Completion Report

Project Number: 38136-013 Loan Number: 2151 September 2016

India: Multisector Project for Infrastructure

Rehabilitation in Jammu and Kashmir This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit – Indian rupee/s (Re/Rs)

At Appraisal At Project Completion (30 November 2004) (16 April 2014)

Re1.00 = $0.0216 $0.0166 $1.00 = Rs44.15 Rs60.40

ABBREVIATIONS ADB – Asian Development Bank DSC – design and supervision consultant EIRR – economic internal rate of return ERA – Economic Reconstruction Agency FIRR – financial internal rate of return km – kilometer O&M – operation and maintenance PIU – project implementation unit PMC – project management consultant PMU – project management unit PSU – project support unit SRP – short resettlement plan TA – technical assistance

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., FY2016 ends on 31 March 2016.

(ii) In this report, "$" refers to US dollars.

Vice-President W. Zhang, Operations 1 Director General H. Kim, South Asia Department (SARD) Director M. Teresa Kho, Country Director, India Resident Mission Team leader S. Majumder, Project Officer (Urban), SARD Team members A. K. Motwani, Senior Project Officer (Transport), SARD

B. Kulshreshtha, Executive Assistant, SARD M. Sharma, Associate Project Analyst, SARD S. Dasgupta, Senior Project Officer (Urban), 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. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 4 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 5 G. Conditions and Covenants 6 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 7 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 8 L. Performance of the Asian Development Bank 8

III. EVALUATION OF PERFORMANCE 9

A. Relevance 9 B. Effectiveness in Achieving Outcome 9 C. Efficiency in Achieving Outcome and Outputs 10 D. Preliminary Assessment of Sustainability 11 E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14

A. Overall Assessment 14 B. Lessons 14 C. Recommendations 15

APPENDIXES 1. Project Framework 16 2. Summary of Project Outputs 20 3. Project Cost and Financing 24 4. Disbursement of ADB Loan Proceeds 26 5. Appraisal and Actual Implementation Schedules Compared 27 6. Chronology of Major Events 28 7. Organization Structure for Project Implementation 30 8. Status of Compliance with Major Loan Covenants 31 9. Summary of Contract Packages 36 10. Economic Reevaluation 37 11. Financial Reevaluation 46 12. Safeguards Assessment 49 13. Contribution to the ADB Results Framework 51

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BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report

Number

India 2151 Multisector Project for Infrastructure Rehabilitation in Jammu and Kashmir India Economic Reconstruction Agency $250 million 1604

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. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan

– Interest Rate – Commitment Charges – Maturity (number of years) – Grace Period (number of years) – Front-end Fee

8. Terms of Relending (if any)

21 July 2004 10 August 2004 1 December 2004 2 December 2004 21 December 2004 17 March 2005 15 June 2005 13 May 2005 0 31 December 2009 16 April 2014 3 London interbank offered rate (LIBOR)-based lending facility 0.75% 25 5 0 none

9. Disbursements a. Dates Initial Disbursement

2 May 2006 Final Disbursement

27 March 2014 Time Interval 107 months

Effective Date 13 May 2005

Original Closing Date 31 December 2009

Time Interval 56 months

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b. Amount ($)

Category

Original Allocation

Last Revised

Allocation

Partial Cancellation

Amount Disbursed

Un- disbursed Balance

01A Civil Works – Urban 45,400,000 89,000,000 (43,600,000) 86,166,127 2,833,873

01B Civil Works – Transport 133,000,000 126,000,000 7,000,000 128,608,834 (2,608,834)

02 Equipment and Materials 51,900,000 5,000,000 46,900,000 4,619,782 380,218

03 Consulting Service and Training 15,200,000 17,600,000 (2,400,000) 18,081,723 (481,723)

04 Incremental Administration Costs 4,500,000 12,400,000 (7,900,000) 12,523,534 (123,534)

Total 250,000,000 250,000,000 0 250,000,000 0

( ) = negative. Notes: 1. The last loan reallocation was made on 2 December 2011.

10. Local Costs (Financed):

- Amount ($) 103,389,464 - Percent of Local Costs 38.9% - Percent of Total Cost 24.6%

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 167.0 199.4

Local Currency Cost 191.0 172.2

Total 358.0 371.6

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual

Asian Development Bank 250.0 250.0

Government 108.0 121.6

Total 358.0 371.6

3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual

A. Rehabilitation of Urban Infrastructure

Rehabilitation of water supply in Jammu 50.9 47.8

Rehabilitation of water supply in Srinagar 23.1 20.9

Rehabilitation of drainage system in Jammu 21.4 16.2

Rehabilitation of drainage system in Srinagar 11.8 29.2

Taxes and duties 16.6 21.2

B. Rehabilitation of Roads and Bridges

Rehabilitation of roads and bridges 164.4 162.4

Taxes and duties 22.6 25.9

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C. Capacity Building Support and Implementation Assistance

Project management support 5.6 5.1

Design and construction supervision support 8.7 13.0

Equipment and vehicle for implementation and incremental administration

5.0 12.5

Training on project management and operation and maintenance

0.9 0.1

Taxes and duties 3.6 1.8

Interest During Construction and Commitment Charges 23.4 15.5

Total 358.0 371.6

4. Project Schedule

Item Appraisal Estimate Actual

Project Preparation

Project effectiveness Q2 2005–Q2 2005 Q2 2005–Q2 2005

Transition technical assistance Q4 2004–Q2 2005 Q4 2004–Q3 2005

Subproject selection and appraisal Q4 2004–Q4 2007 Q1 2005–Q4 2011

Consulting Services

Project management consultants Q3 2005–Q2 2009 Q4 2005–Q4 2013

Design and supervision consultants Q3 2005–Q2 2009 Q1 2006–Q4 2013

Urban Sector Component

Procurement Q4 2004–Q4 2006 Q2 2005–Q4 2010

Construction Q3 2005–Q1 2009 Q2 2006–Q4 2013

Transport Sector Component

Procurement Q4 2004–Q2 2006 Q3 2005–Q3 2011

Construction Q2 2005–Q3 2008 Q1 2006–Q4 2013

5. Project Performance Report Ratings

Ratingsa

Implementation Period Development Objectives Implementation Progress

1 December 2004–31 December 2004 Satisfactory Satisfactory

1 January 2005–31 December 2005 Satisfactory Satisfactory

1 January 2006–31 December 2006 Satisfactory Satisfactory

1 January 2007–31 August 2007 Satisfactory Highly Satisfactory

1 September 2007–31 December 2007 Satisfactory Satisfactory

1 January 2008–31 December 2008 Satisfactory Satisfactory

1 January 2009–31 December 2009 Satisfactory Satisfactory

1 January 2010–31 October 2010 Satisfactory Satisfactory

1 November 2010–31 December 2010 Satisfactory Partially Satisfactory

1 January 2011–31 December 2011 On Trackb

1 January 2012–31 December 2012 On Track

1 January 2013–31 December 2013 On Track

1 January 2014–16 April 2014 On Track a

Project performance report ratings are based on a different method than that used for overall assessment of the project at completion.

b Based on new rating system for evaluation of project performance using e-Operations.

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D. Data on Asian Development Bank Missions

Name of Mission Date

No. of Persons

No. of Person-

Days

Specialization of Members

Fact-finding 21 Jun–2 Jul 2004 5 60 t, t, u, u, m

Appraisal 21 Jul–10 Aug 2004 10 80 t, h, e, l, t, u, u, u,

u, m

Inception 13–16 Jul 2005 4 16 u, t, d, a

Review 1 24–26 Oct 2005 5 15 o, u, t, t, c

Review 2a 24–28 Apr 2006 4 20 u, p, r, e

Review 3 10–13 Oct 2006 5 20 u, n, p, c, c

Review 4 12–16 Feb 2007 6 30 u, p, p, a, e, c

Special loan administration 1 10–12 Sep 2007 3 9 u, a, s

Special loan administration 2 21–28 Oct 2007 1 8 e

Review 5 23–28 Feb 2009 2 16 p, p

Review 6 31 Aug–4 Sep 2009 3 15 p, p, a

Special loan administration 3 4–12 Jan 2010 4 36 r, p, e, c

Special project administrationa 6–9 Dec 2010 3 12 p, p, c

Review 7 19–23 Sep 2011 2 10 p, p

State level tripartite review 7–8 Oct 2011 4 8 o, u, p, p

Disbursementa 19–22 Dec 2011 2 8 n, a

Review 8 6–10 Aug 2012 2 10 p, t

Special loan administration 4 19–21 Nov 2012 2 6 p, t

Review 9a 21–30 Nov 2012 2 20 f, e

Review 10 11 – 14 Jun 2013 2 7 p, t

Special loan administration 5 22–26 Oct 2013 1 5 p

Project completion review 1 5–10 Oct 2015 3 18 t, u, p

Project completion review 2 14–19 Dec 2015 5 28 t, p, a, c, c

a = analyst; c = consultant; d = disbursement specialist, e = environment specialist, f = safeguards officer, h = unit head, l = counsel, m = economist, n = control officer, o = country director, r = resettlement specialist, s = social specialist, p = project implementation officer, t = transport specialist, u = urban specialist. a Combined with other projects in the state.

I. PROJECT DESCRIPTION

1. The Multisector Project for Infrastructure Rehabilitation in Jammu and Kashmir (the project) was formulated for expedient rehabilitation of damaged road infrastructure and urban utility facilities in the state of Jammu and Kashmir. The project, supported by the Asian Development Bank (ADB), represented the first direct intervention by any multilateral funding agency into a longer-term endeavor in the state. The limited availability of financial resources for maintenance and upkeep of infrastructure and more than 10 years of security-related issues resulted in deteriorating roads, bridges and water supply facilities. The situation was aggravated by a significant migrant influx into the key urban centers of the state, exerting tremendous pressure on existing infrastructure and adversely impacting the health and sanitation of the communities. Mobility of people, goods and services was also adversely affected, limiting employment opportunities, income creation, and the general welfare of the state’s population. Recognizing the urgent need to rehabilitate existing infrastructure, the Government of India and the state government sought the support of ADB.

2. The project’s envisaged outcomes were to (i) raise the quality of life of the urban populations in Srinagar and Jammu, the two main cities in the state, through water supply and drainage system improvement; (ii) improve rural connectivity and facilitate trade within the state by reconstructing roads and bridges; and (iii) build the capacity of the executing agency, the Economic Reconstruction Agency (ERA), which would lead to better planning, improved policy formulation, and the introduction of required technical skills, systems, and criteria, thereby improving transparency and efficiency.

3. An investment need of $358 million was identified as a part of the broader economic turnaround plan of the state. On 21 December 2004, ADB approved a loan of $250 million for the project, with the Government of India contributing $108 million.1 The loan agreement was signed on 17 March 2005. The loan physically closed on 30 September 2013 and the loan account closed on 16 April 2014.

4. The project comprised the following three parts: (i) Urban sector component. This component aimed to improve water supply and drainage systems in Jammu and Srinagar. This included replacement of dilapidated water transmission lines, upgrading of old and/or damaged pumps, provision of standby generators and power backup equipment, expansion of the drainage networks in selected areas, rehabilitation of pumping stations and unclogging of drains, and provision of equipment and vehicles for garbage collection in Jammu and Srinagar. (ii) Transport sector component. This component intended to improve rural connectivity and facilitate trade within the state by rehabilitating and/or reconstructing damaged and weak bridges, and rehabilitating and/or upgrading roads in 14 districts of the state. (iii) Capacity building component. This component focused on establishing and strengthening the ERA, which had no prior experience in implementing externally funded projects. It included developing the institutional framework of the newly created ERA, training for staff of ERA and project implementation units (PIU), and providing necessary infrastructure and consultancy services.

1 ADB. 2004. 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. Manila.

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5. At appraisal, the project was expected to benefit (i) the urban population in Jammu and Kashmir by providing 1.50 million people with improved access to safe drinking water, and 1.02 million people with improved drainage; (ii) the state’s rural population by reducing the number of communities unserved by all-weather roads by 10%; and (iii) the state through efficient and transparent management of externally aided projects resulting from the strengthened institutional framework of the ERA.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

6. The project was the first direct involvement by ADB into a longer-term plan for economic growth and recovery conceived by the central and state governments. It sought to address the lack of infrastructure investments in the past in the state, and had an immediate rehabilitation and reconstruction emphasis, rather than that of a planned intervention. The project focused on development of the main growth centers within the state through rehabilitation and upgrading of urban infrastructure, and improved connectivity. It was designed to adapt to the very specific and special situation on the ground to maintain the project’s relevance. The project was aligned with ADB’s Water for All Policy 2001, and also demonstrates alignment with ADB’s Water Operational Plan, 2011–2020.2 Although the project predated ADB’s Strategy 2020, it is relevant to the strategy, with its focus on infrastructure-led growth, poverty reduction, environment protection, and institutional strengthening.3 The project was aligned with the country strategy and program, 2003 for India, and supported the 2004 country strategy and program update, which highlighted interventions in the northeastern states, Uttarakhand, and Jammu and Kashmir, and recognized infrastructure as one of the vehicles to achieve its goals. At completion, the project was relevant to ADB’s policy focus on India in areas of inclusive growth, infrastructure, and environmental sustainability.4 During loan appraisal, it was consistent with India’s Tenth Five Year Plan, 2002–2007, which emphasized reduction of regional economic disparities through rehabilitation and expansion of critical infrastructure, improved operation and maintenance (O&M) to increase effectiveness of infrastructure investments, road safety, energy efficiency, beneficial social impact, and environmental conservation. In the urban sector, the plan’s emphasis was on improved water supply, including augmentation to reach the prescribed norms, higher degree of reliability, assurance of water quality, a high standard of O&M, accountability to customers, and levy and recovery of user charges, which were the main thrusts of the urban water supply intervention of the project. In the area of road transport, the plan’s priority objective was connecting 100% of the rural population with all-weather roads, to which the project aimed to contribute.5

7. At appraisal, the state was gradually recovering from setbacks due to security-related issues, besetting it for over a decade (para. 1). The need to deliver quality infrastructure while managing public expectations was paramount. To address immediate infrastructure gaps in the urban and transport sectors and deliver basic services as soon as possible, the project was quickly formulated using the sector loan modality. It was designed to adapt to the very specific and special situation in the state. The sector loan modality approach was more appropriate, as it

2 ADB. 2001. Water for All: The Water Policy of the Asian Development Bank. Manila; ADB. 2011. Water Operational

Plan, 2011–2020. Manila. 3 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020.

Manila. 4 ADB. 2013. Country Partnership Strategy: India, 2013–2017. Manila; ADB. 2013. Country Operations Business

Plan: India, 2013–2015. Manila. 5 Government of India, Planning Commission. 2002. Tenth Five Year Plan, 2002–07. New Delhi.

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provided the flexibility to design, prioritize, and select subprojects, following the prescribed eligibility criteria and frameworks prepared during appraisal, which are critical for any emergency and reconstruction project. It also helped deliver water supply master plans, which guided subsequent investment decisions in the state.

8. The project design and cost estimate during appraisal were based on available secondary data.6 A total of five sample subprojects, two from the urban sector and three from the transport sector, were appraised during processing. Certain adjustments in fund allocations across sectors and outputs were therefore, required following detailed design and during implementation. 7 The adjustments, which were within the purview of the overall scope, enhanced the project’s relevance.

B. Project Outputs

9. The precise scope of work that can be accommodated under a sector loan project can only be determined during implementation, based on field survey and engineering design. During processing of the project, five sample subprojects were appraised and targeted outputs estimated. The project framework and its achievement is in Appendix 1 and detailed information of the outputs is in Appendix 2. The key outputs achieved were the following:

(i) Urban sector component. An assessment of targets versus achievements under this component reveals that (a) the quantity of potable water supply increased by 135,000 cubic meters per day, against an estimated target of 129,000 cubic meters per day; (b) 425 kilometers (km) of old water supply pipelines were constructed and/or rehabilitated covering the entire scope under the water supply subprojects; and (c) 93 km of drain lines were rehabilitated in Jammu and Srinagar against the target of 97 km.8 In addition, the project delivered 58 storage reservoirs for treated water with a total capacity of 38 million liters in Jammu. A total of 36 public toilets were constructed in Jammu and Srinagar to provide better sanitation facilities. Four new drainage pumping stations were constructed in Srinagar to reduce incidence of waterlogging. Solid waste management equipment was also provided to the municipal corporations of Jammu and Srinagar to help provide an efficient solid waste collection system.

