Completion Report

Project Number: 35290-023 Loan Number: 2528 December 2020

India: North Eastern Region Capital Cities Development Investment Program (Project 1)

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – /s (₹)

At Appraisal At Project Completion (16 January 2009) (22 June 2019) ₹1.00 = $0.02092 $0.01437 $1.00 = ₹47.779 ₹69.580

ABBREVIATIONS

ADB – Asian Development Bank APFS – audited project financial statement CFC – Central Finance Commission DMF – design and monitoring framework DPR – detailed project report DSMC – design, construction supervision, and management consultant EIRR – economic internal rate of return GAP – gender action plan GIS – geographic information system IEE – Initial environmental examination km – kilometer MFF – multitranche financing facility NER – north eastern region NERCCDIP – North Eastern Region Capital Cities Development Investment Program NSEAs – National- and state-level executing agencies O&M – operation and maintenance OP – operational priority under ADB Strategy 2030 SFC – State Finance Commission SIPMIU – state investment program management and implementation unit SWM – solid waste management ULB – urban local body

NOTES

(i) The fiscal year (FY) of the Government of ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2020 ends on 31 March 2021.

(ii) In this report, “$” refers to United States dollars.

Vice-President Shixin Chen, Operations 1 Director General Kenichi Yokoyama, South Asia Department (SARD) Director Norio Saito, Urban Development and Water Division (SAUW), SARD

Team leader Santosh Pokharel, Urban Economist, SAUW, SARD Team members Saswati Belliappa, Safeguards Specialist, SAUW, SARD Edgardo G. Moises, Associate Project Officer, SAUW, SARD Amrit Ajay Sharma, Project Analyst, India Resident Mission, SARD Elvie Jane Tirano, Senior Operations Assistant, SAUW, 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. DESIGN AND IMPLEMENTATION 1 A. Project Design and Formulation 1 B. Project Outputs 3 C. Project Costs and Financing 4 D. Disbursements 4 E. Project Schedule 5 F. Implementation Arrangements 5 G. Technical Assistance 5 H. Consultant Recruitment and Procurement 6 I. Gender Equity 6 J. Safeguards 7 K. Monitoring and Reporting 8 III. EVALUATION OF PERFORMANCE 8 A. Relevance 8 B. Effectiveness 9 C. Efficiency 10 D. Sustainability 10 E. Development Impact 11 F. Performance of the Borrower and the Executing Agency 13 G. Performance of the Asian Development Bank 13 H. Overall Assessment 13 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14 A. Issues and Lessons 14 B. Recommendations 14

APPENDIXES 1. Design and Monitoring Framework 16 2. Project Cost at Appraisal and Actual 19 3. Project Cost by Financier 21 4. Disbursement of ADB Loan Proceeds 25 5. Contract Awards of ADB Loan Proceeds 26 6. Summary of Contract Details 27 7. Implementation of Gender Action Plan 31 8. Safeguards 42 9. Status of Compliance with Loan Covenants 44 10. Economic and Financial Analysis 53

BASIC DATA

A. Loan Identification 1. Country India 2. Loan number and financing source 2528-IND, Ordinary Capital Resources 3. Project title North Eastern Region Capital Cities Development Investment Program (Project 1) 4. Borrower India 5. Executing agency Ministry of Urban Development, 6. Amount of loan $30 million 7. Financing modality Multitranche financing facility

B. Loan Data 1. Appraisal – Date started 13 January 2009 – Date completed 16 January 2009 2. Loan negotiations – Date started 14 May 2009 – Date completed 15 May 2009 3. Date of Board approval 1 July 2009 4. Date of loan agreement 4 August 2009 5. Date of loan effectiveness – In loan agreement 2 November 2009 – Actual 19 November 2009 – Number of extensions 2 6. Project completion date – Appraisal 31 October 2015 – Actual 22 June 2019 7. Loan closing date – In loan agreement 30 April 2016 – Actual 23 October 2019 – Number of extensions 2 8. Financial closing date – Actual 23 October 2019 9. Terms of loan – Interest rate London interbank offered rate-based (floating) + 0.60% – Maturity (number of years) 25 – Grace period (number of years) 5

10. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval 7 July 2010 23 October 2019 111 months Effective Date Actual Closing Date Time Interval 19 November 2009 22 June 2019 115 months

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b. Amount ($‘000) Increased Canceled Last Original during during Revised Amount Undisbursed Allocation Implementation Implementation Allocationa Disburse Balanceb Category (1) (2) (3) (4=1+2–3) d (5) (6 = 4–5) 1. Civil works 1a. 609.40 159.40 450.00 396.19 53.81 1b. 916.50 246.50 670.00 576.28 93.72 1c. 3,177.70 1,577.70 1,600.00 1,561.20 38.80 1d. 2,767.20 2,832.80 5,600.00 5,967.91 (367.91) 1e. 214.20 485.80 700.00 648.27 51.73

2. Equipment 2a. Tripura 474.10 214.10 260.00 247.42 12.58 2b. Mizoram 1,040.50 330.50 710.00 696.46 13.54 2c. Sikkim 319.00 319.00 2d. Nagaland 835.00 835.00 2e. Meghalaya 122.60 25.95 96.66 70.36 26.30

3. Consulting services 3a. Tripura 3,405.40 705.40 2,700.40 2,526.72 173.28 3b. Mizoram 2,369.60 130.40 2,500.00 2,418.08 81.92 3c. Sikkim 2,206.80 206.80 2,000.00 2,062.97 (62.97) 3d. Nagaland 2,214.80 485.20 2,700.00 2,495.44 204.56 3e. Meghalaya 3,373.00 273.00 3,100.00 2,991.10 108.90 3f. Ministry of 473.80 133.80 340.00 251.16 88.84 Urban Development

4. Project implementation and administration 4a. Tripura 572.50 312.50 260.00 251.64 8.36 4b. Mizoram 572.50 47.50 620.00 608.66 11.34 4c. Sikkim 572.50 262.50 310.00 277.75 32.25 4d. Nagaland 572.50 22.50 550.00 541.26 8.74 4e. Meghalaya 572.50 202.50 370.00 366.40 3.60

5. Unallocated 2,616.90 2,616.90 Total 30,000.00 25,536.66 24,955.26 581.39 Note: Numbers may not sum precisely because of rounding. a Last revised allocation takes into account reallocations on 14 February 2012, 5 July 2012, and 14 June 2017, as well as partial cancellation effected on 5 September 2012. b The undisbursed balance of $0.58 million was cancelled on 23 October 2019.

C. Project Data 1. Project cost ($‘000) Cost Appraisal Estimate Actual Foreign exchange cost 4,785.80 1,782.81 Local currency cost 38,032.20 32,294.22 Total 42,818.00 34,077.03

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2. Financing plan ($‘000) Cost Appraisal Estimate Actual Implementation cost Borrower financed 8,032.20 7,338.96 Asian Development Bank financed 30,000.00 24,955.26 Total implementation cost 38,032.20 32,294.22 Interest during construction costs Borrower financed 4,785.80 1,782.81 Asian Development Bank financed Total interest during construction cost 4,785.80 1,782.81

3. Cost breakdown by project component ($‘000) Component Appraisal Estimate Actual A. Base Costs Water supply 9,770.30 6,369.30 Solid waste management 3,938.30 9,402.51 Design, supervision, and management consultants 11,217.20 10,856.09 Financial and institutional development consultants 2,352.40 1,638.22 Project implementation and administration 2,862.50 2,045.71 Tax and duties 4,225.80 1,731.24 Investment program management consultants 473.80 251.16 Investment program coordination and administration 139.20 – Subtotal 34,979.70 32,294.22 B. Contingencies 3,052.50 – C. Financial Charges during Implementation 4,785.80 1,782.81 Total 42,818.00 34,077.03 Sources: Original report and recommendation of the President for appraisal estimates, completion information from ADB Mainframe Database (ADB share) and program management and monitoring consultants (for counterpart contribution), and ADB estimates.

4. Project schedule Item Appraisal Estimate Actual Tripura Date of contract with consultants 31 March 2009 4 December 2009 Completion of engineering designs 31 March 2009 4 September 2011 Civil works contract Date of award 30 June 2009 5 September 2011 Completion of work 31 March 2011 30 March 2015 Equipment and supplies Dates First procurement 31 December 2010 5 September 2011 Last procurement 31 December 2010 5 September 2011 Completion of equipment installation 31 December 2011 30 March 2015 Start of operations Completion of tests and commissioning 1 January 2012 31 March 2015 Beginning of start-up 30 September 2012 1 April 2016 Mizoram Date of contract with consultants 31 March 2009 30 October 2009 Civil works contract Date of award 31 June 2009 19 April 2010 Completion of work 31 March 2011 28 September 2012 Equipment and supplies Dates First procurement 30 June 2009 24 March 2010 Last procurement 30 June 2009 19 January 2011 Completion of equipment installation 31 December 2009 31 March 2012 Start of operations Completion of tests and commissioning 31 December 2010 8 December 2012 Beginning of start-up 1 January 2011 9 December 2012

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Item Appraisal Estimate Actual Sikkim Date of contract with consultants 31 March 2009 22 December 2009 Completion of engineering designs 31 March 2009 31 March 2011 Civil works contract Date of award 15 May 2009 20 September 2011 Completion of work 30 September 2011 25 March 2013 Nagaland Date of contract with consultants 31 March 2009 25 November 2009 Completion of engineering designs 30 September 2009 25 February 2010 Civil works contract Date of award 15 May 2009 14 October 2011 Completion of work 30 September 2011 5 March 2016 Meghalaya Date of contract with consultants 31 March 2009 17 November 2009 Completion of engineering designs 31 March 2009 31 March 2009 Civil works contract Date of award 15 May 2009 13 December 2011 Completion of work 31 December 2009 31 May 2017 Equipment and supplies Dates First procurement 1 April 2012 13 December 2011 Last procurement 1 April 2012 13 December 2011 Start of operations Completion of tests and commissioning 30 June 2013 30 October 2017 Beginning of start-up 1 July 2013 31 October 2017

5. Project performance report ratings Ratings Implementation Period {Development Objectives} {Implementation Progress} From 19 November 2009 to 31 March 2010 Satisfactory Satisfactory From 1 April 2010 to 31 May 2010 Satisfactory Satisfactory From 1 June 2010 to 31 December 2010 Satisfactory Satisfactory Single Project Rating* From 1 January 2011 to 30 September 2011 On track From 1 October 2011 to 31 December 2011 Potential problem From 1 January 2012 to 30 September 2012 On track From 1 October 2012 to 31 December 2012 Actual problem From 1 January 2013 to 30 June 2013 Actual problem From 1 July 2013 to 31 December 2013 Potential problem From 1 January 2014 to 30 June 2014 On track From 1 July 2014 to 31 December 2014 On track From 1 January 2015 to 30 June 2015 On track From 1 July 2015 to 31 December 2015 On track From 1 January 2016 to 30 June 2016 On track From 1 July 2016 to 31 December 2016 On track From 1 January 2017 to 30 June 2017 On track From 1 July 2017 to 31 December 2017 On track From 1 January 2018 to 30 June 2018 On track From 1 July 2018 to 31 December 2018 On track From 1 January 2019 to 30 June 2019 On track From 1 July 2019 to 23 October 2019 Potential problem *After 2010, only one rating is available.

D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person-Days of Members Loan appraisal 13–16 Jan 2009 3 12 a, b, c Loan negotiation 14–15 May 2009 7 14 a, b, c, d, e, f, g Inception 21–30 Apr 2010 3 21 h, i, c

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No. of No. of Specialization Name of Mission Date Persons Person-Days of Members Special project administration (Meghalaya) 7–10 Mar 2011 5 21 c, h, u, v, w and 5 April 2011 Midterm review 12–26 Jun 2012 2 30 a, d Consultation 11–15 Feb 2013 4 20 a, k, l, l Loan review (5 program states) 13–24 May 2013 3 15 a, k, l Loan review (Nagaland and Tripura) 16–20 Sep 2013 2 10 a, m Loan review (Meghalaya, Mizoram, and 12–19 Nov 2013 4 20 a, j, m, n Sikkim) Loan review 16–19 Jun 2014 2 10 a, m Loan review (Meghalaya, Nagaland, and 7–19 Oct 2015 2 18 a, o Sikkim) Loan review () 29 Feb–2 Mar 3 9 a, a, o 2016 Loan review (Mizoram) 2–4 May 2016 2 6 a, l Loan review (Sikkim) 7–8 Nov 2016 4 8 a, l, p, q Loan review (Meghalaya) 12–15 Dec 2016 2 8 a, r Loan review (Mizoram) 19–22 Apr 2017 3 12 l, s, t Loan review (Tripura) 16–18 Aug 2017 5 15 l, n, q, p, s Loan review (Sikkim) 20–22 Sep 2017 2 6 l, s Special project administration (Tripura) 21–23 Mar 2018 3 9 l, s, q Midterm review (Mizoram) 9–11 May 2018 2 6 l, s Midterm review (Nagaland) 16–18 May 2018 3 9 r, s, q Midterm review (Tripura) 4–6 Sep 2018 2 6 l, t Special project administration (Mizoram) 4–5 Oct 2018 2 4 t, s Special project administration (Meghalaya) 19–22 Feb 2019 1 4 s Special project administration (Nagaland) 15–17 Apr 2019 1 3 s Loan review (Sikkim) 7–8 May 2019 1 2 s Note: Project completion mission was not fielded because of lockdown due to COVID-19 pandemic. a = urban development specialist, South Asia urban and water; b = urban economist, South Asia urban and water; c = project implementation officer, India resident mission; d = senior counsel, OGC; e = safeguards specialist, south Asia regional department; f = financial control specialist, Controller’s Loan Administration Division; g = senior control officer; h = portfolio administrative unit head, South Asia urban and water; i = assistant project analyst, South Asia urban and water; j = associate project analyst, South Asia urban and water; k = principal urban development specialist, South Asia urban and water; l = senior project officer, India resident mission; m = safeguards specialist (staff consultant); n gender specialist (consultant); o = gender and social development expert (consultant); p = senior environment officer, India resident mission; q = safeguards officer, India Resident Mission; r = project officer (urban), India Resident Mission; s = associate project analyst, India Resident Mission; t = social development officer (gender), India Resident Mission; u = Counsel, OGC; v = Social Development Specialist (Civil Society and Participation), Non-Government Organization Center/Regional and Sustainable Development Department’s Public Management, Governance and Participation Division (RSGP); w = Social Development Specialist.

I. PROJECT DESCRIPTION

1. The North Eastern Region Capital Cities Development Investment Program (NERCCDIP, or the investment program), supported by the Asian Development Bank (ADB), was designed to improve urban environment and promote reforms for sustainable, efficient, and responsive urban service delivery in the capital cities of five states in the north eastern region (NER) of India, namely (i) Agartala (Tripura), (ii) (Mizoram), (iii) (Nagaland), (iv) (Sikkim), and (v) (Meghalaya). The Government of India’s developmental strategy in the program states has been to integrate and transform the largely agrarian NER economy while repositioning NER as the gateway to neighboring countries and to Southeast and East Asia, as these states share international boundaries with neighboring countries. NERCCDIP sought to improve the environment and overall well-being of urban residents through sustainable and increased access to better urban services while impacting 1.2 million people in these five urban local bodies (ULBs). NERCCDIP included (i) physical improvements in water supply, sanitation and sewerage, and solid waste management (SWM) infrastructure; and (ii) a capacity development program to support urban reforms in governance, finance, and service delivery.

