Lessons

India: Rajasthan Urban Sector Development Investment Program (Tranche 3 and Multitranche Financing Facility)

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Lessons

Delays in the provision of house sewer connections (HSC) provision impact the timely realization of benefits from wastewater management systems.

HSCs were not covered by the multitranche financing facility (MFF) for this investment program but were provided using grant funds from the government of Rajasthan to 15 urban local bodies (ULBs). As of program completion review, only 18,018 HSCs had been provided and functional against the program target of 37,600 HSCs in five ULBs. The still ongoing HSC works were anticipated to be completed in 2019, and the impact of this complementary work in progress will be evident 2–3 years after completion. The delay in HSC provision hampered the timely delivery of the sewerage component’s full benefits to their target beneficiaries. Synchronizing the implementation of program/project activities with complementary, external ones should be worked out in future interventions.  (Implementation: associated external activities, synchronizing project schedules associated external projects)

Project Cycle Stage: 
Implementation

Continued renewal of consents to operate (CTOs) for water treatment plants (WTPs) and sewage treatment plants (STPs) after the handover of program assets is necessary for compliance with statutory requirements.

Safeguards implementation under the MFF was initially weak because of lack of specialized personnel. It later improved with the engagement of full-time professionals in the project.  Overall compliance to safeguards, except for continued renewal of CTOs for the WTPs and STPs after loan closure, was found to be satisfactory, at project completion.  The investment program implementation unit has agreed to ensure renewal of CTOs by 30 September 2019 and this should be monitored by ADB. 

Project Cycle Stage: 
Implementation
Completion and Evaluation

Continued payment of operation and maintenance (O&M) fees for sewage treatment plants (STPs) by project ULBs after handover of the assets is necessary for the optimal maintenance of the plants.

The investment program was not designed for capital cost recovery.  Nevertheless, the operating ratios (revenue–O&M cost ratios) calculated for the 10 ULBs averaged 1.0:0.9, indicating that the ULBs have the financial capacity to meet operating expenses out of internal revenues and assigned compensations.  However, less than the required levels of ownership of STPs by project ULBs has led to delayed O&M payments to contractors, resulting in suboptimal maintenance of the STPs. The investment program implementation unit has agreed to resolve this situation by 30 September 2019 and ADB should keep track of this.  

Project Cycle Stage: 
Implementation
Completion and Evaluation

Having dedicated cadres in the implementing agencies (IAs), instead of staff on deputation, is more beneficial for ADB-financed programs/projects.

The IA for the multitranche financing facility (MFF) and its component projects, the investment program management unit (IPMU), generally exhibited strong leadership with the placement of state government senior officers in its management.  However, it would have been better if it were staffed by dedicated cadres.  Such an arrangement would have ensured continuity in implementation.  Creation of a legal cell in the IPMU would also have improved its handling of techno-legal cases. 

Project Cycle Stage: 
Preparation
Implementation

The statement of expenditure (SOE) threshold should consider the institutional capacity of implementing agencies (IAs) and size and nature of contracts.

The SOE procedure allowed this program up to $100,000 equivalent per individual payment.  This should have been improved given the high implementation capacity demonstrated by the IPMU.  In future, the statement of expenditure (SOE) threshold of projects should consider the institutional capacity of IAs and the size and nature of contracts.  This will give IAs leeway in meeting unforeseen expenditure needs that enhance their projects’ likelihood of success.

Project Cycle Stage: 
Implementation

Overestimation of contingencies results in partial loan cancellations or loan extensions to utilize the excess contingency amounts.

Loan savings mainly because of the appreciation of the United States dollar and the overestimation of contingencies were leveraged by the program to increase its allocation for civil works.  Consequently, it was able to expand infrastructure coverage, implement additional new subprojects, and meet the marginal cost overruns in a few contracts.  These new expenditures enhanced its relevance and impact; however, they also necessitated the multiple and prolonged extension of the loan closing for projects 2 and 3, eventually coinciding with the MFF closing in June 2017.  Despite the loan extensions and new and additional expenditures, $53.1 million of the total allocation of $273 million under the MFF was cancelled.  This highlights the importance of making realistic cost estimates, especially for contingencies that are completely within control.  

Project Cycle Stage: 
Preparation

Incorporation of the latest technological developments and best practices enhances the design of projects.

While the design of this investment program was appropriate to achieve its intended outcomes, incorporation of recent developments and best practices such as 24x7 water supply should have been considered. This would have further enhanced the design and resulting impact of the program and its individual projects. 