(ii) Transport sector component. Upon project completion (a) 604 km of roads were rehabilitated and/or reconstructed, including provision of bituminous surfacing, rehabilitation and widening of carriageway, construction of roadside drainage, installation of road safety measures, etc.; and (b) 22 bridges were constructed.9 These initiatives

6 Due to difficulty in accessing the project sites and other security-related limitations, the project was designed,

including the cost estimate, based on non-validated secondary data and desk-based assessment. Moreover, given its urgency, the project was prepared on a fast-track basis and only five subprojects were appraised. Remaining subprojects were eventually identified and appraised during implementation.

7 ADB. 2011. Reallocation of Loan Funds: Multisector Project for Infrastructure Rehabilitation in Jammu and

Kashmir. New Delhi. The allocation for the urban sector component was increased from $92.8 million to $94.0 million and the allocation of transport sector component was decreased from $137.5 million to $126.0 million.

8 The lengths used at appraisal for the replacement of water supply pipelines (529 km) and drain lines (191 km) were

based on secondary data and desk-based assessment, and had to be revised after the final selection of subprojects to meet the actual requirement.

9 The lengths used at appraisal for rehabilitation of roads (1,500 km) and reconstruction of bridges (80 bridges in 14

districts) were based on a broad assumption by the government on the nature of project roads, which mostly consisted of village roads and other district roads. In the absence of sufficient data, any assessment of the nature of works to be undertaken was not possible, and the cost of works was based on broad assumptions. A contingency provision to cater for cost escalation and variations was not made under the cost estimates. The appraisal targets therefore cannot be considered as targeted outputs. The roads and bridges were identified based on the subproject eligibility criteria and due appraisal of the subprojects.

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helped improve connectivity in project areas significantly.10

(iii) Capacity building component. The state established the ERA as a special purpose vehicle in 2004, for implementation of ADB-funded and other externally aided projects in the state. During preparation of the project, the ERA's implementation capacity was identified as a potential risk, as no large-scale, externally financed project had ever been implemented in the state. To mitigate this risk and to achieve early delivery of project benefits, ADB established a project support unit (PSU) in January 2005. The ERA’s project management and implementation capacity related to large-scale, multilateral-aided infrastructure projects was effectively structured, with on-the-job advice on project implementation by the PSU. The ERA underwent regular external audits and submitted the audited financial statements in accordance with the loan and project agreement. The ERA also prepared master plans for water supply for Jammu and Srinagar, which subsequently guided investment decisions in the state. Apart from capacity building of the ERA and the PIUs, the project also supported the Public Works Department of the state by increasing awareness of road safety, social and environmental safeguards and providing training to the department’s staff on the road maintenance system. Several workshops, seminars, and training sessions were conducted both at the state and project level to train staff from government agencies on road maintenance and funding, O&M of water supply and drainage, ADB safeguard policies and the agreed safeguard frameworks for the project, and transparent and efficient procurement systems. The project management consultant (PMC), with the support of the Public Works Department and ERA officials, carried out a study on road maintenance and management. As a part of the study, several workshops on road asset management were organized.

C. Project Costs

10. The estimated project cost at loan appraisal was $358.0 million, including $123.8 million for the urban sector component, $187.0 million for the transport sector component, $23.8 million for the capacity building component, and $23.4 million for loan financial charges. Out of $358 million, the ADB loan component was $250 million (70% of total project cost) and the government contribution was estimated to be $108 million (30% of total project cost). The cost at completion for the urban sector component was Rs6,337 million (about 22% higher than the original contract amount) and the cost at completion for the transport sector component was Rs9,176 million (about 16% higher than the original contract amount). The increase in costs was to meet the actual requirements and price escalation. The actual project cost at completion was $371.6 million (3.8% higher than the cost at appraisal), comprising $135.3 million for the urban sector component, $188.3 million for the transport sector component, $32.5 million for the capacity building component, and $15.5 million for loan financial charges. At completion, the ADB loan amount remained the same, while the government’s share increased to $121.6 million. The cost of the capacity building component increased from $23.8 million to $32.5 million due to implementation assistance provided during the extended project period. The loan financial charges decreased by $7.9 million during implementation, as the actual rates were less than the rates considered during appraisal. Appendix 3 compares project cost at appraisal with actual costs.

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Benefits of improved connectivity to commuters and business owners were validated through focus group discussions during the project completion review mission.

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D. Disbursements

11. Loan disbursements were slow during the first 2 years of implementation, primarily due to the time required for (i) engagement of the consultants; (ii) selection, appraisal, approval, and detailed engineering design of subprojects; and (iii) the award of contracts. Disbursements gained momentum in 2007, with the award of the majority of the works contracts in late 2006 and early 2007. Appendix 4 provides disbursement details of the loan proceeds. All withdrawal applications were submitted to ADB through the Controller of Aid Accounts and Audit, Ministry of Finance, Government of India. The project used the reimbursement mechanism for disbursement through statements of expenditure and documented claims. The project benefited from the simplified statement of expenditure process, which did not require submission of supporting documents. The ERA did not make use of the imprest account facility provided for under the loan. All disbursement-related qualifications raised by the auditors were duly addressed. At financial closure of the loan, the full loan amount of $250 million was disbursed.11

E. Project Schedule

12. The original loan closing date of 30 June 2009 was extended to 30 September 2013. The comparison of appraisal and actual implementation schedules is in Appendix 5. The initial 2 years of the implementation period were utilized for engagement of consultants; selection, appraisal, and approval of subprojects; primary data collection; survey; detailed design; bid document preparation; award of contracts; and operationalization of the Economic Reconstruction Agency, the newly established entity for project execution. The major civil works contracts were awarded and gained momentum in 2007, although security issues led to severe disruptions during 2008–2010 resulting in suspension of execution of contracts. The project made progress in 2011, but security issues continuously affected its implementation.12 The execution of works contracts was also hampered due to the substantial utility shifting; land acquisition; and poor performance of a few contractors, which contributed to some implementation delays. Overall, project completion required an additional 4 years, mostly reflecting (i) unforeseen difficulties beyond the ERA’s control; (ii) the time needed for the newly created executing agency to become fully functional; and (iii) the time needed to build confidence among different stakeholders, including contractors, to work in the state.

13. Three transport sector contracts and one urban sector contract spilled over beyond the loan closing date because of poor contractor performance that led to termination of contracts. The state has been implementing these contracts using its own funds and is committed to complete the balance of the works by the end of 2016.

F. Implementation Arrangements

14. The project’s implementation arrangements proved appropriate to achieve the envisaged outputs. ERA, the executing agency, demonstrated strong ownership of the project. The ERA’s capacity evolved over time, and the state government arranged for adequate staffing and provided senior-level staff at the management level on deputation from different departments.

15. The ERA, headed by a chief executive officer, established a project management unit (PMU). The PMU had three directors supported by a group of senior officers, and a total of

11

ADB. 2014. Final Cancellation of Unutilized Loan Balances: Multi-sector Project for Infrastructure Rehabilitation in Jammu and Kashmir. Manila. $0.01 was canceled at financial closure for book adjustment.

12 At appraisal, it was identified that the project would be implemented under circumstances of limited institutional capacity and security issues.

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about 45 staff. Four regional PIUs were established (one each in the urban and transport sectors in Jammu and in Kashmir), each with an average of 35 staff. Key responsibilities of the PMU were overall project implementation management and coordination, and support to the PIUs in contract management and monitoring. The capacity building component was directly implemented by the PMU. Major responsibilities of the PIUs included facilitating detailed engineering design, obtaining right-of-way clearances, and supporting construction supervision. The ERA established a committee comprising land collectors and resettlement and environmental experts to expedite the right-of-way clearances. A social and environmental management cell was established within the PMU for efficient coordination and monitoring, and effective management, of safeguard issues.

16. At the state level, a steering committee chaired by the ERA’s chief executive officer and comprising commissioners and secretaries of the departments of public works, planning, housing and urban development, public health engineering, urban environmental engineering, tourism, and power facilitated resolution of critical implementation issues and interdepartmental coordination.

17. The PMU was assisted by the PMC; and PIUs by the design and supervision consultants (DSCs) for detailed engineering design and construction supervision. An agency was engaged as an external monitor to oversee implementation of resettlement plans.

18. ADB established a PSU in January 2005 to support the ERA in project implementation. Major tasks of the PSU included (i) assistance to ERA to expedite project execution; (ii) regular guidance and monitoring of the ERA’s project management activities, especially in areas related to ADB policies and procedures; (iii) improvement of engineering designs and contract packaging to increase the quality of project outputs; (iv) review of bid evaluation reports, subproject appraisal reports, and progress reports; and (v) capacity building of the ERA in project management and implementation. The organization structure for project implementation is in Appendix 7.

G. Conditions and Covenants

19. The majority of the loan covenants have been fully complied with. The state government and ERA established PMU and PIUs with requisite staffing. During the initial years, frequent transfer of key staff between ERA and government departments was an issue that was subsequently resolved. The government provided counterpart funds in a timely manner to support successful project implementation. Separate financial accounts for the project were maintained and audited annually by statutory auditors. The project achieved full compliance with the covenant related to enhancement of the water tariff.13 Implementation of the envisaged water tariff reform was facilitated by (i) the setting of a realistic reform target, (ii) incremental tariff increases in 2005 and 2011, and (iii) an awareness generation drive among project beneficiaries. The covenants related to the allocation of resources for O&M and the installation of water meters are considered partially complied with. The covenant related to the project performance monitoring system was fully complied with in case of the urban sector and was complied with, although late, in the case of the transport sector. Appendix 8 provides the status of compliance with major loan covenants.

13

The annual water tariff for domestic consumers was doubled in Jammu and Srinagar in 2006.

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H. Related Technical Assistance

20. The project was accompanied by a piggybacked project preparatory technical assistance (TA) grant to prepare a comprehensive investment plan for urban water supply, sewerage, drainage, and solid waste management in the state. The total cost of the project preparatory TA was $630,000, of which a grant of $500,000 was financed by the Government of the United Kingdom, and the remaining by the state.14 The project preparatory TA helped the state to design and prepare the follow-on Jammu and Kashmir Urban Sector Development Investment Program.15 Sector plans and policy and institutional aspects to promote cost recovery through tariff reforms were also prepared under the project preparatory TA, which became part of the Jammu and Kashmir Urban Sector Development Investment Program.16 To establish the PSU and help the ERA implement projects, ADB approved an advisory TA on 7 December 2006.17 The TA completion report indicates that the anticipated outputs of supporting project implementation, providing on-the-job training to project staff, improving engineering designs and contract packaging, and assisting the state to establish a project monitoring system were achieved.18 The advisory TA (i) helped make the ERA fully functional, (ii) effectively built its project management and implementation capacity, (iii) expedited contract award and execution by providing guidance to the ERA on procurement-related issues, and (iv) assisted in achieving yearly contract award and disbursement targets. The advisory TA was rated highly successful.

I. Consultant Recruitment and Procurement

21. Consultants were recruited in accordance with ADB’s Guidelines on the Use of Consultants (2002, as amended from time to time). The ERA followed the quality- and cost-based selection procedure to select the PMC and four DSCs.19 The contract with the firm selected as PMC was signed on 2 December 2005, and the DSCs were appointed in January 2006. The ERA was new to ADB procedures, yet recruitment of consultants was accomplished within a reasonable time frame of 6 months.

22. The procurement of civil works contracts conformed to ADB’s Procurement Guidelines (February 1999 and as amended from time to time). Works contracts estimated to cost $10 million or less were procured through local competitive bidding procedure. For transport sector component contracts, the design-as-you-build form of contract was adopted for quick mobilization of contractors. Subsequent to mobilization of the DSCs, work contracts with admeasurement procedures were followed. In view of the size of works and their location, and the importance of starting the rehabilitation process quickly, the ERA used force account for small bridges valued at less than $0.5 million, and entrusted such works to Jammu and Kashmir Projects Construction Corporation, a specialized state agency. Bridges valued at $0.5 million or more were awarded on the basis of competitive bidding. Preparation of standard bid documents, evaluation of bids, and award of contracts were executed smoothly.

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The TA was financially closed on 18 December 2008 and $480,126 was utilized at completion. 15

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

16 A TA completion report is not required for a project preparatory TA that results in a loan. ADB. 2009. Project Completion Report for Sovereign Operations. Project Administration Instructions. PAI 6.07A. Manila (Appendix 2, para. 12).

17 ADB. 2006. Technical Assistance to India for Strengthening Urban Project Management in Jammu and Kashmir. Manila.

18 ADB. 2010. Technical Assistance Completion Report: Strengthening Urban Project Management in Jammu and Kashmir. Manila.

19 The four DSCs are DSC-Urban, Jammu; DSC-Urban, Kashmir; DSC-Transport, Jammu; and DSC-Transport, Kashmir.

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J. Performance of Consultants, Contractors, and Suppliers

23. The overall performance of the consultants is rated generally satisfactory. The consulting firms experienced staff retention problems due to security issues. Frequent replacement of the firms’ personnel, coupled with time required for detailed surveys and investigations, led to delays in the finalization of designs and bid documents, and delays in the issuance of technical drawings during the initial years of the project. The performance of the PMC and DSC-Urban, Jammu and DSC-Transport, Kashmir were satisfactory. The PMC provided strong technical support to the PMU in resolution of contractual issues, safeguard monitoring, and progress report preparation. The PMC also helped the DSC-Transport, Jammu and DSC-Urban, Kashmir overcome their shortcomings.

24. Overall, the performance of contractors is rated satisfactory. The majority of the contractors performed well in terms of completion of civil works within the contract schedules. The support provided to the contractors by the PMU and PMC, especially with respect to stringent quality control requirements and contractual provisions, resulted in their improved capacity. A few contractors did not deliver satisfactorily, despite full support from all the concerned agencies. The PMU and PIUs took action to discuss and resolve contract execution issues amicably, including through regular meetings with contractors. Due to continued poor performance of the contractor, the ERA terminated eight civil works contracts, whose remaining works were later undertaken by the state using its own resources. Jammu and Kashmir Projects Construction Corporation could not demonstrate satisfactory performance in executing some of the bridge works on time. Performance of the suppliers is rated satisfactory.

K. Performance of the Borrower and the Executing Agency

25. The overall performance of the borrower and the executing agency is rated highly satisfactory. The borrower, represented by the Government of India’s Department of Economic Affairs, demonstrated a strong sense of ownership through timely guidance and decisions to the state government on the project and undertook a few joint missions and regular tripartite review meetings with ADB, the state government, and the ERA, which helped resolve issues and monitor progress. The state government provided strong support to the ERA and actively participated in project implementation, coordination, and monitoring. The state provided the required counterpart funding on time and adequate human resources throughout the project period. The ERA exhibited strong leadership with the placement of senior-level officers from the state government in its management (para. 14). The ERA enhanced transparency by publishing all project related reports. Within a short period, the ERA emerged as a strong nodal agency, capable of handling complex and large-scale externally aided or government-funded projects in the state. The ERA also emerged as a preferred employer in the state.

L. Performance of the Asian Development Bank

26. The performance of ADB is rated satisfactory. ADB’s commitment to the project was evident in its regular reviews and missions, which helped identify and overcome hurdles to project progress. ADB’s regular monitoring and timely guidance helped expedite project implementation. The ERA found ADB’s support and advice particularly useful in the resolution of project management issues. The PSU established by ADB was found useful and appreciated by the state government. ADB also provided training and supported exposure visits of ERA personnel to other ADB supported projects in India. The state government appreciated ADB’s guidance to improve sustainability of project outputs as well as ADB’s responsiveness during project processing and implementation.