2. ADB approved NERCCDIP as a multitranche financing facility (MFF) on 23 June 2009 at an estimated cost of $285.7 million. This included a loan component of $200.0 million and $85.7 million as contribution from the government and the five program states.1 Project 1, supported by the $30 million first tranche of the MFF, covering all five capital cities, was approved by ADB on 1 July 2009, signed with the government on 4 August 2009, and declared effective on 19 November 2009. The original loan closing date for Project 1 was 30 April 2016. This was extended twice to finally close on 22 June 2019.

3. The investment program comprised the following two outputs: (i) Part A: Urban Infrastructure and Service Improvements. This component aimed to improve (a) water supply, (b) wastewater management, and (c) SWM. (ii) Part B: Capacity Development and Investment Program Management. This involved (a) capacity building, and (b) investment program management. Project 1 covered all the aforementioned components except wastewater management.

II. DESIGN AND IMPLEMENTATION

A. Project Design and Formulation

4. Project 1 was relevant to the government and ADB sector strategies at appraisal and remains relevant at completion. It was aligned with ADB’s country partnership strategy 2009– 2012 for India, which highlighted the need for interventions to address NER’s relatively high poverty incidence, low levels of social development, weak capacity, and poor infrastructure.2 At appraisal, it was consistent with the emphasis of India’s Eleventh Five-Year Plan, 2007–2012, with its focus on reducing regional disparities by prioritizing and complementing investments in infrastructure and services in NER.3 It also was consistent with the program states’ approach and strategy of driving economic growth by providing improved municipal services to a larger urban population. Extensive public consultations, focus group discussions, and awareness programs were conducted with beneficiary communities and government officials to build consensus and acceptance for project components and institutional reforms. Project 1 interventions were aligned

1 ADB. 2009. India: North Eastern Region Capital Cities Development Investment Program. 2 ADB. 2009. Country Partnership Strategy: India, 2009–2012. Manila. 3 Government of India, Planning Commission. 2008. Eleventh Five-Year Plan, 2007–2012. .

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with ADB’s long-term strategic framework, medium-term strategy, and urban sector strategy, with focus on environmentally sustainable growth and institutional strengthening.4

5. The Project 1 design and modality at appraisal were appropriate to achieve the expected outcomes (footnote 1). The MFF modality addressed the national and the five states’ medium- and long-term goals and facilitated gradual strengthening of institutional capacities and familiarization with ADB practices and guidelines, thus paving the way for a long-term partnership for socioeconomic development among ADB, the government, and NER states’ governments. The project lending approach was appropriate for Project 1, as it was compatible with other sectoral investments by the government and the NER state governments. The MFF modality offered flexibility in subproject selection for subsequent projects in line with the project ULBs’ varying levels of need and absorptive capacities. All subprojects were identified according to the MFF’s subproject selection criteria.

6. Lessons from ADB’s urban sector experience in India and World Bank’s experience in NER influenced Project 1’s design and structure (footnote 1). The MFF was designed for incremental increase in project implementation complexity to allow for phased growth in institutional capacities and provide more time in preparing for and resolving safeguards and technical monitoring capacity and challenges. The sequential implementation model of MFF interventions enabled Project 1’s design to include subprojects ready for implementation in terms of safeguards and technical aspects, institutional capacity, and cost recovery, while those requiring large expansion and/or new construction and longer preparation and implementation periods with multiple stakeholders were taken up in subsequent tranches. Considering the difficult terrain, limited annual window for construction, and consequent supply constraints and implementation delays, an extended implementation period was built in; complex land ownership issues were addressed by concentrating public services on government land; and up-front support for capacity building in project management and implementation was incorporated. The facility design responded to climate change concerns and explored carbon financing options under clean development mechanisms for municipal SWM facilities.

7. The design and monitoring framework (DMF) prepared as part of the project financing request was comprehensive but lacked specific measurable indicators proportionate to the scope of interventions envisaged under Project 1, particularly those related to institutional reforms. It was decided during the 2010 inception mission to defer installation of 17 iron removal plants and equipment procurement to subsequent tranches and exclude interventions already proposed under government schemes.5 Accordingly, the project scope was revised and the DMF was updated during the 2012 midterm review mission jointly conducted by ADB and the national- and state-level executing agencies (NSEAs).6 The updated DMF was in line with the objectives of Project 1, it was in accordance with ADB’s project administration instructions, and it increased the project relevance during implementation.7 Although the results chain of the updated DMF was logical, the DMF erroneously (i) replicated MFF DMF outcomes as Project 1 impacts without rightsizing for Project 1’s interventions which covered fewer number of ULBs and sectors; (ii) indicated inconsistent numerical targets for Project 1 DMF outcomes and impacts; (iii) included sewerage treatment and solid waste collection interventions as impact indicators, even though they were not planned under the project; and (iv) stated the beneficiary population of Shillong as

4 ADB. 1999. Long-Term Strategic Framework. 2001–2015. Manila; ADB. 1999. Urban Sector Strategy. Manila; and ADB. 2006. Medium-Term Strategy II. Manila. 5 ADB. 2010. Aide-Mémoire for Inception Mission for Loan 2528-IND. Manila. 6 ADB. 2012. Aide-Mémoire of Midterm Review Mission for Loan 2528-IND and Loan 2834-IND. Delhi. 7 ADB. 2018. Project Administration Instructions. PAI 6.02. Manila.

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719,000 when it is only 543,233. 8 Risks related to procurement and staffing difficulties were correctly identified in the DMF and managed during implementation (paras. 18 and 32). The project was categorized as effective gender mainstreaming, but the DMF did not include gender- specific indicators (paras. 19 and 23). A comprehensive gender action plan (GAP) framework for the MFF guided gender-mainstreaming activities under the project’s water supply and SWM components. The GAP format was structured for consolidating and assessing gender-equality results under the project.

B. Project Outputs

8. Project 1’s contribution to the ADB results framework is described in para. 30. The achievement of output targets (out of 21 output indicators, 20 are fully achieved, and 1 is partly achieved) is summarized below and detailed in Appendix 1.

Part A: Urban Infrastructure Improvements

9. Water supply. All 12 planned water supply outputs under Project 1 were achieved through (i) expansion of water production capacity by source augmentation and treatment works in Agartala, through replacement of 22 tube wells, installation of electrical and mechanical equipment, and construction of pump houses for 16 tube wells; (ii) expansion and rehabilitation of distribution network in Aizawl, through replacement of 7 reservoirs, installation of 2 chlorinators in 2 newly constructed chlorinator rooms, and installation of 15,000 household meters; (iii) expansion and rehabilitation of distribution systems in Gangtok, by laying 43 kilometers (km) of distribution mains and 2 km of pumping mains, constructing ground-level service reservoir of 1.15 million liters capacity and pumping station with installation of three 50-horsepower pump sets, and installation of 4 bulk flow meters; and (iv) expansion of water production capacity in Kohima through rehabilitation of water treatment plant of 7.5 million liters per day capacity, construction of 18 reservoirs (1 reservoir constructed under tranche 2), and installation of 2 electro-chlorinators.

10. Solid waste management. Project 1 investments in the sector targeted development of treatment and sanitary disposal facilities in two program ULBs. All four output indicators were achieved as planned: (i) Kohima—development of sanitary landfill at 8,000 square meters (m2) site, including installation of leachate treatment plant with capacity of 75,000 liters per day, and construction of a compost plant with capacity of 50 tons per day, service buildings, such as administrative block and garages for primary and secondary vehicles, and a 2 km approach road; and (ii) Shillong—development of a short-term sanitary landfill with capacity of 25,000 cubic meters at a 6,500 m2 site.

8 Government of India, Office of the Registrar General and Census Commissioner. 2011. Census of India, 2011. Delhi.

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Part B: Capacity Development and Investment Program Management

11. Local government strengthening for better financial management and sustainable service delivery in Agartala and Shillong. Project 1 interventions focused on providing support to Agartala and Shillong ULBs to meet their institutional and financial reform commitments to the government and to the respective state governments. Four of the five output indicators were fully achieved in both ULBs, and 1 output indicator was not achieved in one out of two ULBs. The four output indicators fully achieved were (i) installation of double-entry accounting systems and computerization of financial systems; (ii) installation and operationalization of property mapping based upon a geographic information system (GIS); (iii) strengthening of development controls through amendment of planning process and/or legislation and sanitation regulations (achieved in Agartala by instituting a program for regular cleaning of septic tanks and in Shillong with appropriate by-laws); and (iv) training of municipal staff in operation and maintenance (O&M) of services, financial management, and regulation enforcement. The output indicator related to strengthening of property tax yield was partly achieved with government notification for revised rates for computation of property value and constitution of a municipal valuation committee for property tax issued for Agartala municipal corporation, and for Shillong all approval processes except for state government approval has been completed (paras. 22, 24, and 30).9

C. Project Costs and Financing

12. The estimated cost at appraisal for Project 1 was $42.80 million, comprising an ADB loan of $30.00 million and government contribution of $12.80 million. At completion, the actual project cost was just $34.08 million without curtailment of the revised project outcomes or outputs and comprised an ADB loan of $24.96 million and government contribution of $9.12 million. 10 Completion costs of SWM contracts in Shillong and Kohima exceeded estimated costs due to refurbishment of damaged works and financing of O&M (paras. 14 and 26). Financing charges decreased by $3.00 million because of lower interest rates. The cost of incremental administration was lower by $0.96 million despite that the implementation period was extended by 44 months due to significant change in currency exchange rates from ₹47.78 per United States dollar (USD) at appraisal in 2009 to ₹69.58 per USD by loan closure in 2019. Loan funds were reallocated and $4.56 million was cancelled in 2012 to align with the updated project cost as finalized during the midterm review mission. Loan funds were reallocated again in 2017 to adjust against increased costs due to the extended implementation period and design changes in Shillong SWM works. The undisbursed balance of $0.58 million was cancelled in 2019 (para. 14).11 The ratio of the ADB loan to counterpart funding was 73:27 at completion. Appendix 2 details project cost at appraisal and completion. Appendix 3 provides project cost by financier.

D. Disbursements

13. In all, $24.96 million out of $25.54 million (97.7%) in revised loan funds were disbursed to achieve the updated scope during the project period. The statement of expenditure procedure allowing up to $100,000 equivalent per individual payment simplified claims submission and was effectively utilized by the participating states. Disbursement projections, though realistic, were not met because disbursements were low during the initial years of implementation due to (i)

9 , Tripura Gazette. 2019. Extraordinary Issue: No. F.8(2).UDD/DUD/2018/7059/100 dated 28 August 2019. Agartala. 10 The counterpart finance component is a blended contribution of 90% grant by the government and balance of 10% contribution by respective state governments. 11 Loan funds were reallocated on 14 February 2012, 5 July 2012, and 14 June 2017. Partial cancellation of loan funds was effected on 5 September 2012.

5 procurement delays arising from revisions in detailed project reports (DPRs) (paras. 14, 16, and 18), (ii) delays in processing of claims by state governments (paras. 14 and 32), and (iii) poor performance of contractors in four subprojects during October 2012 to June 2013 that contributed to the project’s actual problem rating for said period (para. 18). Strategies for streamlined communications and a restructured fund flow process, mutually decided by ADB with NSEAs, helped expedite disbursements (paras. 18 and 33). Disbursement achievements are detailed against projections in Appendix 4.

E. Project Schedule

14. The original project completion date was extended twice from 30 June 2016 to 22 June 2019. The total delay of 36 months was to (i) enable completion of retendered Shillong SWM works (para. 18), (ii) finance O&M of Kohima SWM works, and (iii) refurbish and reconstruct Kohima state investment program management and implementation unit (SIPMIU) offices and records damaged during social unrest in the state (paras. 12 and 26). The preparedness at appraisal of the NER states was significant and ably supported by ADB’s technical assistance (TA) (para. 16), requisite land for subprojects was identified and available, permissions were obtained from concerned authorities, and DPRs were prepared. There nevertheless were delays related to (i) revision of DPRs and cost estimates in three project cities (paras. 13 and 18), (ii) poor performance of contractors in four subprojects (para. 18), (iii) claims processing (paras. 13 and 32) issues, and (iv) procurement issues in retendering contracts (para. 18 and 32). Despite the extreme in NER, difficult terrain and accessibility, and the consequent limited annual window open for construction, all but two project works were completed within the original loan closing period and the two contracts for which the loan was extended were completed within the extended project closing date.

F. Implementation Arrangements

15. Project 1’s implementation arrangements proved appropriate to achieving the envisaged outputs. The arrangements involved the national executing agency, the Ministry of Urban Development; the government; and state-level executing agencies, respectively the urban development departments of the governments of Tripura and Nagaland, the Urban Development and Poverty Alleviation Department of the , the Urban Affairs Department of the Government of Meghalaya, and the Urban Development and Housing Department of the . At state level, the investment program empowered committees, each state had a SIPMIU headed by a project director, and there were city-level committees that also functioned as grievance redress committees and were chaired by District Collectors. The design, construction supervision, and management consultants (DSMCs) in the five states and institutional development consultants in Meghalaya and Tripura supported the respective SIPMIUs. Program management and monitoring consultants supported the national executing agency. A GIS expert; municipal, fiscal, and utility management expert; and financial management expert were additionally engaged to support urban reforms in Meghalaya. The project assets, once developed, were handed over to line agencies and ULBs for O&M, including the management of ongoing O&M contracts. Water supply assets are managed by the public health engineering departments while ULBs manage SWM assets.

G. Technical Assistance

16. Advisory TA of $1.52 million, financed by the Cooperation Fund for the Water Sector and ADB’s Technical Assistance Special Fund, was provided to strengthen managerial and institutional capabilities of states and national executing agencies for successful implementation

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of NERCCDIP.12 The TA supported the states in project preparedness through (i) consultation workshops and study tours for senior state government officials of the program states concerned with project preparation, (ii) preparation of DPRs and bid documents for subprojects and project management, and (iii) reforms implementation.

H. Consultant Recruitment and Procurement

17. Recruitment of consultants was in accordance with the quality- and cost-based selection procedure and ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). The services of such consultants were continued for the subsequent tranches. DSMCs were engaged for each SIPMIU, as were institutional development consultants for Agartala and Shillong SIPMIUs. Further, three experts (municipal, fiscal, and utility management; GIS; and financial management) were engaged to support Shillong SIPMIU. The performance of consultants is rated satisfactory.

18. ADB procedures were followed for the procurement of civil works and goods and conformed to ADB’s Procurement Guidelines (2007, as amended from time to time). Procurement packages were sized to optimize contract administration and management by SIPMIUs and to enable gradual capacity building. Tendering for the six works contracts under Project 1 were carried out during 2010–2011, and the five equipment packages were awarded in 2011. However, poor contractors’ performance led to retendering of the balance of works under four subprojects in Agartala, Kohima, and Shillong (paras. 13 and 14) and contributed to the project’s actual problem rating between October 2012 and June 2013. A more detailed assessment of procurement-related governance procedures could have avoided delays in procurement decisions by the NSEAs. Delays in procurement also occurred due to DPR and cost estimate revisions, repeated rebidding due to poor bidder participation, lack of qualified bidders, and high bid price, which contributed to extension of project timelines (paras. 13, 14, and 16). The procurement risks identified in the DMF were managed with timely decisions, such as revision of cost estimates with supporting documents and defining timelines for procurement activities, reached jointly by ADB and NSEAs, that helped to resolve procurement issues (paras. 7 and 13). The Kohima landfill contract included provisions for O&M, and that resulted in more effective allocation of ULB’s human resources. Overall, the performance of contractors is rated less than satisfactory. Details of contract award projections and achievements are in Appendix 5 and a summary of contracts is in Appendix 6.

