Many fiscal reforms related to taxes or subsidies, as in the PDFP, have political and economic implications and are often difficult to undertake without strong ownership. The implementation success of such policies resides in (i) a good understanding of the vested interests; (ii) the government’s strong commitment, irrespective of political party leadership; (iii) the institutional capacity of government agencies; (iv) effective partnership and coordination between ADB, the state government, and the national government; and (v) a strong sense of appreciation for the overall benefits of the program. All these were observed in the PDFP. In particular, despite the change in political leadership, the state government reiterated its endorsement and ownership of the PDFP and continued its commitment to full implementation.
To design policy action that requires major technical inputs and significant physical investment, alternatives with simpler, lower-cost solutions should be weighed, especially if they are helping the program to reach a similar outcome. In the PDFP, technical and financial challenges were identified during the implementation of the second-tranche policy action requiring 100% metering of the distribution transformers connected to agricultural feeders. A more cost-efficient alternative was found and achieved the same objective of improving energy audits through a combination of measures.
Policy actions involving legislative changes should be evaluated prudently as they have attached political risk, especially in or near an election cycle. This was observed during the implementation of the PDFP, as the state government postponed implementing policy actions because of a legislative assembly election.
A digitally driven system strengthens government capacity and introduces efficiency in tax administration, expenditure management, and financial planning. It helps prevent leakage and corruption thus improving accountability and overall governance. The PDFP made possible several IT-enabled measures in the Finance Department that helped the state to make more effective financial planning decisions, especially on current and projected state liabilities. It improved accountability and transparency in expenditure management, and reinforced the effective functioning of state government electronic databases in preventing leakages.
Fiscal space creation should be a gradual and sequential process, paying careful attention to related policy measures, and maintaining the economic potential intact. The Punjab Development Finance Program (PDFP) managed to achieve this balance. It paid attention to revenue administration, including digitization of land records, and better expenditure targeting such as metering of agriculture power distribution and improved energy audits to generate savings for grow while enhancing infrastructure and social sectors. The PDFP did not turn to measures such as increasing the tax rate, which may have adversely affected economic growth.
This program demonstrated the need for sufficient resources to develop stakeholder ownership and commitment, which is critical to the successful implementation of a PBL. Dialogue was cultivated between various stakeholders on multiple occasions. For example, for the policy action on the targeting plan for the agricultural power subsidy, discussions were held with the Punjab State Power Corporation Limited, the Punjab Agriculture University, and the Department of Power. Public awareness campaigns were organized, thus garnering user buy-in to complying with the committed policy action. (Preparation, Implementation: PBLs, stakeholder engagement, leadership and commitment)
Operation and maintenance (O&M) manuals are vital documents to ensure correct operation, particularly of gates, and proper flood management. It is therefore most important that the information from these manuals be disseminated to provincial departments of water resources and meteorology, farmer water user communities (FWUCs), and communes. Also, because strengthening FWUCs are essential to sustainability, continued support for building FWUCs’ capacity should be incorporated in O&M planning.
In flood-prone areas, there is a need to build climate-resilient infrastructure by following design standards and material specifications that can adapt to runoff or water flow during the flooding period. For road subprojects, the most effective solution to reduce the impacts from floodwaters is to build adequate cross drainage at appropriate water outlets and not necessarily to build very high road embankment. Paving road sections with strong pavement such as concrete, or constructing spillways in lowland areas should be considered instead of raising road embankment to a very high level. For both roads and irrigation infrastructure, engineering designs should carefully consider the government’s capacity to allocate maintenance budget, including to meet adequate staff capacity requirements.
Considering limited road maintenance budgets, road subprojects were designed to incorporate low maintenance structures and long-design-life road pavement, such as concrete. Bridges were replaced and roads and irrigation infrastructure improved to a better and higher-standard structure, some with climate resilience features. Hydrometeorological and automatic weather stations (AWS) were acquired for real-time measurement of river water level and rainfall at strategically important locations in order to help better detect future flooding. These efforts are considered to have contributed significantly to the project’s sustainability. With a 33% economic internal rate of return, the project is also seen to be viable and sustainable from an economic perspective. Future similar projects should do the same, and do better by including specific provisions related to sustainability in the loan agreement.
Each IA had its own project performance monitoring system, which allowed for more detailed data and indicators to be reflected in each of their quarterly and annual reports. However, an integrated reporting system would have been helpful in providing a holistic, more comprehensive view of project implementation progress and performance. This needs to be ensured in future projects.
As designed, each subproject contract required a separate bank account, with the approved disbursement mechanism involving part payment from the two grant funding sources in fixed percentages. This arrangement proved administratively complex, and was rectified through two changes that enabled one grant source to be used up first. The streamlined disbursement arrangement eased financial transfers and monitoring and management that, along with proper liquidation of the advance account and prompt audit submission, led to the timely project financial closure.
This project was processed by the Environment, Natural Resources and Agriculture Division of ADB’s Central and West Asia Department that took turns with the ADB Afghanistan Resident Mission (AFRM) in project administration. Project administration by the resident mission was effective and resulted in closer ADB interaction with the executing agency and IAs and timely and adequate monitoring and review during the peak of project implementation. AFRM active field presence enabled prompt action on project matters, reducing the need for formal review missions. Nevertheless, an annual formal review or a midterm review may have assisted in promptly resolving initial consultant procurement delays.
