in addition to the proceeds of the Loan, for the carrying out of the Project.

Section 4.02 of Article IV

Complied. The Borrower made these available as in this covenant.

The Borrower shall cause the State to ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

Section 4.03 of Article IV

Complied. The Borrower caused the State that the carrying out of the Project and operation of the Project facilities were conducted and coordinated in accordance with sound administrative policies and procedures.

The Borrower shall enable ADB's representatives to inspect the Project, the goods and Works, and any relevant records and documents.

Section 4.04 of Article IV

Complied. The Borrower enabled ADB’s representative to inspect as in this covenant.

The Borrower shall take all actions which shall be necessary on its part to enable the State to perform its obligations under the Project. Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.

Section 4.05 of Article IV

Complied. The Borrower took actions in line with this covenant.

(a) In relation to the Project, the Borrower shall exercise its rights under the Financing Arrangements in such a manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan. (b) In relation to the Project, no rights or obligations under the Financing Arrangements shall be assigned, amended, abrogated or waived without the prior notice to ADB.

Section 4.06 of Article IV

(a) Complied. The Borrower exercised its rights to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan. (b) Complied. Amendments were made only with prior concurrence of ADB.

Execution of Project, Implementation Arrangements

Appendix 11 49

Covenant

Reference in Loan Agreement,

Project 2 Status of Compliance

(a) The Borrower, State and ERA shall ensure that the Project is implemented in accordance with the detailed arrangements set forth in the PAM. Any subsequent change to the PAM shall become effective only after approval of such change by the Borrower, State and ERA, and ADB. In the event of any discrepancy between the PAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail. (b) The State and ERA shall ensure that towards smooth implementation of the Project, grievances if any from stakeholders, relating to any subproject or Component implementation or use of funds are addressed effectively and efficiently.

para. 1 of Schedule 5

(a) Complied. The implementation arrangements are in accordance with the detailed arrangements set forth in the PAM. (b) Complied. Grievances from stakeholders, relating to any subproject or Component implementation or use of funds are being addressed effectively and efficiently.

Counterpart Funds The State shall make available the Loan proceeds through ERA to the PMU under appropriate arrangements acceptable to ADB, and ensure: (a) sufficient counterpart funds from its budget for each fiscal year, in a timely manner, for the efficient implementation of the Project; and (b) adequate funds towards operations and maintenance of Project facilities, through budgetary allocations or other means, to be provided to the PMU, during and after Subprojects’ completion.

para. 2 of Schedule 5

Complied. (a) Sufficient budgetary allocation was provided by the state including funds for completion of spillover subprojects. (b) O&M budget for created assets under the project provided from state budget to the line departments.

Subprojects Selection Criteria and Implementation The State and ERA shall ensure that all Subprojects meet the selection criteria and are implemented, to the satisfaction of ADB, in accordance with the provisions set forth in Schedule 4 to the FFA.

para. 3 of Schedule 5

Complied. Subprojects have been selected and approved following eligibility criteria and selection procedures.

The State and ERA will ensure that all engineering structures under the Project are designed in accordance with the Borrower’s standard for earthquake resistance buildings.

para. 4 of Schedule 5

Complied. All the structures are designed in compliance with relevant Indian standards.

Environment The Borrower shall ensure, or cause the executing agency to ensure, that the preparation, design, construction, implementation, operation and decommissioning of the Project, and all Subprojects’ facilities comply with (i) all applicable laws and regulations of the Borrower and the State relating to environment, health, and safety; (ii) the Environmental Safeguards; (iii) the EARF; and (iv) all measures and requirements set forth in the respective IEE and EMP, and any

para. 5 of Schedule 5

Complied. The subprojects were designed and constructed in compliance with Borrower, State, ADB policies and the EARF. The IEEs and EMPs were prepared in accordance with ADB’s SPS 2009 guidelines and other relevant country laws and policies.

50 Appendix 11

Covenant

Reference in Loan Agreement,

Project 2 Status of Compliance

corrective or preventative actions set forth in a Safeguards Monitoring Report.

Land Acquisition, Resettlement and indigenous peoples The Borrower shall ensure or cause the executing agency to ensure that all land and all rights-of way required for the Project, and all Project facilities are made available to the Works contractor in accordance with the schedule agreed under the related Works contract and all land acquisition and resettlement activities are implemented in compliance with (i) all applicable laws and regulations of the Borrower and the State relating to land acquisition and involuntary resettlement; (ii) the Involuntary Resettlement Safeguards; (iii) the RF; and (iv) all measures and requirements set forth in the respective resettlement plan, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.

para. 6 of Schedule 5

Complied. Land acquisition and Resettlement planning and implementation including resettlement plans followed national and state laws and regulations ADB’s SPS 2009 and the resettlement framework (RF).

Without limiting the application of the Involuntary Resettlement Safeguards, the RF or the resettlement plan, the Borrower shall ensure or cause the executing agency to ensure that no physical or economic displacement takes place in connection with any subproject until: (a) compensation and other entitlements have been provided to affected people in accordance with the resettlement plan; and (b) a comprehensive income and livelihood restoration program has been established in accordance with the resettlement plan.

para. 7 of Schedule 5

Partially complied. The affected persons of the Ganghyal drainage subproject were not compensated. The resettlement plan of Jehangir Chowk flyover and other subprojects were implemented as planned.

Indigenous Peoples In the event of any subproject involving indigenous peoples, the Borrower shall ensure or cause the executing agency to ensure that the preparation, design, construction, implementation and operation of the subproject and all Project facilities comply with (a) all applicable laws and regulations of the Borrower and the State relating to indigenous peoples; (b) the indigenous peoples Safeguards; (c) the IPPF; and (d) all measures and requirements set forth in the respective IPP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.

para. 8 of Schedule 5

Complied. Project 2 was categorized as category C for indigenous peoples and the subprojects did not involve any impact of Indigenous People.

Human and Financial Resources to Implement Safeguards Requirements The Borrower shall ensure or cause the executing agency to ensure, that all necessary budgetary and human resources to fully

para. 9 of Schedule 5

Complied. The PMU had adequate safeguards staffs throughout the project duration. The safeguards unit under Director Safeguards had social and environment experts

Appendix 11 51

Covenant

Reference in Loan Agreement,

Project 2 Status of Compliance

implement the EMP, the resettlement plan and the IPP as required, are made available.

within the PMU. Relevant subject experts from the PMC and DSCs were also mobilized.

Safeguards – Related Provisions in Bidding Documents and Works Contracts The Borrower shall ensure or cause the executing agency to ensure that all bidding documents and contracts for Works contain provisions that require contractors to: (a) comply with the measures and requirements relevant to the contractor set forth in the IEE, the EMP, the resettlement plan and the IPP (to the extent they concern impacts on affected people during construction), and any corrective or preventative actions set out in a Safeguards Monitoring Report; (b) make available a budget for all such environmental and social measures; (c) provide the executing agency with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise during construction, implementation or operation of the Project that were not considered in the IEE, the EMP, the resettlement plan or the IPP; (d) adequately record the condition of roads, agricultural land and other infrastructure prior to starting to transport materials and construction; and (e) fully reinstate pathways, other local infrastructure, and agricultural land to at least their pre-project condition upon the completion of construction.

para. 10 of Schedule 5

Complied. Bidding documents and contracts for works contained these provisions and the same were complied with.

Safeguards Monitoring and Reporting The Borrower shall ensure or cause the executing agency to ensure, the following: (a) submit semiannual Safeguards Monitoring Reports to ADB and disclose relevant information from such reports to affected persons promptly upon submission; (b) if any unanticipated environmental and/or social risks and impacts arise during construction, implementation or operation of the Project that were not considered in the IEE, the EMP, the resettlement plan or the IPP as applicable, promptly inform ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan; and (c) report any breach of compliance with the measures and requirements set forth in the EMP, the resettlement plan or the IPP promptly after becoming aware of the breach.

para. 11 of Schedule 5

Complied. The semiannual monitoring reports were submitted duly.