I. Gender Equity

19. Project 1 is categorized as effective gender mainstreaming and is rated satisfactory for implementation and achievement of GAP objectives. A detailed GAP framework was included in the MFF. The GAP for Project 1 was developed in 2017 based on the MFF GAP framework to capture gender-equality results and enable consolidation of data (para. 7). Project 1’s GAP included four activities and 10 quantitative targets to assess state-specific gender-equality results. The GAP’s overall objective was to ensure women and men equal access to awareness as well as social and economic benefits of the water supply infrastructure and SWM systems provided by the project. Overall, gender was adequately mainstreamed in project design and implementation and is rated highly relevant. The GAP, with its calibrated outputs, activities, corresponding performance target indicators, and quota for women’s involvement, was effective in achieving the desired practical and strategic benefits. The SIPMIUs effectively implemented

12 ADB. 2006. Technical Assistance to India for the Project Implementation and Urban Management Improvement in the North Eastern Region (Phase I). Manila.

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GAP activities with adequate resource allocation in each of the five project cities. They were adequately supported by the DSMCs and monitored by the investment program coordination cell. The project is rated efficient for GAP implementation, as it collected sex-disaggregated data and regularly reported on GAP activities (para. 22). Appendix 7 details GAP achievements.

J. Safeguards

20. Project 1 was classified as B for environment and involuntary resettlement and as category C for indigenous peoples' development. ADB’s Environment Policy 2002 and Involuntary Resettlement Policy 1995 were applicable. An environmental assessment and review framework, resettlement framework, and indigenous peoples’ development framework were prepared for the MFF. All safeguards documents were prepared in accordance with these frameworks. Initial environmental examination reports were prepared and disclosed for all six subprojects: (i) rehabilitation of water supply schemes in Agartala, Aizawl, Gangtok, and Kohima; (ii) SWM scheme in Kohima; and (iii) sanitary landfill in Shillong. Further, two initial environmental examination IEEs for water supply and SWM subprojects in Kohima were updated during implementation and disclosed. Each subproject consisted of design and civil works packages for which environmental management plans were prepared. The investment program coordination cell and the SIPMIUs coordinated implementation of the environmental management plans with no major deviations or noncompliance recorded, and minor issues that were identified were corrected by the contractors. The SIPMIUs’ environment officers, DSMCs, and contractors conducted environmental quality monitoring on a regular basis. A resettlement plan was prepared for Gangtok water supply subproject. No indigenous peoples plan was prepared for Project 1 because there was no impact on indigenous peoples under the project.

21. No land acquisition or involuntary resettlement was involved in implementing subprojects in Agartala, Aizawl, Kohima, and Shillong, and these subprojects were categorized C for involuntary resettlement. There were no negative impacts on vulnerable groups and indigenous peoples were not impacted. Grievance redress committees were constituted in accordance with the requirements as specified in the agreed environmental assessment and review framework and resettlement framework. All subprojects were developed on government land and did not involve land acquisition. The resettlement plan for the Gangtok water supply subproject envisaged potential temporary impacts on livelihoods caused by disruptions to access to businesses due to laying of pipelines along the right-of-way. These temporary impacts were avoided by design changes to realign pipelines and by scheduling construction during weekly business holidays and night shifts. As there were no temporary impacts during construction, compensation payment was not required. There was no resettlement- or environment-related grievances during project implementation. There were no unanticipated impacts during or after construction. As there were no temporary impacts during construction, the project could have been recategorized to C for involuntary resettlement upon completion. Requisite stakeholder participation, public consultation, and information dissemination undertaken throughout the project period helped in structuring construction schedules to avoid livelihoods impacts and generate community support for the project. The institutional arrangements for safeguards proposed during appraisal were instituted accordingly and are considered effective. The management of safeguard compliance under institutional arrangements—including information disclosure, participation, consultation activities, grievance redress, and regular submission of semiannual safeguard monitoring reports (para. 22)—is rated satisfactory.13 The project authorities confirmed there to be no outstanding

13 Adequate safeguard monitoring and management was ensured by state SIPMIU officers, supported by safeguard experts of the investment program coordination cell at national level. The SIPMIU officers, supported by the social

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issues related to social or environmental safeguards at completion. Overall, the safeguards compliance was assessed to be satisfactory. A detailed safeguards assessment is in Appendix 8.

K. Monitoring and Reporting

22. Of the investment project’s 63 loan covenants, 60 were fully complied with and 3 were partly complied with. There was compliance with the urban reforms program, insofar as it is applicable to Project 1 based on the updated DMF, except for pending actions to strengthen property tax yield in Shillong (para. 11). Compliance with two covenants related to timely submission of audited project financial statements (APFSs) is partial. Delays in submission by SIPMIUs and consolidation of APFSs throughout the implementation period contributed to the project’s actual problem rating during the period October 2012 to June 2013.14 Of the 66 APFS reports to be submitted for the loan account period, (i) 6 APFSs for FY2020 are not yet due in line with the extended deadline of 31 March 2021, (ii) 3 APFSs from Mizoram, Sikkim, and Tripura for FY2018 need to be resubmitted, and (iii) 2 APFSs from Ministry of Housing and Urban Affairs and Sikkim for FY2019 and the APFS for FY2012 from Sikkim are yet to be submitted at the time of preparing this report. Overall, the majority of ADB’s disbursed loan amount was audited. Although the project financial management arrangements of the borrower and the executing agency required strengthening, counterpart funding was generally timely. Audit shortcomings, such as non-inclusion of a management letter in the APFS and lack of opinion on use of loan proceeds, were also observed (paras. 32–33). Monitoring and reporting arrangements, including submission of quarterly progress reports, semiannual safeguard reports, and a project completion report were complied with. GAP reporting was undertaken by all participating states based on the GAP derived from the MFF GAP framework. Details of the compliance status are in Appendix 9.

III. EVALUATION OF PERFORMANCE

A. Relevance

23. At both appraisal and completion, Project 1 was relevant to the government’s development objectives and ADB’s country and sector strategies (paras. 4–7). The project was aligned during implementation with ADB’s Strategy 2020, which emphases reforms and capacity building initiatives to strengthen urban service delivery.15 Although the project predated ADB’s Strategy 2030, the project remains relevant at completion in relation to the Strategy, and especially its Operational Priority (OP) 4 that focuses on building livable cities and providing safe and effective water and sanitation services.16 It is aligned with the government’s successive five-year plans; the National Institution for Transforming India three-year action agenda, 2017–2018 to 2019– 2020; and the successive policies of the five program states, which prioritized the potable water supply and wastewater management to improve urban quality of life and thereby economic growth and poverty alleviation.17 The project design and loan modality were relevant and responsive to the requirements of the program states (para. 5). The project design’s consideration of climate change concerns by exploring green finance options for SWM interventions that reduce methane

and environmental experts of the concerned DSMC, were responsible for safeguard implementation, monitoring, and management in the program cities. All contractors engaged environment officers during construction. 14 Submission of audited project financial statements were delayed for the following fiscal years: (i) 2 months for FY2010, 2011, and 2017; (ii) 7 months for FY2012 and 2014; (iii) 3 months for FY2013 and 2016; (iv) 4 months for FY2015; and (v) 24 months for three APFSs for FY2018 and 96 months for one APFS for FY2012. 15 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank 2008–2020. Manila. 16 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila. 17 Government of India, National Institution for Transforming India. 2017. India Three Year Action Agenda, 2017–18 to 2019–20. Delhi.

9 emissions remain relevant to India’s Nationally Determined Commitments under the Paris Agreement. The DMF, prepared as part of the project financing request, lacked specific, measurable indicators proportionate to the scope of the interventions. The DMF was updated during the midterm review mission to align the project scope and objectives with appropriate performance indicators and incorporate decisions taken during the 2010 inception mission, thereby increasing the relevance during implementation and completion (para. 7). The project results chain was sound, indicative of project interventions, and appropriate to achieve the planned project outcomes, although errors in determining indicators were observed and did not include gender-specific indicators.

B. Effectiveness

24. Overall, Project 1 is rated effective as 2 out of the 3 planned outcome indicators have been fully achieved and 1 outcome indicator is 80% achieved while 20 out of 21 output indicators have been fully achieved18 (Appendix 1). The water supply interventions in Agartala, Gangtok, Kohima, and Mizoram resulted in asset creation, production, pumping and distribution system improvements, and metering. As a result, unaccounted for water and O&M costs were reduced. That improved water quality, service reliability, and supply quantity, thereby benefitting all households in the program cities. The water supply outcome target was overachieved by providing a population of 1.06 million in four program cities with improved water supply against the targeted population of 373,720. The project enabled a more efficient, sustainable, and equitable water supply system in the four program cities, thereby contributing to achieving Sustainable Development Goal 6.19 The SWM interventions in Kohima and Shillong developed engineered sanitary landfills with comprehensive facilities for segregating and treating municipal solid waste, benefitting 100% of the population in these cities.20 They enabled environmental improvement and climate change mitigation by improving urban environment, reducing fugitive methane emissions, 21 and providing treatment systems for biodegradable waste. Institutional capacities for urban governance, municipal asset management, and revenue augmentation were strengthened. Legal frameworks for strengthened development controls and participatory planning were put in place in Agartala and Shillong, benefitting 543,233 people, or 100% of their populations. Focused training for staff of these two ULBs and line agencies strengthened asset management, financial management, and regulatory practices, and improved sustainability of municipal operations. Implementation of a double-entry accounting system enhanced accounting and budgeting practices, thereby contributing to improved governance, while GIS installation enabled effective planning and management of municipal operations. Development controls and regulations introduced in Agartala and Shillong strengthened management of existing sanitation assets, thereby contributing to public health and hygiene. The property tax rationalization in Agartala, in combination with GIS mapping of assets, will contribute significantly toward realistic valuations, effective collections, and improved tax yields.

25. Safeguard compliance reporting, monitoring, and management were rated effective. Gender mainstreaming under the project was rated effective as the objectives of all 4 GAP activities were achieved and all 10 quantitative targets were met. Institutionalization of women’s

18 ADB. 2016. Guidelines for the Evaluation of Public Sector Operations. Manila 19 United Nations, Sustainable Development Goals, Goal 6: Ensure access to water and sanitation for all. https://www.un.org/sustainabledevelopment/water-and-sanitation/ 20Government of India, Office of the Registrar General and Census Commissioner. 2011. Census of India, 2011. . The population of Kohima (267,988) and Shillong (143,229) was 411,217 according to 2011 census by the government. Including population growth, the SWM interventions benefitted 100% of the population in the two project cities. 21 Fugitive methane emissions are leaks of methane gas from landfill and SWM plant that contribute to climate change.

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representation in infrastructure development organizations and municipal service delivery utilities combined with training to service providers and contractors in gender mainstreaming to enable sustained increase in economic opportunities for women. The GAP established replicable factors in mainstreaming gender for subsequent NERCCDIP tranches and other projects by line agencies in identifying women’s needs to achieve their empowerment in urban planning, construction, O&M, and representation in participatory governance structures. Project 1 is rated effective for GAP implementation.

C. Efficiency

26. Overall, Project 1 is rated efficient. The economic internal rate of return (EIRR) for Project 1 interventions was not calculated separately at appraisal. At completion of Project 1, EIRRs were calculated considering costs and benefits of the four water supply subprojects in Agartala (19.45%), Aizawl (14.36%), Gangtok (14.32%), and Kohima (17.89%), and for two SWM subprojects in Kohima (17.33%) and Shillong (17.78%). The consolidated EIRR for all interventions under Project 1 was put at 16.68%. Even though there were implementation delays (para. 14) resulting in delayed delivery of benefits, the EIRRs at completion for Project 1 subprojects are above the 12% threshold for economic viability. The EIRRs of all Project 1 subprojects will contribute to the economic valuation of the 13 subprojects under the MFF. The economic net present values for the subprojects at completion are positive when applying a 12% discount rate. Each of the subprojects have been evaluated under with- and without-project scenarios while considering the population benefitted and apportioning benefit due to project interventions. In case of SWM, the annual savings due to improved health benefit is considered based upon the wages of each state. In the case of water supply, the tariff on additional water is considered based upon the existing rate. The health benefit attributed due to project intervention is specific for both water supply and SWM. Several indirect and direct benefits could not be quantified and hence have not been captured in the analysis, although qualitative assessments demonstrate their contribution in providing basic municipal services and improving urban environment and quality of life in all Project 1 ULBs. Process efficiencies were also achieved in the five ULBs, except that execution delays and cost overruns in SWM contracts at Shillong and Kohima partially affected the overall efficiency of Project 1 interventions. 22 The institutional efficiencies and grievance redress mechanisms developed in the five SIPMIUs improved transparency and accountability of governance. This significantly augmented knowledge and administrative capacities of respective SIPMIUs and was useful in implementing the subsequent tranches. These intangible benefits in business and operational resilience of NER organizations, if quantified, would further contribute to the project EIRR at completion. The details of the economic reevaluation are in Appendix 10.

D. Sustainability

27. Overall, Project 1 is rated as likely sustainable. Because the project was not designed for capital cost recovery, operating ratios (calculated as operating expense / operating revenue) are calculated. These indicate that the program ULBs and state-level agencies meet the O&M costs of all urban services through well-structured and planned budgetary allocations based on a revenue-sharing model among the three tiers of government aligned with their constitutional duties, regular transfers from the State Finance Commissions (SFCs) and Central Finance

22 Subproject cost for SWM of Kohima increased by 2.36 times and of Shillong by 2.61 times between the appraisal estimate and actual costs of Project 1.

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Commissions (CFCs), tariff enhancements, and improved tax collection.23 Because water supply assets are managed by line agencies under the state governments, the calculated operating ratios of the five state governments—Meghalaya (0.92), Mizoram (0.87), Nagaland (0.92), Sikkim (0.84), and Tripura (0.92)—indicate that the NER states have the financial capacity to meet the operating expenses of project assets.24 A review of the overall finances of the public health engineering or public works departments of the five states indicates the ability of the respective departments to meet the requisite O&M expenses of the existing water supply assets and inclusion of new projects through timely state budgetary allocations.

28. The Constitution of India (Article 243X and Schedule Twelve) mandates that the state allocate to the ULBs associated sources of finance and functionaries required to manage the assigned functions and sustain service delivery. ULBs’ finances are structured through fiscal transfers from the state in the form of compensation grants (in lieu of the former octroi tax on goods and other taxes subsumed under the Goods and Service Tax Act, 2017), transfers from CFCs and SFCs, tariff enhancement, and performance improvement in collection of taxes and user charges. Recognizing this, the facility design covenanted that any shortfall in funds for O&M be met by the central and state governments. 25 SWM subprojects were implemented under Project 1 in Kohima and Shillong and are since being managed as part of ULBs’ responsibility. Although the operating ratio for Shillong ULB averaged 1.15 and that of Kohima ULB averaged 1.00, indicating insufficient operating receipts to meet O&M costs, the SFC and CFC allocations are adequate to meet incremental O&M expenses of the project assets. Requisite funds have been released by the state governments consistently and in a timely manner to meet all O&M requirements of water supply and SWM assets in accordance with the fundamental duties of the State as prescribed by the Constitution of India. Details of the financial reevaluation are in Appendix 10.