9

III. EVALUATION OF PERFORMANCE

A. Relevance

27. The project was relevant to the Government of India’s development objectives and ADB’s country and sector strategies at appraisal and at completion (para. 6). It was part of a broader economic turnaround plan defined by the central and state governments, and it was designed to meet the objectives of the turnaround plan while taking into consideration the very specific and special situation on the ground. It was aligned with the state’s priorities to restore the facilities that are needed to deliver basic urban services in the two main cities and to rehabilitate key roads and bridges in the state. The project was an integral part of the Government of India and state government’s strategy to promote inclusive development in the state, and to address regional inequality within and between states. The project remained aligned with policies and objectives stated in India’s Tenth Five Year Plan, 2002–2007 (footnote 5); Eleventh Five Year Plan, 2007–2012; and Twelfth Five Year Plan, 2012–2017. It responded to aspirations arising from the country’s gross domestic product growth target of 8%–9% per annum under the eleventh and twelfth plans, which required a focus on improved infrastructure and governance, and the environment.20 The project supported the government’s urban sector targets relating to water supply articulated in the twelfth plan, including a water supply of 135 liters per person per day, and an emphasis on individual piped water supply. It also remained relevant to the government’s focus on the development of efficient, adequate, and reliable transport infrastructure, and on good roads and reduced transit time, as criteria for achieving rapid growth (footnote 20). The project remains in line with ADB’s country partnership strategy for India, which supports the government’s strategic goals of faster, more inclusive, and sustainable growth (footnote 4). The project has also successfully developed the ERA as an organization with capacity for project formulation, safeguards, and implementation of large infrastructure projects, and it addressed the need for long-term capacity building of the ERA. Overall, the project had improved the quality of life of people across the state and functioning of the executing agency. Significant investments have been made in the state following project implementation.

B. Effectiveness in Achieving Outcome

28. The project is rated less than effective due to under-achievement of outputs parameters of roads and bridges, and drainage components as compared to those indicated in the project framework (para. 9). While most of the outcome parameters were achieved and those related to improved rural connectivity and access to safe drinking water were surpassed, the number of people benefitted from drainage improvement is less than the figures indicated in the project framework. The project delivered quality outputs. The improvements to water supply and drainage systems have enhanced the quality of life of the urban populations in Jammu and Srinagar. Upon completion, urban infrastructure in Jammu and Srinagar stands substantially improved, benefiting 1.8 million people with safe drinking water and 0.43 million people with better drainage facilities.21 The drainage pumping stations in Srinagar played a crucial role during the 2014 floods in the city, serving to dispose flood waters. The drainage subproject in

20

Government of India. Planning Commission. 2007. Eleventh Five Year Plan, 2007-2012. New Delhi; and Government of India. Planning Commission. 2012. Twelfth Five Year Plan, 2012-2017. New Delhi. http://planningcommission.nic.in/plans/planrel/fiveyr/welcome.html

21 The project framework indicated that 1.5 million people would benefit from improved access to safe drinking water and 1.02 million people from improved drainage. The output and population coverage figures for water supply and drainage at appraisal, were based on broad estimates and without technical due diligence. Output targets were finalized during implementation after due technical appraisal of constituent subprojects.

10

Jammu led to reclamation of about 3.7 hectares of prime land in the heart of the city. The price of the reclaimed land has increased to almost 10 times of that before the project. There is potential to use the reclaimed land for commercial purposes and contribute to the resource base for O&M of urban sector components in Jammu. Under the transport sector component, 604 km of roads were upgraded and 22 bridges constructed. Post-project implementation, vehicles could drive about 50% faster on the improved project roads than before, leading to substantial savings in vehicle operating costs and passenger travel time costs. In some remote rural areas where there was no connectivity, six new bridges were constructed providing all-weather vehicular connectivity. Overall, the transport subprojects have improved connectivity, facilitated trade, and served as lifelines during floods.22

29. Implementation of capacity building programs has led to better planning and policy formulation, and strong project implementation capacity of the ERA. The project helped the state deliver quality outputs, enhanced its aspirations and acted as a catalyst for future investments by different development partners. The ERA has grown in strength and emerged as an organization capable of implementing externally aided, large infrastructure projects, including safeguards. The state government has developed confidence in the ERA and often approaches it to help plan and implement complex projects. The project helped build capacity of the local contracting community in the state. The district administrations and divisional commissioners were fully involved and consulted at every stage, allowing for effective implementation.

30. The project was successful in introducing several innovative practices, which enhanced the project’s effectiveness in achieving the targeted outcomes. These practices included the following: (i) use of a geographical information system for mapping of Jammu’s water utilities and master planning for Jammu’s water supply (the first time in the state); (ii) linking part of each payment to contractors to satisfactory implementation of the environmental management plans; (iii) use of mobile environmental monitoring units and laboratories for regular monitoring of ambient air quality, water quality, and noise levels during construction; and (iv) reclamation of prime land with significant commercial potential (under the drainage subproject in Jammu). Strict adherence with engineering standards helped achieve good construction quality, which has influenced the state to adopt similar standards and specifications and quality control measures for all infrastructure projects.

C. Efficiency in Achieving Outcome and Outputs

31. Overall, the project is rated efficient. Economic and financial reevaluation was undertaken at completion, using a methodology similar to that adopted at appraisal for the sample subprojects (Appendix 10 and Appendix 11). Under sector loan modality, the appraisal and approval of subprojects during implementation included economic and financial due diligence in accordance with the eligibility criteria and procedures stipulated under the project. The economic internal rate of return (EIRR) at completion was analyzed separately for water supply, drainage and sanitation, and roads and bridges. Economic benefits were calculated for the with- and without-project scenarios. For the urban sector, the economic benefits included (i) water sources cost savings through reduced water leakage, (ii) lower health expenditures due to improved access to water supply and sanitation, (iii) opportunity cost savings through improved access to water supply, and (iv) increase in land value due to improved drainage. For the transport sector component, the economic benefits included vehicle operating cost reductions, and passenger travel time cost savings resulting from use of the project roads and bridges. The

22

This was evident from the project completion review mission focus group discussions with road users, communities in remote areas, traders, and business owners.

11

analysis could not quantify some important expected benefits, such as reduced disruption of traffic and reduced damage to property due to reduced flooding, and positive impacts on tourism and related businesses. The EIRR at completion was calculated at 19.9% for the entire project, accounting for its efficient rating. The EIRR for the urban sector component was 19.1% and that of the transport sector component was 20.5%. All the EIRRs are higher than the recommended discount rate of 12% stipulated in the subproject eligibility criteria.

32. The implementation was efficient because quality outputs were delivered within an acceptable time frame without any significant cost overruns, despite the field level constraints. The delay was mainly due to unforeseen difficulties beyond the ERA’s control (para. 12). Funds were made available on time and the loan amount was fully utilized.

D. Preliminary Assessment of Sustainability

33. Overall, the project is rated less than likely sustainable. The degree of sustainability will vary between outputs, as indicated below.

(i) Urban drainage in Jammu is likely to be sustainable, as reclaimed land from the drainage project is available for development, and has potential to yield substantial financial benefits on a continual basis. Urban drainage in Srinagar is, however, less than likely sustainable. Regular O&M of the drainage pumping stations in Srinagar needs improvement, and the urban local body needs to provide adequate resources for their upkeep. (ii) Sustainability of the urban water supply in Jammu and Srinagar is less than likely, as O&M costs are not being fully recovered and there is a dependence on state support for operating expenses.23 Considering devolution as part of the financial benefits of the water supply subcomponent, the financial internal rate of return (FIRR) was calculated at 2.52%, which is higher than the weighted average cost of capital of 1.46% calculated at appraisal. Without taking devolution into account, the FIRR is negative, as cost recovery is low. Unless reform related to tariff increase is initiated, and metering and improved collection efficiency are fully implemented, sustainability of the water supply will continue to be an issue.24 Optimal use of the equipment and services provided under the project, and appropriate utilization of the geographical information system developed to manage and operate urban services, could improve sustainability. (iii) Overall, the transport sector component is less than likely sustainable, as annual budgetary allocations of the state government are not sufficient for maintenance of the roads rehabilitated under the project. The state needs to set up adequate O&M systems and provide dedicated funds for the assets to enhance sustainability in the road sector. (iv) For institutional sustainability, the ERA has to continue to build on its experience and capability to handle major infrastructure projects.

23

After physical completion, all subprojects have been transferred to related government line agencies for O&M. The urban subprojects are now operated and maintained by the Public Health Engineering Department. The total fiscal allocations to the Public Health Engineering Department for O&M in FY2015 were Rs1,072.7 million for Jammu (21.3% higher than FY2011, with an annual increase rate of 4.9%) and Rs560.7 million for Srinagar (24.9% higher than FY2011, with an annual increase rate of 5.7%).

24 The water supply tariff is set by the local governments. The present tariff for domestic consumers is about Rs1,200–Rs1,400 per connection per year. For commercial consumers, the tariff is collected on the basis of usage, through metered connections. Commercial water tariff is increased by 10%–15% per year. As per revenue data provided by the urban local bodies, water supply tariffs increased significantly in Jammu and Srinagar during and after project implementation. Revenue realization was 25%–30% of the assessed amount.

12

E. Impact

1. Economic and Social Impacts

34. The rate of growth in per capita gross state domestic product increased from 7.38% in FY2006 to 12.5% in FY2014.25 Poverty in the state decreased from 13% in FY2005 to 10% in FY2012, lower than that in other states in India. 26 Though economic growth and poverty reduction in the state cannot be completely attributed to the project, it is widely recognized by the state and its people that the project led to economic benefits, contributed to prosperity, and had significant positive impacts on the poor in terms of equal access and improved service coverage. Installation of drainage pumps in Srinagar helped drain floodwater during the major flood in the city in 2014 and minimized losses. Transport component has improved connectivity; significantly reduced travel time and vehicle operating costs for road users; and provided improved access to schools, hospitals, markets, and workplaces. The improved connectivity has boosted trade and tourism in the state. New shops and businesses have been established along the roads improved under the project, and bus services have increased. Increased economic activities and a significantly improved business environment were also reported along project roads due to improved connectivity.27 Water supply subcomponent in Srinagar and Jammu provided all households in project areas with regular and reliable service.28

2. Institutional Impacts

35. A new organization, the ERA, was established for project management, and its capacity built. This was the first such institutional intervention in the state. The institutional capacity of the ERA increased during the course of project implementation to handle contract management, safeguards, and project formulation, and it is now poised to become the state-level nodal agency for externally aided projects. The ERA has the capability to plan, design, implement, and monitor such projects; and provide technical advice to line agencies to operate facilities created. The ERA is currently implementing the ADB-financed Jammu and Kashmir Urban Sector Development Investment Program, a multitranche financing facility (footnote 15). During appraisal of the project, the security situation and limited implementation capacity of the state are considered as major risks. Satisfactory implementation of the project has triggered interest by external funding agencies in the recent past. The project also helped build people’s confidence in the state government’s ability to manage and successfully execute large-scale infrastructure projects.

36. Another positive impact of the project is the reclamation of prime land in Jammu, which has the potential to make the operator for O&M of urban works financially self-sufficient (para. 28).29

25

Government of Jammu and Kashmir, Directorate of Economics and Statistics 2014. Economic Survey. 2014-15 Volume I. Srinagar. http://ecostatjk.nic.in/publications/publications.htm

26 Government of India, Planning Commission. 2013. Press Note on Poverty Estimates 2011–12. New Delhi.

27 Field visits and consultations during the project completion review mission revealed benefits to road users and businesses.

28 Prior to project implementation, water was supplied once or twice a week in the project towns, while after project implementation, supply increased to 1 hour every day of the week, benefiting the local people in terms of time savings and cost savings (owing to reductions in water tanker supply costs and healthcare expenditure). In Srinagar, new areas that had been dependent on water tankers were provided with a reliable, safe, and assured piped water supply, resulting in huge social and economic benefits.

29 At present, the estimated value of land reclaimed from the drainage subproject in Jammu is Rs206 million.

13

3. Resettlement and Environmental Impacts

37. Overall, resettlement management followed ADB’s social safeguards requirements for the project. Affected persons and other stakeholders perceived improved economic activities and better living conditions and quality of life in the project area. ADB approved 49 short resettlement plans (SRPs) with the objective of minimizing land acquisition and resettlement impact.30 Eight SRPs were not required to be implemented due to the dropping of a few subproject components, and another five SRPs were not required to be implemented as the anticipated impacts were avoided during implementation. A total of 36 SRPs were finally implemented and their implementation was compliant with ADB’s Involuntary Resettlement Policy (1995) and government policy.31

38. The overall institutional arrangements for management of safeguards are assessed as adequate. Deputing a high-level officer of chief engineer rank as director (safeguards) at the PMU, with adequate team support, worked in favor of safeguards management and helped make it a success.32 A number of off-site and on-site training programs were conducted for PIUs and contractors’ staff, covering efficient safeguards monitoring and implementation.

39. The project initially restricted (i) subprojects that are classified as category A or sensitive B as defined in ADB’s Environment Policy (2002); and (ii) any facilities and lots in, or close to, national parks, sanctuaries, or other environmentally sensitive areas. All subprojects taken up under the project were classified as category B for environmental safeguards. During implementation, a loan amendment was carried out to remove the restriction on subprojects classified as category A or sensitive B, which allowed subprojects passing through or close to wildlife sanctuaries or other environmentally sensitive areas, subject to the ERA obtaining all statutory clearances. Subsequent to the loan amendment, a road section passing through the buffer zone of wildlife sanctuary under one subproject was approved but not implemented. Environmental assessment for all subprojects was undertaken, reports were prepared, and approvals were obtained from ADB. The objectives of the environmental management plans were achieved, and there are no outstanding issues reported. Forest clearances required for some subprojects were obtained. The introduction of a new process to obtain an environmental compliance certificate,33 issued by team leaders of DSCs and accompanying every contractor bill, facilitated and helped promote environmental compliance. 34 Overall, the project has improved the environment of the project towns and the region. The project has the potential to further improve environmental and health conditions, if facilities are maintained and operated

30

No full resettlement plans were required, and only short resettlement plans were prepared. No indigenous people impacts were assessed, as the indigenous people in project areas were mainstreamed.

31 According to the ERA’s records, compensation of Rs100,861,452 was paid to affected persons. Rs184,383 remains undisbursed to 15 affected persons, who are not interested in receiving compensation, despite information provided by the ERA and the state government’s Revenue Department, and the issuance of public notices. Following government rules, the amount is deposited with the court, and can be claimed by the affected persons at any time.

32 The social and environmental management cell headed by the director (safeguards) comprised two land collectors (one each at Jammu and Srinagar) deputed from the state government’s Revenue Department, two social and resettlement experts, and two assistant social and resettlement experts for each division (i.e., Jammu and Kashmir). Two environmental experts supported by assistant environmental experts handled environmental safeguards. The social and environmental management cell emerged as a strong entity, with the capacity to implement project-related safeguards matters. The project-related grievances received were addressed and resolved by the social and environmental management cell.

33 The requirement and process for obtaining an environmental clearance certificate was specified in a circular issued by the chief executive officer of the ERA in 2008.

34 The practice of withholding 10% of the billed amount, rather than withholding the entire amount, was adopted until the compliance was achieved.