52 Appendix 11

Covenant

Reference in Loan Agreement,

Project 2 Status of Compliance

Prohibited List of Investments The Borrower shall ensure or cause the executing agency to ensure that no proceeds of the Loan under the Project are used to finance any activity included in the list of prohibited investment activities provided in Appendix 5 of ADB‟s Safeguard Policy Statement (2009).

para. 12 of Schedule 5

Complied. Subprojects have been selected and approved following eligibility criteria and selection procedures and were not in prohibited list.

Other Social Measures The executing agency shall ensure that civil works contracts under the Project follow all applicable labor laws of the Borrower and the State and that these further include provisions to the effect that contractors; (i) carry out HIV/AIDS awareness programs for labor and disseminate information at worksites on risks of sexually transmitted diseases and HIV/AIDS as part of health and safety measures for those employed during construction; and (ii) follow and implement all statutory provisions on labor (including not employing or using children as labor, equal pay for equal work), health, safety, welfare, sanitation, and working conditions. Such contracts will also include clauses for termination in case of any breach of the stated provisions by the contractors.

para. 13 of Schedule 5

Complied. The contract documents under the project included the stated provisions.

Gender The executing agency shall ensure that the Project is undertaken in conformity with the Gender Action Plan and the Communication Strategy as agreed between ADB, the Borrower, and the executing agency as included in the PAM.

para. 14 of Schedule 5

Complied. The implementation of GAP was satisfactory.

Governance and Anticorruption; Procurement The executing agency shall ensure that the anticorruption provisions acceptable to ADB, the Borrower, and the State are included in all bidding documents and contracts financed by ADB in connection with the Project, including provisions specifying the right of ADB to review and examine the records and accounts of the State and ERA and all contractors, suppliers, consultants, and other service providers as they relate to the Subprojects and the Project.

para. 15 of Schedule 5

Complied.

Appendix 11 53

Covenant

Reference in Loan Agreement,

Project 2 Status of Compliance

ERA shall announce the Project and business opportunities associated with the Project on its website. The website will disclose the following information in relation to goods and services procured for the Project: (i) the list of participating bidders, (ii) the name of the winning bidder, (iii) the amount of the contracts awarded, and (iv) the goods and services procured.

para. 16 of Schedule 5

Complied. The ERA website hosted the listed information.

The State and ERA shall continue to undertake the anticorruption and good governance measures as identified in table 1 under para. 5 to Schedule 3 to the FFA, during the implementation of the Project.

para. 17 of Schedule 5

Complied.

The Borrower, State, and ERA, shall comply with ADB‟s Anticorruption Policy (1998, as amended to date) and shall allow and assist ADB‟s representatives to carry out random spot checks on the work in progress and utilization of funds for the Project.

para. 18 of Schedule 5

Complied.

Institutional and Financial Reforms The State shall follow the principles outlined under the Borrower’s JNNURM program in undertaking urban sector reforms in the State. In this regard without limiting the requirements of institutional reforms stipulated under Project 1, and the Action Plan, the State shall more particularly undertake activities included under Project 1 and the following activities: (a) enhance the O&M budget allocation under the State budget to address the requirements of O&M for assets created under the Project; (b) implement the modern accrual-based accounting systems in the municipal corporation of Jammu and municipal corporation of Srinagar and require both corporations to publish their annual financial

statements starting from FY2013–14; (c) through a combination of increased efficiency of billing and collection, increased user charges, reducing water losses and allocating a proportion of property tax collections to water supply and sewerage operations, the water supply service providers in Srinagar and Jammu shall recover 50% of the O&M costs for water supply by no later than 31 December 2015; and (d) as also required in particular under Project

para. 19 of Schedule 5

(a) Complied. Adequate O&M budget for functioning of the created assets allocated from state budget. ERA confirmed that allocation for O&M has been increased for PHED under the State budget. The state has also doubled the domestic and commercial water charges in 2011. (b) Complied. The State has taken up the municipal accounting reform from its own resources. State Municipal Accounting Manual prepared and adopted in ULBs. Accrual-based accounting system commenced in the two municipalities. Consultancy support from within project 2 was provided to achieve the same. Both Municipalities prepared the annual financial statements until 2016–2017. (c) Complied. Work for development of software and its commissioning for computerized water billing system of PHED has been completed and is operational. The tariff for water usages has been approved up to 20–21 by SWRRA. The state has also doubled the domestic and commercial water

54 Appendix 11

Covenant

Reference in Loan Agreement,

Project 2 Status of Compliance

1: (i) by 2015 establish semi-autonomous

entities or boards or other suitable institutional mechanism responsible for water supply, sewerage and drainage operations for Srinagar and Jammu cities respectively; these entities shall (1) operate on commercial principles and have their own independent budget, (2) perform their tasks in accordance with a business plan approved initially by the State’s Urban Environmental and Engineering Department, and, PHED and the corporations, and later when the corporations have gained capacity, such budgets shall be developed by the urban local bodies of the State along with the service levels to be maintained by the entities and water supply and sewerage charges that the entities shall be authorized to collect and retain; and

(ii) empower the municipal corporations of Jammu and Srinagar cities to collect property tax at rates within a range as laid down by the State in consultation with the corporations.

charges in 2011. (d) (i) Not complied. State yet to decide on creation of semi-autonomous entities or boards or other suitable institutional mechanism responsible for water supply, sewerage and drainage operations either as a separate administrative unit of under the municipalities in the targeted cities. (d) (ii) Complied. Municipal corporations of have been empowered by municipal corporation Act and its amendment to collect property tax. Government order on transfer of 18 mandatory functions to ULBs issued on 1 April 2013; however institutional arrangements yet to be decided.

Capacity Development As part of the capacity development activities included under Component B under Schedule 1 to this Loan Agreement, the executing agency shall ensure that (a) the business plan for water supply and sewerage is prepared by ERA in consultation with PHED and adopted as satisfactory to ADB by June 2013, and that the plan is implemented by the state government with guidance of Governing Body during the implementation period of the Project; and (b) the key staff of PHED are selected under proper and transparent selection criteria, within six months of the effective date, for training with newly recruited staff and that such staff are retained to the extent possible for at least two years from the date of such training or the duration of the Project (whichever is the longer).

para. 21 of Schedule 5

(a) Complied. Business plan and reform strategy submitted in April 2015. (b) Complied. The consultants recruited under project 2 conducted 6 trainings for the staffs of PHED.

Appendix 11 55

Covenant

Reference in Loan Agreement,

Project 2 Status of Compliance

Institutional Reforms Action Plan The executing agency shall undertake all institutional reforms and capacity development activities specified in paras. 20 and 21 of this Schedule in accordance with the Action Plan as agreed between ADB and the executing agency.

para. 22 of Schedule 5

Partially complied. The executing agency despite its efforts were not able to push through all the reforms which involved changes in the state policy and direct involvement of the state legislature.

56 Appendix 11

Covenants in Project Agreement Covenant Reference in

Project Agreement,

Project 2

Status of Compliance

(a) The State and ERA shall carry out the Project with due diligence and efficiency, and in conformity with sound administrative, financial, engineering, environmental and urban development practices. (b) In the carrying out of the Project and operation of the Project facilities, the State and ERA shall perform all obligations set forth in the Loan Agreement to the extent that they are applicable to the State and ERA, respectively.

Section 2.01. (a) Partially complied. The APFS in 2018 was a combined report for all the three projects under the MFF. (b) Complied. The State and ERA performed the obligations as stated in this Appendix.

The State shall make available, promptly as needed, including to ERA, the funds, facilities, services, equipment, land and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project.

Section 2.02. Complied. The state made available of these items for carrying out of Project 2.