E. Development Impact

29. The focus of the investment program and Project 1 is to create positive and sustainable impact on urban infrastructure, service delivery, and urban governance in order to benefit residents of the program ULBs, particularly the poor, women, and vulnerable. Project 1 benefitted a population of 1.06 million in four project cities with treated and safe water. It reduced the time burden in water collection, primarily for the vulnerable segments of the population and women, thereby increasing opportunity and time for economic pursuits, reducing time poverty, and enhancing health leading to human capital development. Moving beyond income poverty, Project 1 contributed to reducing the standard of living deprivation indicator of the United Nation’s (UN) multidimensional poverty index in the project ULBs.26 Moreover, the project introduced sanitary waste disposal processes and practices, thereby benefitting 411,217 people in two project cities,

23 The CFC allocates 42% of the funds of the general pool to ULBs and Panchayati Raj institutions (rural bodies). These are distributed based on population (55%), area (15%), and weaker local bodies (30%). The CFC provides an additional 5% of ULBs’ fund utilization as performance incentives. CFC funds can be used toward O&M (minimum 90%) of basic municipal services with a ceiling of 10% going to capital works. The SFCs allocate about 7.18% of net state tax revenue to ULBs using the same distribution weightages (e.g., population, area). The SFC funds can be used for capital investments (85%), administration (10%), and management reforms (5%). 24 Average of the past 5 fiscal years reported by respective state governments. All four water supply subprojects under Project 1 are managed by the relevant state governments (public works department or public health engineering department of the states). 25 Framework Financing Agreement Undertakings para. 73 (iv) of the Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility to India for the North Eastern Region Capital Cities Development Investment Program. 26 United Nations. 2019. Global Multidimensional Poverty Index 2019: Illuminating Inequalities. New York. The drinking water deprivation indicator under the standard of living dimension of poverty has been fully reduced in four ULBs.

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improved their public health by providing a hygienic environment, reduced the disease burden of the citizens, and contributed to protection of the fragile environment of the Himalayan range. Effective and sustained awareness campaigns under the project in both cities covered by SWM resulted in enduring behavior changes, such as segregation of waste (biodegradable and non- biodegradable) and increased public awareness. 27 Further, associated carbon emission reductions due to the project’s waste treatment and disposal facilities contributed toward meeting India’s intended nationally determined commitments for greenhouse gas reduction under the Paris Agreement.

30. The water supply and SWM interventions have contributed significantly to providing the populace with cleaner and healthier urban environment while reducing the financial and economic burden of disease on the poor due to loss of economic opportunities and productive workdays.28 The project strengthened ULB finances in Agartala with the adoption of a revised formula for computing property value and constitution of a municipal valuation committee for property tax (para. 11). The project contributed to strengthened institutional frameworks; improved municipal governance, asset management, and service delivery; and participatory management in all five project ULBs. Similarly, administrative, management, and operating capabilities for effective and accountable urban governance and management were strengthened in all five ULBs. Project 1 achieved gender-equality results and contributed to the Strategy 2030 OP2 pillar: accelerating progress in gender equality on increasing women’s economic empowerment and enhancing gender equality in decision making and leadership. It aligned with ADB’s OP2.1.1 and generated employment opportunities for 1,568 women—1,500 women in civil works related to water supply in the four project towns covered under water supply subprojects, 40 women in constructing SWM infrastructure in two towns under SWM subprojects, and 28 women rag-pickers in the dumping sites of Kohima and Shillong (footnote 29). The project also aligned with ADB’s OP 2.3.2 by institutionalizing participatory planning and women’s advocacy in development and delivery of basic municipal services, particularly the inclusion of gender indicators in provision of public stand-posts for water supply (footnote 29). In view of the above, the project’s development impact is rated satisfactory.

31. Project 1 contributed to the following operational priorities under ADB Strategy 2030: (i) OP 2.1.1: Women’s access to job skills improved; (ii) OP 2.2.1 Women and girls’ participation in nontraditional education and training increased; (iii) OP 2.3.2: Regulatory, legal, and institutional environment for gender equality improved; (iv) OP 4.1.1: Performance of urban and social service providers improved; and (v) OP 4.1.1.2: Provision of urban infrastructure and services improved. The Project 1 contributions to ADB results framework are: households with new or improved water supply (number) in four cities (Agartala, Aizawl, Gangtok, and Kohima) = 204,172,29 (ii) water supply pipes installed or upgraded (length of network in km) = 45, (iii) service providers with improved performance (number) = 2 municipal corporations (Agartala and Shillong), (iv) infrastructure assets improved or established = 2 SWM sanitary landfill facilities, and (v) women benefitted from employment and vocation training (number) = 1,568.

27 Nongovernment organization and community-based organizations were mobilized and engaged in all five states to support civic awareness raising, community-level solid waste management, and resettlement monitoring. The nongovernment organizations also facilitated waste collection in slums and poor neighborhoods where access for waste collection vehicles was difficult. 28 Source: https://www.census2011.co.in and https://en.wikipedia.org/wiki/Kohima#cite_note-cdp-2006-16 29 Considering average household size of 5.2 and total population of Agartala, Aizawl, Gangtok, and Kohima as 1,061,694 based on the Government of India’s 2011 census.

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F. Performance of the Borrower and the Executing Agency

32. The overall performance of the borrower and NSEAs is rated satisfactory. The borrower, represented by the government’s Department of Economic Affairs, provided timely guidance and decisions to the NSEAs. It undertook regular tripartite review meetings with ADB and the NSEAs, helping thereby to identify bottlenecks, resolve issues, and monitor progress. The Ministry of Urban Development and state governments provided strong support to the respective SIPMIUs from the project preparation stage through implementation and monitoring, including to ensure availability of timely counterpart funding. The staffing risks identified in the DMF were not consistently managed, however, resulting in intermittent shortages, frequent replacement, and multiple charges assigned to deputed staff in the SIPMIUs (para. 7). Complex fund flow mechanisms and fiscal constraints in the NER states delayed claim processing by the SIPMIUs, budget allocation, and funds release by the states’ finance departments. Lack of familiarity with ADB’s procurement guidelines and processes affected timely decisions on procurement and contract management issues (paras. 13 and 14). Extensive consultations among NSEAs and ADB resolved such issues to streamline implementation and improved interagency coordination, monitoring, and progress reporting (paras. 14 and 19). The performance of the NSEAs in financial management is rated less than satisfactory, due to persistent audit shortcomings and delays in APFS submissions (paras. 22 and 33).

G. Performance of the Asian Development Bank

33. The performance of ADB is rated satisfactory. ADB undertook regular review missions, disbursement review missions, midterm review missions, and a consultation mission to assess progress and provide advice on resolving outstanding issues. Monitoring, capacity building, and guidance by ADB throughout the project cycle helped define processes, address issues through time-bound actions and targets, and expedite project implementation. ADB’s financial management is rated less than satisfactory, however, as audit shortcomings were identified and commented upon, but specific steps not taken over the years to resolve these issues (paras. 22 and 32). The program management and monitoring consultants and SIPMIUs found ADB’s support and advice effective in resolving procurement and project management issues (paras. 13 and 18). ADB’s close monitoring ensured adherence to due processes and transparency in procurement, disbursements, and safeguards, while upholding integrity and ethical standards.

H. Overall Assessment

34. Project 1 is rated successful. The project is relevant to the government and state governments’ development objectives and consistent with ADB’s policies and country strategy at appraisal and completion. It is assessed effective, because 2 out of the 3 planned outcome indicators are fully achieved, 1 outcome indicator is 80% achieved, and 20 out of the 21 output indicators were achieved. The project is rated efficient, as the EIRRs for all subprojects were reassessed to be higher than the economic opportunity cost of capital of 12%. It is rated likely sustainable because sufficient funds are available to meet the O&M costs of the project assets. The development impacts are rated satisfactory, as the project’s attribution to all the impact indicators is significant and resulted in improved quality of life, as well as reduction in poverty and inequities in municipal resource allocation and access. The performance of the borrower, NSEAs and ADB is rated satisfactory. These are summarized in the table:

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Overall Ratings Criteria Rating Relevance Relevant Effectiveness Effective Efficiency Efficient Sustainability Likely sustainable Overall Assessment Successful Development impact Satisfactory Borrower and executing agency Satisfactory Performance of Asian Development Bank Satisfactory Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS

A. Issues and Lessons

35. The following important lessons emerge from Project 1: (i) Incremental and sequential investment planning under the MFF was appropriate to allow for phased strengthening of institutional capacities and gaining familiarity with ADB practices and guidelines, particularly in procurement and processing, so that experience gained can be applied in succeeding tranches (para. 5). (ii) Project structuring in terms of investment size, safeguards implementation, and engineering scope was appropriately calibrated to implementing agencies’ capacities and external dependencies (paras. 6 and 7). (iii) Clear delineation of DMF performance indicators at the project appraisal (SMART: specific, measurable, achievable, relevant, and timely) would have enabled improved outcomes measurement (paras. 7 and 22). (iv) Multiple executing agencies at national and state levels with overlapping mandates often result in complex mechanisms that can delay interagency communication, coordination, and timely decisions, thus resulting in implementation delays and ineffective contract management (paras. 14, 18, and 32). (v) Systematic analysis of market and states’ internal procurement capacity could have avoided procurement delays due to cumbersome governance procedures and rebidding due to poor bidder participation (para. 18). (vi) Avoiding resettlement impacts or land acquisition in subproject design and site selection averted grievances and associated delays during construction (para. 21). (vii) Stakeholder participation, extensive community consultations, and information dissemination in structuring construction schedules helped avoid livelihoods impacts and generated community support for the project (para. 21). (viii) Reporting individually and collectively by multiple agencies requires dedicated support, particularly with respect to fiduciary covenants and impacts on financial management performance of the implementing agencies (para. 22). (ix) Complex fund flow mechanism coupled with unfamiliarity regarding ADB’s guidelines and processes delayed implementation. Extensive and continuous support is required for executing agencies unfamiliar with various of ADB’s guidelines and requirements (paras. 7, 18, and 32).

B. Recommendations

36. Project-specific recommendations for project implementation are as follow: (i) Structuring of project components needs to be calibrated to executing and implementing agencies’ capacities (paras. 6, 7, and 35 item ii).

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(ii) Consistency between impacts and outcomes in setting numerical targets for DMF performance indicators is important for effective results monitoring (paras. 7, 22, and 35 item iii). (iii) Streamlined communications and a clear fund flow process need to be established for efficient disbursement, especially when multiple agencies are involved (paras. 7, 13, 18, 32, and 35 items iv and ix).

37. General recommendations for future projects are: (i) The MFF’s sequencing of investment planning is appropriate where incremental institutional strengthening or familiarization with ADB practices and guidelines is planned (paras. 5 and 35 item i). (ii) Simplified program implementation and decision-making structures, supplemented by tailored and continued support, help in efficient project implementation, regular reporting, and compliance monitoring (paras. 18, 21, 35 items v and viii). (iii) Procurement strategy to consider externalities, including governance aspects and market analysis, is important while arriving at procurement frameworks and details for the project (paras. 18 and 35 item v). (iv) Efforts need to be made while designing the project in appropriate site selection and design of subprojects to avoid resettlement impacts and land acquisition (paras. 21 and 35 item vi). (v) Stakeholder participation, including frequent and meaningful consultations and information dissemination before and during scheduling and implementation, should be ensured to avoid livelihood impacts and maximize ownership and support by the beneficiaries (paras. 21 and 35 item vii). (vi) Continuous support and follow-up by ADB and, when necessary, inclusion of a financial management specialist as part of the team to monitor and support financial management performance of the implementing agencies are key for improved FM performance (paras. 22, 32, 33, and 35 viii).

38. Future monitoring. Operational aspects for monitoring may include preparation of the investment program performance management systems’ end-line survey. Follow-up actions should be undertaken regarding submission of the remaining 12 APFSs by 31 March 2021.

39. Covenants. The covenants related to strengthening of property tax yield in Agartala and Shillong should be ensured.

40. Timing of the project performance evaluation report. The project performance evaluation report should be prepared in 2022, by which time the subprojects will have been operational for more than 3 years.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Indicators and Targets Project Achievementsa Impact By 2019 By 2019 (end of project) Sustainable urban • 1.2 million population in the Achieved. 1.06 million (100% population) in services in 5 program 4 program cities provided with the 4 project cities (Agartala, Aizawl, Gangtok cities (from MFF DMF’s treated water and Kohima) provided with treated water.b Project Outcomes) • 300,000 population in the central Not applicable. Sewerage interventions were zone of the 4 program cities not taken up under the project. Sewerage outputs not defined in DMF. provided with access to sewerage treatment • 900,000 population in the 4 program Not applicable. Solid waste collection cities provided with solid waste interventions not taken up under Project 1. Solid waste treatment interventions were collection taken up in Kohima and Shillong, and 100% population (411,217) in these two project cities benefitted. Outcome By 2016 By 2019 (end of project) Improves access to • 373,000 population in Agartala, Exceeded. 1.06 million population in selected urban services Aizawl, Gangtok, and Kohima Agartala, Aizawl, Gangtok and Kohima in 5 program cities provided with improved water supply provided with improvements in reliability and quantity of water supply. • 430,000 population in Kohima and Achieved. 411,217 population (100%) in Shillong provided with improved Kohima and Shillong provided with improved solid waste management SWM through sanitary landfill facilities (population overestimated in DMF target). • 719,000 population in Agartala and Substantially achieved. Of the 5 institutional Shillong provided with strengthened strengthening measures, 4 have been institutional capacity of ULB achieved (80%) in Agartala and Shillong benefitting 100% of the population (543,233) (population overestimated in DMF target). Outputs By 2016 By 2019 (end of project) (i) Constructed and • Agartala rehabilitated water Exceeded. 22 tube wells with electrical and supply infrastructure (i) Tube wells (22 nos) replaced mechanical equipment replaced and pump houses constructed for 16 tube wells. • Aizawl (i) Reservoirs (7 nos) replaced Achieved. Seven ground level RCC tanks replaced. (ii) Chlorinators (2 nos) installed Achieved. Two chlorinators installed in two newly constructed chlorinator rooms. (iii) Household meters (15,000 nos) Achieved. 15,000 household meters installed. installed • Gangtok (i) Secondary pipelines (45 km) Achieved. 45 km of distribution mains laid. constructed (ii) Reservoir (1 no.) constructed Achieved. 1.15 ML ground level service reservoir constructed. (iii) Pumping station with 3 pumps Achieved. Construction of pumping station with installation of three 50 HP pump sets completed. (iv) Pumping main of 1.2 km Exceeded. 2 km pumping main constructed.