Project Cycle Stage: 
Preparation
Implementation

Inconsistent and nonuniform indicators between the multitranche financing facility (MFF) and its projects and impractical measurement tools and irregular data sources affect the accuracy of performance assessments.

Project 1 did not have an individual DMF and there were inconsistencies between the performance indicators across the facility and project 2 and 3 DMFs. Specific to project 3 DMF, some of the outcome indicators for urban drainage, urban transport, and firefighting services are defined as output indicators.  The project 3 DMF also does not define the outcomes intended from output interventions for firefighting and cultural heritage support infrastructure. Though the overall objective of the MFF and its projects are the same in terms of impacts, outcomes, and outputs, there are variations in the respective performance indicators between the MFF and the projects. Performance of the water supply, drainage, and urban transport subprojects are measured differently in the DMFs of project 3 and the facility, resulting in the same output being measured under multiple parameters in the two DMFs.  Overall, the inconsistencies and use of nonuniform indicators in the MFF DMF and those of its component projects impact the accuracy of MFF- and project-level performance assessment. In future, the DMFs of MFF projects should be aligned with those of their parent investment programs.  Target-setting should be based on reliable data baseline data, in the absence of which, baseline research may be undertaken at early implementation stage and followed by DMF adjustments, as appropriate.  

 

Project Cycle Stage: 
Preparation
Implementation
Completion and Evaluation

Close monitoring of consultants’ performance is necessary for optimal utilization of consulting services and timely delivery of outputs. 

A few nonperforming personnel of the design and supervision consultant were removed by the IA. Similarly, the contract of the consulting firm engaged to prepare the baseline, midterm, and end-term project performance monitoring reports was terminated, based on its less than satisfactory performance.  In both cases, close monitoring of consultants’ performance underpinned the decisions made. Following the actions taken, consultant performance improved, demonstrating the importance of a performance-based management system in ensuring the optimal utilization of consulting services and improved delivery of consultant outputs.  

Project Cycle Stage: 
Implementation

End-to-end e-procurement and contract management will improve project efficiency and organizational effectiveness.

The e-portal established by the government of Rajasthan greatly facilitated the procurement of the contracts that employed national competitive bidding and shopping methods. Moving forward, the procurement capacity of the state government, demonstrated by the IPMU as a core strength, could be further enhanced by the adoption of end-to-end e-procurement and contract management systems.  This will not only improve procurement and overall project efficiency but also enhance the effectiveness of program/project implementation units by promoting transparency, auditability, and collaboration among all users of the systems.  

Project Cycle Stage: 
Implementation

Ensuring project readiness prior to contract awarding fosters the efficient and effective implementation of projects. 

Lessons from the first ADB loan in Rajasthan, the Rajasthan Urban Infrastructure Development Project, and other ADB projects in India were applied in the MFF and project 3 design and implementation. Areas of focus were delineated. The availability of all the required land, except in one site, was ensured before program commencement.  The investment program implementation units (IPIUs) were established and project consultants mobilized before individual loan signing. Coordination for utility shifting was pursued and ULBs and subprojects were identified according to the MFF subproject selection criteria. These measures, undertaken prior to contract awarding, facilitated the implementation of the MFF and project 3 in a generally timely, responsive, and efficient manner.  Delays, resulting in the completion of 17 of the 132 MFF water supply and sewerage subprojects beyond the program close, were due mainly to ambitious contract periods, exacerbated by the poor resourcemobilization of the contractors.  Such delays may be addressed in future projects through the adoption of more stringent contractor qualification criteria.  

Project Cycle Stage: 
Implementation

Compliance to financial covenants requires as much attention from ADB as the borrowers’ auditors and project authorities.

The financial management of this program was less than satisfactory.  Annual audits were conducted by statutory auditors and furnished in a timely manner to ADB, but separate accounts for each project were not maintained and reconciled with the loan financial information services, and the statutory auditor’s opinions were unclear. The financial management arrangements of the borrower and the executing agency were likewise not up to standard though counterpart funding for the MFF was timely. Furthermore, while ADB identified and commented on the audit shortcomings that persisted for years, missions were not fielded to resolve the issues. In future, ADB should exercise greater responsibility.  It should address financial management issues promptly and more stringently to ensure compliance to loan financial covenants.   

 

Project Cycle Stage: 
Implementation
Background

In October 2007, the Asian Development Bank (ADB) approved a $273 million multitranche financing facility (MFF) for the Rajasthan Urban Sector Development Investment Program, which was designed to improve the urban environment and promote ongoing reforms for sustainable, efficient, and responsive urban service delivery. Through three components, the program sought to close the development gap in the state with increased economic growth, reduced poverty, and sustained improvements in the urban environment, impacting the quality of life of 1.6 million people in 15 urban local bodies (ULBs). 