(a) In the carrying out of the Project, the State and ERA respectively, shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB. (b) Except as ADB may otherwise agree, all goods, Works and consulting services to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 4 to the Loan Agreement. ADB may refuse to finance a contract where goods, Works or consulting services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.

Section 2.03. (a) Complied. Only one good supply /procurement package was terminated. (b) Complied.

The State and ERA respectively, shall carry out the Project in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. The State and ERA, respectively shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

Section 2.04. Partially complied. There was delay in works schedule of the three contract packages. The spillover work was completed by the state fund.

(a) The State and ERA as appropriate, shall each take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of Project facilities, to such extent and against such risks

Section 2.05. (a) Complied. ERA took and maintained insurance of Project facilities as a part of its contract with the contractors.

Appendix 11 57

Covenant Reference in Project

Agreement, Project 2

Status of Compliance

and in such amounts as shall be consistent with sound practice. (b) Without limiting the generality of the foregoing, the State and ERA as appropriate, each undertake, to insure, or cause to be insured, the goods to be imported for the Project and to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods.

(b) Complied. The State and ERA undertook to insure the imported goods for the Project and financed out of the loan proceeds against hazards incident as specified here.

The State and ERA shall each maintain, or cause to be maintained, records and accounts adequate to identify the goods, Works and consulting services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

Section 2.06. Complied. ERA maintained records and accounts to identify the goods, works and consulting services financed by the ADB loan.

(a) ADB, the State and ERA shall cooperate fully to ensure that the purposes of the Loan will be accomplished. (b) The State and ERA shall each promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement or the Financing arrangements, or the accomplishment of the purposes of the Loan. (c) ADB, the State and ERA shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, the State, ERA, and the Loan.

Section 2.07. (a) Complied. ADB, the State and ERA cooperated fully to ensure the purposes of the Loan was accomplished. (b) Complied. The State and ERA each informed ADB of any issues specified in this covenant. (c) Complied. ADB, the State and ERA exchanged views concerning matters relating to the Project, the state, ERA, and the Loan.

(a) The State and ERA shall each furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the goods, Works and consulting services and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of the State and ERA with respect to the Project and the Loan; and (v) any other matters relating to the purposes of the Loan.

Section 2.08. (a) Complied. The State and ERA furnished to ADB all reports and information as ADB reasonably requested concerning the matters specified in this covenant. (b) Partially complied. There were some delays in submission of reports. APFS in 2018 was a combination of all three projects under the MFF.

58 Appendix 11

Covenant Reference in Project

Agreement, Project 2

Status of Compliance

(b) Without limiting the generality of the foregoing, the State through ERA shall furnish to ADB quarterly reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter. (c) Promptly after physical completion of the Project, but in any event not later than three (3) months thereafter or such later date as ADB may agree for this purpose, the State through ERA shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by the State and ERA, of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan.

(c) Complied with delay. ERA furnished the report and submitted it to ADB after six months from the physical completion of the Project.

(a) The State as applicable, and ERA shall (i) maintain separate accounts and records for the Project; (ii) prepare annual financial statements for the Project in accordance with accounting principles acceptable to ADB; (iii) have such financial statements for the Project audited annually by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB, in accordance with international standards for auditing or the national equivalent acceptable to ADB; (iv) as part of each such audit, have the auditors prepare a report (which includes the auditors’ opinion on the use of the Loan proceeds and compliance with the financial covenants of this Loan Agreement as well as on the use of the procedures for the imprest account(s) and statement of expenditures) and a management letter (which sets out the deficiencies in the internal control of the Project that were identified in the course of the audit, if any); and (v) furnish to ADB, no later than 9 months after the close of the fiscal year to which they relate, copies of such audited financial statements,

Section 2.09. (a) Not complied. Separate accounts for the Project maintained with annual audit and submitted to ADB. All annual audited project financial statements (APFS) from project effective date to closing (FYEs 2014 to 2018) were received, with two reports delayed by 0.6 and 3.8 months and the rest submitted on time. The APFS of FYE 2018 was not accepted by ADB due to: (i) combined audit opinion issued with other subprojects 1 and 3, (ii) incomplete annexures provided from those required per TOR with DEA, (iii) some computational errors, and (iv) some deficiencies in audit opinion. Full disbursement amount recorded in ADB’s Loan Financial Information System (LFIS) was audited and recorded in APFS. Audit opinions were unqualified (clean). Specific audit opinions were issued to confirm that the loan proceeds were utilized

Appendix 11 59

Covenant Reference in Project

Agreement, Project 2

Status of Compliance

audit report and management letter, all in the English language, and such other information concerning these documents and the audit thereof as ADB shall from time to time reasonably request. (b) ADB shall disclose the annual audited financial statements for the Project and the opinion of the auditors on the financial statements within 30 days of the date of their receipt by posting them on ADB’s website. (c) In addition to annual audited financial statements referred to in subsection (a) hereinabove, the ERA shall (i) provide its annual financial statements prepared in accordance with national accrual-based financing reporting standards acceptable to ADB; (ii) have its financial statements audited annually by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB, in accordance with international standards for auditing or the national equivalent acceptable to ADB; and (iii) furnish to ADB, no later than 1 month after approval by the relevant authority, copies of such audited financial statements in the English language and such other information concerning these documents and the audit thereof as ADB shall from time to time reasonably request. (d) The State and ERA shall each enable ADB, upon ADB's request, to discuss the financial statements for the Project and ERA and its financial affairs where they relate to the Project with the auditors appointed by (i) the State pursuant to subsections (a)(iii), and (ii) by ERA pursuant to subsection (c) hereinabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB. This is provided that such discussions shall be conducted only in the presence of an authorized officer of State or ERA as applicable, unless the State or ERA shall otherwise agree.

for the purpose as per the ADB loan/project agreements. While audit management letter was required, no separate management letter was issued by the auditor. Instead, the auditor included audit observations as part of their emphasis of matter para. pertaining to outstanding advance of ₹146.45 million which has not been adjusted in the books against non-receipt of Utilization Certificate or Work Done Estimate, a recurring observation from FYE 2017 and prior years. As at 31 March 2018, ERA has been pursuing line departments to whom advances were given to provide the utilization or work done estimate to enable necessary adjusting entries in the books. A letter from the auditor stating there is no separate management letter has not been issued. (b) Partially complied. All were disclosed except for FYE 2018 which is pending resubmission. (c) Not complied. AEFS for FYE 2017 and prior years were combined with APFS. (d) Complied.

The State and ERA shall enable ADB's representatives to inspect the Project, the goods and Works and any relevant records and documents.

Section 2.10. Complied. The State and ERA enabled ADB to inspect the Project, the goods and Works financed out of the proceeds of the Loan as specified in this covenant.

60 Appendix 11

Covenant Reference in Project

Agreement, Project 2

Status of Compliance

(a) The State and ERA shall, promptly as required, take all action within its powers to maintain its societal existence (in case of ERA), to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its operations. (b) In relation to the Project, the State and ERA shall at all times conduct its operations in accordance with sound applicable technical, financial, business, development and operational practices, and under the supervision of competent and experienced management and personnel. (c) In relation to the Project, the State and ERA shall at all times operate and maintain its plants, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound applicable technical, financial, business, development, operational and maintenance practices.

Section 2.11. (a) Complied. The State and ERA maintained ERA’s existence as specified in this covenant. (b) Complied. The State and ERA conducted its business as specified in this covenant. (c) Complied. The State and ERA operated and maintained its plans, equipment and other property as specified in this covenant.

Except as ADB may otherwise agree, the State and ERA shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.

Section 2.12. Complied. There was no such instance that the State and ERA sold, leased, or otherwise disposed of its assets as in this covenant.

Except as ADB may otherwise agree, the State and ERA shall apply the proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all items of expenditures financed out of such proceeds are used exclusively in the carrying out of the Project.