14

properly. Appendix 12 summarizes the safeguards assessment.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

40. Overall, the project is rated less than successful on the basis of its assessed relevance, effectiveness, efficiency, and sustainability. The project was relevant to the government’s overall development objectives and ADB’s policies at appraisal, and remains so after completion. The project is assessed as less than effective due to under-achievement in one outcome parameter and two outputs parameters (para. 9,28). It contributed to achieve the Millennium Development Goals, related to safe drinking water and sanitation access.35 The project is rated efficient in achieving its outcome and outputs. Despite the initial delays, the project made a strong and positive development impact through significantly improved living conditions in urban areas and improved connectivity across the state, triggering economic activity. After the major contracts were awarded by 2007, the project consistently achieved high disbursements over the implementation period. Project investments are less than likely to be sustainable. To improve sustainability of the assets created, the state needs to immediately address O&M issues and provide requisite resources. Compliance with loan covenants was satisfactory. The success of the project can be attributed to robust institutional arrangements, capacity building, and sound processes. The ERA’s success is attributed to its leadership, the provision of senior-level staff from the state government to fill management roles, and the availability of requisite human resources to implement the project. The state’s high ownership of the project, demonstrated through timely decisions, close monitoring, and completion of spillover works using government funds, was a key contributing factor to the project’s success.

B. Lessons

41. The following important lessons emerged from the project: (i) For any immediate rehabilitation project, the sector loan modality is most appropriate, as it allows flexibility to prioritize interventions during implementation. (ii) A strong PMU with a clear mandate, a high level of state ownership, requisite staffing in the PMU and PIUs, retention of trained staff for a reasonable span of time (at least 3 years), and adequate capacity development support are critical for timely implementation of projects. (iii) Capacity building of a new executing agency or institution requires sustained effort, for which TA support is very useful. Flexible terms of reference of handholding TAs can help meet evolving requirements. (iv) Advance action for consultant selection, procurement, land acquisition, and right-of-way clearances prior to contract award will facilitate timely project completion. Engineering design based on validated primary data yields more efficient outcomes and helps avoid delays and cost overrun. (v) Design-as-you-build contract procedures had a risk of unanticipated cost variations, procedural issues, and delays. The project authorities need to be sensitized during the planning stage on these aspects. (vi) Covenants and targets related to water tariff can be achieved through incremental increases, aided by effective public awareness campaigns. (vii) Clear agreement between stakeholders during processing, requiring

35

UN Habitat. 2000. Millennium Development Goals. Nairobi. The Millennium Development Goals (MDGs) were the eight international development goals for the year 2015. MDG goal 7, target 10 aimed to halve the population without sustainable access to safe drinking water and sanitation by 2015.

15

proportionate increase of O&M budgets as assets are created, and commitment by the state for apportionment of resources for project-related O&M help promote project sustainability. (viii) Preparation of a development plan for land reclaimed from drainage projects can facilitate its optimum use and the realization of benefits. (ix) Practices such as linking contractor payment to environmental management plan implementation, using mobile environmental monitoring units and labs, using a geographical information system for mapping of utilities, and strictly adhering to standards can strengthen project implementation.

C. Recommendations

1. Project Related

42. Further action or follow-up. Project implementation could be aided by (i) creation of a well-established O&M mechanism by the state for sustainability of assets created, including provision of requisite human resources and funds for sustainable O&M of project outputs; (ii) use of revenue generated from land reclamation to enhance sustainability; and (iii) completion of spillover works.

43. Timing of the project performance evaluation report. The project performance evaluation report should be prepared towards the end of 2018, by which time a majority of the subprojects will have been operational for over 4 years.

2. General

44. Evaluation. Performance evaluation of emergency or immediate rehabilitation project should have certain provisions to capture the specific situation in which project was processed and challenges encountered in difficult working environment during the project cycle.

45. Consultancy contracts. Consultants’ payments for engineering designs, reports, and documents should be structured on the basis of outputs or deliverables, while those for supervision should be based on inputs. This mix of payment procedures is likely to help timely delivery of outputs even for projects in challenging locations.

46. Institutional learning. To enable the project to deliver quality benefits in a timely manner, the technical capacity of the executing agency should be built through the creation of a core technical team, with a mix of permanent employees and consultants. Agencies like the ERA, which has evolved into the state’s primary development agency, do not have dedicated cadres and the staff are on deputation from other agencies. This results in limited accumulation of institutional knowledge and learning across projects. Retention of staff supports continuity of on-the-job learning and equips staff to take charge of all project related issues.

47. Operation and maintenance by contractors. The contracts for major water supply works should include provisions for the contractor to undertake at least 5 years of O&M, with performance guarantees. O&M training of maintenance staff needs to be provided for under the contracts for a smooth transition from contractor to asset owner. Future projects in challenging locations must examine ways of minimizing staff attrition for contractors. O&M jobs created under projects in challenging locations must employ only qualified local people after adequate training to ensure continuity, even under difficult conditions.

16 Appendix 1

PROJECT FRAMEWORK

Design Summary Performance

Indicators/Targets Revised Targets (2007) 1

Project Achievements Impact Bring the economy of Jammu and Kashmir back to the normal course of economic growth

Achieve economic growth of 6.3% per annum for 2005–2008

No revision

The rate of growth in per capita gross state domestic product increased from 7.38% in FY2006 to 12.5% in FY2014.

Outcome Improvement of living condition for the urban population in Jammu and Kashmir Improvement of rural connectivity Strengthened institutional capacity of ERA and PIUs Incorporation of ADB Water Policy in ADB assistance

Improved access to safe drinking water in urban areas for 1.5 million people (including 180,000 migrants) by 2008 (project completion) Improved drainage for 1.02 million people by 2008 (project completion) Reduced number of local communities not being served by all-weather roads by 10% by 2008 (project completion) Two-tier system established by April 2005 for efficient and transparent management of externally aided projects Policy and institutional framework adopted by June 2006

No revision No revision No revision No revision No revision

1.8 million people benefited from access to safe drinking water in the cities of Jammu and Srinagar. About 0.43 million people benefited from the improved drainage system. The number of local rural community members not using all-weather roads decreased by 14% during 2001–2011. (According to the 2001 and 2011 censuses, road users among the rural population increased from 54% in 2001 to 68% in 2011).

2

A two-tier system was established in the ERA at the start of the project, including the PMU and 4 PIUs in Jammu and Kashmir.

ADB’s water policy was adopted while preparing the water supply master plan.

Outputs 1.0 Urban sector

component

1.1 By 2008 (project completion), replaced 529

km of old water lines in Jammu and Kashmir.

1.2 By 2008 (project completion), increased water supply by 129,000 cubic meters per day in Jammu and Kashmir.

1.1 Construct and/or rehabilitate 425

km of old water lines in Jammu and Kashmir, as per actual requirement

1.2 No revision

1.1 425 km of old water lines were

rehabilitated in Jammu and Srinagar.

1.2 Water supply was increased by 135,000 cubic meters per day in Jammu and Srinagar.

Appendix 1 17

Design Summary Performance

Indicators/Targets Revised Targets (2007) 1

Project Achievements

2.0 Transport sector component

3.0 Capacity building

component

1.3 By 2008, (project completion) replaced 191 km drain lines in Jammu and Kashmir

2.0 By 2008, (project completion) rehabilitated

1,500 km of roads and reconstructed 80 bridges in 14 districts

3.0 By December 2005, capacity established in

ERA and PIUs with 20 core staff for (i) appraising subprojects in accordance with the project requirements, (ii) preparing and implementing subprojects in compliance with

1.3 Rehabilitate and/or replace 97 km of drainage network

2.0 Rehabilitate and/or reconstruct 604 km of roads and rehabilitate or reconstruct or construct 22 bridges.

No revision

1.3 93 km of drainage network was restored and constructed in Jammu and Srinagar. The figure arrived at appraisal was based on broad assumptions. The target was finalized after primary data based on field assessment was collected and a detailed appraisal of constituent subprojects was conducted.

2.0 604 km of roads were

rehabilitated and/or reconstructed and 22 bridges were constructed. The figures arrived at appraisal were based on a broad assumption about the nature of project roads by the government, which mostly consisted of village roads and other district roads. In the absence of any data, any assessment of the nature of works to be undertaken was not possible, and the cost of works was based on broad assumptions. A contingency provision to cater for cost escalation and variations was not made under the cost estimates. The appraisal figures therefore cannot be considered as targeted outputs. The roads and bridges were identified during implementation and the nature of works and cost was determined after engineering studies.

3.0 In 2005, the ERA established a

PMU, which was composed of a group of senior officers and about 45 staff, for (i) appraising subprojects in accordance with

18 Appendix 1

Design Summary Performance

Indicators/Targets Revised Targets (2007) 1

Project Achievements 4.0 Piggybacked project

preparatory TA

ADB policy and procedure, and (iii) managing the project in an efficient and transparent manner

4.1 By March 2006, investments identified for the 2006 urban project

4.2 By March 2006, action plan developed to

implement policy and institutional reforms

No revision

No revision

the project requirements, (ii) preparing and implementing subprojects in compliance with ADB policy and procedure, and (iii) managing the project in an efficient and transparent manner.

4.0 The new urban sector project was processed and approved in May 2007, with the total cost of the investment program estimated at $485 million. The program framework for the ensuing loan included an agreed action plan for policy and institutional reforms.

Inputs 1.0 Urban sector

component

2.0 Transport sector component

3.0 Capacity building

component 4.0 Attached project

preparatory TA

1.0 Civil works (including equipment) for

• Water supply: $85.6 million • Drainage: $38.1 million

2.0 Civil works (including equipment) for

• Roads: $147.1 million • Bridges: $40.0 million

3.0 Consulting services for

• PMC: $5.6million • DSCs: $8.7million • Training: $0.9 million • Incremental administration, vehicles, and equipment: $5.0 million

(ADB $250 million; Government $108 million) 4.0 Grant of $500,000 from the Government of

the United Kingdom

No revision

No revision

No revision

No revision

1.0 Civil works (including equipment)

for • Water supply: $81.4 million • Drainage: $53.8 million

2.0 Civil works (including equipment)

for • Roads and bridges: $188.3 million

3.0 Consulting services for

• PMC: $5.4 million • DSCs: $13.6 million • Training: $0.1 million • Incremental administration, vehicles, and equipment: $13.7 million

(ADB $250.0 million; Government $121.6 million) 4.0 Grant of $399,511 from the

Government of the United Kingdom

Appendix 1 19

Design Summary Performance

Indicators/Targets Revised Targets (2007) 1

Project Achievements 5.0 India Resident

Mission’s mobile PSU

5.0 Staff consultants for 12–18 person-months for the India Resident Mission’s mobile PSU for the first year, and 20–30 person months/year (three individual consultants) for second year onwards

No revision

5.0 Three consultants were engaged

by ADB to assist the PMU to select, prepare, and implement the subprojects.

ADB = Asian Development Bank, DSC = design and supervision consultant, ERA = Economic Reconstruction Agency, km = kilometer, PMC = project management consultant, PIU = project implementation unit, PMU = project management unit, PSU = project support unit, TA = technical assistance. 1

At appraisal, the figures arrived at for outputs and population coverage were based on preliminary broad estimates and without technical due diligence. These were finalized during implementation after due technical appraisal of constituent subprojects.

2 Office of the Registrar General and Census Commissioner. Government of India. Census of India. 2001. Primary Census Abstract. New Delhi.

Source: ADB project completion review mission.

20 Appendix 2

SUMMARY OF PROJECT OUTPUTS

Table A2.1: Summary of Project Outputs

Component At Appraisal Actual Quantity People Benefited

1 Urban Sector

Water supply rehabilitation in Jammu

Rehabilitation of damaged networks and facilities, pipes, pumps, and standby generators, including a low-cost sanitation system for selected migrant areas

(i) Rehabilitation of damaged networks and facilities and laying of new water supply pipelines

337 km

1.000 million

(ii) Redevelopment of existing tube wells and/or construction of new tube wells

93 units

(iii) Construction of overhead tanks 42 units

(iv) Construction of ground-level service reservoirs

16 units

(v) Construction of new intake structure

8.2 million liters per

day Drainage rehabilitation in

Jammu Restoration of drain linings, widening and re- grading of drains, and equipment and vehicles for garbage collection for drain cleaning

(i) Restoration and construction of new drainage network

39 km 320,000

(ii) Construction of public toilets (iii) Vehicles for garbage collection for drain

cleaning

24 units 25 units

25,000

Water supply rehabilitation in Srinagar

Replacement of dilapidated water supply transmission lines, upgrading of old/damaged pumping machinery, and provision of standby generators and power supply protection equipment

(i) Rehabilitation of damaged networks and facilities and laying of new water supply pipelines

87.9 km

785,000

(ii) Water transmission plant and pumping stations: renovation and/or revamping of civil and electromechanical units

5 units

(iii) Construction of sedimentation tanks, clear water sump, and allied civil and electromechanical works for treatment of backwash water at the water transmission plant

3 units

Drainage rehabilitation in Srinagar

Extension of drainage systems in selected areas, including Bemina, a heavily waterlogged sector of the city Works will also include the rehabilitation of pump stations, unclogging of drains, and equipment and/or vehicles for garbage collection (drain cleaning purposes)

(i) Restoration and construction of new drainage network

52.4 km

105,000

(ii) Construction of drainage pumping stations (main and intermediate), including electromechanical equipment

4 units

(iii) Construction of public toilets (iv) Vehicles for garbage collection for drain

cleaning

12 units 25 units 12,000

Appendix 2 21

Component At Appraisal Actual Quantity People Benefited

Supply and delivery of equipment

Electrical and/or mechanical equipment for pumping station at Jammu. Procurement of power transformers, distribution transformers, panels, potential transformer, current transformer, aluminum conductors, insulators, cables and control cables, and steel tabular poles

(i) Water tankers for Public Health Engineering Department

35 units 50,000

(ii) Front-end loaders for garbage collection 7 units

(iii) Backhoe loaders and excavators for

garbage collection 4 units

(iv) Skid loaders for garbage collection 4 units

(v) Garbage collection vehicles 16 units 60,000

(vi) Dumper placer for garbage collection 10 units

(vii) Garbage containers 175 units

(viii) Suction and jetting machine for drain

cleaning 8 units

(ix) Trolley-mounted sewer loading equipment 2 units

(x) Horizontal centrifugal pumps 44 units Included in water supply rehabilitation

section (xi) Panels 30 units

2 Transport Sector

Rehabilitation/reconstruction of about 80

damaged and weak bridges, and the rehabilitation and upgrading of about 1,500 km of roads that fall under the jurisdiction of the Public Works Department, and that include state, urban, major district, other district and village roads.

(i) rehabilitation and/or reconstruction of 8 roads in Jammu

161 km

(ii) rehabilitation and/or reconstruction of 3

bridges in Jammu 3 units

(iii) rehabilitation and/or reconstruction of 30

roads in Kashmir 443 km

(iv) rehabilitation and/or reconstruction of 19

bridges in Kashmir 19 units

3 Capacity Building

Project management support

(i) operational support, (ii) trainings, and (iii) policy and planning advice

(i) operational support, (ii) trainings, and (iii) policy and planning advice

1 PMC 32 workshops and trainings with total

participants of 1,935 persons

Design and Supervision support

(i) operational support, (ii) training. (i) operational support, (ii) training. 4 DSCs

Operational support

Incremental administrative support, together with necessary equipment and vehicles

Incremental administrative support, together with necessary equipment and vehicles

DSC = design and supervision consultants, km = kilometer, PMC = project management consultant. Source: Project management unit.

