While the key urban sector and executing agency for this project, the Ministry of Urban Development (MUOD), adopted a structure for GESI mainstreaming with separate budget head, this initiative faced challenges after the country’s administrative restructuring. There were no division offices and GESI units in the districts, and the sociologist’s position that used to support GESI activities was removed from the departments. Nevertheless, using the resource materials developed under this project as guide, the GESI-trained staff in the divisions can push for establishing and institutionalizing GESI in the new structure of the provinces and at the local level. This would require revising MOUD’s GESI operational guidelines 2013 to define the roles and responsibilities in all tiers of government.
Neither the ADB project team nor project coordination office could fully comprehend the financial management requirements and financial covenant issues raised during this project’s review missions. As such, they were unable to follow up on audit opinions and recurrent issues, leading to the recurrence of the same issues and delays in submitting the audited project financial statements This improved only with the inclusion of a financial management staff toward the project’s end.
Part of the project’s design innovation is the construction of modern SLS. The Nepalgunj SLS construction was successful due to continuous community engagement, cooperation among political leaders, and early implementation of a community development program targeted at communities living near the SLS. However, the SLSs in Janakpur and Siddharthanagar had to be dropped, as nearby communities did not agree to their construction. Due to haphazard operation of existing SLSs and dumping sites, there is a growing “not in my backyard” syndrome in these communities towards SWM facilities. Discord among local political leaders, inadequate coordination at inter-local level, and political misunderstanding disrupted stakeholder engagement and contributed to the two sites’ cancellation.
The initial design of this project was delayed and required modifications during implementation mainly due to the unavailability of information on existing underground utilities such as by plan profile and as-built drawings. Final designs were likewise not always comprehensive, necessitating variations for most contracts, resulting in both startup delays and contract modifications. In future, ADB should ensure that the scope of work of design consultants for urban development projects include an assessment of all existing utilities, including those underground. Also, that the consultants make every effort to meet their deliverables, comply with the agreed schedules and contract obligations, and respond to requests from client governments and ADB.
The financial management arrangements of the borrower and EA were robust. Separate project financial accounts were maintained and audited by statutory auditors. Except for fiscal year (FY) 2018, APFSs were received, albeit with delays up to 3.6 months from the due dates but within the grace period of 6 months. The APFS for FY2018 was rejected because it included a combined audit report for all three projects despite the requirement for separate reports and opinions. Also, the AEFSs for FY end-2017 and prior years were combined with the APFS. All non-compliances could have been mitigated with tighter monitoring from ADB.
The number of overhead water supply tanks built under the project was reduced from 10 to 8 because of poor contractor performance. But the outcome target of augmenting potable water supply by 23.5 million liters per day (MLD) was substantially achieved and reached 20 MLD with the installation of 19 tube wells and by replacing more pumps and other electro-mechanical equipment than targeted (148 actual against the 112 target). The adjustments also resulted in an additional 10,200 people in low-income or poor households (against the target of 3,800) benefiting from the increase in water supply. These accomplishments demonstrate how being outcome-oriented could lead to better results. Nevertheless, the design could have considered incorporating more comprehensive solutions, such as 24x7 water supply with O&M arrangements, into 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 recruitment of a new project management consultant (PMC) and a new design and construction supervision consultant (DSC) for the MFF, although late, worked favorably for this project. The new PMC and DSC performed substantially better than their predecessors. However, the delivery of their services was hampered 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 during loan preparation and appraisal.
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.
The project’s target to have the municipalities adopt the accrual-based accounting system and publish their balance sheets from fiscal year 2015 were only partly achieved. The target to have semi-autonomous water supply entities prepare and adopt organizational development plans was achieved but with delay. So was the target to install a more efficient water billing and collection system that materialized only post-project completion. Therefore, it became evident that the reform targets were rather ambitious considering the state’s limited capacity and the local context, including frequent local unrest, which required a longer implementation period.
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 executing agency (EA) was adequate. A chief engineer was deputed as director of safeguards and supported by four environmental and resettlement experts. 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 the project. Creating a land acquisition office in the PMU to manage unavoidable involuntary resettlement may be explored in ongoing and future projects.
Project 2 was completed with a minimal 3-month delay. This was attributable to, among other things, the preparation of better detailed designs concurrent with project 1 implementation.
At appraisal, this project was classified category A for involuntary resettlement and indigenous peoples and an indigenous peoples’ development framework was prepared to guide the selection and preparation of an additional subproject where impacts on indigenous peoples were identified. During implementation, no indigenous peoples were impacted as none of the two landowners affected by the project’s acquisition of 0.47 hectares of land for resettlement purposes belonged to a scheduled tribe. Therefore, no additional indigenous peoples safeguards documents such as an indigenous peoples plan needed to be prepared. However, the project was not recategorized B for involuntary resettlement and C for indigenous peoples, which would have highlighted the project’s strong adherence to a key ADB principle to avoid and minimize resettlement impacts.
Financial management arrangements of the borrower and executing agency were robust and counterpart funding timely. Separate project financial accounts were maintained and audited by statutory auditors. For FY2008, no APFS or AEFS were submitted. The APFS for FY2018 was rejected as it included a combined audit report for all three projects despite separate reports and opinions being required. These non-compliances could have been avoided had ADB monitored and followed up closely on the submission of the documents.
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.
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.
More attention needs to be given to sanitation components, including continuing hygiene awareness campaigns. Improved designs are needed for school toilet blocks, and schools need support for operation and maintenance.
The grant component of this project developed a sector strategy and road map that was successful in supporting necessary WSS reforms nationally. Similar projects can leverage their added value to the sector through this kind of targeted support for sector reform. Sequencing sector reform support in advance of loans may maximize the benefits.