Appendix 1 17

Design Summary Performance Indicators and Targets Project Achievementsa (v) Bulk meter (4 nos) Achieved. 4 bulk flow meters supplied and installed. • Kohima (i) Existing WTP (7.5 MLD) Achieved. 7.5 million liters per day WTP refurbished refurbished and rehabilitated. (ii) Reservoirs (18 nos) replaced Achieved. 18 reservoirs were constructed of which one reservoir was constructed under tranche 2 of MFF. (iii) Chlorinators (2 nos) installed Achieved. Two electro-chlorinators supplied and installed in the WTP. (ii) Constructed and By 2016 By 2019 (end of project) installed SWM • infrastructure Kohima (i) Compost plant (50 tpd) developed Achieved. 50 tpd capacity compost plant constructed. (ii) Sanitary landfill developed Achieved. Sanitary land fill site of 8000 sqm area and installation of leachate treatment plant of 75,000 liters/day capacity developed. (iii) Garage and approach road Exceeded. 2 km approach road constructed, constructed besides construction of internal roads and restoration of damaged sections of internal roads. Service buildings like administrative block and garages for primary and secondary vehicles constructed. • Shillong (i) Short-term sanitary landfill site Achieved. Short-term sanitary landfill of (6.500 sqm) developed 25,000 m3 capacity at 6.500 sqm site (25,000 m3) developed. (iii) Strengthened local By 2016 By 2019 (end of project) government for • Agartala: Achieved. Notification issued and better financial Agartala and Shillong implemented. management and (i) Double entry accounting systems sustainable service installed and financial systems Shillong: Achieved. Accounting manual delivery computerized prepared and adopted, and double-entry systems strengthened. (ii) Property tax yield in AMC & SMB Agartala: Achieved. Revised formula for strengthened computation of property value and constitution of municipal valuation committee for property tax was notified vide Gazette Notification issued on 28 August 2016. Shillong: Partly achieved. All approval processes completed; awaiting state government approval. (iii) GIS installed/updated and Agartala: Achieved. GIS systems installed. operational Shillong: Achieved. GIS systems installed. (iv) Planning process/legislation Agartala: Achieved. Sanitation regulations in amended to strengthen place. development controls and Shillong: Achieved. Adoption of by-laws sanitation regulations instituting a program of regular cleaning of septic tanks. (v) Municipal staff trained in operation Agartala: Achieved. Two trainings provided and maintenance of services, for 75 staff as planned. Shillong: Achieved. 37 trainings provided to

18 Appendix 1

Design Summary Performance Indicators and Targets Project Achievementsa financial management, regulation 387 municipal staff in financial management, enforcement GIS services, etc. AMC = Agartala municipal corporation; DMF = design and monitoring framework, GIS = geographic information system; km = kilometer; m3 = cubic meter; MLD = million liters per day; MFF = multitranche financing facility, MTD = metric tons per day; O&M = operation and maintenance; RCC = reinforced concrete cement, SMB = Shillong municipal board; sqm = square meter; SWM = solid waste management; tpd = tons per day; ULB = urban local body, WTP = water treatment plant. Source: Asian Development Bank. a Project performance is assessed against the Design and Monitoring Framework mutually updated during the Mid Term review mission held in June 2012. Data obtained from aide memoires of ADB Missions, quarterly progress reports submitted by the National Executing Agency, semi-annual monitoring reports for environmental and social safeguards submitted for the project, and tripartite portfolio review meeting records. Source for population figures: Government of India, Office of the Registrar General and Census Commissioner. 2011. Census of India, 2011. New Delhi. b The water supply interventions under Project 1 included rehabilitation of bulk water infrastructure which benefitted the entire population of the respective cities. Therefore, 100% population are considered as project beneficiaries.

Appendix 2 19

PROJECT COST AT APPRAISAL AND ACTUAL ($'000)

Appraisal Estimate Actual Foreign Local Foreign Local Item Total Cost Total Cost Exchange Currency Exchange Currency A. Base Costs and Taxes & Duties 1. Water Supply 9,770.30 9,770.30 6,369.30 6,369.30 a. Agartala, Tripura 1,340.70 1,340.70 886.43 886.43 b. Aizawl, Mizoram 2,342.40 2,342.40 1,625.94 1,625.94 c. Gangtok, Sikkim 4,832.80 4,832.80 2,518.06 2,518.06 d. Kohima, Nagaland 1,254.40 1,254.40 1,338.87 1,338.87 2. Solid waste management 3,938.30 3,938.30 9,402.51 9,402.51 a. Kohima, Nagaland 3,511.30 3,511.30 8,286.80 8,286.80 b. Shillong, Meghalaya 427.00 427.00 1,115.71 1,115.71 3. Design, supervision, and management 11,217.20 11,217.20 10,856.09 10,856.09 consultants a. Agartala, Tripura 2,229.20 2,229.20 1,668.16 1,668.16 b. Aizawl, Mizoram 2,369.60 2,369.60 2,418.08 2,418.08 c. Gangtok, Sikkim 2,206.80 2,206.80 2,062.97 2,062.97 d. Kohima, Nagaland 2,214.80 2,214.80 2,495.44 2,495.44 e. Shillong, Meghalaya 2,196.80 2,196.80 2,211.44 2,211.44 4. Financial and institutional development 2,352.40 2,352.40 1,638.22 1,638.22 consultants a. Agartala, Tripura 1,176.20 1,176.20 858.56 858.56 b. Shillong, Meghalaya 1,176.20 1,176.20 779.66 779.66 5. Project implementation and administration 2,862.50 2,862.50 2,045.71 2,045.71 a. Agartala, Tripura 572.50 572.50 251.64 251.64 b. Aizawl, Mizoram 572.50 572.50 608.66 608.66 c. Gangtok, Sikkim 572.50 572.50 277.75 277.75 d. Kohima, Nagaland 572.50 572.50 541.26 541.26 e. Shillong, Meghalaya 572.50 572.50 366.40 366.40 6. Investment program management consultants 473.80 473.80 251.16 251.16 a. Ministry of Urban Development 473.80 473.80 251.16 251.16 7. Investment program coordination and 139.20 139.20 - - administration a. Ministry of Urban Development 139.20 139.20 - -

20 Appendix 2

Appraisal Estimate Actual Foreign Local Foreign Local Item Total Cost Total Cost Exchange Currency Exchange Currency 8. Taxes & duties 4,225.80 4,225.80 1,731.25 1,731.25 a. Agartala, Tripura 723.70 723.70 128.03 128.03 b. Aizawl, Mizoram 722.80 722.80 556.51 556.51 c. Gangtok, Sikkim 1,061.20 1,061.20 266.23 266.23 d. Kohima, Nagaland 1,048.80 1,048.80 342.68 342.68 e. Shillong, Meghalaya 590.40 590.40 408.47 408.47 f. Ministry of Urban Development 78.90 78.90 29.32 29.32 Subtotal - 34,979.50 34,979.50 - 32,294.22 32,294.22 B. Contingencies 3,052.50 3,052.50 - -

C. Financial Charges During Implementation 4,785.80 4,785.80 1,782.81 1,782.81

a. Agartala, Tripura 819.70 819.70

b. Aizawl, Mizoram 818.60 818.60

c. Gangtok, Sikkim 1,201.80 1,201.80

d. Kohima, Nagaland 1,187.80 1,187.80

e. Shillong, Meghalaya 668.60 668.60

f. Ministry of Urban Development 89.30 89.30 Total (A+B+C) 4,785.80 38,032.00 42,817.80 1,782.81 32,294.22 34,077.03 Source: {Asian Development Bank estimates.}

Appendix 3 21

PROJECT COST BY FINANCIER

Table A3.1: Project Cost at Appraisal by Financier

Government of India/ State ADB Total Costa Governments % of Cost % of Cost Amount Amount Amount Item Category Category A. Base Costs 1. Agartala, Tripura a. Water Supply 1,084.50 81% 256.20 19% 1,340.70 b. Design, supervision, and management consultants 2,229.20 100% - 2,229.20 c. Financial and institutional development consultants 1,176.20 100% - 1,176.20 d. Project implementation and administration 572.50 100% - 572.50 e. Tax and duties - 0% 723.70 100% 723.70 Base Costs after Taxes and Duties 5,062.40 84% 979.90 16% 6,042.30 2. Aizawl, Mizoram a. Water Supply 1,957.00 84% 385.40 16% 2,342.40 b. Design, supervision, and management consultants 2,369.60 100% - 2,369.60 c. Project implementation and administration 572.50 100% - 572.50 d. Tax and duties - 0% 722.80 100% 722.80 Base Costs after Taxes and Duties 4,899.10 82% 1,108.20 18% 6,007.30 3. Gangtok, Sikkim a. Water Supply 3,496.70 72% 1,336.10 28% 4,832.80 b. Design, supervision, and management consultants 2,206.80 100% - 2,206.80 c. Project implementation and administration 572.50 100% - 572.50 d. Tax and duties - 0% 1,061.20 100% 1,061.20 Base Costs after Taxes and Duties 6,276.00 72% 2,397.30 28% 8,673.30 4. Kohima, Nagaland a. Water Supply 977.50 78% 276.80 22% 1,254.30 b. Solid waste management 2,624.70 75% 886.70 25% 3,511.40 c. Design, supervision, and management consultants 2,214.80 100% - 2,214.80 d. Project implementation and administration 572.50 100% - 572.5 e. Tax and duties - 1,048.80 100% 1,048.80 Base Costs after Taxes and Duties 6,389.50 74% 2,212.30 26% 8,601.80

22 Appendix 3

Government of India/ State ADB Total Costa Governments % of Cost % of Cost Amount Amount Amount Item Category Category 5. Shillong, Meghalaya a. Solid waste management 336.90 79% 90.10 21% 427.00 b. Design, supervision, and management consultants 2,196.80 100% - 2,196.80 c. Financial and institutional development consultants 1,176.20 100% - 1,176.20 d. Project implementation and administration 572.50 100% - 572.50 e. Tax and duties - 0% 590.40 100% 590.40 Base Costs after Taxes and Duties 4,282.40 86% 680.50 14% 4,962.90 6. Ministry of Urban Development a. Financial and institutional development consultants 473.80 100% 473.80 b. Project implementation and administration - 0% 139.20 100% 139.20 c. Tax and duties - 0% 78.90 100% 78.90 Base Costs after Taxes and Duties 473.80 68% 218.10 32% 691.90 Subtotal (A) 27,383.20 78% 7,596.30 22% 34,979.50 B. Contingencies 1. Agartala, Tripura 438.00 93% 33.40 7% 471.40 2. Aizawl, Mizoram 450.30 90% 47.50 10% 497.80 3. Gangtok, Sikkim 689.40 79% 188.20 21% 877.60 4. Kohima, Nagaland 680.90 81% 156.30 19% 837.20 5. Shillong, Meghalaya 340.10 97% 10.50 3% 350.60 6. Ministry of Urban Development 18.10 100% - 0% 18.10 Subtotal (B) 2,616.80 86% 435.90 14% 3,052.70 C. Financial Charges During Implementation - 0% 4,785.80 100% 4,785.80

Total Project Cost (A+B+C) 30,000.00 12,818.00 42,818.00 % Total Project Cost 70% 30% 100% Notes: 1. Numbers may not sum precisely because of rounding. Source: ADB Estimates.

Appendix 3 23

Table A3.2: Project Cost at Completion by Financier

Government of India/ State ADB Total Cost Governments % of Cost % of Cost Amount Amount Amount Item Category Category A. Base Costs 1. Agartala, Tripura a. Water Supply 643.61 73% 242.83 27% 886.43 b. Design, supervision, and management consultants 1,668.16 100% - 1,668.16 c. Financial and institutional development consultants 858.56 100% - 858.56 d. Project implementation and administration 251.64 100% - 251.64 e. Tax and duties - 0% 128.03 100% 128.03 Base Costs after Taxes and Duties 3,421.96 90% 370.86 10% 3,792.82 2. Aizawl, Mizoram a. Water Supply 1,272.74 78% 353.20 22% 1,625.94 b. Design, supervision, and management consultants 2,418.08 100% - 2,418.08 c. Project implementation and administration 608.66 100% - 608.66 d. Tax and duties - 0% 556.51 100% 556.51 Base Costs after Taxes and Duties 4,299.48 83% 909.71 17% 5,209.19 3. Gangtok, Sikkim a. Water Supply 1,561.20 62% 956.86 38% 2,518.06 b. Design, supervision, and management consultants 2,062.97 100% - 2,062.97 c. Project implementation and administration 277.75 100% - 277.75 d. Tax and duties - 0% 266.23 100% 266.23 Base Costs after Taxes and Duties 3,901.91 76% 1,223.10 24% 5,125.01 4. Kohima, Nagaland a. Water Supply 830.10 62% 508.77 38% 1,338.87 b. Solid waste management 5,137.82 62% 3,148.99 38% 8,286.80 c. Design, supervision, and management consultants 2,495.44 100% - 2,495.44 d. Project implementation and administration 541.26 100% - 541.26 e. Tax and duties - 342.68 100% 342.68 Base Costs after Taxes and Duties 9,004.62 69% 4,000.43 31% 13,005.05

______

24 Appendix 3

Government of India/ State ADB Total Cost Governments % of Cost % of Cost Amount Amount Amount Item Category Category 5. Shillong, Meghalaya a. Solid waste management 718.64 64% 397.07 36% 1,115.71 b. Design, supervision, and management consultants 2,211.44 100% - 2,211.44 c. Financial and institutional development consultants 779.66 100% - 779.66 d. Project implementation and administration 366.40 100% - 366.40 e. Tax and duties - 0% 408.47 100% 408.47 Base Costs after Taxes and Duties 4,076.13 83% 805.54 17% 4,881.67 6. Ministry of Urban Development a. Financial and institutional development consultants 251.16 100% 251.16 b. Project implementation and administration - 0% - 0% - c. Tax and duties - 0% 29.32 100% 29.32 Base Costs after Taxes and Duties 251.16 90% 29.32 10% 280.48 Subtotal (A) 24,955.26 77% 7,338.96 23% 32,294.22 Contingencies B. 1. Agartala, Tripura - 0% - 0% - 2. Aizawl, Mizoram - 0% - 0% - 3. Gangtok, Sikkim - 0% - 0% - 4. Kohima, Nagaland - 0% - 0% - 5. Shillong, Meghalaya - 0% - 0% - 6. Ministry of Urban Development - 0% - 0% - Subtotal (B) 0.00 0% 0.00 0% 0.00 Financial Charges During Implementation - 0% 1,782.81 100% 1,782.81

C. Total Project Cost (A+B+C) 24,955.26 9,121.77 34,077.03 % Total Project Cost 73% 27% 100%

Note: 1. Numbers may not sum precisely because of rounding. Source: ADB Estimates.

Appendix 4 25

DISBURSEMENT OF ADB LOAN PROCEEDS

Table 4.1: Annual and Cumulative Disbursement of ADB Loan Proceeds ($ million) Annual Projections Annual Disbursement Cumulative Disbursement Amount Amount Amount Year1 ($ million) % of Total ($ million) % of Total ($ million) % of Total 2010 2.70 11.58% 2.71 10.87% 2.71 10.87% 2011 3.63 15.57% 3.63 14.56% 6.35 25.43% 2012 2.2 9.43% 2.24 8.98% 8.59 34.42% 2013 6.2 26.59% 5.93 23.75% 14.51 58.17% 2014 1.9 8.15% 3.05 12.21% 17.56 70.38% 2015 3.33 14.28% 1.85 7.43% 19.41 77.81% 2016 1.9 8.15% 1.90 7.61% 21.31 85.42% 2017 1.04 4.46% 2.44 9.78% 23.75 95.20% 2018 0.22 0.94% 0.45 1.78% 24.20 96.99% 2019 0.2 0.86% 0.75 3.01% 24.95 100.00% Total 23.32 100.00% 24.95 100.00% ADB = Asian Development Bank. Source: Asian Development Bank.

Figure 4.1: Projection and Cumulative Disbursement of ADB Loan Proceeds ($ million) Annual and Cumulative Disbursement of ADB Loan Proceeds 30.00

25.00

20.00

15.00

10.00

5.00

0.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Annual Projections Amount ($ million) Annual Disbursement Amount ($ million) Cumulative Disbursement Amount ($ million)

1 The data for years 2010-2012 were obtained from annual tripartite reviews and the remaining years from aide memoires of ADB Missions.