22 Appendix 2

Table A2.2: List of Major Workshops and Trainings

Type Delivered by Date Attended by Number of

Participants Workshop on financial accounting system Financial analyst 10 Mar 2005 Financial advisor, accounts

officer and accounts staff of ERA

15

Presentation on improvement in accounting structure for the project

Financial analyst 9 Sep 2005 PMU and PIU staff 15

Presentation on Jammu vision Urban planner 15 Apr 2006 Senior citizens of Jammu 70

Workshop on Financial Management System Financial analyst 9 Jul 2006 ERA Director General (Finance), accounts officer, and accounts staff

15

Workshop on project planning, evaluation and monitoring

Training and capacity building expert

3–7 Apr 2006 PMU, PIUs, and DSCs 50

Training Program on Microsoft Project Management information system expert

1 Apr 2006 PMU, PIUs and DSCs 60

Orientation Course for elected councilor of Jammu Municipal Corporation

Training and capacity building expert

4 Apr 2006 Councilors of Jammu Municipal Corporation

45

Workshop on Microsoft Project Software Project coordinator 19 Apr 2006 PMU, PIU, and DSCs 70

Seminar on team building Training and capacity building expert

13 Apr 2006 PMU, PIU, and DSCs 60

Workshop on due diligence report (social safeguards)

Social safeguard expert 24 Jun 2006 PIU, DSC-I, and DSC-III staff

45

Workshop on financial and economic analysis Financial analyst 2 Aug 2006 ERA Director (Finance), accounts officer, and accounts staff

15

Training program on accounting concepts, procedures, and tally accounting software

Financial analyst 3–6 Oct 2006 Accounts officer and accountants; Director (Jammu); Joint Commissioner, Jammu Municipal Corporation

5

Presentation on sewerage master plan and solid waste management

Sewerage and drainage expert Solid waste management expert

19 May 2007 Health officer; project manager; superintending engineer, Housing and Urban Development Department; DSC-1

120

Lecture on concrete technology Team leader, DSC 10 Jan 2007 PIUs, contractors 65

Appendix 2 23

Type Delivered by Date Attended by Number of

Participants

Lecture on site clearance, earth work, granular subbase, and wet mix macadam

Team leader, DSC 7 Apr 2007 PIUs, contractors 80

Workshop on road asset management in Jammu Institutional expert and experts from Central Road Research Institute

11 Dec 2008 Line departments and ERA 125

Workshop on financial accounting system Financial analyst 9 Aug 2007 ERA Director General (Finance), accounts officer, and accounts staff

15

Environmental orientation and/or training program on ADB environmental safeguard procedures at Srinagar (two separate sessions organized)

Environmental expert 28 Apr 2009

12 Jun 2009

PIUs, DSCs, contractors 45

Orientation program Environmental expert, PMC 4–12 Jan 2010 ERA staff, DSCs, and contractors

55

Training session on financial account system Financial analyst 9 Apr 2010

ERA Director General (Finance), accounts officer, and accounts staff

10

Workshop on O&M of tube wells and electromechanical equipment

O&M expert, DSC, PMC 9 Apr 2011 ERA staff and line department staff

110

Workshop on road asset management in Srinagar (two separate sessions organized)

Institutional expert and experts from Central Road Research Institute

13 Sep 2012

11Oct 2012

Line department and ERA staff

140

Environmental awareness program in Jammu Environmental expert 9 Jan 2013 Site engineers 35

Workshop on financial management system Financial analyst 9 Jun 2013 ERA Director General (Finance), accounts officer, and accounts staff

15

Workshop on contract management and International Federation of Consulting Engineers conditions in Jammu

Contract specialist 11 Nov 2014 Line department and ERA staff

135

Workshop on water supply system in Srinagar DSC (water supply expert) 11 Dec 2014 Line department and ERA staff

100

Workshop on road asset management in Jammu Institutional expert and experts from Central Road Research Institute

13 Dec 2014 Line department and ERA staff

120

DSC = design and supervision consultant, ERA = Economic Reconstruction Agency, O&M = operation and maintenance, PIU = project implementation unit, PMC = project management consultant, PMU = project management unit.

Source: Project Management Unit.

Appendix 3 24

PROJECT COST AND FINANCING

Table A3.1: Project Costs ($ million)

Item

Appraisal Estimate Actual Foreign

Exchange Local

Currency Total Cost

Foreign

Exchange Local

Currency Total Cost

A. Urban Sector Component

1. Rehabilitation of water supply in Jammu

a. Civil works 3.8 12.0 15.8

28.6 17.5 46.1

b. Equipment and materials 26.4 8.7 35.1

1.7 0.0 1.7

2. Rehabilitation of water supply in Srinagar

a. Civil works 3.9 12.4 16.3

11.9 7.3 19.2

b. Equipment and materials 5.1 1.7 6.8

1.7 0.0 1.7

3. Rehabilitation of drainage system in Jammu

a. Civil works 4.8 15.0 19.8

9.7 5.9 15.6

b. Equipment and materials 1.2 0.4 1.6

0.6 0.0 0.6

4. Rehabilitation of drainage system in Srinagar

a. Civil works 1.2 3.7 4.9

17.8 10.8 28.6

b. Equipment and materials 5.2 1.7 6.9

0.6 0.0 0.6

5. Taxes and duties 0.0 16.6 16.6

0.0 21.2 21.2

Subtotal (A) 51.5 72.3 123.8 72.6 62.7 135.3

B. Transport Sector Component

1. Rehabilitation of roads and bridges `

a. Civil works 87.9 71.7 159.6

109.4 53.0 162.4

b. Equipment and materials 3.6 1.2 4.8

0.0 0.0 0.0

2. Taxes and duties 0.0 22.6 22.6

0.0 25.9 25.9

Subtotal (B) 91.5 95.6 187.1 109.4 78.9 188.3

C. Capacity Building Component

1. Project management support 0.6 5.0 5.6

0.9 4.2 5.1

2. Design and construction supervision support 0.0 8.7 8.7

0.0 13.0 13.0

3. Equipment and vehicle for implementation and incremental

administration 0.0 5.0 5.0

1.0 11.5 12.5

4. Training on project management and operation and maintenance 0.0 0.9 0.9

0.0 0.1 0.1

5. Taxes and duties 0.0 3.6 3.6

0.0 1.8 1.8

Subtotal (C) 0.6 23.1 23.7 1.9 30.6 32.5

Total Cost 143.6 191.0 334.6

D. Interest During Construction and Commitment Charges 23.4 0.0 23.4 15.5 0.0 15.5 Total Project Cost 167.0 191.0 358.0 199.4 172.2 371.6

Source: Asian Development Bank.

Appendix 3 25

Table A3.2: Project Financing

Source

At Appraisal Actual

Total Cost ($ million)

% of Total Total Cost % of Total

Asian Development Bank 250.0 69.8

250.0 67.3

Government 108.0 30.2

121.6 32.7

Total 358.0 100.0 371.6 100.0

Source: Asian Development Bank

26 Appendix 4

DISBURSEMENT OF ADB LOAN PROCEEDS

Table A4: Annual and Cumulative Disbursement of ADB Loan Proceeds

Year

Annual Disbursement Cumulative Disbursement

Amount ($ million)

% of Total Amount ($ million)

% of Total

2005 2.53 1.01

2.53 1.0

2006 6.95 2.78

9.48 3.8

2007 23.84 9.53

33.32 13.3

2008 38.02 15.21

71.34 28.5

2009 58.66 23.46

129.99 52.0

2010 37.41 14.96

167.40 67.0

2011 40.48 16.19

207.88 83.2

2012 22.18 8.87

230.07 92.0

2013 15.90 6.36

245.97 98.4

2014 4.03 1.61

250.00 100.0

Total 250.00 100.0 ADB = Asian Development Bank. Source: Asian Development Bank loan financial information system.

Figure A4: Annual and Cumulative Disbursement of ADB Loan Proceeds

($ million)

Source: Asian Development Bank loan financial information system.

-

50.00

100.00

150.00

200.00

250.00

300.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Annual Disbursement Cumulative Disbursement

Appendix 5 27

APPRAISAL AND ACTUAL IMPLEMENTATION SCHEDULES COMPARED

Planned Actual Source: Economic Reconstruction Agency.

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Preparation

Consulting service

Urban sector component

Transport sector component

2010 20132011 2012

Subproject selection and appraisal

Technical assistance

2007 2008 2009

2004 2005 2006

Loan effective

Procurement

Construction

Project management consultant

Design and supervision consultants

Procurement

Construction

28 Appendix 6

CHRONOLOGY OF MAJOR EVENTS

Date Main Event

2004

21 June–2 July Project fact-finding mission

21 July–10 August Project appraisal mission

23 September Approval for advanced action for procurement of the project

1–2 December Loan negotiation

21 December ADB Board approval

2005

17 March Loan agreement signing

13 May Loan effectiveness

13–16 July Project inception mission

24–26 October Project review mission

2 December Contract signing with the project management consultant

26 December Contract signing with the design and supervision consultant for the urban component in Srinagar

27 December Contract signing with the design and supervision consultant for the urban component in Jammu

2006

20 January Contract signing with the design and supervision consultant for the transport component in Jammu

20 January Contract signing with the design and supervision consultant for the transport component in Kashmir

24–28 April Project review mission

2 May First loan disbursement

10–13 October Project review mission

2007

12–16 February Project review mission

10–12 September Special loan administration mission

21–28 October Special loan administration mission

2009

23 – 28 February Project review mission

30 June Anticipated project completion date at appraisal

31 August–4 September Project review mission

31 December Original loan closing date

2010

4–12 January Special loan administration mission

Appendix 6 29

Date Main Event

6–9 December Special project administration mission

2011

19–23 September Project review mission

7–8 October State-level tripartite review mission

2 December Last reallocation of the loan proceeds

19–22 December Project disbursement review mission

28 December Workshop on road asset management held in Jammu

2012

6–10 August Project review mission

19–21 November Special loan administration mission

21–30 November Project review mission

2013

11–14 June Project review mission

30 September Actual loan closing date

22–26 October Special loan administration mission

2014

27 March Final loan disbursement

16 April Actual loan account closure

2015

5–10 October Project completion review mission

14–21 December Project completion review mission

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

30 Appendix 7

ORGANIZATION STRUCTURE FOR PROJECT IMPLEMENTATION ADB = Asian Development Bank, DSC = design and supervision consultant, PIU = project implementation unit, TA = technical assistance. Source: Economic Reconstruction Agency.

State Government

Steering Committee

Project Management Consultant

Economic Reconstruction Agency (executing agency)

PIU-Jammu (urban)

ADB Project Support Unit

PIU-Jammu (transport)

PIU-Kashmir (transport)

PIU-Srinagar (urban)

Project Management Unit

DSC-Kashmir (transport)

DSC-Srinagar (urban)

DSC-Jammu (transport)

DSC-Jammu (urban)

Project Preparatory TA Consultant

Civil Works Contractors and Equipment Suppliers

Monitoring Nongovernment

Organization

Appendix 8 31

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Covenant

Reference in Loan

Agreement Status of Compliance Project Execution and Implementation Arrangement

The State and Economic Reconstruction Agency (ERA) shall have joint responsibility for the execution of the Project. The State shall have overall coordination responsibility for ensuring the participation and performance by its departments of their responsibilities under the Project. ERA shall have overall Project execution and coordination responsibility and shall also be responsible for coordinating the assistance provided by multilateral development institutions.

Loan Agreement (LA), Schedule 6, para. 1

Complied with. The ERA was established, provided adequate staffing, and had the responsibility for project management and execution.

ERA shall establish the PMU, headed by the Project Director (who shall be the chief executive officer of ERA) and comprised of four senior officers of the rank of directors , one each for finance, roads, urban sector departments & loan II sub-projects, and eight other officers for environmental matters, social development/resettlement, technical (engineering), administration, procurement, monitoring and reporting (information technology). The PMU shall provide overall coordination support for the PIUs. The PMU shall be supported by the PMCs.

LA, Schedule 6, para. 2

Complied with. The ERA established a PMU, which was headed by three directors and composed of a group of senior officers and about 45 staff covering a set of sector and/or thematic matters and a number of project implementation functional tasks.

The PMU shall be guided by the Project Steering Committee, chaired by the chief executive officer of ERA, and including the Commissioners/Secretaries in charge of the State departments of public works, planning, housing and urban development, urban environmental engineering, public health engineering, tourism and power. The Steering Committee shall meet as required.

LA, Schedule 6, para. 3

Complied with.

ERA shall establish (i) for Component A, a project implementation unit (PIU) in each of Jammu and Kashmir and (ii) for Component B, a PIU in each of Jammu and Kashmir. For Component C, the PIU shall be the PMU.

LA, Schedule 6, para. 4

Complied with. Four PIUs were established locally: (i) two PIUs were responsible for the implementation and monitoring of urban and transport subprojects in Jammu, and (ii) the other two PIUs were responsible for implementing and monitoring the urban and transport subprojects in Kashmir.

Each PIU, headed by a project manager, shall comprise professional and support staff who shall be assisted by the design and supervision consultants (DSCs). The PIUs for Component A shall include, among others, staff from public health engineering department and urban environmental engineering department, and the PIUs for Component B shall include, among others, staff from public works department.

LA, Schedule 6, para. 5

Complied with. Each PIU, headed by a project manager, had about 35 professional and support staff who were assisted by the DSCs.

The State and ERA shall ensure that adequate budgetary allocations of required counterpart funds are made and released in a timely manner to the PMU and each PIU for each financial year of the project implementation period and that the PMU and each PIU applies such counterpart funds to agreed project expenditures.

LA, Schedule 6, para. 6

Complied with. The state government and ERA ensured that adequate budgetary allocations of required counterpart funds were made and released in a timely manner to the PMU and each PIU.

The State and ERA shall ensure that staff, consultants, materials, vehicles, equipment and other items required for project implementation shall be given reasonable access to the project area, and shall take all measures necessary to ensure the safety of all project personnel, including

LA, Schedule 6, para. 7

Complied with. The state government and ERA ensured that staff, consultants, materials, vehicles, equipment, and other items required for project implementation were given

32 Appendix 8

Covenant

Reference in Loan

Agreement Status of Compliance consultants and contractors, during the implementation of the project.

reasonable access to the project area, and took all measures necessary to ensure the safety of all project personnel.

The State and ERA shall ensure that the facilities provided under the Project are operated and maintained appropriately, and that adequate budgetary and other resources shall be provided for this purpose.

LA, Schedule 6, para. 8

Partially complied with. The allocated budget for operation and maintenance of the facilities is not sufficient to appropriately meet the expenses incurred.

The State shall double the current water tariffs by 30 June 2006 for all types of connections, including domestic and commercial, and shall introduce metering of bulk water supply at the ,source and distribution centers, and commercial establishments falling within the Project areas. The State and ERA shall undertake, under the PPTA, public awareness on water metering of domestic connections and consumption based water tariff systems.

LA, Schedule 6, para. 9

Complied with. The tariff as of January 2016 for water supply is about Rs1200–Rs1400 per connection per year, which is much higher than that at appraisal (Rs15–Rs28 per connection per month).Public awareness on metering of domestic water connections and consumption-based water tariff systems was carried out under the project preparatory TA.

Subproject Eligibility Criteria

The State and ERA shall ensure that each PIU shall ensure that each Subproject meets, to the satisfaction of ADB, the agreed eligibility criteria and is selected in accordance with the eligibility criteria and selection procedures set out in Appendix 2 of the RRP. Each Subproject shall be proposed on the basis of the general criteria.

LA, Schedule 6, para. 10

Complied with. All subprojects were selected and approved following the eligibility criteria and selection procedures.

The State and ERA shall ensure that in Subproject selection, priority shall be given to: (i) reconstruction and/or rehabilitation of damaged and/or deteriorated infrastructure facilities; (ii) completion of undertakings which had started earlier, but stalled or slowed down; (iii) extension of the minimum level of services to cater to the needs of migrants; and (v) provision of minimum connectivity to rural communities.

LA, Schedule 6, para. 11

Complied with.

Land Acquisition and Resettlement

The State and ERA shall ensure to extent possible, subprojects shall not require land acquisition or involuntary resettlement. If land acquisition and/or involuntary resettlement are required for any subproject, including a prepared subproject, the Borrower, the State and ERA shall ensure that: (i) The applicable PIU shall prepare a resettlement plan for that subproject, acceptable to ADB, in accordance with applicable laws and regulations of the State (including the Land Acquisition Act, 1990), ADB's Policy on Involuntary Resettlement (1995), and the Resettlement Framework, and submit it to ADB for review and approval before any land acquisition or involuntary resettlement is initiated and before construction for the subproject commences; (ii) all land, rights of way and other land-related rights required for the subproject are acquired or otherwise made available to the concerned PIU; (iii) all affected persons, if any, are compensated in accordance with the agreed resettlement plan before commencement of construction or resettlement for the Subproject, and if during project implementation there are any changes in the subproject design, for either the prepared subproject or for any additional subprojects, that results in any additional affected persons or any changes to the impacts on previously identified affected persons, the resettlement plan shall be promptly updated and implemented satisfactory to

LA, Schedule 6, para. 12

Complied with. 49 SRPs were approved by ADB, with the objective of minimizing land acquisition and resettlement impact. 8 SRPs were not required to be implemented due to the dropping of a few subproject components, while another 5 SRPs were not required to be implemented, as the anticipated impacts were avoided during implementation. A total of 36 SRPs were finally implemented. Implementation of the SRPs was compliant with ADB’s Involuntary Resettlement Policy (1995) and government policy.