Section 2.13. Complied. The State and ERA used the proceeds of the Loan in accordance with the Loan Agreement and the Project Agreement. The loan agreement was amended in 2017 and the loan proceeds were allocated as per the amendments to the loan agreement of 2925.

Except as ADB may otherwise agree, the State and ERA shall duly perform all its respective obligations under the Financing Arrangements, and shall not take, or concur in, any action which would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the Financing Arrangements.

Section 2.14. Complied. The State and ERA performed their obligations under the financing agreements.

Appendix 11 61

Covenant Reference in Project

Agreement, Project 2

Status of Compliance

The State and ERA shall promptly notify ADB of any proposal to amend, suspend or repeal any provision of ERA’s basic documents, which, if implemented, could adversely affect the carrying out of the Project or the operation of the Project facilities. The State and ERA shall afford ADB an adequate opportunity to comment on such proposal prior to taking any action thereon.

Section 2.15. Complied. The State and ERA performed their obligations under the financing agreements.

ADB = Asian Development Bank, AEFS = audited entity financial statements, APFS = audited project financial statements, DSC = design and construction supervision consultant, EARF = environmental assessment review framework, EIA = environment impact assessment, EMP = environment management plan, ERA = Economic Reconstruction Agency, FAM = facility administration manual, FFA = framework financing agreement, FY = fiscal year, IEE = initial environmental examination, IPP = indigenous peoples plan, JNNURM = Jawaharlal Nehru National Urban Renewal Mission, NCB = national competitive bidding, O&M = operation and maintenance, PHED = Public Health Engineering Department, PMU = project management unit.

62 Appendix 12

ECONOMIC AND FINANCIAL ANALYSIS

A. Re-evaluation Scope, Methodology, and Data Input 1. Economic internal rates of return (EIRRs) ascertained project efficiency of water supply, drainage, urban transport, and solid waste management (SWM) components of project 2 upon its completion1 and compared results with appraisal estimates for (i) two water supply subprojects,2 (ii) three drainage subprojects,3 (iii) two flyover subprojects,4 (iv) one solid waste subproject,5 and (v) one mechanized parking facility.6 Economic evaluation of project 2 as a whole was also undertaken to determine its accumulative economic significance and also included sensitivity with a 20% reduction of future benefits. 2. Financial analysis assessed the ability of urban local bodies (ULBs) and line agencies to meet the operation and maintenance (O&M) costs of new assets out of their revenue streams, considering (i) the municipal corporation for the SWM subproject and parking facility, (ii) the state’s Public Health Engineering Department (PHED) for the water system, (iii) the state’s Public Works Department (PWD) for the flyovers, and (iv) the state’s Urban Environmental Engineering Department under the Housing and Urban Development Department (HUDD), for the drainage facility. Financial viability evaluation of project 2 to determine the financial internal rate of return (FIRR) was carried out during loan appraisal in respect of the revenue-generating subprojects namely for: water supply, SWM, and the parking facility during loan appraisal.7 Targets were set under a proposed revenue enhancement action plan including the implementation of water, SWM, and parking facility tariffs and property taxes to help meet O&M and capital recovery costs. However, the tariffs have yet to be fully implemented, and O&M depends on government grants. 3. As project 2 could not recover capital cost, operating ratios were calculated for state government finances, and reviews of the overall finances of PHED, HUDD, PWD and the municipal corporations were undertaken to determine capacity to meet O&M expenditure. The water supply, drainage, flyovers, mechanized parking and SWM assets created by project 2 are not considered self-sufficient despite the collection of user charges.

1 Project 2 is an intervention by the state government for large-scale and comprehensive improvement of basic urban

infrastructure under the multitranche financing facility, comprising two water supply subprojects, three drainage subprojects, two flyover subprojects, one mechanized parking subproject, and one SWM subproject. Targeted benefits were achieved under project 2.

2 The water supply intervention (i) constructed 19 tube-wells; (ii) constructed 10 overhead tanks; (iii) installed 50 kilometers (km) of distribution pipes, revised down from 67 km at appraisal; (iv) installed 148 new pumps; (v) installed 8,000 new water meters, and (vi) supplied to the state’s Public Health Engineering Department 14 mobile water tankers and equipment for operation and maintenance. Source: ERA’s project completion report.

3 The drainage intervention completed 28.6 km of drains in Digiana and Channi, revised up from a target of 23.54 kilometers, achieved 19.181 km including construction of new drain of 1.3 km not in original scope and 10 km in Athawajan Pantha Chowk along National Highway (revised target of 9.2 km)achieved 8.491 km. It rehabilitated about 27 existing pump stations, not in original scope, after floods in 2014, at a cost of ₹386.8 million. This amount is not included in the analysis of the drainage component at completion.

4 Flyover intervention included the 1.3 km Bikram Chowk flyover and the 3.3 km Jehangir Chowk flyover with grade separators.

5 The SWM intervention procured four rear-end loader compactors with 300 bins, 34 small motorized waste collectors, 10 dumper placer vehicles with 100 bins, 2 hook loaders with 10 containers and 1,000 hand carts, and 300 cycle rickshaws.

6 One mechanized multilevel parking facility for 288 light commercial vehicles. 7 The FIRR of the water supply system, leaving aside PHED equipment, was at 3.2%, SWM equipment at 5.8%, and

parking facility at 3.2%, as against an assessed weighted average cost of capital of 4.0%. Source: ADB. 2012. Periodic Financing Request: Jammu and Kashmir Urban Sector Development Investment Program-Project 2. Manila

Appendix 12 63

4. Economic and financial analyses were based on ADB’s Guidelines for the Economic Analysis of Projects (2017), Guidelines for the Economic Analysis of Water Supply Projects (1998), and Financial Analysis and Evaluation: Technical Guidance Note (2019). Detailed assumptions for the analyses were derived separately. Data from the state government departments PHED, HUDD and PWD; municipal corporation, project reports of India: Preparation of the MFF; and the project completion report prepared by Economic Reconstructing Agency (ERA), the executing agency, were used for analyses. Project costs—paid using the ADB loan and the state counterpart contribution—were derived from the actual yearly expenditure summary for each package reported by the state government. 5. The financial value of subproject costs include the yearly expenditure incurred by the state government, using both ADB loan and counterpart contribution, until October 2017.8 At the completion of project 2, financial costs were (i) for water supply ₹785.9 million, (ii) drainage ₹1,703.4 million, (iii) flyover ₹4,620.8 million, (iv) mechanized parking ₹229.6 million, and (v) SWM ₹114.5 million. Minor changes in scope during implementation addressed ground realities, 9 notably a disastrous flood of 2014,10 and to avoid duplication with ongoing national and state programs. The ADB loan was reduced from $110 million at appraisal to $78.3 million.

B. Economic Evaluation Methodology 6. For economic analysis, the actual financial cost was first reevaluated at current 2021 prices and then converted into economic costs by applying prescribed conversion rates and adjusting for contingencies, taxes, and duties but excluding financing costs: interest during construction and commitment charges.

1. At Appraisal 7. Subproject selection criteria required an EIRR exceeding the economic opportunity cost of capital of 12.0%. Subproject economic net present value assessed during loan appraisal in 2011 were positive when applying discount rates of 12.0%. Sensitivity analysis found the EIRR most sensitive to capital cost overrun and delay in realizing benefits. 8. At appraisal, base case EIRR were (i) 13.3% and 13.0% for the two water supply subprojects; (ii) 22.0%, 13.6%, and 15.4% for the three drainage subprojects; (iii) 13.9% and 14.9% for the two flyover subprojects; (iv) 13.1% for the mechanized parking subproject; and (v) 17.8% for SWM subproject.