The program components were: (i) improvements in urban infrastructure, including water supply, wastewater management, solid waste management (SWM), urban drainage, road rehabilitation and safety, and social and cultural heritage infrastructure; and (ii) capacity development and implementation support.  These components comprised the key features of the three projects supported by three tranches of the MFF: project 1 of $60 million, was approved along with the MFF; project 2 of $150 million, was approved in January 2009; and project 3 of $63 million was approved in December 2010 and, along with project 2 and the MFF, closed in June 2017.

At completion, project 3 and the investment program delivered most their respective planned outputs, and consequently achieved most of their intended outcomes.  Drinking water quality in two project ULBs meets national water quality standards as a result of project 3’s water supply interventions. Reliability and average duration of supply has increased, though 8 hours of daily supply could not be achieved, especially in summers in the desert region, and 95% of the population in the project towns are being provided with more than 127 lpcd of water. Nonrevenue water has reportedly been reduced to 20% and 15% in the two ULBs as targeted.  Piped sewerage infrastructure, including STPs, benefitted 100% of the population in five ULBs. All ULBs have reported covering more than 90% of households with door-to-door collection and transportation of municipal solid waste, including proportionate coverage of slum and low-income households and women-headed households.

The water supply component of the investment program benefitted over 2.28 million people (96% of the population) with an average supply of 131 lpcd of 100% disinfected, treated, piped water.  The wastewater management component resulted in asset creation and the development of a safe disposal system for sewage and protected water bodies. Sewerage facilities developed in 14 hitherto unserved ULBs benefited 1.92 million people or 100% of the population. Discharge of untreated wastewater to water bodies has been reduced to more than 44 million liters per day (mld), of the 109 mld treatment capacity created.  The detailed project reports for sewerage and drainage, prepared for the entire municipal area of the 15 ULBs, are being used by the ULBs as basis for network expansion with state resources.

Comprehensive drainage master plans were prepared, drainage outfalls were rehabilitated or constructed in five ULBs, and roadside drains were built in six ULBs, thereby reducing flooding incidences and the number of days these ULBs are impacted. The urban transport component improved mobility in 13 ULBs, benefitting residents, particularly the poor, with improved access to economic opportunities by eliminating vehicle idling time and traffic congestion and reduced average travel times and travel costs, in addition to reported reduction in accidents at the sites of interventions. Roads-over-bridges constructed in eight ULBs eliminated high-traffic, gated, railway level crossings. Over 0.21 million people living in identified slums benefited from improved basic infrastructure and urban services, resulting in significantly improved living conditions.  The SWM outcome was partly achieved. While the capacity of ULBs to collect and transport waste has been augmented, their access to sanitary landfill facilities was unmet as the five landfills developed remained nonfunctional and remaining landfills were dropped per government’s decision to develop compost plants through Rajasthan Awas Vikas Nigam.

The program also built the capacities of the executing and implementing agencies and consultants and contractors in a structured manner through training programs and on-the-job learning. It successfully introduced good practices such as the use of trenchless technologies with pulling method, which enabled the use of high-density polyethylene pipes without buckling and adherence to health and safety measures. Outsourcing the operation of some municipal services such SWM, water billing, and sewerage cess, freed up human resources for urban governance and management of municipal service delivery. Training programs effectively reoriented the staff of ULBs and state bodies towards professionalization of municipal services and better urban governance, including grievance redress and safeguard management mechanisms.

The program had the Local Self Government Department of Rajasthan as executing agency.  The investment program management unit served as overall implementing agency, supervising the work of the investment program implementation units in each project town.

Project Information
Project Name: 
Rajasthan Urban Sector Development Investment Program (Tranche 3 and Multitranche Financing Facility)
Report Date: 
July, 2019
Main Sector: 
Water and Other Urban Infrastructure and Services
Country: 
India
Project Number: 
40031-013, 40031-053
Report Type: 
PCR
Project/Modality: 
MFF
Themes: 
Environmentally Sustainable growth
Inclusive Economic Growth
Gender Equity and Mainstreaming
SDG: 
Goal 11: Sustainable Cities and Communities
Goal 6: Clean Water and Sanitation
Goal 3: Good Health and Well-Being
Sub Sector: 
Other urban services
Urban policy, institutional and capacity development
Urban sewerage
Urban water supply
Loan Number: 
L2725, M0015
Source of Funding: 
OCR
Date Approved: 
MFF: 31 October 2007 , Tranche 3: 13 December 2010
Report Rating: 
Successful

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