Appendix 8 33

Covenant

Reference in Loan

Agreement Status of Compliance ADB; (iv) ADB's Policy on Involuntary Resettlement (1995) shall prevail in case of any difference between such policy and the State's laws and regulations; and; and (v) ERA shall appoint a resettlement officer to supervise implementation of the resettlement framework. Environment

With respect to environmental assessment and compliance, the Borrower, the State and ERA shall ensure that: (i) the Project is carried out and all Project facilities are designed, constructed, operated, maintained, and monitored in compliance with the existing environmental laws and regulations of the Borrower, the State, and ADB's Environmental Policy (2002), and the initial environmental examination (lEE) or the environmental impact assessment (EIA) as applicable, including the Environmental Assessment Framework; (ii) sub-projects encroaching any National Park or its buffer zone shall not be included in the project, however, sub-projects encroaching upon wildlife sanctuary or any other environmentally sensitive areas may be allowed subject to ERA obtaining all statutory clearances; (iii) all environmental clearances required by any laws, acts and regulations at national and local levels specified in the Environmental Assessment Framework are obtained in a timely manner and prior to commencement of construction on the relevant Subproject; (iv) each PIU shall prepare an IEE/EIA report, including an environmental management plan (EMP), with adequate public consultation for each subproject, in accordance with the Environmental Assessment Framework. PIU shall ensure that (a) all mitigation measures identified in the IEEs/EIAs, the summary IEE/EIA and EMPs prepared for the subprojects, are incorporated in the Subprojects’ designs, and are carried out during their construction, operation, and maintenance in consultation with stakeholders and (b) if there are any changes in specific locations or alignments of infrastructure or project facilities after the process of IEE/EIA, for either the prepared subprojects or additional subprojects, additional environmental assessment shall be done and a process similar to IEE/EIA, acceptable to ADB, shall be undertaken; and (v)an appropriate budgetary allocation (including vehicles, material and equipment, operating expenses and staff) is provided to PIUs to fulfill their responsibilities for implementation of mitigation measures and monitoring requirements as outlined in the IEE/EIA, in particular those mitigation and monitoring requirements arising from the application of the Environmental Assessment Framework; (b) ERA assigns an adequate number of environment and social specialists to be responsible for appraising IEEs/EIAs and EMPs for Subprojects prepared by the PIUs, ensuring the implementation of EMPs and submitting IEEs/EIAs and progress reports on implementation of EMPs to ADB; and (c) each PIU shall assign an adequate number of environment and social specialists to be responsible for preparing IEEs/EIAs and EMPs for the subprojects and submitting them to the ERA and ADB, and implementing the EMP. The Borrower shall design and conduct appropriate training programs for environment and social specialist staff on topics related to their areas of

LA, Schedule 6, para. 13

Complied with. For all subprojects, environmental assessment was undertaken, reports prepared, and approvals obtained from ADB. No subprojects encroaching national parks were taken up under the project. Forest clearances required for some subprojects were obtained. All subprojects executed were assessed for environmental impact. IEEs and EMPs were prepared for each subproject that was implemented, and duly approved by ADB. Adequate budgetary allocation and staff were provided for the implementation of IEEs and EMPs. Capacity building of the staff was undertaken as envisaged. The ERA emerged as a strong project implementation agency, capable of implementing and monitoring social and environmental safeguards.

34 Appendix 8

Covenant

Reference in Loan

Agreement Status of Compliance responsibility. Indigenous Peoples Issues

The State and ERA shall ensure that during preparation of each Subproject, the relevant PIU shall undertake a review of the impacts, if any, of the Subproject on indigenous peoples, and if any impacts on indigenous peoples are identified, the PIU shall prepare an Indigenous Peoples Development Plan in accordance with ADB's Policy on Indigenous People (2003) and the Indigenous Peoples Development Framework in Supplementary Appendix E to the Report and Recommendation of the President.

LA, Schedule 6, para. 14

Complied with.

Accounts

Without limiting the provisions of Section 2.09 of the Project Agreement, the Borrower, the State and ERA shall ensure that ERA and each PIU shall (a) maintain separate accounts for the Project and for its overall operations , and maintain records and accounts; (b) ensure that Project accounts and financial statements are audited annually in accordance with appropriate auditing standards consistently applied by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (c) furnish to the PMU for consolidation and delivery to ADB, not later than nine months after the close of each fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the Loan proceeds as well as on the procedures for the imprest account, the SGIA and statement of expenditures), all in the English language. The state shall ensure that ERA shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

LA, Schedule 6, para. 15

Complied with. All audited project accounts were submitted from FY2006 to FY2014.

Review

Without limiting the provisions of Section 2.08 of the Project Agreement, ERA shall prepare quarterly progress reports in a format acceptable to ADB which shall provide information on: (i) progress made against established targets, including pre-identified monitoring indicators; (ii) delays and problems encountered, and actions taken to resolve them; (iii) compliance with loan covenants; and (iv) proposed program of activities to be undertaken during the next quarter and expected progress during the next quarter. The ERA shall ensure that the PMU shall consolidate the reports of each PIU and ERA shall deliver them to ADB. Within three months of physical completion of the Project, ERA shall submit to ADB a Project Completion Report on the execution of the Project including the costs and the compliance with loan covenants.

LA, Schedule 6, para. 16

Complied with.

Project performance shall be reviewed through a three-tier system, the first level by PMU, the second level by ERA and the third Level by ADB. The review at each of the first and second level shall include a summary of contracts awarded and pricing. A mid-term review shall be conducted to identify any problems or weaknesses in implementation arrangements and agree on changes needed to achieve Project objectives.

LA, Schedule 6, para. 17

Complied with.

Appendix 8 35

Covenant

Reference in Loan

Agreement Status of Compliance Project Performance Management System

The State shall establish, maintain and implement a project performance management system (PPMS). The PMU shall develop comprehensive PPMS procedures and plans within nine months of the Effective Date, for approval by ADB. The PMU shall undertake every six-month a quantitative and qualitative Project performance monitoring for each Project Component to evaluate the delivery of the planned facilities and the Project benefits accrued.

LA, Schedule 6, para. 18

Complied with.

ADB = Asian Development Bank, DSC = design and supervision consultant, EIA = environmental impact assessment, EMP = environmental management plan, ERA = Economic Reconstruction Agency, FY = fiscal year, IEE = initial environmental examination, LA = Loan Agreement, PMU = project management unit, PIU = project implementation unit, PPMS = project performance monitoring system, SRP= short resettlement plan, TA = technical assistance.

36 Appendix 9

SUMMARY OF CONTRACT PACKAGES

Component No. of

Contracts Procurement

Method Contract Date

Contract Amount

(Rs)

Actual Amount

Total Amount (Rs)

ADB Financing

($)

A. Urban Sector Component

Rehabilitation of urban subprojects in Jammu

23 LCB 24 Jun 2006－20 Oct 2010 2,973,543,152 3,309,844,357 51,718,513

Rehabilitation of urban subprojects in Srinagar

11 LCB 10 May 2006－5 Dec 2011 1,956,467,606 2,756,026,136 34,447,616

Equipment procurement 18 ICB 24 Feb 2006 – 20 Oct 2010 273,738,100 269,348,354 4,619,782

B. Transport Sector Component

Rehabilitation of roads and bridges in Jammu

13 LCB 20 Feb 2006－12 Feb 2011 3,422,045,865 2,448,510,229 33,467,047

Rehabilitation of roads and bridges in Kashmir

52 LCB 2 Feb 2006－29 Aug 2011 4,476,131,674 6,727,371,856 95,141,788

C. Capacity Building

Project management support 1 QCBS 27 Oct 2005 221,354,430 252,378,816 5,083,840

Design and construction supervision support

4 QCBS 26 Dec 2005－20 Jan 2006 395,138,562 636,299,222 12,997,883

Total 122 13,718,419,389 16,399,778,970 237,476,469

ADB = Asian Development Bank, ICB = international competitive bidding, LCB = local competitive bidding, QCBS = quality- and cost-based selection. Source: Economic Reconstruction Agency.

Appendix 10 37

ECONOMIC REEVALUATION

1. At appraisal, the economic evaluation was carried out for sample subprojects. Under the sector loan modality of the Asian Development Bank (ADB), the appraisal and approval of subprojects during implementation included economic and financial due diligence in accordance with the eligibility criteria and procedures stipulated under the project. The economic internal rates of return (EIRRs) were evaluated at project completion using similar methodology as that used at appraisal for the sample subprojects. Actual investment and operation and maintenance (O&M) costs were used. Economic benefits were estimated by comparing the with- and without-project scenarios. The EIRRs were calculated at completion for the whole project, as well as for the urban sector and transport sector components respectively. Sensitivity tests were also carried out. A. Project Outputs and Capital Costs

2. Under the project, urban infrastructure and transport facilities were significantly improved in the state. The outputs of the project mainly included the following:

(i) Water supply. (a) Rehabilitation of damaged networks and facilities and laying of new water supply pipelines of 425 kilometers (km), which increased the potable water capacity by 135 million liters per day; (b) redevelopment and/or construction of 93 tube wells with a cumulative capacity of 38 million liters; (c) construction of 58 overhead tanks and ground-level service reservoirs; and (d) purchase and installation of a large amount of equipment for increasing water supply capacity and efficiency. A total of 1.8 million people benefited from these outputs.

(ii) Drainage and sanitation. (a) Restoration and construction of 91 km of new drainage networks; (b) construction of 36 public toilets; (c) construction of 4 drainage pumping stations in Srinagar; and (d) purchasing equipment for solid waste management system. A total of 0.43 million people benefited from the drainage system, 0.04 million people benefited from the public toilets, and 0.6 million people benefited from the sanitation equipment.

(iii) Roads. (a) Rehabilitation and/or reconstruction of 604 km of roads in Jammu and Kashmir, including provision of bituminous surfacing; (b) rehabilitation and widening of existing carriageway; (c) construction of roadside drainage; and (d) installation of road safety measures. The traffic on these roads has increased.

(iv) Bridges. (a) Rehabilitation and/or reconstruction of 22 bridges, including conversion of existing timber structures into permanent structures; (b) minor widening to accommodate pedestrian footpaths along bridges; and (c) new bridge construction. The bridges have substantially increased connectivity and access in the project areas.

3. Table A10.1 presents the annual financial costs of the urban sector and transport sector components (without taxes, financial charges, and costs for capacity building).

Table A10.1: Annual Financial Costs by Component (Rs million)

Fiscal Year

Urban Sector Component

Transport Sector Component

2006 0.10 11.87

2007 175.03 186.27

2008 932.98 406.88

2009 1,090.05 1,421.22

2010 931.05 1,805.65

38 Appendix 10

Fiscal Year

Urban Sector Component

Transport Sector Component

2011 667.32 1,004.40

2012 545.20 1,118.15

2013 448.94 668.08

2014 355.22 1,004.13

2015 170.30 245.22

2016 32.10 46.92 Note: Costs do not include taxes, financial charges, and costs for capacity building. Source: Economic Reconstruction Agency.

4. In the economic reevaluation, the actual annual project investment costs were used. The taxes and financial charges of the loan were not included, and the costs for consulting services and capacity building were allocated to each component. The annual costs were converted to 2015 costs by applying annual price indexes. The financial costs were then converted into economic costs by using the average conversion factor (0.90) adopted from the analysis at appraisal. B. Economic Reevaluation for the Urban Sector Component

5. The actual average O&M costs for water supply, drainage system (pumping stations in Srinagar), and sanitation facilities (public toilets in Jammu and Srinagar) in 2015 were used as the basic costs for estimating the incremental O&M costs for the project. The O&M costs were kept at constant prices, and a 3% increase per year was added to account for usage increases and deterioration of the facilities. Some of the subprojects were completed and started operation earlier. Beginning 2008, the O&M costs were increased. Large-scale periodic maintenance (rehabilitation) expenditures were estimated at 10% of the investment cost, and they were treated as a capital cost of the project and scheduled for every 5 years. Such O&M costs were converted to economic costs by using the average conversion factor. 6. As at appraisal, the following major economic benefits were anticipated. Some subprojects were completed and started operation earlier than scheduled, hence the benefits also started accruing since earlier, 2008.

(i) Water resource cost savings. Before the project, water losses were huge due to poor water production facilities and transmission lines; water leakage was estimated at about 30%–35%. After the project, water leakage has substantially decreased, with estimated savings of at least 15% of the water. At appraisal, a survey showed that the average willingness to pay for treated public water was Rs32.5 per household per month. This was used as the shadow price of water, adjusted by 2015 price.

(ii) Operation and maintenance cost savings. Before the project, many water users could not access the public water supply and needed to use their own water sources or purchase water from private water vendors. After the project, such users have gained access to safe public water with much lower opportunity costs, including O&M cost and time savings. It was estimated that at least 30% of the water was used by such users. The opportunity cost savings are estimated at half of the O&M cost for public water.

(iii) Reduced healthcare costs due to improved access to safe drinking water. The project resulted in savings in healthcare costs due to improved access to safe drinking water and a substantial reduction in water-borne diseases. The water supply subcomponent benefited about 1.8 million people in Jammu and Srinagar. It was estimated that 10% of household income would be used for healthcare, and 15% of total healthcare costs would be saved due to use of safe drinking water. The estimated

Appendix 10 39

savings also included time savings for hospital visits, and opportunity costs related to waterborne diseases and their treatment.

(iv) Land reclaimed. Before the project, large areas of land experienced flooding during monsoons in Jammu and Srinagar. The state government estimated that about 3.7 hectares of such land has been reclaimed due to the storm water drainage system under the project. The current average price of the reclaimed land is Rs8,000 per square meter, about 10 times of that before the project. It was assumed that half of the price increase was a result of the project. Such benefit would be realized by 10% each year.

(v) Increased land price. At project completion, it was reported by state government that the total project catchment area of the drainage system comprises about 67.7 million square meters. The land price in the catchment area increased from an average Rs3,000 per square meter before the project to Rs10,000 per square meter in 2016. It was assumed that at least 10% of the catchment area was directly influenced by the project and at least 15% of the price increase was a result of the project. Such benefit would be realized by 10% each year.

(vi) Reduced healthcare costs due to improved sanitation and drainage system. Due to improvements in the drainage system and better sanitation conditions in the project area, the incidence of related diseases has decreased substantially. The drainage system benefited about 0.43 million people, the toilets about 0.04 million people, and the sanitation equipment about 0.6 million people in Jammu and Srinagar. It was estimated that 5% of total healthcare costs, including time savings for going to the hospital and related opportunity costs, would be saved annually.

7. Based on the above assumptions and estimates, the EIRR was calculated for the urban sector component. The calculation covers 28 years, including 10 years of construction and 25 years of operation (with some overlapping of construction and operation). No residual cost was considered. The calculated EIRR was 19.1%, with an economic net present value of Rs8,930.4 million (at a 12% discount rate), which is higher than the recommended discount rate of 12%. This component is therefore considered economically viable. Details of cash flows of the EIRR calculation are in Table A10.2. C. Economic Reevaluation for the Transport Sector Component

8. The actual maintenance costs of the project roads were used for the economic reevaluation. The maintenance costs were kept at constant prices, and a 3% increase per year was added to account for the deterioration of the roads. Some of the project roads were completed and opened to traffic earlier, so the maintenance cost was increased from 2009 as per the project completion schedule. Large-scale periodic maintenance (rehabilitation) expenditures were estimated at 10% of the investment cost for roads and 20% for bridges, and they were treated as capital costs of the project and scheduled for every 5 years. Such road maintenance costs were converted to economic costs by using the average conversion factor. 9. During the project completion review mission, a traffic survey was carried out by ERA on six roads and bridges that are representative of the project roads with respect to scope and cost. These survey roads and bridges were different from the sample subprojects appraised during loan processing. As the survey roads are near urban areas, their traffic volume is generally higher than that of the project roads. Therefore, a conservative traffic level used at appraisal was considered for a better and realistic representation of the project roads. The traffic growth rates and vehicle patterns were referenced, and the traffic forecast for the project roads and bridges were adjusted accordingly.

