Although the physical scope of the water supply subproject was reduced, its outcome target was overachieved because it increased the beneficiaries to 533,000 people against a target of 380,000 people. This was a major contribution to the MFF target of 2.4 million beneficiaries. Water supply quantity also increased from 80 liters per capita per day (lcpd) to 135 lpcd, meeting the government of India’s national target. These accomplishments demonstrate how being outcome-oriented could lead to better results. Nevertheless, the project could have considered incorporating comprehensive end-to-end solutions, such as 24×7 water supply with well-defined O&M arrangements in construction contracts. This would have maximized the benefits from the improved water supply systems and enhanced the sustainability of both the project benefits and assets.
The assessment of state capacity at appraisal was rather optimistic, encouraging ambitious reform targets and delaying the start of some subprojects under the capacity building and institutional development component. Partially achieved outputs, including among others the introduction of a computerized system for water billing and collection, updating of municipal database, and introduction of a management information system, were consequently deferred for completion under succeeding tranches.
This project’s completion was delayed by about 61 months. Major reasons were procurement delays due to limited contractor interest and state capacity, on-and-off public unrest, and the historic 100-year flooding in 2014. Prolonged consultant recruitment (15 months for the initial PMC and DSC), significantly holding up detailed designs and project startup, replacement and rebidding of poorly performing consulting and works contracts, and slow-moving works contracts also underpinned the completion delay. In future, a realistic timeframe for all activities within project control should be ensured during preparation.
ERA has been headed by senior officers of the state government and this benefited decision making and interdepartmental coordination. It also enjoyed strong state government support, including timely counterpart funding, not least to complete sewerage works after loan closure. Having ADB-financed projects managed by senior government officials needs to be worked out to the extent possible. (
Consultant performance under this project was less than satisfactory. The original PMC and one of the DSCs were weak and had difficulty fielding and maintaining experienced staff in the planned positions. Absence was frequent and several senior engineers were replaced, resulting in delayed output delivery. Upon contract completion for the original PMC and one of the DSCs, new consultants were hired and performed substantially better. However, implementation delays continued due to various factors such as site constraints, design changes, and consequent delay in finalizing and issuing technical and as-built drawings. Because of the need for replacements, a total of four consultants were engaged by the project.
The construction contract for the STP constructed under this project included 1 year of O&M in addition to a 6-month trial run. After a year, O&M of the STP was handed over to the Urban Environmental Engineering Department. It might be useful to extend this arrangement to other urban infrastructure works contracts, even if the entities responsible for the O&M of the facilities have enough technical capacities. Under current state arrangements, the Public Health Engineering Department is responsible for technical O&M of water supply systems, the Housing and Urban Development Department for sewerage systems, and municipal corporations for solid waste facilities. With delayed property connections a frequent problem in ADB-financed sewerage interventions in India, it might also be helpful for ADB to explore requiring the incorporation of an annual implementation and financing plan for house connections in sewerage subproject plans and contracts. Adherence to the implementation and financing plan should be considered part of contract performance.
The Constitution of India mandates that the state allocate to urban local bodies (ULBs) the funds required to maintain their functions and sustain service delivery. The Central Finance Commission transfers accounts for 30%–40% of ULB finances, of which up to 90% may be used for the O&M of municipal assets. The state finance commission likewise supports the O&M of municipal assets through compensation grants and transfers to the municipal corporations. At project completion, state operating revenues appear enough to meet O&M expenses. Nevertheless, continued payment by municipal corporations of O&M fees for water treatment plants and sewage treatment plants (STPs) would still be necessary for optimal maintenance and sustainability.
Project 1 exceeded its target of laying 180 kilometers of sewerage network (actual: 190 kilometers) and achieved its target on developing one sewage treatment plant with 30 million liters per day capacity. However, because implementation was delayed by a mis-procured contract and the termination of other nonperforming contracts, it was able to install only 20,000 of its targeted 33,500 house connections. While the remaining connections were completed in March 2019 with funds provided by the state and project 3 of the program, the shortfall impeded the expeditious realization of the intended benefits.
Sufficient support is required for the implementation of multitranche financing facilities (MFFs) in the initial years as this could impose a heavy burden on executing and implementing agencies (EAs/IAs) that need to prepare subsequent tranches while also implementing the first project.