2. At Completion 9. The approach used during appraisal was applied to recalculate subproject EIRR at

8 Project 2 closed on 31 March 2017 and financial closure was in October 2017. For the drainage subproject and one

flyover, expenditure incurred up to FY2020 was considered for analysis at completion. 9 The scope changes were (i) water supply distribution pipelines reduced from 67 km to 42 km as suggested by PHED;

8 overhead tanks constructed, down from 10; and drains shortened from 38.6 km to 32.59 km. Moreover, scope added after flows in 2014 was 27 drain pump stations to be rehabilitated, of which 23 were actually rehabilitated. This additional scope for drains is not included in the economic re-evaluation. Changes in scope did not reduce the number of beneficiaries from the original estimate. The implementation of subprojects was delayed by 2–4 years, but all subprojects have been completed and are operative. The Jehangir flyover and the drainage subproject from Athawajan to Pantha Chowk were completed in 2018.

10 Torrential rain caused a flood in September 2014, submerging much of the cites and including landslides and damage to bridges and roads.

64 Appendix 12

completion and compared it with the economic opportunity cost of capital of 12.0%. The EIRR for the whole of project 2 was also calculated. 10. Economic viability was evaluated over the period considered at appraisal. Cost-benefit analyses were undertaken from the completion of each subproject considering their actual costs. Financial costs actually incurred were first converted to 2021 prices using wholesale price indexes published by Government of India.11 Economic cost was assessed by applying to the financial cost reassessed conversions of 0.89 for the shadow wage factor and 1.04 for the shadow exchange wage factor. Actual financial cost, actual financial cost in 2021 prices, and converted economic cost are in Table 12.1. Table 12.1: Financial and Economic Capital Cost

(₹ million)

Component Actual Financial Cost with Tax

Actual Financial Cost without Tax, Indexed to 2021 Prices Economic Cost

Water supply 740.91 846.54 703.87

PHED equipment 44.98 53.2 46.72

Digiana drainage 1,196.22 1,399.18 1,163.36

Channi drainage 138.98 162.24 134.95

Athawajan drainage 368.20 414.55 344.81

Vikram flyover 848.37 975.38 811.30

Jehangir flyover 3,772.42 4,346.21 3,615.09

KMDA parking 229.57 264.51 221.68

Solid waste 114.51 137.15 120.88 PHED = Public Health Engineering Department. Source: Asian Development Bank estimates.

11. Project benefits assumed at appraisal were reassessed and updated at completion by applying growth in the gross state domestic product from 2011 to 2021. The assumed parameters were drawn from the periodic financing request for project 2 and the project completion report prepared by ERA and shared information.12 12. Water supply. EIRR calculation considered (i) the economic capital cost of the water supply and PHED equipment subprojects as detailed in Table 12.1, (ii) O&M cost updated to 2021 prices, and (iii) subproject benefits including savings for domestic users who currently supplement piped water with water from other sources. Non-incremental savings in the costs of labor, storage tanks, alternative bottled water, and water purification costs, as assessed during appraisal, were updated at completion. Incremental benefits were not assessed during appraisal analysis and hence not considered in completion analysis. Average time per household spend fetching water daily was estimated at 10 minutes, and the resulting labor cost saved was valued at ₹126.73 per month per household. The average cost per household for storage was estimated at ₹1,303.1, for procuring drinking water at ₹20 per liter or ₹29.53 per month, and for purification by boiling, including labor, energy, and utensils, ₹79.67 per month. There was no change in the number of beneficiaries. Water supply subprojects were re-evaluated based on these assumptions.

11 https://eaindustry.nic.in/download_data_1112.asp. 12 The difficulty of fielding missions because of security concerns and then the pandemic meant public surveys, in

particular a detailed willingness-to-pay survey, could not be conducted, so the calculation is based on project preparatory reports, the periodic financing request for project 2, and information shared by ERA.

Appendix 12 65

13. Drainage. EIRR calculation considered (i) the economic capital cost of three drainage subprojects as detailed in Table 12.1, (ii) O&M cost updated to 2021 prices, and (iii) subproject benefits including cost savings through health benefits from reduced incidence of disease and time savings from reduced waterlogging. These benefits as assessed at appraisal were updated at completion. Average days of waterlogging was estimated at 25 per annum. Average monthly health care cost savings, for treating diarrheal and other waterborne diseases, were estimated at ₹530.02 per household. The average annual loss of income from waterlogging was estimated at ₹4,903.1 per household. There was no change in the number of beneficiaries. 14. Flyovers. EIRR calculation considered (i) the economic capital cost of the two flyover subprojects as detailed in Table 12.1, (ii) O&M cost updated to 2021 prices, and (iii) subproject benefits of vehicle time savings as assessed at appraisal and updated to completion. The unit value of vehicle time savings ranged from ₹11.82 to ₹162.87 per vehicle-hour for different types of vehicles. The number and categories of vehicles—two-wheelers, cars, buses, light commercial vehicles, two-axle trucks, multi-axle trucks, and three-wheelers, as projected at appraisal—were considered for analysis. 15. Mechanized parking. EIRR calculation considered (i) the economic capital cost of this subproject as detailed in Table 12.1, (ii) O&M cost updated to 2021 prices, and (iii) subproject benefits in vehicle time savings and savings in vehicle operating costs as assessed during appraisal and updated at completion. The unit value of vehicle time savings ranged from ₹17.77 to ₹218.00 per vehicle-hour, and vehicle operating costs ranging from ₹2.00 to ₹31.15 per vehicle-kilometer for different types of vehicles. The number and category of vehicles—two- and three-wheelers, minibuses, and cars, as projected during appraisal—were considered for analysis. 16. Solid waste management. EIRR calculation considered (i) the economic capital cost as detailed in Table 12.1, (ii) O&M cost updated to 2021 prices, and (iii) subproject benefits including labor cost saved and health benefits from reduced incidence of disease. Non-incremental benefits from saved labor cost and medical costs as assessed at appraisal were updated at completion. The average monthly healthcare cost was estimated at ₹32.58 per household for treating diseases from delayed and insufficient solid waste collection. Average monthly labor cost saving from sorting and disposing of solid waste was estimated at ₹25.35 per household. Municipal corporations collect and dispose of household waste daily. There was no change in the number of beneficiaries.

3. Analysis and Re-evaluation 17. The overall EIRR for project 2 was assessed at 17.3% at completion but not assessed at appraisal. When applying the 12.0% discount rate, the economic net present value of the completed subprojects was positive, except for one drainage and one water supply subproject. Excepting one drainage subproject at Athawajan and the PHED equipment subproject, the EIRRs of all others were near or higher than the benchmark value of 12.0% at completion, justifying project investments. The EIRR at completion of the drainage and PHED equipment subprojects were below the threshold for economic viability determined at appraisal because of cost overrun and implementation delay. Several indirect and direct benefits such as improved environment and quality of life could not be quantified and so were not captured in the analysis, though qualitative assessments demonstrate their contribution to improving the urban environment and quality of life in project 2 areas. 18. Water supply. EIRRs at completion for the two water supply subprojects were assessed to be 12.2% and 8.5%, lower than the appraisal estimates of 13.3% and 13.0%. Field missions

66 Appendix 12

and discussions with households to update the willingness-to-pay survey were rendered impossible by civil unrest and then travel restrictions under the pandemic. Both subprojects realized benefits, though EIRRs at completion were lower than at appraisal because of cost and time overruns. 19. Drainage. The three drainage subprojects had EIRRs at completion of 14.1%, 22.1%, and 9.8%, as compared with appraisal estimates of 22.0%, 13.6%, and 15.4%. All three subprojects realized benefits, with one subproject achieving an EIRR at completion higher than at appraisal thanks to reduced cost. The two drainage subprojects at Digiana and Athawajan had EIRRs at completion lower than at appraisal because of cost and time overruns. In Digiana, 1.3 km of new drain was constructed though not in the original scope. 20. Transport. The two flyover subprojects had EIRRs at completion of 15.6% and 14.1%, as compared with appraisal estimate of 13.9% and 14.9%. Both flyover subprojects realized benefits, one of them with an EIRR at completion higher than at appraisal thanks to reduced cost, and the other at Jehangir Chowk, with an EIRR at completion lower than to appraisal stage because of cost and time overruns. The mechanized parking facility subproject had an EIRR at completion of 13.4%, slightly higher than the appraisal estimate of 13.1%. 21. Solid waste management. The SWM subproject had an EIRR at completion of 24.7%, higher than the appraisal estimate of 17.8%. 22. Table A12.2 summarizes EIRR at completion and with three sensitivity scenarios.