40 Appendix 10

10. As at appraisal, the following major economic benefits were realized. As some road subprojects were completed and opened to traffic earlier than scheduled, the benefits were realized beginning in 2009 as per actual subproject completion schedules.

(i) Reduced vehicle operating costs. Before the project, road conditions were poor, with international roughness index value of 12–14.1 Under the project, roads have been rehabilitated to an international roughness index value of about 4. After the project, vehicles were able to travel at speeds of 30–40 km per hour compared to 20–25 km per hour before the project. This has led to a 30%–40% reduction in vehicle operating costs. The unit vehicle operating cost was adopted from a similar project in India.

(ii) Savings in passenger time cost—project roads. Due to better road conditions, passenger travel time decreased substantially. Passenger time cost was estimated at an average Rs30 per person-hour, which was based on the state gross domestic product per capita in FY2015 (Rs71,861 per person). The cost estimate also considered income groups and work related trips (50%–70%, depending on vehicle type). It was assumed that the passenger time cost would increase by 5% each year considering economic growth and quality of life improvements.

(iii) Savings in passenger time cost—existing bridges. Before the project, bridge conditions were very poor. Some of the bridges were only 2–3 meters wide, and some had timber structures. After the project, which rehabilitated or reconstructed such bridges, they are able to better serve the fast-growing traffic and pedestrians. The traffic survey (Appendix 10, para. 9) and consultations with road users estimated that a combined 2,000 vehicles, passengers and pedestrians crossed each existing bridge daily after completion of the project. The time savings were estimated as at least 20 minutes per person-trip, considering greater use of motorized vehicles at present, shorter trips, and avoidance of traffic jams. Passenger time cost was estimated at an average Rs30 per person-hour as that for roads.

(iv) Savings in passenger time cost—new bridges. Six large cross-river bridges were constructed under the project. Before the project, vehicles and pedestrians could only cross the river by ferry or travel across the riverbed during dry seasons. During floods, connectivity was completely disrupted. After the project, vehicles and pedestrians now have all-weather roads to cross the river to go to markets, clinics, and schools. Based on observations, focus group discussions, and quick consultations during the project completion review mission site visit, it was estimated that the average usage of each new bridge was about 500 persons-trips per day after the project. The time savings were estimated as 700 hours per year per person, including time spent taking the ferry and walking, and accounting for the lack of access during times of complete disconnection (about 30–60 days per year).

11. Based on above assumptions and estimates, the EIRR was calculated for the transport sector component. The calculation covers 28 years, including 10 years of construction and 24 years of operation (with some overlapping of construction and operation). The calculated EIRR was 20.5%, with an economic net present value of Rs18,367.4 million (at a 12% discount rate). The EIRR is much higher than the recommended discount rate of 12%. This component is therefore considered economically viable. The details of cash flows of the EIRR calculation are in Table A10.3.

1 The international roughness index is the roughness index most commonly obtained from measured longitudinal

road profiles. The international roughness index ranges from 1 to 22.

Appendix 10 41

D. Summary of the Reevaluation and Sensitivity Analysis

12. The reevaluation results were aggregated by combining all the costs and benefits for all four subcomponents. The aggregated EIRR was 19.9% for the whole project, with an economic net present value of Rs27,297.8 million (at a 12% discount rate). The EIRR for the whole project is much higher than the recommended discount rate of 12%. Therefore, the project is confirmed to be economically viable. The summary of cash flows of the EIRR calculation for the project as a whole is in Table A10.4. 13. The EIRRs were subjected to sensitivity analysis to test different scenarios of costs and benefits. The sensitivity analysis results show that all the subcomponents continue to be economically viable for most of the tested scenarios. If a 20% O&M cost increase were to be combined with a 20% reduction in benefits, the EIRRs would be 13.5% for the whole project, 11.6% for the urban sector component, and 14.6% for the transport sector component. The sensitivity analysis also shows that the EIRR is more sensitive to changes in benefits. Therefore, the respective government departments and urban local bodies should maintain and improve the services and performance of the urban facilities and transport infrastructure to maximize their impacts and benefits. The results of the sensitivity tests are in Table A10.5.

42 Appendix 10

Table A10.2: Economic Reevaluation, Urban Sector Component (Rs million)

Costs Benefits Net

Benefit

Net Present Value

Fiscal Year Capital O&M Total Water

O&M Cost

Land Reclamation

Land Price Health Total

2005 27.2 27.2

(27.2) (84.5) 2006 375.7 375.7

(375.7) (1,041.9)

2007 1,468.5 1,468.5

(1,468.5) (3,635.8) 2008 1,620.8 10.7 1,631.5 4.8 3.9 1.3 71.1 105.6 186.7 (1,444.8) (3,194.0) 2009 1,304.1 21.3 1,325.5 9.5 7.8 2.6 142.3 211.2 373.4 (952.1) (1,879.3) 2010 939.4 64.0 1,003.4 23.9 19.5 6.5 355.6 527.9 933.5 (70.0) (123.3) 2011 704.7 106.7 811.4 33.4 27.3 9.1 497.9 739.1 1,306.8 495.4 779.5 2012 540.0 160.1 700.1 38.2 31.2 10.4 569.0 844.7 1,493.5 793.4 1,114.6 2013 394.6 181.5 576.1 42.9 35.1 11.8 640.1 950.2 1,680.2 1,104.2 1,385.1 2014 202.0 192.1 394.1 45.3 37.1 12.4 675.7 1,003.0 1,773.6 1,379.4 1,545.0 2015

213.5 213.5 47.7 39.1 13.1 711.3 1,055.8 1,866.9 1,653.4 1,653.4

2016

219.8 219.8 49.1 41.0 13.1 711.3 1,108.6 1,923.1 1,703.3 1,520.8 2017

226.3 226.3 50.6 43.1 13.1 711.3 1,164.0 1,982.0 1,755.7 1,399.7

2018 841.9 233.0 1,074.9 52.1 45.2 13.1 711.3 1,222.2 2,043.9 969.0 689.7 2019

239.9 239.9 53.7 47.5 13.1 711.3 1,283.4 2,108.8 1,868.9 1,187.7

2020

247.0 247.0 55.3 49.8 13.1 711.3 1,347.5 2,177.0 1,930.0 1,095.1 2021

254.4 254.4 57.0 49.8 13.1 711.3 1,414.9 2,246.0 1,991.7 1,009.0

2022

261.9 261.9 58.7 49.8 13.1 711.3 1,485.6 2,318.5 2,056.6 930.3 2023 841.9 269.7 1,111.6 60.4 49.8 13.1 711.3 1,559.9 2,394.5 1,283.0 518.2 2024

277.7 277.7 62.2 49.8 13.1 711.3 1,637.9 2,474.3 2,196.7 792.1

2025

285.9 285.9 64.1 49.8 13.1 711.3 1,719.8 2,558.1 2,272.2 731.6 2026

294.4 294.4 66.0 49.8

1,805.8 1,921.7 1,627.3 467.8

2027

303.2 303.2 68.0 49.8

1,896.1 2,014.0 1,710.8 439.1 2028 841.9 312.2 1,154.1 70.1 49.8

1,990.9 2,110.8 956.7 219.3

2029

321.4 321.4 72.2 49.8

2,090.4 2,212.4 1,891.0 386.9 2030

331.0 331.0 74.3 49.8

2,195.0 2,319.1 1,988.1 363.2

2031

340.9 340.9 76.5 49.8

2,304.7 2,431.1 2,090.3 341.0 2032

351.0 351.0 78.8 49.8

2,420.0 2,548.6 2,197.6 320.1

Net Present Value: 8,930.4

Economic Internal Rate of Return: 19.1%

Discount Rate: 12.0%

( ) = negative, O&M = operation and maintenance. Source: Asian Development Bank estimates.

Appendix 10 43

Table A10.3: Economic Reevaluation, Transport Sector Component (Rs million)

Costs Benefits

Net Benefit Net Present

Value Fiscal Year Capital O&M Total VOC Time Total

2005 58.5

58.5 (58.5) (181.8) 2006 439.2

439.2 (439.2) (1,217.9)

2007 744.0

744.0 (744.0) (1,842.2) 2008 2,127.2

2,127.2 (2,127.2) (4,702.6)

2009 2,480.3 14.4 2,494.7 16.8 314.9 331.8 (2,162.9) (4,269.2) 2010 1,407.7 66.6 1,474.3 35.5 562.2 597.7 (876.6) (1,544.9) 2011 1,394.3 87.9 1,482.3 75.0 973.4 1,048.4 (433.8) (682.7) 2012 800.8 108.8 909.6 197.9 2,005.3 2,203.2 1,293.6 1,817.4 2013 1,047.8 170.1 1,217.9 334.3 2,407.0 2,741.4 1,523.4 1,911.0 2014 291.6 190.6 482.2 397.1 1,674.7 2,071.9 1,589.6 1,780.4 2015

211.1 211.1 466.0 2,071.5 2,537.5 2,326.4 2,326.4

2016

217.4 217.4 487.2 2,277.1 2,764.2 2,546.8 2,274.0 2017

223.9 223.9 509.3 2,423.8 2,933.1 2,709.2 2,159.7

2018 1,296.5 211.1 1,507.6 532.5 2,581.4 3,113.9 1,606.3 1,143.3 2019

217.4 217.4 556.8 2,751.0 3,307.7 3,090.4 1,964.0

2020

223.9 223.9 582.2 2,933.5 3,515.7 3,291.8 1,867.8 2021

230.6 230.6 606.4 3,117.4 3,723.9 3,493.2 1,769.8

2022

237.5 237.5 631.7 3,315.0 3,946.7 3,709.1 1,677.8 2023 1,296.5 211.1 1,507.6 658.1 3,527.3 4,185.4 2,677.8 1,081.5 2024

217.4 217.4 685.6 3,755.6 4,441.2 4,223.8 1,523.1

2025

223.9 223.9 714.2 4,001.4 4,715.6 4,491.7 1,446.2 2026

230.6 230.6 744.1 4,266.0 5,010.1 4,779.5 1,374.0

2027

237.5 237.5 775.3 4,551.3 5,326.5 5,089.0 1,306.2 2028 1,296.5 211.1 1,507.6 807.8 4,858.9 5,666.7 4,159.1 953.2 2029

217.4 217.4 841.7 5,191.0 6,032.6 5,815.2 1,189.9

2030

223.9 223.9 877.0 5,549.5 6,426.6 6,202.7 1,133.2 2031

230.6 230.6 913.9 5,937.1 6,851.0 6,620.4 1,079.9

2032

237.5 237.5 952.4 6,356.2 7,308.6 7,071.0 1,029.9

Net Present Value: 18,367.4

Economic Internal Rate of Return: 20.5%

Discount Rate: 12.0%

( ) = negative, O&M = operation and maintenance, VOC = vehicle operating cost. Source: Asian Development Bank estimates.

44 Appendix 10

Table A10.4: Economic Reevaluation, Whole Project (Rs million)

Costs Benefits Net

Benefit Net Present

Value Fiscal Year Capital O&M Total

Water Saving

O&M Cost

Land Reclaim

Land Price

Health Cost

VOC Saving

Time Saving Total

2005 85.8

85.8

(85.8) (266.4) 2006 814.9

814.9

(814.9) (2,259.8)

2007 2,212.5

2,212.5

(2,212.5) (5,478.0) 2008 3,748.0 10.7 3,758.7 4.8 3.9 1.3 71.1 105.6 186.7 (3,572.0) (7,896.5) 2009 3,784.4 35.8 3,820.2 9.5 7.8 2.6 142.3 211.2 16.8 314.9 705.1 (3,115.0) (6,148.5) 2010 2,347.1 130.6 2,477.7 23.9 19.5 6.5 355.6 527.9 35.5 562.2 1,531.1 (946.6) (1,668.2) 2011 2,099.0 194.7 2,293.7 33.4 27.3 9.1 497.9 739.1 75.0 973.4 2,355.2 61.5 96.8 2012 1,340.8 268.9 1,609.7 38.2 31.2 10.4 569.0 844.7 197.9 2,005.3 3,696.7 2,087.0 2,932.0 2013 1,442.4 351.6 1,794.0 42.9 35.1 11.8 640.1 950.2 334.3 2,407.0 4,421.6 2,627.6 3,296.1 2014 493.6 382.7 876.3 45.3 37.1 12.4 675.7 1,003.0 397.1 1,674.7 3,845.4 2,969.1 3,325.3 2015

424.5 424.5 47.7 39.1 13.1 711.3 1,055.8 466.0 2,071.5 4,404.4 3,979.8 3,979.8

2016

437.2 437.2 49.1 41.0 13.1 711.3 1,108.6 487.2 2,277.1 4,687.3 4,250.1 3,794.7 2017

450.2 450.2 50.6 43.1 13.1 711.3 1,164.0 509.3 2,423.8 4,915.1 4,464.9 3,559.4

2018 2,138.4 444.1 2,582.5 52.1 45.2 13.1 711.3 1,222.2 532.5 2,581.4 5,157.8 2,575.3 1,833.1 2019

457.3 457.3 53.7 47.5 13.1 711.3 1,283.4 556.8 2,751.0 5,416.6 4,959.3 3,151.7

2020

470.9 470.9 55.3 49.8 13.1 711.3 1,347.5 582.2 2,933.5 5,692.7 5,221.7 2,962.9 2021

485.0 485.0 57.0 49.8 13.1 711.3 1,414.9 606.4 3,117.4 5,969.9 5,484.9 2,778.8

2022

499.4 499.4 58.7 49.8 13.1 711.3 1,485.6 631.7 3,315.0 6,265.2 5,765.7 2,608.1 2023 2,138.4 480.7 2,619.2 60.4 49.8 13.1 711.3 1,559.9 658.1 3,527.3 6,579.9 3,960.7 1,599.7 2024

495.1 495.1 62.2 49.8 13.1 711.3 1,637.9 685.6 3,755.6 6,915.5 6,420.4 2,315.3

2025

509.8 509.8 64.1 49.8 13.1 711.3 1,719.8 714.2 4,001.4 7,273.7 6,763.8 2,177.8 2026

525.0 525.0 66.0 49.8

1,805.8 744.1 4,266.0 6,931.8 6,406.8 1,841.8

2027

540.7 540.7 68.0 49.8

1,896.1 775.3 4,551.3 7,340.5 6,799.8 1,745.3 2028 2,138.4 523.2 2,661.7 70.1 49.8

1,990.9 807.8 4,858.9 7,777.5 5,115.8 1,172.4

2029

538.8 538.8 72.2 49.8

2,090.4 841.7 5,191.0 8,245.1 7,706.2 1,576.8 2030

554.9 554.9 74.3 49.8

2,195.0 877.0 5,549.5 8,745.7 8,190.8 1,496.4

2031

571.5 571.5 76.5 49.8

2,304.7 913.9 5,937.1 9,282.1 8,710.6 1,420.9 2032

588.5 588.5 78.8 49.8

2,420.0 952.4 6,356.2 9,857.2 9,268.7 1,349.9

Net Present Value: 27,297.8

Economic Internal Rate of Return: 19.9%

Discount Rate: 12.0%

( ) = negative, O&M = operation and maintenance, VOC = vehicle operating cost. Source: Asian Development Bank estimates.