The executing agency, the Economic Reconstruction Agency (ERA), had a functioning project management unit for another ongoing ADB loan at the time the MFF was approved, and the project loan agreement was signed. Given this, consultant recruitment for project 1 could have proceeded immediately. But for lack of staff and overload from multiple large projects, ERA did not proceed until after the loan became effective. As a result, it took 15 months to recruit the project management consultant (PMC) and one of the design and supervision consultants (DSCs), delaying project 1 startup. Advance action by ERA to facilitate consultant recruitment, detailed designs, and utility sharing would have helped minimize the startup delay and its knock-on effects on subsequent tranches and the whole investment program.
The Jammu and Kashmir Urban Sector Development Investment Program, approved by the Asian Development Bank (ADB) for a multitranche financing facility (MFF) of $300 million in May 2007, was designed to expand and upgrade urban services in the major urban areas of the state to Indian national and state standards. It aimed to improve public health, the urban environment, and quality of life in the state’s two main cities and other selected towns. It also sought to modernize and streamline the planning, operation and maintenance (O&M), and administrative functions of the responsible city departments. The MFF was to be provided in three tranches.
Project 1, the subject of this report, was financed by the first tranche approved by ADB together with the MFF for a loan of $42.2 million. As with the MFF, its envisaged impact was sustainable economic growth through the provision of urban infrastructure and services and improved urban management. Its expected outcomes were (i) improved living environments and employment opportunities for the 2.4 million people in Srinagar and Jammu, and (ii) improved capacity in participating institutions to manage sector reform and service delivery. These impact and outcomes were planned to be delivered through two types of output: (i) urban infrastructure improved and (ii) capacity and institutions developed.
Four infrastructure improvement subprojects were identified at appraisal: (i) water supply – the laying of a raw water pipeline in Srinagar, (ii) Sewerage and drainage in Jammu, (iii) solid waste management (SWM) in Srinagar, and (iv) urban transport - BC Road widening and overpass in Jammu. Two minor changes in scope were made during implementation: the raw water pipeline was reduced from 10 kilometers (km) to 5.6 km, following the discovery of raw water of better quality from a nearer natural source; and the transfer of the urban transport subproject to project 2 to better address congestion with larger scope.
Despite the reduced scope, the project overachieved its water supply outcome target. It increased the beneficiaries to 533,000 people against a target of 380,000 people. This was a major contribution to the MFF target of 2.4 million beneficiaries. Water supply quantity also increased from 80 liters per capita per day (lpcd) to 135 lpcd, meeting the government of India’s national target. Further, it lengthened water supply service by 1–2 hours per day to 8 hours. The SWM outcome target was also achieved, with the Achan landfill site benefiting an additional 1.1 million people. Albeit with delay, the sewerage outcome targets were also achieved: 230,000 people were being served as of project completion; the new sewage treatment with 30 million liters per day capacity will serve beneficiaries until 2036. These outcome achievements were directly attributable to the urban infrastructure subprojects’ achieved outputs.
Capacity building and institutional development output targets based on the periodic financing request for project 1 were also mostly achieved and have contributed to related MFF outcome targets. These include (i) strengthened capacity in the government entities through a structured institutional development plan; and (ii) sector reforms, including economic opportunity development plans and introduction of e-procurement for e-submission. In addition, action was taken to outsource some municipal functions on SWM and water billing, including an assessment for sewerage that freed up human resources for improved urban governance and management of municipal service delivery. Related training programs, including those under the state budget, effectively reoriented government agency staff toward a professional approach to municipal services and better urban governance.
Taking up only 18% of the whole MFF investment, project 1’s success overall addressed the most urgent and basic infrastructure gaps in the project areas and laid the foundation for succeeding investments to be successfully implemented by building capacity in responsible agencies. As with the MFF and projects 2 and 3, project 1 had the Economic Reconstruction Agency (ERA) as executing agency. ERA established a dedicated project management unit and project implementing units in the target towns to carry out the project.
The non-achievement of some GAP targets under could have been avoided if remedial actions were done during the MTR. Specifically, the agreed relegation of the setting up of the nonrevenue water (NRW) task force to the Public Health Engineering Department and the agreed reduction of the target number of women marshals should have been formally documented or reflected in the MTR aide memoire. This lesson underscores the need to regularly monitor the GAP progress to identify unrealistic targets and for the ADB responsible gender officer or assigned consultant to participate in the MTR mission to raise corrective measures.