26 Appendix 5

CONTRACT AWARDS OF ADB LOAN PROCEEDS

Table 5.1: Annual and Cumulative Contract Awards of ADB Loan Proceeds ($ million) Annual Projections Annual Contract Awards Cumulative Contract Awards Amount Amount Amount Year1 ($ million) % of Total ($ million) % of Total ($ million) % of Total 2009 11.68 31.56% 11.33 45.41% 11.33 45.41% 2010 16.4 44.31% 3.41 13.65% 14.74 59.06% 2011 6.10 16.48% 8.06 32.32% 22.80 91.37% 2012 2.55 6.89% 0.60 2.40% 23.40 93.77% 2013 0.16 0.43% 0.32 1.29% 23.72 95.07% 2014 0 0.00% 0.06 0.23% 23.78 95.29% 2015 0 0.00% 0.37 1.50% 24.15 96.79% 2016 0 0.00% 0.42 1.67% 24.57 98.46% 2017 0 0.00% 0.38 1.54% 24.95 100.00% 2018 0.12 0.32% 0 0.00% 24.95 100.00% Total 37.01 100.00% 24.95 100.00% ADB = Asian Development Bank. Source: Asian Development Bank.

Figure 5.1: Projection and Cumulative Contract Awards of ADB Loan Proceeds ($ million) Annual and Cumulative Contract Award of ADB Loan Proceeds 30

25

20

15

10

5

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Annual Projections Amount ($ million) Annual Contract Award Amount ($ million) Cumulative Contract Award Amount ($ million)

1 The data for years 2010-2012 were obtained from annual tripartite reviews and the remaining years from aide memoires of ADB Missions.

Appendix 6 27

SUMMARY OF CONTRACT DETAILS

ADB Contract Financing Disbursed Contract Contract Actual PCSS Amount ($) ($) ($) Package Contract Description Contractor Name Award Completion State of Tripura 01A – Civil Works Water Supply 0021 97,625 97,625 97,625 AGT/WS01(R)/ Replacement of 22 tube wells Subash Podder 5-Sep-11 22-Mar-17 NCB/11/1 LOT1 incl construction of pump house & installation of electrical & mechanical equipment 0036 66,125 66,125 66,125 AGT/WS01/R3/ Replacement of 16 tube wells Joint venture of 2-Jan-13 22-Mar-17 NCB/1/2/3- with supply & installation of Priyatosh Saha with LOT3 electrical & mechanical Saraswati Engineers equipment 0037 72,113 72,113 72,113 AGT/WS01(R3) Replacement of 16 tube wells Kabir Saha, Agartala 29-Dec-12 22-Mar-17 / NCB/12/3- with supply and installation of LOT2 electrical & mechanical equipment 0038 160,327 160,327 160,327 AGT/WS01(R3) Construction of pump houses Uttam Dey of , 14-Jun-13 22-Mar-17 / CIV/NCB/12/4 for 16 tube wells with supply West Tripura and installation of electrical arrangements 02A – Equipment 0022 247,416 247,416 247,416 AGT/WS01/ Procurement of MS ERW pipe Utkarsh Tubes & 5-Sep-11 28-Oct-13 M/NCB/11/2 for housing, casing and pipe Pipes Limited for making strainer for construction of tube 03A – Consulting Services 0001 1,668,159 1,668,159 1,668,159 A1-DSMC- Design, construction STUP Consultants 4-Dec-09 5-Apr-19 AGARTALA supervision & management Private Limited. consultants for Agartala 0002 858,558 858,558 858,558 A2-IDC- Institutional development Psp Financial 4-Dec-09 19-Dec-14 AGARTALA consultants for Agartala Consultants Private Limited., Taxila

28 Appendix 6

ADB Contract Financing Disbursed Contract Contract Actual PCSS Amount ($) ($) ($) Package Contract Description Contractor Name Award Completion State of Mizoram 01B – Civil Works Water Supply 0014 576,276 576,276 576,276 OHT/WS/AIZ/ Construction of 7 replacement Joint venture of 19-Apr-10 22-Mar-17 T1/NCB-3 ground level RCC zonal tanks, S.S. Construction with 3 staff/ chowkider quarters, H. Sanga site office 02B – Equipment 0013 76,731 76,731 76,731 CHL/WS/AIZ/ Supply, installation, test & De Nora India Limited 24-Mar-10 22-Jun-17 T1/NCB-1 commission of 2 nos. Electro- chlorinators 0015 551,904 551,904 551,904 WM1/WS/AIZ/ Supply, installation, testing & Aman Engineering 25-Jun-10 23-Oct-19 T1/NCB-2 commissioning of 13,000 nos. Works Water meters in Aizawl 0028 67,831 67,831 67,831 WM1/AIZ/T1/ Additional 2,000 water meters Aman Engineering 19-Jan-11 23-Oct-19 NCB-2 for Aizawl Works 03B – Consulting Services 0003 2,418,079 2,418,079 2,418,079 B1-DSMC- Design, construction Wadia Techno- 30-Oct-09 23-Oct-19 AIZAWL supervision & management Engineering Services consultants for Aizawl Limited State of Sikkim 01C – Civil Works Water Supply 0030 1,561,199 1,561,199 1,561,199 GTK-WA1 Supplying and laying Joint venture of A.K. 20-Sep-11 22-Mar-17 (NCB) distribution system in Engineers with B.M. Burtukand Chandmari, Engineering & construction of pump house, Construction 03C – Consulting Services 0011 2,062,966 2,062,966 2,062,966 C1-DSMC- Design, construction Wilbur Smith 22-Dec-09 19-Jun-18 GANGTOK supervision & management Associates consultants for Gangtok

Appendix 6 29

ADB Contract Financing Disbursed Contract Contract Actual PCSS Amount ($) ($) ($) Package Contract Description Contractor Name Award Completion State of Nagaland 01D – Civil Works Water Supply 0024 772,483 772,483 772,483 WTP/WS/KOH/ Refurbishment of Kohima Abiram Infra Projects 14-Oct-11 22-Mar-17 T1/NCB water supply scheme Private Limited. 0042 57,613 57,613 57,613 KHM-WS1 Balance works for Nohol and Sons 11-Aug-14 22-Mar-17 refurbishment of Kohima water supply scheme Solid Waste Management 0023 4,763,582 4,763,582 4,763,582 KHM-SWM-1 Civil works & procurement of Ramky Enviro 14-Oct-11 23-Oct-19 equipment for development of Engineers Limited. sanitary landfill, compost plant & internal roads 0043 205,367 205,367 205,367 KHM-SWM3 Construction of retaining walls Trident Enterprises 19-Dec-15 18-Oct-17 nos.1,4,5&6 at the SWM site at Lerie in Kohima 0044 168,870 168,870 168,870 KHM-SWM4 Construction of retaining walls Premier Enterprises, 19-Dec-15 18-Oct-17 nos.7,8 & 9 at the SWM site at Government Lerie in Kohima Contractors & Suppliers 03D – Consulting Services 0004 2,495,442 2,495,442 2,495,442 D1-DSMC- Design, construction Wilbur Smith 25-Nov-09 18-Oct-17 KOHIMA supervision & management Associates consultants for Kohima State of Meghalaya 01E – Civil Works Solid Waste Management 0029 230,815 230,815 230,815 LF&R/SWM/SHI Development of landfill site Joint venture of 13-Dec-11 4-Dec-15 / T1/NCB/AG01 and associated works at Anderson Biotech Shillong Private Limited with Aloysius Arengh

30 Appendix 6

ADB Contract Financing Disbursed Contract Contract Actual PCSS Amount ($) ($) ($) Package Contract Description Contractor Name Award Completion 0045 417,457 417,457 417,457 LF&R/SWM/SH Development of landfill site B.D.Marbaniang, 19-Apr-16 31-May-17 L/T1/NCB-RT and associated works (balance Shillong works) under T1 at Marten, Shillong 02E – Equipment 0029 70,366 70,366 70,366 LF&R/SWM/SHI Development of landfill site Joint venture of 13-Dec-11 5-Mar-13 / T1/NCB/AG01 and associated works at Anderson Biotech Shillong Private Limited with Aloysius Arengh 03E – Consulting Services 0005 1,827,600 1,827,600 1,827,600 E1-DSMC- Design, construction Mott MacDonald 17-Jan-09 31-Mar-17 SHILLONG supervision & management Private Limited in consultants for Shillong association with Shah TCPL 0012 682,547 682,547 682,547 E2-IDC- Institutional development Price Water House 25-Mar-10 13-Sep-13 SHILLONG consultants for Shillong Coopers Private Limited 0039 56,425 56,425 56,425 SIPMU/MEG/ GIS expert for Shillong Monuj Gohain 26-Jul-13 20-Jul-16 18/2103/E2-I3 0040 35,617 35,617 35,617 SIPMIU/MEG/ Municipal, fiscal & utility Anjan Kumar Sharma 26-Jul-13 25-Jan-17 19/2013/E2-I2 management expert for Shillong 0041 5,069 5,069 5,069 SIPMIU/MEG/ Engagement of financial Mr. Deb Kumar 31-Oct-13 22-Mar-17 19/2103/E2-I1 management expert for Dwibedi NERCCDIP 0046 383,840 383,840 383,840 DSMC-T2-SHG Design, construction Mott MacDonald 31-Mar-17 22-Jun-19 supervision and management Private Limited consultant (DSMC) for Shillong Ministry of Urban Development 03F – Consulting Services 0016 251,156 251,156 251,156 1/NERUDP/ Program management & JPS Associates 20-Oct-10 19-Jun-13 2010 monitoring consultants Private Limited., New (PMMC) Delhi

Appendix 7 31

IMPLEMENTATION OF GENDER ACTION PLAN

A. INTRODUCTION

1. The project considered not only the physical interventions of water supply and solid waste management (SWM) but also the social and gender dimensions in the five-project urban local bodies (ULBs). The project was categorized effective gender mainstreaming (EGM). The project was guided by the underlying principle that lack of basic urban infrastructure and services disproportionately affects women and poor. A gender action plan (GAP) for Project 1 was developed in 2017 based on the multitranche financing facility (MFF) GAP framework to capture gender-equality results and consolidation of data. Project 1’s GAP included four activities and 10 quantitative targets to assess state specific gender-equality results. The main approaches used to mainstream gender in the project were the incorporation of performance indicators and targets for gender equality and women’s empowerment (GEWE) in the design and implementation of a GAP. Women’s issues were considered in the project design, premised on the findings of consultations with stakeholders involved in women and gender affairs, e.g., female councilors, self-help groups, etc.

B. GENDER ISSUES

2. Women’s issues and priorities were identified during program design. Stakeholders concerned with improving the status of women, including female councilors, self-help groups for women, NGOs involved in gender issues, and institutions involved in women’s development, were consulted. The appraisal concluded that the five program states had higher values on the Human Development Index and Gender and Development Index (2006).1 However, they compare poorly to the national figures on the Gender Empowerment Index. Primary and secondary data in project cities indicated similar disparities in the status of women. In education, women scored lower in literacy than men.2 Employment and income disparities and gender biases in labor force were high, particularly in poorer female-headed households (FHH).3 The difference in average wage was also observed due to women being clustered in lower skill and low wage activities. Among the many factors in the persistence of such discrimination was the perception that women are secondary earners. Women’s primary role in household management and water collection meant that the lack of basic urban infrastructure and services impacted them more than men in terms of health, well-being, and participation in productive activities. Lack of clean water supply also exposed women to diseases from contaminated water in the process of collecting water and using water in cooking and washing.

C. PROJECT GENDER FEATURES4

1 Ranks: Meghalaya (HDI 24, GDI 24), Mizoram (HDI 12, GDI 32), Nagaland (HDI 8, GDI 35), Sikkim (HDI 17, GDI 23), Tripura (HDI 21, GDI 30) - Data Source: Development Indexes: 2006: Ministry of Women and Child Development (2009). Gendering Human Development Indices: Recasting the Gender Development Index and Gender Empowerment Measure for India. Summary Report. http://wcd.nic.in/ (under publications and reports). 2 Meghalaya (Male 65.4%: Female 59.6%), Mizoram (Male 90.7%, Female 86.7%), Nagaland (Male 71.2%, Female 61.5%), Sikkim (Male 76%, Female 64.4%), Tripura (Male:81%, Female 64.9%) – Census of India, 2001 3 The SPRSS included only statement on low work participation. At appraisal, NSS: 2004 data was available on http://mospi.nic.in/Mospi_New/upl. Urban work participation is Meghalaya (Male 47.7%: Female 23.6%), Mizoram (Male 50.0%, Female 31.0%), Nagaland (Male 47.9, Female 25.9%), Sikkim (Male 77.7%, Female 24.8%), Tripura (Male:53.8, Female 15.4%) 4 Guided by GAP Supplementary Appendix N to Report and Recommendation to the President, this GAP was structured in review missions to Aizawl (April 2017) and Agartala (August 2017) and included in the aide-memoires. It was formally shared with other three state investment program management and implementation units (SIPMIUs) in the same year. This has helped consolidate data and conduct the assessment of the project’s gender empowerment results.

32 Appendix 7

3. To address these gender issues and enable women to benefit equally from the project, the GAP included the following features:

Gender in urban infrastructures and services (i) Awareness campaigns and public consultations per project ULB, with the participation of both women and men, on the project objectives, water connections through the placement of public stand posts (PSP), non-revenue water, and the importance of SWM; (ii) Women’s involvement in awareness generation and exposure programs on source segregation of solid waste in each project ULB; (iii) Identification of FHHs in the service wards of Aizawl and Agartala for provision of metered connections; (iv) Identification of FHHs in service wards of Kohima and Shillong for placement of household bins; (v) Increased employment opportunities for women in civil works; and (vi) Women’s representation in all State Investment Program Management and Implementation Unit (SIPMIUs) and other program management structures at technical and managerial levels.

Enabling Measures (i) Survey per project ULB to identify affected rag pickers including women in the wake of new landfill sites; (ii) Orientation of all civil contractors across components on the gender equality aspects of core labor standards and the mitigation of social and health risks associated with infrastructure development; (iii) Training of staff of SIPMIUs, Urban Development Department (UDD), Municipal Department, Public Health Engineering Department (PHED), and ULBs on (i) gender equality, poverty, and vulnerability issues in urban infrastructure and utility management; and (ii) identification of women’s needs and concerns in accessing municipal services; (iv) Inclusion of gender equality aspect in the study of community water supply through public stand posts (PSPs) to capture women’s views and priorities; (v) Enhancement of the capacity of regional offices in project performance monitoring and gender equality issues in water supply, SWM and sanitation; and (vi) Adequate implementation arrangement and resources for GAP—e.g., gender focal point in SIPMIUs, and social development and gender and development expert (SD/GAD).

D. IMPLEMENTATION, MONITORING, REPORTING ARRANGEMENTS

4. The social safeguards officer in the SIPMIUs in each of the five project ULB, were also appointed as gender focal person to oversee implementation and report on GAP implementation. They were adequately supported by the social safeguards specialists in the design and supervision management consultant (DSMC) in each state. The project rigorously oriented these gender focal persons and the environmental officer and social safeguards officers on (i) gender concepts and ADB GAD policies; 5 (ii) ADB’s approach to GAD in the project cycle; (iii) and analysis of sex-disaggregated information and data. The project collected sex-disaggregated data and submitted the progress reports on GAP implementation regularly. An investment program

5 The gender focal persons had no training in ADB’s gender and development requirements. Hence, the training included a discussion of basic gender concepts and reporting requirements.