Appendix 10 45

Table A10.5: Sensitivity Analysis

(%)

Scenarios

EIRR of Whole Project

EIRR of Urban Sector

Component

EIRR of Transport Sector

Component

Base Case 19.9 19.1 20.5

Sensitivity Tests

1 O&M cost 10% higher 19.7 18.8 20.3

2 O&M cost 20% higher 19.5 18.6 20.1

3 O&M cost 10% lower 20.2 19.4 20.6

4 O&M cost 20% lower 20.4 19.7 20.8

5 Benefits 10% higher 21.7 21.1 22.2

6 Benefits 20% higher 23.5 23.0 20.0

7 Benefits 10% lower 18.0 17.0 18.7

8 Benefits 20% lower 16.0 14.8 16.8

9 O&M cost 10% higher and benefits 10% lower

17.8 16.7 18.5

10 O&M cost 20% higher and benefits 20% lower

15.6 14.1 16.4

EIRR = economic internal rate of return, O&M = operation and maintenance. Source: Asian Development Bank estimates.

46 Appendix 11

FINANCIAL REEVALUATION

1. The financial internal rate of return (FIRR) and fund flow for water supply in Jammu and Srinagar, which is a cost recovery component, was calculated in accordance with the Financial Management and Analysis of the Projects (the Guidelines) of the Asian Development Bank.1 The FIRR of water supply was calculated based on actual capital costs, operation and maintenance (O&M) costs, water usage and revenues generated, and government subsidies. 2. Under the project, water supply facilities in Jammu and Srinagar were substantially improved with the rehabilitation and/or construction of 425 kilometers of damaged pipelines, 93 tube wells, and 58 overhead tanks and ground-level service reservoirs, as well as the purchase and installation of a large amount of equipment. The capacity and efficiency of the water supply system have increased in the project areas. The water supply increased by 135 million liters per day, about 16% of the total water supply in Jammu and Srinagar. After physical completion, all project facilities and equipment were transferred to the Public Health Engineering Department in Jammu and Srinagar for O&M. The tariff scheme for water supply is set by the urban local bodies in Jammu and Srinagar. As on January 2016, for households, the tariff is about Rs1,200–Rs1,400 per connection per year, while for commercial users, the tariff is collected on the basis of water usage. The water tariff for all categories of users is scheduled for increase by 10%–15% every year. From the revenue data provided by the urban local bodies of Jammu and Srinagar, the water supply and revenue increased in the two project cities in the last few years by about 20%–30% per year. However, the actual revenue was only about 25%–30% of the assessed revenue, which is below a self-sustainable level for operators. The O&M of the water supply mainly relies on state government subsidies. The total fiscal allocations to the Public Health Engineering Department for O&M in FY2015 were Rs1,072.7 million for Jammu (21.3% higher than FY2011, with an annual increase rate of 4.9%) and Rs560.7 million for Srinagar (24.9% higher than FY2011, with an annual increase rate of 5.7%).

3. In the FIRR recalculation, the following assumption and parameters were used:

(i) Capital costs included all capital expenditures related to civil works, equipment, and consulting services, but excluded the financial charges for the loan. The actual annual capital costs were adjusted to 2015 costs by applying annual price indexes. Large-scale periodic maintenance (rehabilitation) expenditures were estimated at 10% of the capital cost, and they were treated as capital costs of the project and scheduled for every 5 years.

(ii) Actual average O&M costs for water supply in 2015 were used as the basic costs for estimating the incremental O&M costs for the project. The O&M costs were kept at constant prices, and a 3% increase per year was added to account for water production increases and deterioration of the facilities. Some of the subprojects were completed and started operation earlier. The O&M cost was therefore increased from 2008 in accordance with the project completion schedule.

(iii) As at appraisal, the targeted revenues were used in the reevaluation. It was assumed that such revenue would increase by 30% per year during 2016–2020 and 20% per year from 2021 onwards. Such revenue increase assumed increased water consumption, a higher tariff level, and better enforcement of revenue collection.

(iv) In addition to the revenue from water usage, charges for new connections were considered. At appraisal, it was estimated that the revenue from new connections would be about Rs40 million in 2005 based on Rs450 per connection and about 900 new

1 ADB. 2005. Financial Management and Analysis of Projects (the Guidelines). Manila.

Appendix 11 47

connections added per year. Revenue from new connections was also included in the revenue calculation, adjusted by 2015 price.

(v) Minimum government fiscal subsidies were considered based on actual fiscal allocations to water supply O&M in Jammu and Srinagar. It was assumed the fiscal subsidy to the project was Rs249 million in 2015, with annual increase rates of 10% per year during 2016–2020 and 5% from 2021 onwards.

(vi) The calculation is for 25 years, including 10 years for construction and 22 years for operation (with some overlapping of construction and operation). No residual cost was considered.

4. Based on the above assumptions and/or estimates, the FIRR was calculated at 2.52% for the water supply subcomponent of the project, lower than the appraisal estimate of 2.61% for the sample subprojects. The calculated FIRR is higher than the weighted average cost of capital of 1.46% calculated at appraisal. Therefore, the project is still considered financially viable (with government subsidies). Table A11.1 presents the cash flows of the FIRR recalculation. 5. Additionally, the FIRR was subjected to sensitivity tests, which indicated that the FIRR was relatively sensitive to revenue changes (Table A11.2). Without considering the government subsidy for O&M, this subcomponent appears to be not financially viable. To keep the subcomponent financially viable, the revenue should be increased by at least 50%. In both Jammu and Srinagar, reforms are urgently needed to increase efficiency and financial sustainability of the project. This would entail establishing a practical water tariff adjustment mechanism, installing water meters for all users, enforcing revenue collection, and corporatizing water production and transmission. Table A11.1: Financial Reevaluation of the Water Supply Subcomponent

(Rs million)

Fiscal Year

Costs Benefits Net Profit Capital O&M Total Revenue Connection Subsidy Total

2005 18.7

18.7

(18.7)

2006 348.2

348.2

(348.2)

2007 1,217.9

1,217.9

(1,217.9)

2008 1,570.5 13.0 1,583.5 2.8 0.4 9.2 12.4 (1,571.0)

2009 1,052.0 26.0 1,078.1 5.7 0.7 18.5 24.9 (1,053.2)

2010 742.0 78.1 820.1 17.1 2.2 55.4 74.7 (745.4)

2011 512.8 130.2 643.0 28.4 3.6 92.4 124.4 (518.6)

2012 302.3 195.3 497.5 42.7 5.4 138.5 186.6 (310.9)

2013 148.9 221.3 370.2 48.4 6.2 157.0 211.5 (158.7)

2014 26.0 234.3 260.3 51.2 6.5 166.2 224.0 (36.3)

2015

260.4 260.4 56.9 7.2 184.7 248.8 (11.5)

2016

268.2 268.2 74.0 8.0 203.2 285.1 16.9

2017

276.2 276.2 96.1 8.8 223.5 328.4 52.2

2018 508.6 284.5 793.1 125.0 9.6 245.8 380.5 (412.6)

2019

293.0 293.0 162.5 10.6 270.4 443.5 150.5

2020

301.8 301.8 211.2 11.7 297.5 520.4 218.6

2021

310.9 310.9 253.5 12.3 312.3 578.1 267.2

2022

320.2 320.2 304.2 13.5 328.0 645.6 325.4

2023 508.6 329.8 838.4 365.0 14.8 344.4 724.2 (114.2)

48 Appendix 11

Fiscal Year

Costs Benefits Net Profit Capital O&M Total Revenue Connection Subsidy Total

2024

339.7 339.7 438.0 16.3 361.6 815.9 476.2

2025

349.9 349.9 525.6 17.9 379.7 923.2 573.3

2026

360.4 360.4 630.8 19.7 398.6 1,049.1 688.8

2027

371.2 371.2 756.9 21.7 418.6 1,197.2 826.0

2028 508.6 382.3 890.9 908.3 23.9 439.5 1,371.7 480.7

2029

393.8 393.8 1,090.0 26.3 461.5 1,577.7 1,183.9

2030

405.6 405.6 1,307.9 28.9 484.5 1,821.4 1,415.8

2031

417.8 417.8 1,569.5 31.8 508.8 2,110.1 1,692.3

2032

430.3 430.3 1,883.4 35.0 534.2 2,452.6 2,022.3

Financial Internal Rate of Return: 2.52%

( ) = negative, O&M = operation and maintenance. Source: Asian Development Bank estimates.

Table A11.2: Sensitivity Analysis (%)

Scenarios FIRR

Base Case 2.52

Sensitivity Tests

1 O&M cost 10% higher 1.99

2 O&M cost 20% higher 1.45

3 O&M cost 10% lower 3.03

4 O&M cost 20% lower 3.53

5 Revenue 10% lower 3.09

6 Revenue 20% lower 3.61

7 Revenue 10% higher 1.90

8 Revenue 20% higher 1.22

9 No government subsidy for O&M (2.49)

9 No government subsidy & revenue 50%

higher 1.38

10 O&M cost 10% higher & revenue 10% lower 1.34

11 O&M cost 20% higher & revenue 20% lower 0.02

( ) = negative, FIRR = financial internal rate of return, O&M = operation and maintenance. Source: Asian Development Bank estimates

Appendix 12 49

SAFEGUARDS ASSESSMENT

1. This assessment of the environmental and social safeguards activities implemented under the project draws upon a review of the biannual safeguard monitoring reports prepared for the project by the Economic Reconstruction Agency (ERA).

2. Safeguards implementation arrangements. A high-level officer of chief engineer rank was deputed as director (safeguards) at the project management unit (PMU), and provided with adequate team support. The social and environmental management cell, under the director (safeguards), comprised two land acquisition collectors (one each at Jammu and Srinagar divisions) deputed from the state government’s Revenue Department, two social and resettlement experts, and two assistant social and resettlement experts for Jammu and Srinagar divisions. For environmental safeguards, two environmental experts were appointed at the PMU and they were supported by two assistant environmental experts. The social and environmental management cell had the capacity to plan and implement project safeguard requirements. The project consultants engaged safeguard experts and relevant support staff and provided necessary support to the PMU. Regular training programs were conducted for the executing agency and contractors’ staff for safeguards monitoring and implementation. The overall institutional arrangements for management of safeguards are assessed as adequate.

3. Social safeguards. The Asian Development Bank (ADB) approved 49 short resettlement plans (SRPs), which were based on census and sample socioeconomic surveys of project-affected persons. Trained enumerators were used for primary data collection. In-depth consultations and discussions with affected persons took place during SRP preparation and implementation.1 ERA undertook social assessments for all subprojects, prepared reports, and obtained approvals from ADB. Social safeguard planning and monitoring adhered to the loan agreement stipulations and ADB’s Involuntary Resettlement Policy (1995). ERA disclosed the resettlement plans and the entitlement matrix (translated into the local language) to the affected persons and the general public. Of the 49 SRPs prepared, five were not required to be implemented, as the anticipated impacts were avoided during implementation.2 Eight SRPs were not required to be implemented, as the related subprojects were dropped from the project. A total of 36 SRPs were finally implemented: 31 in Kashmir and 5 in Jammu.

4. Land acquisition for the subprojects was undertaken through negotiations with affected persons by the Private Negotiation Committee headed by the respective District Collectors. Under the State Land Acquisition Act, 1990, the committee is a statutory body that follows the required procedure for negotiated land acquisition. Valuation of structures was undertaken by the state’s Public Works Department (roads and bridges division), while that of crops and fruit bearing trees was undertaken by the state’s agriculture and horticulture departments. Private land acquisition of 5.7 hectares was undertaken. According to the records of the ERA, compensation of Rs100,861,452 has been paid to the affected persons as per the entitlement matrix in the approved SRPs. Rs184,383 remains undisbursed to 15 affected persons, who are not interested in receiving compensation, despite information provided by the ERA and the state government’s Revenue Department, and the issuance of public notices. Following government

1 Government of Jammu and Kashmir, Economic Reconstruction Agency. 2012. Second Bi-annual Report on External Monitoring and Evaluation of Resettlement Plan Implementation under Multi-sector Loan for Infrastructure Rehabilitation in Jammu and Kashmir (ADB Loan 2151 IND). Srinagar.

2 Resettlement and land acquisition was avoided by restricting corridor width and carrying out civil works within the available right-of-way.

50 Appendix 12

rules, the amount was deposited with the court, and can be claimed by the affected persons at any time.

5. The loss of assets was compensated adequately and no pending grievances regarding compensation amount or process were reported (footnote 1). The residents and businesses within the project influence area of sample roads consulted during the project completion review mission reported benefits due to improved access and reduced travel time because of improved road connectivity. Improved public transport on the project roads and lower carriage costs were also reported. Improved access to social infrastructure was reported by people in both Jammu and Kashmir regions, which people reportedly valued higher than their improved economic status. Consultations with urban residents of Jammu and Srinagar during the project completion review mission indicated significant benefits from improved water supply and drainage in particular.

6. Environmental safeguards. ERA undertook environmental assessment for all subprojects, prepared reports, and obtained approvals from ADB. The objectives of the environmental management plans were achieved, and no outstanding issues were reported. Forest clearances required for some subprojects were obtained. Implementation of project environmental safeguards as envisaged was helped by (i) strong safeguard implementation arrangements with the PMU, project management consultant, design and supervision consultants, and adequate staff in the social and environmental management cell; and (ii) a systematic approach to develop awareness and build capacity. The introduction of a process to obtain an environmental compliance certificate, issued by team leaders of design and supervision consultants and accompanying every contractor bill, facilitated and helped promote environmental compliance. In case of noncompliance, 10% of the billed amount was withheld until compliance was achieved. The practice of deducting a percentage of the billed amount, rather than withholding the entire amount, served as an incentive for compliance.

7. The project initially restricted (i) subprojects that are classified as category A or sensitive B as defined in ADB’s Environment Policy (2002); and (ii) any facilities and lots in, or close to, national parks, sanctuaries, or other environmentally sensitive areas. All subprojects taken up under the project were classified as category B for environmental safeguards. During implementation, a loan amendment was carried out to remove the restriction on subprojects classified as category A or sensitive B, which allowed subprojects passing through or close to wildlife sanctuaries or other environmentally sensitive areas, subject to the ERA obtaining all statutory clearances. Subsequent to the loan amendment, a road section passing through the buffer zone of wildlife sanctuary under one subproject was approved but not implemented.

8. Overall, the project has improved the environment of the project towns and the region. The project has the potential to contribute further to improve environmental and health conditions, if facilities are maintained and operated properly.

Appendix 13 51

CONTRIBUTION TO THE ADB RESULTS FRAMEWORK

No.

Level 2 Results Framework Indicator Target

Revised Target

Aggregate Output Methods/Comments

1 Households with new or improved water supply (number)

300,000 households

360,000 households

1.8 million people benefited from the water supply system rehabilitated under the project.

2 Water supply pipes installed or upgraded (length of network in kilometers)

529 km

425 km 425 km The length of water supply network (529 km) at appraisal was based on secondary data and desk-based assessment; it was revised to 425 km in accordance with appraisal during implementation.

3 Land improved through irrigation, drainage, and/or flood management (hectares)

3.7 hectares 3.7 hectares of land was reclaimed by improving the drainage system in Jammu and Srinagar.

4 Households with reduced flood risk (number)

240,000 households

100,000 households

The figure of 240,000 households for drainage at appraisal was based on broad estimates.

5 Roads built or upgraded (kilometers)

1,500 km 604 km 604 km The length of roads for rehabilitation and/or upgrading (1,500 km) at appraisal was based on a broad assumption by the government on the nature of project roads, which mostly consisted of village roads and other district roads. In the absence of sufficient data, any assessment of the nature of works to be undertaken was not possible, and the cost of works was based on broad assumptions. A contingency provision to cater for cost escalation and variations was not made under the cost estimates. The appraisal targets therefore cannot be considered as targeted outputs. The roads and bridges were identified during implementation, and the nature of works and cost was determined after engineering studies.

ADB = Asian Development Bank, km = kilometer. Source: Project completion review mission.