Three covenants related to financial management were not complied with. No APFS and AEFS were submitted for FY 2008. The APFSs for FY2018 were rejected as they included a combined audit report for all three MFF projects despite separate reports and opinions being required. Also, AEFSs for FY 2017 and prior years were combined with APFSs. These non-compliances may have been avoided if ADB monitored and followed up closely on the submissions made in line with the financial loan covenants.
While the design of projects 1–3 at appraisal was appropriate to achieve the expected outcomes and outputs, it could have considered incorporating comprehensive end-to-end solutions such as 24/7 water supply with O&M arrangements built in construction contracts. This would have maximized the benefits from the improved water supply systems and enhanced the sustainability of both the project benefits and assets.
Program implementation was hampered by procurement delays due to limited contractor interest and state capacity, on-and-off civil unrest, and the historic 100-year flooding in 2014. Prolonged recruitment of the initial PMC and DSC (15 months) and their replacements (17 months for the new PMC while the new DSC was recruited only in July 2014) also caused significant delays alongside slow-moving works contracts and the need to rebid poorly performing contracts. The new PMC and DSC performed substantially better than their predecessors. However, the delivery of their services was held back by site constraints, design changes, and delays in finalizing the drawings. In future, a realistic timeframe for consultant recruitment, detailed design development, and civil works contracts should be ensured to mitigate the risk of implementation delays.
The financial sustainability analysis conducted at MFF completion showed that there are enough state operating receipts to meet the O&M expenses of the project facilities. Given that the operating institutions did not achieve recovery of the O&M costs as envisaged at appraisal, fiscal transfers from the state and central governments need to continue to ensure the sustainability of the project assets.
All the subprojects planned at appraisal, except for tourism, were implemented. The tourism subproject, planned to be undertaken in five towns, had to be dropped because of security reasons. Also, during implementation, state capacity was found more constrained than assessed at appraisal, leading to delays in capacity building and the reform program. More careful assessment of EA/IA capacity and the local context is needed to ensure a realistic project scope and implementation period.
The overlapping implementation periods between project 1 and then-ongoing ADB Loan 2151 and other national programs, and concurrent preparation and appraisal of projects 2 and 3 of the MFF imposed a heavy burden on the ERA. Exacerbating this burden was the initially weak capacity of project implementation units (PIUs). ADB providing greater implementation support, particularly for the preparation of subsequent tranches, would help address this challenge in future MFFs. Such support would also help enhance the quality of subsequent tranches of the MFFs and mitigate the risk of implementation delays.
Safeguards implementation arrangement in the ERA was adequate. An officer with the rank of chief engineer was deputed as the director of safeguards and was supported by four environmental and resettlement experts responsible for implementing safeguard requirements. Two officers from the state revenue department were posted as land acquisition officers. These land acquisition officers provided much-needed support to the high-powered committee Divisional Level Committee established by the state government to fast-track the implementation of the resettlement plans for subprojects under projects 2 and 3. Creating a land acquisition office in the PMU to manage unavoidable involuntary resettlement may be explored in ongoing and future projects.
During the preparation of the multitranche financing facility (MFF) in 2007, only outline plans and designs were required to formulate the investment program and generate cost estimates to secure the proposed ADB financing. This meant that detailed surveys and designs had to wait after the approval of the periodic financing requests. But as the recruitment of the first project management consultant (PMC) and design and supervision consultant (DSC) took 15 months, MFF startup and the development of detailed designs for project 1 were significantly held back. By the time all contracts were awarded, and project 1 implementation went full swing, it was already past midpoint of the original implementation period for the whole program. The delay in the completion of project 1 amounted to 61 months. By contrast, although there were spillover works that needed to be finished post-MFF completion, projects 2 and 3 were both completed with minimal delays of three months each. Early preparation of the detailed designs for these projects, concurrent with the implementation of project 1, was key to the timelier completion of these projects.
The Jammu and Kashmir Urban Sector Development Investment Program was designed to expand and upgrade urban services and strengthen institutional capacity in the major urban areas of the state to Indian national and state standards. The Asian Development Bank (ADB) approved a multitranche financing facility (MFF) of $300 million for the program in May 2007.