Table A12.2: Summary of Economic Internal Rate of Return at Completion

including Sensitivity Analysis

Component

EIRR at Appraisal

(%)

ENPV at Completion

(₹ million)

Base EIRR at

Completion (%)

EIRR at Completion

with 20% Reduction of Future Benefits

(%)

EIRR at Completion

with 20% increase in

O&M

(%)

EIRR at Completion

with 20% Increase in O&M and

0% Reduction in Benefits)

(%)

Water Supply Full water system

13.3 4.3 12.2 9.5 12.1 9.5

PHED equipment

13.0 (4.2) 8.5 3.5 7.7 2.6

Drainage

Digiana 22.0 90.1 14.1 11.0 13.9 10.7

Channi 13.6 70.1 22.1 18.1 21.7 17.6

Athawajan 15.4 (28.8) 9.8 7.5 9.7 7.4

Flyovers

Vikram Chowk 13.9 160.6 15.6 11.6 14.4 10.1 Jehangir Chowk

14.9 484.9 14.1 11.8 14.0 11.7

Appendix 12 67

Component

EIRR at Appraisal

(%)

ENPV at Completion

(₹ million)

Base EIRR at

Completion (%)

EIRR at Completion

with 20% Reduction of Future Benefits

(%)

EIRR at Completion

with 20% increase in

O&M

(%)

EIRR at Completion

with 20% Increase in O&M and

0% Reduction in Benefits)

(%)

Mechanized Parking

13.1 15.3 13.4 10.8 13.2 10.6

SWM 17.8 68.9 24.7 17.3 22.4 15.6

Project 2 (All Together)

Not assessed 2,158.8 17.3 14.3 17.1 14.0

EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance, PHED = Public Health Engineering Department, SWM = solid waste management. Sources: ADB. 2012. Periodic Financing Request: Jammu and Kashmir Urban Sector Development Investment Program-Project 2. Economic and Financial Analysis. Manila; and Asian Development Bank estimates at project completion.

C. Financial Evaluation

1. At Appraisal 23. Financial viability was evaluated to determine FIRRs for the water supply, SWM, and mechanized parking subprojects, the only revenue-generating subprojects in project 2. FIRRs were less than the 4.0% weighted average cost of capital except for the SWM subproject. Emphasis was more on O&M cost recovery and subproject operational sustainability which were also the objectives in project preparatory appraisal of the multitranche financing facility (MFF). Instead, balance sheet financial analysis and revenue enhancement action plan were considered to ensure a 4.0% FIRR over the life of the MFF under scenarios with 50% and 60% cost recovery. Tariffs were proposed as part of the action plan.13 24. The water supply subproject, leaving aside PHED equipment, had a FIRR assessed at 3.2%, the SWM subproject at 5.8%, and the parking facility subproject 3.2% as against the assessed weighted average cost of capital of 4.0%. Assumptions for achieving these FIRRs included user charges and tariffs and the achievement of collection efficiency targets, among other factors. Targets were set under a proposed revenue enhancement action plan including implementation of water, solid waste and parking facility tariffs and property taxes to help meet O&M costs and recover capital cost but have yet to be fully implemented, with O&M depending on government grants.

2. At Completion 25. The Constitution of India mandates that states allocate the funds required to maintain

13 ADB. 2006. Report and Recommendation of the President to the Board of Directors: Proposed Loan to India for the

Multisector Project for Infrastructure Rehabilitation in Jammu and Kashmir and Technical Assistance Grant for the Preparation of the Jammu and Kashmir Urban Infrastructure Development Project. Economic and Finance Analysis. Manila.

68 Appendix 12

their functions and sustain service delivery.14 Because the operating institutions failed to recover O&M costs by implementing the financial plan as envisaged at appraisal, the standard approach to FIRR analysis adopted at appraisal was not considered appropriate at the close of project 2. Instead the financial sustainability of the operating institutions was analyzed to evaluate their capacity to meet the O&M costs as required to manage project 2 assets. PHED is responsible for technical O&M of water supply, PWD for transport, HUDD for drainage, and municipal corporations for SWM and parking facilities. Their responsibilities include billing and collecting fees and remitting revenue back to the state government, which is responsible for financially managing these assets and services. Municipal corporation finances are structured through fiscal transfers from the state in the form of compensation grants and transfers from the Central Finance Commission and state finance commissions.15 As the project was not designed for capital cost recovery, state government operating ratio in the past 5 years were calculated to assess sustainability.16 They averaged 0.95, meaning operating revenues are enough to meet O&M expenses. 17 Similar reviews of the finances of PHED, HUDD, PWD, and the municipal corporations indicate their ability to meet the O&M costs of the water supply and sewerage assets through state budgetary allocations.18 Analysis assumed consistency in the timely release of requisite O&M funds by the state government to PHED, HUDD, PWD, and municipal corporations, as the provision of these urban services is a fundamental responsibility of state governments. 26. The overall performance of state government, PHED, HUDD, and PWD finances was considered to assess their financial capacity to manage urban infrastructure (Tables A12.3–A12.7 below).

Table A12.3: Financial Performance of the State Government (₹ million)

Particulars FY2016 FY2017 FY2018 FY2019 FY2020a

Operating Receipt Total (1) = A + B + C + D + E

357,800.00 419,780.00 485,120.00 510,690.00 682,360.00

A. State tax revenue 73,260.00 78,190.00 95,360.00 98,260.00 132,210.00

B. Non-tax revenue 39,130.00 40,720.00 43,630.00 41,880.00 44,680.00

C. Share of central taxes 78,130.00 94,890.00 119,120.00 139,900.00 122,240.00

D. Resources from union government

167,280.00 205,980.00 227,010.00 230,650.00 372,230.00

E. Additional resource mobilization (ARM)

- - - - 11,000.00

Capital Receipts Total (2) = F + G + H + I

99,700.00 82,190.00 60,250.00 159,390.00 121,870.00

F. Net Provident fund 28,860.00 18,460.00 15,560.00 52,880.00 32,790.00

G. Borrowings and other liabilities b

56,540.00 57,490.00 69,000.00 78,770.00 88,360.00

H. Nondebt-creating 14,260.00 6,050.00 (24,350.00) 27,700.00 670.00

14 Article 243 X and Schedule XII. 15 The Central Finance Commission transfers accounts for about 30%–40% of ULB finances, of which up to 90% may

be used for O&M of municipal assets. 16 Ratio of operating receipts to operating expenditures. Cost recovery calculation does not include assets depreciation. 17 The state finance commission allocates a percentage of net proceeds of tax (about 7.18% of Net State Tax

Revenue)/general pool (as in case of Government of India) to local governments to support financially weaker local bodies (Categories II to IV). The Central Finance Commission, in addition, has provision of 5% towards performance incentive and is in the process of expanding the pool and criteria.