Appendix 7 33 coordination cell (IPCC), established in the Ministry of Urban Development (MOUD), Government of India, also provided oversight to GAP implementation and reporting.6 The overall institutional arrangements for the GAP implementation are assessed as adequate and the overall assessment of GAP implementation, monitoring and reporting is assessed as satisfactory.

E. GENDER ACTION PLAN ACHIEVEMENTS

5. As shown in Table 1, 100% of the 4 activities in the GAP were completed, and 100% of the 10 quantitative targets were achieved. As such, GAP implementation was assessed as successful. The practical and strategic gender benefits of GAP implementation are summarized below:

Practical Gender Benefits (i) Women’s increased awareness about water and solid waste management: The Project rigorously involved women in all the project ULBs in awareness generation activities, meetings on the project objectives, water supply, and water management, the importance of SWM, and segregation of solid waste at sources. The 1,174 events and programs covered 213, 391 local community members, of whom 138,033 (65%) were women. (ii) Increased employment opportunities and skill development for women: With the efforts of the SIPMIUs, the project cumulatively (across components) employed 1,588 women, including the affected rag pickers, in civil works related to water supply and SWM infrastructure, and state project implementation structures (SIPMIUs). The women utilized their job to enhance their skills to achieve occupational growth in their respective field. The role of civil contractors was instrumental in the provision of income opportunities to women in such a large number as all these civil contractors (40) were oriented on gender equality aspects of core labor standards and the mitigation of social and health risks associated with infrastructure development. (iii) Provision of water supply and SWM services. It provided 373,720 population in Agartala, Aizawl, Gangtok, and Kohima with an improved water supply and 15,000 households with meters in Aizawl. In Kohima and Shillong, 430,080 population experienced an efficient and healthy SWM services and infrastructure. The region comprises of 49% women’s population.

Strategic Gender Benefits (i) Gender equality in human capital development: Through their involvement in community-led water conservation initiatives, women developed skills and confidence to advocate for their needs and priorities related to safe, reliable, and affordable services. This awakening is considered a transformational shift from traditional gender norms for the urban planners towards recognition of women’s need. For instance, higher quota for women participation was provided in the community participation plans on water supply and SWM components in the project and subsequent tranches. (ii) Women’s economic empowerment: The Project cumulatively created jobs for 1, 588 women with wage parity in civil works related to water supply, SWM, implementation structures created in the project states (SIPMIUs). This benefit is also enumerated as one of the practical benefits; however, the sustained income generation, in the long run, has the potential to challenge the perception that

6 MOUD is renamed Ministry of Housing and Urban Affairs.

34 Appendix 7

women are secondary earners. It promotes women’s holistic empowerment and economic independence, not just an income opportunity. (iii) Enabling institutional environment and institutional capacity in gender mainstreaming. Through 45 training, orientations and cross-learning programs, 842 service providers (297 women)−which included SIPMIU staff, DSMCs, ULBs, and other staff, stakeholders, and public representatives−gained a better understanding on community-based gender equality, poverty, and vulnerability issues in urban infrastructure and utility; and identification of women’s needs in municipal services. The precedence set for gender mainstreaming in the north- eastern region through this project facilitated a paradigm shift towards a gender- inclusive provision of municipal services. This GAP was the first of a few initiatives in the region that influenced technocrats and engineers to recognize women’s distinct needs and priorities in urban planning and services management, which were traditionally associated with men. It influenced the design of customized interventions for women, particularly in the segregation of solid waste (household trash), which encouraged men and women equally to adopt the "3R” -reduce, reuse and recycle- concept which aims for waste minimization and promotion of good health for women who are the prime managers of household water, sanitation, and solid wastes.

Enablers (i) Women’s voice and agency: Women’s representation in public consultations steered to a great extent the planning, operation, and maintenance of urban infrastructure and services created convention among the urban planners to provide women with space to raise their concerns (i.e., water schedules, methods for distribution or connection to water supply, sanitation services, and garbage collection). Facilitation of women’s agency induced minimizing their constraints on access to critical resources and freedom of movement in the public domain. Various public interaction platforms invited a total of 235,824 women. (ii) Focus on identification of female-headed households: The Project efficiently identified 8,948 FHHs (4,562 in Kohima and 4386 in Shillong) in two ULBs for the provision of household bins under SWM components in the next tranche.

Appendix 7 35

Table A7.1: Gender Action Plan Achievements Matrix-Project 1

Activities and Targets Achievements Assessment Part A - Improved Urban Infrastructure and Services A.1. Water Supply expanded and rehabilitated Target 1. Conduct awareness campaigns and public Total of 164 awareness campaigns was conducted in four towns. Table A.1 presents the Target 1 consultations per town on the placement of PSP, participants’ details per town: achieved water user connections, non-revenue water. Table A.1 Participants of Public Awareness Campaigns and Consultations Agartala, Aizawl, Gangtok, Kohima No. of Town Total Women • No. of awareness campaigns and public campaigns consultations per town. All four towns 164 22,560 8,171 (36.22%) Agartala 35 773 552 (71%) Aizawl 26 N/A 200 Gangtok 71 21,327 7,190 (34%) Kohima 32 460 230 (50%)

• Common topics were public health, hygiene education, sanitation principles, segregation of solid waste into biodegradable and non-biodegradable, related community needs and priorities, and the placement of PSP, and water user connections, non-revenue water (where applicable). Other topics and activities were: o Agartala: Water management, sewerage connection, and fecal disposal management. Community group discussions, drawing and slogan competitions on environment protection, good health & hygiene practices in 13 locations were conducted through 13 programs with 777 participants, 50% women. o Gangtok: Members from scheduled caste and scheduled tribes and non-government organizations were also invited in the campaigns. o Kohima: Women’s aspects in water supply; usage and effective management; women’s issues in water supply management and their role. o As per participants’ feedback, the awareness campaigns were highly relevant as the improved water supply infrastructures (water reservoirs, tube wells, distributing network, etc.) under project provided 373,720 people (49% women) in Agartala, Aizawl, Gangtok, and Kohima with improved water supply. 1 Also, it installed 15,000 household meters in Aizawl (including 500 households headed by women). The knowledge imparted to the community contributed to a better management of household, and community water supply. Target 2. Increase employment opportunities for Table A.2 presents the number of women employed in water supply civil works and the number Target 2 women in civil works related to water supply of contractors oriented on the gender equality aspects of core labor standards and mitigation of achieved component and orient all civil contractors across social and health risks associated with infrastructure development. components on gender equality aspects of core labor standards and the mitigation of social and Table A.2 Women Employed and Contractors Oriented

1 The average % of women’s share in the NER population was 49% per Census 2011.

36 Appendix 7

Activities and Targets Achievements Assessment health risks associated with infrastructure Town Women employed Contractors Oriented development. 2 All four towns 1,500 20 Agartala 1,275 11 civil contractors (100%) Agartala, Aizawl, Gangtok, Kohima intermittently for the entire • Number of women/female laborers received project stretch. employment opportunities in civil works related Aizawl 200 intermittently for the Three civil contractors and two consultancy to the water supply component. entire project stretch. contractors (100%) • Number of civil contractors across components Gangtok N/A Two civil contractors and two consultancy oriented on gender equality aspects of core contractors (100%) labor standards. Kohima 25 women for 300 Four civil contractors and two consultancy

workdays contractors (100%) Activity 1. Identify FHHs in the service wards of A total of 1,721 FHHs were identified by the IDC, mobilized under the project. Activity 1 both towns for provision of metered connections 3 Aizawl had 500 FHHs, while Gangtok recorded 1,221 FHHs. The identified FHHs would be completed Aizawl and Gangtok provided with metered connections in the next tranche of NERCCDIP (a multi-tranche facility). • Survey on FHHs carried out in the service wards of both towns by IDC. A.2. Solid Waste Management (SWM) Systems developed Target 3. Conduct awareness campaigns, and Kohima Target 3 public consultations per town on the project • The project organized 38 awareness campaigns and public consultations (1 city level, two achieved objectives, the importance of SWM. village level, and 35 small group level) for 450 participants, (66% are women). The SWM facility with compost plant and sanitary landfill was developed at Lerie near Kohima village, Kohima and Shillong and the public consultations helped clear the apprehensions of the villagers residing near the • Number of awareness program conducted in site. each town. Shillong • Total number of participants. • The project organized 668 awareness campaigns and public consultations with 118,034 • Total number of female participants. participants (74% are women). • The SWM facility with compost plant and sanitary landfill was developed in the town, and the public consultation was conducted to win the residents’ confidence and a sense of ownership residing in the proximity of the site. Activity 2. Conduct 1 survey per city to identify Kohima Activity 2 FHHs for placement of bins • Out of 28,437 households identified by the benefit monitoring surveys for the provision of achieved Kohima and Shillong dry & wet waste bins, 4,562 were FHHs. • One survey per city conducted [a total of two Shillong surveys] to identify FHHs for the placement of bins.

2 Covered labor standards were (i) the provision of equal pay for work of equal value, (ii) promotion of the well-being and better quality of life for women, incl. scheduling for construction works for women; (iii) prevention of child labor; (iii) adoption of special measures for controlling STD, HIV/AIDS, etc.; (iv) resolution of all issues/grievances of women and children involved directly or indirectly with the construction activities; and (v) reporting of all cases of women exploitation or abuse to the social and resettlement cell. 3 Registrar General & Census Commissioner of India, 2011, defines a FHH as a household where a woman generally bears the chief responsibility for household maintenance and decision-making.

Appendix 7 37

Activities and Targets Achievements Assessment • 4,386 FHHs were identified under the project. • The project benefitted 430,080 persons (49% women) in Kohima and Shillong with improved SWM (footnote 7). Activity 3. Conduct 1 survey per town to identify Kohima Activity 3 affected rag pickers including women in the wake of • 20 ragpickers were identified, 5 of whom were women. All of them were employed in the completed new landfill sites dumping site of Kohima City for 110 days. Kohima and Shillong • The SWM dumping site was equipped with toilets, drinking water, etc. • One survey per town conducted [total two surveys] to identify affected rag pickers, Shillong including women in the wake of new landfill • 25 ragpickers were identified, of the total 23 were women. The women ragpickers were sites [Target: 1 list containing town-wide provided with income activities at the solid waste treatment plant (STP). affected rag pickers disaggregated by sex]. Target 4. Increase employment opportunities for • 20 women laborers were employed for 110-worker days in the construction site of the SWM Target 4 women in civil works related to the construction of facility at Lerie in Kohima, and 20 women laborers employed in the construction site of the completed SWM infrastructure and orient all civil contractors SWM facility in Shillong. on gender equality aspects of core labor standards • All (two) civil contractors in Kohima and one civil contractor in Shillong, were and the mitigation of social and health risks oriented on the gender equality aspects of core labor standards and the mitigation of associated with infrastructure development. social and health risks associated with infrastructure development. Kohima and Shillong • Employment opportunities for women in civil works related to SWM component increased (number of female laborers). Part B: Institutional Development and Investment Program Management Strengthened B.1. Urban institutional, financial, service delivery reforms undertaken, and municipal capacities strengthened Target 5. Sensitize AMC and SMB staff on O&M of • In Agartala, two training programs were organized for 75 staff and other stakeholders, 21 Target 5 services, financial management, and regulation (28%) of whom were women at various levels in different government departments, i.e., achieved enforcement. UDD, SIPMIU, AMC, DSMC, NGOs, DWS, SHGs, and some active community members Agartala and Shillong: • In Shillong, 15 training programs were organized for 387 project staff, 175 of whom were • Number of sensitization program conducted in women staff at various levels in different government departments. each town. • In both Agartala and Shillong, the training program aimed to (i) build and strengthen the • Total number of participants. capacity of staff and stakeholders on gender-responsive project management; and (ii) provide • Total number of female participants. technical support to SIPMIU in organizing community consultations on hygiene education; community (including women’s) needs and priorities in water supply, waste collection, and other urban services. In Shillong, the training also aimed to develop capacity in O&M of services, financial management, and regulation enforcement. B. 2. Public Utility Management Improved Target 6. Train SIPMIU, UDD, PHED, and ULB on • In Agartala, the topics for Target 6 were incorporated in the two training programs held for Target 6 (i) community based- infrastructure and utility Target 5—as stated, participants were 75 AMC, staff, and other stakeholders, 21 (28%) of achieved management; (ii) basic concepts of sanitation, whom were women staff at various levels in different government departments such as health and hygiene; (iii) gender equality, poverty, UDD, SIPMIU, AMC, DSMC, NGOs, DWS, and SHGs and vulnerability issues in urban infrastructure and • In Shillong, 22 training programs were organized for 309 SMB staff, and other stakeholders, utility management; (iv) identification of women’s 89 of whom were women staff at various levels in different government departments.

38 Appendix 7

Activities and Targets Achievements Assessment needs and concerns in accessing municipal • Topics of the training in both Agartala and Shillong included (i) community-based- services; slum development issues. infrastructure and utility management; (ii) basic concepts of sanitation, health and hygiene; (iii) gender equality, poverty, and vulnerability issues in urban infrastructure and utility Agartala and Shillong: management; (iv) identification of women’s needs and concerns in accessing municipal • Number of training programs conducted. services; slum development issues. In Agartala, also discussed was the of indicators in the • Total number of participants. design of the study of PSP contributing to capture women’s views and priorities in the final • Total number of female participants. report. Activity 4. Include indicators in the design of the Agartala and Shillong Activity 4 study of PSPs contributing to capture women’s The assessment study reports were prepared in both towns. The reports incorporated women’s completed views and priorities in the final report views and priorities in the placement of PSPs. Women’s preference informed the schedule and Agartala and Shillong: length of the public water supply. • The report finalized incorporating women’s aspects and their priorities. B.3 Public Awareness Increased4 Target 7. Achieve women’s involvement in Table B.1 shows the number of awareness generation and exposure events conducted in all five Target 7 awareness generation and exposure programs in cities and the participants, included women participants, in all five cities. achieved each city on the segregation of solid waste at sources. Table B.1 Women Participants in Awareness Generation and Exposure Events on Solid Waste Segregation at Source In all five cities No. of Town Total Participants Women • No. of awareness generation and exposure Events programs conducted in each city on segregation Total of five towns 246 71,570 41,832 (58.45%) of solid waste at sources. Agartala 55 206 147 (71%) • Total number of participants. Aizawl 26 N/A 200 • Total number of female participants. Gangtok 50 21,327 7,190 (34%) Shillong 54 48,264 36,200 (75%) Kohima 61 1,720 1,109 (64%)

• A common topic was the segregation of solid waste at sources (with exposure). In Agartala, the other topics were (i) Government of Tripura’s decisions to create ULB in all project towns: (ii) significance of segregation of solid waste at sources (iii) collection points for segregated trash by AMC; (iv) community-based infrastructure and utility management; (v) basic concepts of sanitation, health, and hygiene; (vi) gender equality, poverty, and vulnerability issues in urban infrastructure and utility management; and (vii) identification of women’s needs and concerns in accessing municipal services; slum development, etc. B.4. Investment Program Capacity Developed

4 During the mid-term review mission held on 12-16 June 2012, the DMF was revised and the GAP activity, “ensure women’s participation in all public awareness campaigns to generate acceptance of village leaders for the creation of ULB in all project towns” and its performance indicators were dropped.