The MFF was to be provided in three tranches to support: (i) project 1 with a $42 million loan approved along with the MFF, (ii) project 2 with a $110 million loan approved in October 2012; and (iii) project 3 with a $60 million loan approved in June 2014. Each of these projects was to contribute to achieving the MFF’s expected impact of sustainable economic growth through the provision of urban infrastructure and services and improved urban management. Each would also help achieve the MFF’s expected outcomes of (i) improved living environments and employment opportunities in Srinagar and Jammu, and (ii) improved capacity in participating institutions to manage sector reform and service delivery. These impact and outcomes were to be achieved through two types of output: (i) urban infrastructure improved and (ii) capacity and institutions developed. Project 3 covered mainly water supply, drainage, and urban transport.
Using weights based on the actual cost of each subproject, overall achievement of outputs under project 3 was assessed at 106%, leading to a 90% outcome achievement. Urban infrastructure improvements (i) increased water supply in the project towns to the national standard of 135 liters per capita per day, benefiting 368,000 people, with 47% women; (ii) reduced water logging to 0.3 hour a year in Srinagar; and (iii) eased road transport by building parking facilities and reduced average travel time along the Dalgate bridge in Srinagar from 30 to 15 minutes through the construction of a grade separator.
But MFF performance was not as good. Program implementation was significantly affected by external factors particularly major flooding and security issues, which were not anticipated during appraisal, necessitating adjustments in the design and scope of the projects. Using the same weighting methodology based on actual subproject cost, MFF overall output achievement was assessed at 68%, resulting in an outcome achievement of 62%.
Achieved or substantially achieved MFF outcome targets were on: (i) reducing wastewater discharge to storm drains; (ii) provision of functioning drainage to 1.63 million people (target: 2 million target) and (iii) increasing public private partnership in services delivery, i.e., in parking facility construction and through solid waste management (SWM) charges. Partly achieved outcome targets were on: (i) the number of people provided access to municipal water systems (1.52 million against 2.2 million target); (ii) beneficiary reach of SWM improvements (1.1 million actual, 2 million target); (iii) beneficiaries of improved road facilities (1.8 million actual, 2.4 million target), (iv) sector reforms, (v) capacity of relevant agencies developed using state budget; and (vi) capacities of agencies in O&M of assets. The target of providing 1 million people with access to sanitation was not achieved due to reduced component scope under projects 2 and 3. For capacity building and institutional development, creation of a semi-autonomous water board is awaiting state’s political decision. Recovery of O&M cost of water supply has also been delayed.
Notwithstanding the shortfalls, the MFF achieved its envisaged impact. The three MFF projects aggregately improved people’s access to economic activities, contributing to a 162.46% increase in per capita real income between 2007 and 2017 in the project areas. During the project period, the non-primary sector also grew by 225.06%, with increases of 100.45% in industry and trade investment and 100.45% and tourist inflow. The MFF also significantly helped improve the quality of life, particularly of women and the poor, in the project towns.
The MFF and all its three projects had the Economic Reconstruction Agency (ERA) as executing agency. ERA established a dedicated project management unit and project implementing units in the project towns to carry out the MFF
This program comprised 29 policy actions: 11 for subprogram 1 and 18 for subprogram 2. The total number of policy actions was significantly large, particularly in subprogram 2, and represented a challenge in monitoring and implementation. The number of policy measures should be limited so that ADB can monitor compliance with them effectively throughout the program.
PFM and SOE reforms to ensure fiscal sustainability, like those in the program, have political and economic implications and are difficult to undertake without strong ownership. The implementation success of such policies resides in (i) a good understanding of vested interests; (ii) the government’s strong commitment; (iii) the institutional capacity of government agencies; (iv) effective partnership and coordination between ADB and the government; and (v) a strong appreciation for overall program benefits. All these were observed in the program.
This program was developed in close consultation with the government and development partners including the International Monetary Fund, World Bank, Agence Française de Développement, and United Nations Development Programme, and was designed through a holistic approach. It demonstrated that a holistic consultation process can ensure effective diagnosis of the issues, leading to a relevant policy matrix that prioritizes reform measures in collaboration with the development partners.
This program supported the preparation of the medium-term framework (MTBF) and MTBF manual, including gender-responsive budgeting tools at the MOF. Program experience has highlighted that institutionalizing change-management practices among those charged with implementing reforms requires enhancing both technical and change management competency. It is also necessary to enable the government to sustain capacity development programs beyond the life of a program for instance, by providing training experts, particularly to develop soft capacities.