18 For water supply, O&M costs are not fully recovered but is dependent on state support.

Appendix 12 69

Particulars FY2016 FY2017 FY2018 FY2019 FY2020a

receipts

I. Recovery of loans and advances

40.00 190.00 40.00 40.00 50.00

-

Total Receipts (3) = (1) + (2)

457,500.00 501,970.00 545,370.00 670,080.00 804,230.00

Operating Expenditure (4) = J + K + L

364,200.00 398,120.00 409,160.00 558,940.00 595,780.00

J. On revenue account 311,280.00 332,450.00 337,530.00 482,090.00 526,140.00

K. Interest payments 37,190.00 45,670.00 46,630.00 51,730.00 35,430.00

L. Centrally sponsored schemes

15,730.00 20,000.00 25,000.00 25,120.00 34,210.00

Capital Expenditure (5) = M + N + O c

93,300.00 103,850.00 136,210.00 111,140.00 208,450.00

M. On capital account 62,490.00 69,220.00 76,620.00 54,560.00 111,290.00

N. Debt repayment 18,250.00 20,230.00 32,430.00 26,320.00 20,500.00

O. Centrally sponsored schemes

12,560.00 14,400.00 27,160.00 30,260.00 76,660.00

Total Expenditure 457,500.00 501,970.00 545,370.00 670,080.00 804,230.00

Revenue (deficit)/surplus = (1) – (4)

(6,400.00) 21,660.00 75,960.00 (48,250.00) 86,580.00

Operating ratio (operating expense or [4]/operating receipts or [1])

1.02 0.95 0.84 1.09

0.87

Average 0.94

a The fiscal year (FY) of the Government of India ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2021 ends on 31 March 2021. These are revised budget figures for 7 months from 1 April to 30 October 2020 and budget estimates for 5 months from 31 October to 31 March 2020.

b Includes Power Bonds under Ujwal DISCOM Assurance Yojna (UDAY), a Government of India scheme to financially turnaround state power distribution companies (DISCOMs) by improving their operational and financial efficiency.

c The Government of India and state governments discontinued their presentation of annual financial statements and budget documents showing "plan" and "non-plan" items and instead adopted presentation of "revenue" and "capital" expenditure, effective in fiscal year 2016.

Sources: The state government’s Annual Financial Statements and Asian Development Bank estimates.

27. The analysis of the state government finances in Table A12.2 shows that, except in 2 of the last 5 years, it ran revenue surpluses and had operating ratios below 1.0. Since fiscal year (FY) 2017, the ratio has been below 1.0 except in FY2019, meaning that revenue is sufficient to meet the O&M expenses of all state infrastructure, including those being created using ADB funds. Gross state domestic product at constant prices grew from FY2011 to FY2019 (the last year for which data are available) by 14%, indicating that the state government can manage and sustain its future operations. 28. PHED The financial performance was considered to assess its expenditure capacity and capacity to meet the O&M cost of water supply assets using state government budget allocations (Table A12.4). Through the State Water Resources Regulatory Authority, the state government notified the latest water tariff for metered domestic connections at ₹14.00–₹18.50 per kiloliter. For metered nondomestic connections, it is ₹18.00–₹30.00 per kiloliter. Flat tariffs proposed for domestic connections are ₹1,050.00–₹2,340.00 per half year. However, tariffs will be

70 Appendix 12

implemented gradually. Steps initiated by the department to improve cost recovery and tariff collection efficiency include (i) increasing water connections for households,(ii) regularizing illegal water connections, (iii) delivering water bills to consumers at their doorsteps, and (iv) providing to consumers options for bill payment online, by mobile android app, through door-to-door collection through point-of-sale machines, and at bank branches, with awareness of online payment raised through electronic, print, and social media. Analysis of PHED collections and O&M expenditure shows that the present extent of tariff collection inadequate to meet O&M expenditure. PHED depends on budgetary allocation from the state government to meet O&M costs.

Table A12.4: Financial Performance of the Public Health Engineering Department (₹ million)

Particulars FY2014 FY2015 FY2016 FY2017 FY2018

Revenue and Receipts

Operating receipts 356.80 361.59 NA 473.37 525.40

Expenditure

Operating expenditure 8,086.93 8,535.76 9,818.26 10,496.77 11,558.39

Capital expenditure - - - - -

NA = not available. Note: The fiscal year (FY) of the Government of India ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2021 ends on 31 March 2021. Sources: Government Annual Financial Statements; and Asian Development Bank estimates. 29. HUDD financial performance was considered to assess its expenditure capacity and capacity to meet the O&M costs of drainage assets using state government budget allocation (Table A12.5).

Table A12.5: Financial Performance of Housing and Urban Development Department (₹ million)

Particulars FY2014 FY2015 FY2016 FY2017 FY2018

Revenue & Receipts

Operating receipts (housing) 25.72 21.90 NA 33.45 34.59

Operating receipts (urban development)

2.75 2.25 NA 2.92 3.16

Total 28.47 24.15 NA 36.37 37.75

Expenditure

Operating expenditure (housing)

561.86 503.69 NA 866.35 1,008.34

Operating expenditure (urban development)

3,666.74 5,921.08 6,106.63 6,902.26 7,029.15

Capital expenditure (housing) - - - - -

capital expenditure (Urban development)

- - - - -

Total 4,228.60 6,424.77 6,106.63 7,768.61 8,037.49

NA = not available. Note: The fiscal year (FY) of the Government of India ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2021 ends on 31 March 2021.

Sources: The State government Annual Financial Statements; and Asian Development Bank estimates.

30. The financial performance of PWD was considered to assess its expenditure capacity and capacity o to meet the O&M costs of urban transport flyover assets using the state government

Appendix 12 71

budget allocation (Table A12.6).19

Table A12.6: Financial Performance of Public Works Department (₹ million)

Particulars FY2014 FY2015 FY2016 FY2017 FY2018

Expenditure

Operating expenditure (transport)

771.73 1,159.47 NA 1,151.62 1,149.64

NA = not available. Note: The fiscal year (FY) of the Government of India ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2021 ends on 31 March 2021. Sources: The State government Annual Financial Statements; and Asian Development Bank estimates. 31. Municipal corporation operating expenditure exceeded internal revenue in all years (Table A12.7). The state government has yet to implement a property tax system in ULBs.20 Municipal corporation internal tariff collection is inadequate to meet O&M costs. Nevertheless, ULB and state government finances are strengthened by levies on goods and service, and compensation grants in lieu of the abolished octroi tax on goods and other taxes subsumed under the Goods and Service Tax Act, 2017, and transfers from state finance commissions and the Central Finance Commission. Municipal corporations depend on the funds devolved from the state government to meet the O&M expenditure. With the implementation of the Fourteenth Central Finance Commission recommendations, the central government transfers 42% of the divisible pool as untied and unconditional grants, while the share passed on to ULBs by the state government has also increased. With the introduction of fiscal reform in the past 2 financial years in central and state governments affecting the form of goods and services tax, many taxes like entry tax, octroi, and advertisement tax, mostly levied by ULBs across Indian the past, have been subsumed by the central and the state governments, which now pay compensation.

Table A12.7: Financial Performance of the Municipal Corporation (₹ million)

Particulars FY2014 FY2015 FY2016 FY2017

Operating income–internal resources 116.79 122.96 125.96 118.34

Operating expenditure 1,079.45 1,163.15 1,494.57 1,185.60

Note: The fiscal year (FY) of the Government of India ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2021 ends on 31 March 2021. Source: Municipal corporation’s budget statements; and Asian Development Bank estimates. The municipal corporation finalized annual financial statements until 2017.

3. Analysis and Re-evaluation Findings

32. Interventions for water supply, drainage, urban transport and flyovers, mechanized parking, and SWM i proposed under project 2 and for the subsequent projects under the MFF were prepared to provide basic services to residents of the target towns and to protect the environment by reducing (i) groundwater depletion, (ii) the discharge of untreated wastewater into water bodies and irregular disposal of solid waste; and (iii) road traffic accidents and travel time within the city. With recent changes in state government policies, notably the implementation of pro-poor water tariffs, and national introduction of a goods and service tax, or unified indirect taxes,

19 PWD is mainly a cost center and has no revenue. Road and related taxes are reflected in a separate account in the

state budget. 20 The municipal corporation collects advertisement tax, trade tax, shop tax, and other non-tax revenue. The municipal

corporation is yet to implement property tax within its area.