This project’s implementation arrangements were satisfactory and resulted in the successful attainment of the planned outputs and outcomes. Supervision of the subproject works was the responsibility of the local offices of the PMOs of the two implementing agencies (IAs), the Ministry of Rehabilitation and Rural Development (MRRD) and the Ministry of Energy and Water (MEW), with national project staff and consultant support. Ensuring adequate technical and supervision capacity in future ADB-financed projects in the country will require using existing PMO capacity, early recruitment of supervision consultants, and provision of training to local project staff. ADB-financed programs/projects Afghanistan, implementation arrangements ADB-financed programs/projects Afghanistan)
Initial delays occurred in recruiting staff and establishing the project management offices, in part due to the newly appointed government’s suspension of new recruitments in early 2015. This resulted in some slippage in the design, approval, signing, and execution of planned CDC and nationally competitive bidding contracts. The delays would have been avoided through advance action, firm administrative follow-up, andclose monitoring. Adoption of proactive approaches at approval, timely effectiveness, and adequate project and procurement readiness would further reduce the risk of startup delays in future projects.
Although an emergency assistance project normally has a 2-year implementation period, given the Afghan post-conflict situation at appraisal, in which security issues and various constraints could cause delays, it was correctly decided that a 3-year implementation period for the project would be more appropriate. Project implementation was effective, with completion achieved within the planned period. Besides incorporating FCAS considerations in their design, future projects in Afghanistan would also benefit from the enhanced project delivery approach adopted by the government and ADB in June 2016.
Implementation of this project required strong community engagement and commitment, as nearly all the small-scale irrigation and rural road infrastructure subprojects were undertaken under community contracts. Use of community contracting proved effective in generating direct and indirect employment, as well as in building community project ownership and the capacity of community development councils (CDCs). Enhanced CDC capacities will benefit the conduct of other community livelihood and social activities.
This project at appraisal was envisaged to cover 15 provinces and comprise some 800 subprojects. When further assessment identified a number of subprojects as not feasible, or already completed by the provincial government or local communities, the project’s emergency assistance modality was flexible and responsive and allowed for the substitution of subprojects, as necessary. During implementation, as unmet priorities were identified in other affected provinces, the project’s geographic scope was expanded twice to cover an additional 12 provinces. Adoption of firm subproject selection criteria provided the basis for prioritizing subproject investments and facilitated subproject substitution.
The need to identify new households for off-grid solar home systems, because the initially proposed households were already connected to the grid, was among the key reasons for the first extension of the project implementation period. The new connections occurred more quickly than expected. In future, initiatives to install solar home systems must be based on a detailed technical assessment of the areas that could not be connected to the grid. Safety and sustainability considerations, including the availability of well-trained village technicians and technical support and the establishment of proper controls over the issuance of materials, should also be incorporated into the plans.
The executing and implementing agencies had regular meetings to discuss matters related to project implementation. Appropriate corrective action was taken on day-to-day basis in response to implementation challenges relating to bad weather, transportation of equipment through difficult terrain, and scheduling of works, and better strategies were implemented. As a result, all project-related issues that arose were resolved.
IREDA has not complied with the required gross nonperforming loan (NPL) level of 3.9% during 2015–2019. The gross NPL ratio had already reached 4.2% in 2014. The project completion report notes that because of the adverse operating environment, specifically slow credit growth with a high number of NPLs in the financial sector, the gross NPL ratio for nonbanking finance companies in India’s infrastructure sector a grew from 1.1% to 7.5% in 2015–2018, while that of IREDA increased from 5.3% to 6.3% during the same period. The NPL covenant needs to be reexamined and updated, considering changes in the operating environment. Likewise, a gap analysis between the latest environmental and social management system updated by IREDA for the ADB credit line and ADB’s Safeguard Policy Statement needs to be undertaken in the next tranche.
The Indian Renewable Energy Development Agency Limited (IREDA), the financial intermediary for this program, has a risk management policy that defines its risk appetite and risk management framework. Its continuous and close association with renewable energy projects through the initial stages of the still-evolving sector has enabled it to acquire unique technical skills and understanding of the sector, which influences its lending policies. It has several policies and manuals to guide lending operations and also has credit risk management committees, a problem-solving committee, an internal review committee, and a settlement advisory committee to strengthen credit approval, monitoring, and management of recoveries. Introduction of a separate enhanced credit risk management function under a dedicated team that produces pre- and post-credit appraisal validation and performs key risk analytics for decision making will be crucial for IREDA to keep pace with its corporate plan and anticipated growth in the next 5 years when tranches 2 and 3 will be disbursed. Such function needs to be independent of credit origination and may be implemented in conjunction with the measures identified under the technical assistance provided by ADB to strengthen IREDA’s financial performance and risk management.
This program improved the quality of contracts through the use of independent bodies to review and evaluate them. In addition, the accompanying technical assistance enabled the PPP Center to build capacity and internal systems in both national agencies and LGUs. Given the complex nature of PPPs, this type of capacity development is difficult to deliver effectively. However, the use of a programmatic approach provided longer-term engagement that was able to utilize both classroom and on-the-job training to bolster the capacity of the PPP Center, the National Economic and Development Authority, and other government agencies.
In this case, issues and concerns of the local government units (LGUs) would have been specifically addressed. In particular, LGUs face especially acute and challenging planning horizons because of the election cycle. Projects that have not been completed and carry over to the incoming government often face delays, changes in project plan, or outright cancellation. To address this limiting factor, PPP project cycles in LGUs must be shortened so that they achieve physical and financial closing within local election cycles. The window is about 3 years.
In effect, PPP centers or key institutions should be utilized as service organizations. The governments ultimately make the decision as to whether to pursue any project. Once that decision is made, the PPP centers’ role is to determine if the project can be structured as a PPP and, if it can be, to implement the project ensuring value-for-money and the best trade-off for taxpayers.
This program would have generated a more substantive and long-lasting impact if the revised build–operate–transfer (BOT) Law had been approved. The revised BOT law would have clarified and strengthened the framework for government undertakings and obligations, the bidding process would have been streamlined and made more competitive, and the revolving feature of the project development and monitoring facility would have been codified in law.