72 Appendix 12

the central and state governments duly fulfill their obligations mandated by the Article 243X and Schedule XII of the Constitution of India, through consistent and timely support for the O&M of municipal assets, including project assets, and ensure that residents have continued access to basic urban services. Fiscal reform and policies in state governments and ULBs, and innovative taxes and charges levied by ULBs—such as through the introduction of property taxes, value capture financing, and destination-based charges on the display of commercial and noncommercial hoardings and billboards—can be leveraged to strengthen municipal service delivery and governance.

Appendix 12 73

Table A12.8 Consolidated Tranche 2 subprojects Cost Benefits Table

(₹ million)

Benefits Cost

Year Time

Savings

Resource Cost

Savings

Saved Medical

Cost

Saved Flooding

costs

Total Benefits

Investment OM Total Net

1 2011 0.0 0.0 0.0 0.0 0.0 263.9 0.0 263.9 -263.9 2 2012 0.0 0.0 0.0 0.0 0.0 298.4 0.0 298.4 -298.4 3 2013 0.0 0.0 0.0 0.0 0.0 758.3 0.0 758.3 -758.3 4 2014 0.0 0.0 0.0 0.0 0.0 854.5 0.0 854.5 -854.5 5 2015 0.0 0.0 0.0 0.0 0.0 1,655.3 0.0 1,655.3 -1,655.3 6 2016 20.5 6.8 25.7 0.0 53.0 1,201.2 14.0 1,215.2 -1,162.2 7 2017 22.0 6.7 27.6 0.0 56.3 1,545.8 14.0 1,559.7 -1,503.4 8 2018 280.8 8.4 104.2 241.6 635.1 690.7 129.8 820.5 -185.4 9 2019 1,066.4 75.5 111.0 307.3 1,560.3 0.0 157.5 157.5 1,402.8

10 2020 1,099.8 79.9 114.5 313.5 1,607.8 0.0 157.5 157.5 1,450.3 11 2021 1,134.1 84.5 118.0 319.8 1,656.4 0.0 157.5 157.5 1,498.9 12 2022 1,169.5 89.3 121.4 326.0 1,706.2 29.0 157.5 186.5 1,519.7 13 2023 1,205.9 94.3 124.9 332.3 1,757.3 0.0 157.5 157.5 1,599.8 14 2024 1,243.4 99.4 128.3 338.5 1,809.7 0.0 157.5 157.5 1,652.2 15 2025 1,282.0 104.8 131.8 344.8 1,863.4 0.0 157.5 157.5 1,705.9 16 2026 1,321.7 110.4 135.2 351.0 1,918.4 0.0 157.5 157.5 1,760.9 17 2027 19,147.1 122.8 137.1 351.0 19,758.0 -1,673.6 1,515.4 -158.1 19,916.2

Total 28,993 883 1,280 3,226 34,382 5,623 2,933 8,556.5 25,825.3

NPV @ 12% 5,267.9 207.1 330.5 801.8 6,607.3 3,846.0 602.5 4,448.5 2,158.8

Base EIRR 17.3%

Sensitivity Capital Cost Over-run by 20% 15.0%

O&M Cost over-run by 20% 17.1%

Benefits reduced by 20% 14.3%

Worst Scenario (all three) 11.9%

One Year Delay in Implementation 14.3%

O&M +20%, Ben -20% 14.0%

74 Appendix 13

CONTRIBUTION OF PROJECT 2 TO ADB’S STRATEGY 2030 OPERATIONAL PRIORITIES

OP Number

OP Indicator Achievement Methodology / Remarks

OP 1.3.1 Infrastructure assets established or improved (number)

2 Outputs below included poor and other low-income HHs in the coverage area Output 1: Improved water supply infrastructure Output 3: Improved drainage infrastructure

OP 2.1.4 Women and girls benefiting from new or improved infrastructure (number)

12,393 Outcome 1: Average water supply increased from 90 lpcd to 135 lpcd (target: 13% of poor and other low-income HHs, including all FHHs)

a

OP 2.4.1 Time-saving or gender-responsive infrastructure assets and/or services established or improved (number)

11 Under output 2: improved urban transport infrastructure, 10 sex-segregated male and female toilets were constructed at two shopping complexes at relocation sites, and twin sex-segregated blocks were built at a new car parking facility. b

OP 3.2.1 Area with reduced flood risk (hectares)

2,056 2,056 hectares is the total area with flood risk reduced in the two target towns through output 3, for improved drainage infrastructure

OP 3.2.5 New and existing infrastructure assets made climate and disaster resilient (number)

3 Output 1: Improved water supply infrastructure; Output 2: Improved urban transport infrastructure; Output 3:Improved drainage infrastructure

OP 3.3.1 infrastructure assets enhancing pollution control established or improved (number)

1 Collection, transportation for treatment, and efficient disposal of solid waste improved.

OP 4.1.1 Service providers with improved performance (number)

2 (PHED and 2 ULBs)

Under output 4,. institutional capacity of PHED and the 2 ULBs of the target towns were strengthened

OP 4.1.2 Urban infrastructure assets established or improved (number)

3 Water supply system, road and drainage infrastructure were improved through the outputs below Output 1: Improved water supply infrastructure Output 2: Improved urban transport infrastructure Output 3:I Improved drainage infrastructure

OP 4.2.1 Measures to improve regulatory, legal, and institutional environment for better planning supported in implementation (number)

2 2 measures (conducting training workshops on (i) new business processing and (ii) project management) achieved under the following outputs Output 4: Institutional capacity of ERA and ULBs strengthened; Output 5: Project management system operational

Appendix 13 75

OP 4.2.2 Measures to improve financial sustainability supported in implementation (number)

1 Accrual-based accounting system commenced in municipal corporations under output 4: Institutional capacity of ERA and ULBs strengthened

OP 4.3.1 Solutions to enhance urban environment implemented (number)

2 Augmentation of potable water supply and improved drainage infrastructure for reduced flooding achieved under following outputs. Output 1: Improved water supply infrastructure Output 3: improved drainage infrastructure

OP 6.1.1 Government officials with increased capacity to design, implement, monitor, and evaluate relevant measures (number)

250 Under following outputs, (i) four workshops organized with 200 participants from ULBs and line agencies; (ii) two workshops organized for 50 project staff from the executing agency and the line agencies Output 4: Institutional capacity of ERA and ULBs strengthened Output 5: Project management system operational

OP 6.1.4 Transparency and accountability measures in procurement and financial management supported in implementation (number)

1 A measure on e-tendering supported under output 5: project management system operational

OP 6.2.4 Citizen engagement mechanisms adopted (number)

1 An improved consumer grievance mechanism introduced under output 4: institutional capacity of ERA and ULBs strengthened

DMF = design and monitoring framework, ERA = Economic Reconstruction Agency, FFH = female-headed household, HH = household, lpcd = liter day per capita, MFF = multitranche financing facility, OP = operational priority, PHED = Public Health Engineering Department, SOE = state-owned entity, ULB = urban local body. Note: The contributions of project 2 to the ADB results framework are (i) households with new or improved water supply in the two target towns: 121,821; (ii) roads built or upgraded: 3.8 kilometers; (iii) water supply pipes installed or upgraded: 50 kilometers; and (iv) land improved through drainage and/or flood management: 1,337 hectares. a A 2011 census counted 154,908 households in the target town. The project did not provide household connections

or conduct baselines or end-line surveys. Interventions were expected to benefit 20,138 households living below the poverty line and 12,393 FHHs.

b Total 10 separate male and female toilets constructed in the two shopping complexes at relocation sites. Also, 1 toilet block each for male and female constructed at the mechanized car parking facility.

Source: Asian Development Bank.