Appendix 7 39

Activities and Targets Achievements Assessment Target 8. Prepare on-the-job capacity building program • In Agartala, the topics for Target 8 were incorporated in the two training programs for Targets Target 8 for implementation; develop SIPMIUs’ capacity on 5 and 6. In addition to the 75 staff (including 21 women) who attended these programs, select achieved consultant recruitment/management, procurement, active community members (including seven women and one from scheduled caste, and one contract management, and disbursement management; from scheduled tribe) also participated. The programs for the same participants were divided enhance the capacity of project regional offices in into topics. (water, solid waste, sanitation, project management and gender mainstreaming) performance monitoring and gender equality issues in • In Aizawl, one workshop for SIPMIU staff was organized, which covered 34 staff, 11 of water supply, SWM and sanitation. whom were female staff (32%). In all five cities • In Gangtok, two training programs for SIPMU staff organized, 20 (all) staff trained. • Number of induction programs conducted. • In Shillong, three workshops for SIPMIU staff were held, which covered 17 staff, 6 of whom • Total number of participants. were female staff (35%), The common topics were on gender-sensitive consultant • Total number of female participants. recruitment/management, procurement, and contract management, disbursement management, project and performance monitoring, safeguards compliance, and gender equality issues in water supply, SWM, and sanitation. Target 9. Deploy 1 GFP at each SIPMIU for GAP Agartala, Aizawl, Gangtok, Kohima, and Shillong Target 9 supervision and coordination and 1 Social 1 GFP in each of five SIPMIUs (total 5) and 1 Social Safeguard and Gender Specialist in each achieved Development (SD) /Gender and Development SIPMIU (total 5) at DSMCs supported the GAP implementation throughout the project period. (GAD) Expert ( (Total: 10), all GFP and Social Development/Gender and Development Expert oriented on key gender-related concepts, ADB’s approach to GAD in its project cycle, and analysis of sex-disaggregated information and data. In all five cities: 1 Gender Focal Person and 1 Social Development /Gender and Development staff mobilized and oriented. Target 10. Achieve 33% women’s representation in Agartala SIPMIU 3 out of 14 staff were women (28%) Target 10 all SIPMIUs and program management structures Aizawl SIPMIU 16 out of 47 staff are women (34%) achieved at technical and managerial levels. Gangtok SIPMIU 7 out of 20 staff are women (35%) In all five cities Shillong SIPMIU 6 out of 17 staff are women (35%) • % of women’s representation in all SIPMIUs and Kohima SIPMIU 7 out of 17 staff are women (35%) program management structures at technical

Total 38 out of 117 staff are women (32.4%) and managerial levels. Overall GAP Assessment: Successful5 AMC = Agartala Municipal Corporation, DSMC = design supervision, and management consultant, DWS = Department of Water Supply, FHH = female-headed household, GAD = gender and development, GAP = Gender Action Plan, GFP = gender focal point, IDC=institutional development consultant, NGO =nongovernment organization, O&M = operation and maintenance, PHED = Public Health Engineering Department, PSP = Public Stand Post, SHG = self-help group, SIPMIU = State Investment Program Management and Implementation Unit, SWM = solid waste management, UDD = Urban Development Department, ULB = urban local body.

5 4/4 activities completed (100%), 10/10 quantitative targets achieved [100%]. One activity, under B.3 Public Awareness Increased, discounted.

40 Appendix 7

F. EVIDENCE OF PROJECT OUTCOMES ON WOMEN

6. To provide evidence to the practical and strategic gender benefits of women from the implementation of the GAP (para. 7), the PCR team collected the following testimonials from select women beneficiaries (Boxes 1-2). These testimonials are classified into two GEWE areas mentioned in para. 7: human capital development leading to economic empowerment, and increased voice in community decision making, reduced timed poverty of women, and participation and representation in decision-making:

Box 1 Reduced timed poverty of women Before the new water Reservoir, sources of water for us were Rainwater, streams, tank water/ bought water from natural open source and Public Health Engineering (PHE) Department. However, the water from these sources was considered unsafe for drinking and domestic usage. The new water reservoir under the project in 7th Day Tlang, Chawnpui has provided 100% of the households with tap water supply connections. We now use treated water from PHE Department rather than other natural open sources. The clean drinking water available in our community is sufficient to meet our daily needs. It has significantly saved us time spent on fetching water and reduced routine drudgery. It has also ushered in a sense of self-respect and security for me and thousands of other women residents of the municipal areas under the jurisdiction. Besides, we have experienced that the incidence of water borne diseases among household members, especially children has reduced ever since the new connections were installed. Ms. P.C. Lalrosiami, Chawnpui Veng, Aizawl Municipal Corporation (West): Source: in-depth beneficiary interview.

Box 2. Better Health Leads to Human Development Our house is situated just below the road facing the garbage disposal point. We vividly recollect how irregularly the garbage would be collected. The residents used to dump their wastes there erratically and intermittent collection would result in the heaps of scraps for six to seven days at times. The situation used to get worse when stray animals, rain and wind scattered the litters in the surrounding. The stench from the wastes was too difficult for residents, especially for women were more exposed to it 24x7. It posed severe threats to health. The SIPMIU mobilized us in the awareness programs in the neighborhoods on waste management which contributed a big way in changing our behavior on trash management at households as well as the community level. We acknowledged that our reckless behavior towards waste management was also exacerbating the situation. Besides training on waste reduction, management, and segregation between biodegradable and non- biodegradable , and behavior change, we also benefitted with two-colored trash bins to segregate dry and wet wastes. The designated trucks with different compartments was introduced to collect household thrash. Now the garbage truck collects door to door wastes twice a week. The project interventions have made our life more comfortable, healthier and more environment-friendly, and cleaner. We now live with hygiene and dignity. The incidence of water-borne diseases has also reduced among the family member, especially children. Mrs. Khriezotuonuo Rupreo-U, Officers Hill ward No10. Kohima, covered under Solid Waste Management Tranche1 Kohima (Loan 2528) - Source. Interview and discussion on 15 June 2020.

G. CONCLUSIONS

7. GAP strived to address the gender equality issues identified at project appraisal by including gender equality targets in the project components (e.g., infrastructure construction, service provision, community consultations, and employment opportunities generation). This response to the gender issues in water and SWM practices boosted the relevance of the GAP.

8. GAP is rated effective as 100% of activities have been completed and all the targets have been achieved. The awareness campaigns and public consultations under the project led to the participation of both women and men in the project activities. Women were actively involved in hands-on training on the segregation of solid waste at sources. The household surveys identified FHHs for the provision of metered connections and household waste bins for the subsequent tranche of NERCCDIP. The project generated employment opportunities for women in civil works related to water supply and SWM infrastructure, and in the dumping sites; and facilitated women’s representation in SIPMIUs. It oriented civil contractors on the gender equality aspects of core

Appendix 7 41 labor standards, and the project staff and stakeholders on the effective identification of women’s needs and concerns in accessing municipal services and on gender equality, poverty, and vulnerability issues in urban infrastructure and utility management.

9. GAP activities and achievements under the project enabled mainstreaming gender in the subsequent tranches of NERCCDIP and other projects taken up by the DWS and PHED in the project cities. The measures planned for institutionalization to ensure sustainability of project interventions beyond the footprint of the facility were (i) training of 842 service providers, including the SIPMIUs, DSMCs, and ULBs, in gender mainstreaming (including identifying women’s needs to achieve empowerment) in urban planning and service management and in the construction, operations and maintenance of urban infrastructure and utilities related to water supply and SWM; (ii) orientation of contractors on the gender aspects of the core labor standards; (iii) ensuring the representation of women in SIPMIUs; and (iv) inclusion of gender indicators in the placement of PSPs. Based on these enabling factors, GAP achievements under the project are rated as likely sustainable.

42 Appendix 8

SAFEGUARDS

1. Safeguards implementation arrangements. The investment program coordination cell (IPCC) established within the Ministry of Urban Development (MOUD), the national level Executing Agency (NEA) for the Investment Program, included social and environmental safeguard specialists for monitoring of safeguards provisions of the project. The environmental officer and social safeguards officer in the state investment program management and implementation units (SIPMIUs), established in each of the five program cities, oversaw implementation and reported on the compliance to project environment and social safeguard requirements. They were adequately supported by the environmental specialist and social safeguards specialist in the design and supervision management consultant (DSMC) in each state. During implementation, no change in institutional arrangement for safeguards was required, as the arrangement proposed in appraisal was adequate. The overall institutional arrangements for the management of safeguards are assessed as adequate and the overall assessment of safeguard implementation, monitoring and reporting is assessed as satisfactory.

2. Information disclosure and grievance redress. A grievance redress mechanism was established in all the project cities to address project-related grievances as per the environment assessment and review framework and resettlement framework prepared for the investment program. There were no resettlement related grievances during project implementation. Community consultation, involvement and information sharing were successful features of the project and ensured community support for the project interventions.

3. Monitoring and reporting. The social and environmental safeguards monitoring reports adequately captured the status of safeguard implementation, were periodically submitted and disclosed on ADB website. The project authorities confirmed that there are no outstanding issues and/or any court cases related to social or environmental safeguards at completion. Overall, the safeguards compliance was assessed to be satisfactory.

4. Compliance with Loan Covenants. The project complied with all loan covenants related to safeguards.

Social Safeguards

5. Project 1 was classified as ‘B’ for involuntary resettlement and as category ‘C’ for indigenous peoples' development. ADB’s Environment Policy 2002 and Involuntary Resettlement Policy 1995 were applicable. A resettlement framework and indigenous peoples' development framework were prepared for the MFF. A resettlement plan was prepared for Gangtok water supply subproject during loan processing. Indigenous Peoples report was not prepared for Project 1 as there was no impact on indigenous peoples due to any subproject in any of the five project cities.

6. There was no land acquisition or involuntary resettlement involved in implementation of subprojects in Agartala, Kohima, Shillong and Aizawl; and these subprojects continued to be categorized ‘C’ for involuntary resettlement. There was no negative impact on vulnerable groups; and Indigenous Peoples were not impacted under any subproject. All subprojects were constructed on vacant government land and did not involve land acquisition. The resettlement plan for the Gangtok water supply subproject envisaged potential temporary impacts on livelihoods caused by disruptions to access to businesses due to laying of pipelines along right- of-way. These temporary impacts were avoided by design changes to realign pipelines and by scheduling construction during weekly business holidays and night shifts. As there were no

Appendix 8 43 temporary impacts during construction, compensation payment was not required. There was no temporary loss or disruption of business during implementation of any subprojects, and hence, compensation was not required to be paid. There were no unanticipated impacts during or after construction of any subproject. Consultation activities for the implementation of social safeguards were effectively carried out. Further to avoidance of all temporary impacts, the project could have been recategorized as category “C” for involuntary resettlement upon completion. The advantage of involuntary resettlement categorization as “B” was that it led to an assessment of design alternatives and stringent monitoring during construction, that ultimately enabled impact avoidance.

Environmental Safeguards

7. The ADB-approved environment category of the Project was “B” in line with ADB’s Environment Policy, 2002. The initial environmental examination (IEE) reports for all six subprojects spread over five project cities were prepared and updated as required during implementation: (i) Gangtok water supply subproject, (ii) water supply subprojects in Aizawl, Kohima and Agartala, (iii) Kohima solid waste management (SWM) subproject, and (iv) Shillong SWM subproject. The requisite environmental permissions as per India’s environmental regulatory framework such as permissions to cut trees, no objection certificates, etc. were obtained from the respective regulatory agencies.

8. The contract documents included the environmental monitoring and management plans (EMMPs), which were systematically executed and monitored. IEEs were updated for (i) Kohima water supply subproject for change in location of eight water tanks, and (ii) Kohima SWM subproject to reflect inclusion of minor additional works within the existing premises. Both these changes did not result in change of impact or risks and did not require recategorization of the subprojects. Compliance was reported regularly through semi-annual environmental monitoring reports and were disclosed on ADB website. Safety measures at sites, provision of basic amenities to laborers, housekeeping practices, etc. were adequate. The overall implementation of EMMPs was adequate and there are no outstanding environmental safeguards issues in the Project.

Impacts and Lessons Learnt

9. Water supply and sanitation interventions under the project have improved access to community water resource and basic municipal services, thereby reducing developmental inequities and directly benefitting the poor through improved health and access to economic opportunities. Care in project ideation and design played a significant role in avoiding resettlement impacts under the project and expedited implementation due to avoidance of land acquisition. Stakeholder participation and community consultations in structuring construction schedules avoided livelihoods impacts and generated community support for the project. The sanitary landfills developed under Project 1 significantly contributed to arrest environmental degradation and conservation of Himalayan ecosystems.

44 Appendix 9

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Reference in Covenant Loan Agreement Status of Compliance Project management and implementation Central level – National-level Project Executing Agency MOUD shall be the national-level Project Executing Agency LA, Schedule 5, Complied with. para. 1 National Steering Committee Within three (3) months of the Effective Date, MOUD shall establish LA, Schedule 5, Complied with. an NSC to monitor the use of funds under the Project as well as para. 2 overall Project performance. The NSC shall be chaired by the Secretary MOUD and comprise representatives of DEA, the Ministry for Development of the North Eastern Region, the Planning Commission, and representatives of each State. The NSC shall meet whenever necessary, but not less than once every quarter Investment Program Coordination Cell The IPCC established within MOUD shall at all times during Project LA, Schedule 5, Complied with. implementation be headed by an Investment Program Manager para. 3 who shall be supported by at least one administrative and financial official, one technical official, and one official responsible for environmental and social issues. The IPCC shall be supported by a team of program management and monitoring consultants, to be headed by an experienced urban development or municipal engineering expert and including an urban management and finance specialist as well as a management information systems specialist. The IPCC shall be responsible for (i) reporting to ADB on LA, Schedule 5, Complied with. Investment Program and Project implementation progress; para. 4 (ii) preparing and submitting to ADB consolidated quarterly reports; (iii) consolidating payment and reimbursement requests; (iv) coordinating policy-related activities and ensuring that actions highlighted during NSC meetings are acted upon; (v) preparing the overall Investment Program implementation plan and consolidated annual work plans; (vi) coordinating training programs and allocations for each of the States; (vii) conducting monitoring and evaluation activities to ensure compliance with Loan covenants and agreed targets; and (viii) designing and implementing Investment Program performance management system surveys. State-level Project Executing Agencies Each State shall have a SEA as follows: (i) for Meghalaya: its Urban LA, Schedule 5, Complied with. Affairs Department; (ii) for Mizoram: its Urban Development and para. 5 Poverty Alleviation Department; (iii) for Nagaland: its Urban Development Department; (iv) for Sikkim: its Urban Development and Housing Department; and (v) for Tripura: its Urban Development Department. State Steering Committee and Investment Program Empowered Committee Within three (3) months of the Effective Date, each State shall have LA, Schedule 5, Complied with. established an SSC and an IPEC. Each SSC shall be chaired by para. 6 the of the concerned State and comprise relevant Secretaries and Heads of Department of such State. The SSC shall meet quarterly to (i) review progress on Project implementation; (ii) provide policy guidance; (iii) advise on matters that affect the scope or cost of the Project, as well as on matters related to the Urban Reform Program; and (iv) facilitate inter-agency coordination

Appendix 9 45

Reference in Covenant Loan Agreement Status of Compliance Each IPEC shall be chaired by the Secretary of the concerned SEA LA, Schedule 5, Complied with. and comprise representatives from ULBs and relevant departments para. 7 of the concerned State. Each IPEC shall decide on matters related to the implementation of the Project that do not affect its scope or cost. The IPEC shall meet whenever needed, at the request of any IPEC member. The Program Director shall be the IPEC's member- secretary. State Investment Program Management and Implementation Unit The SIPMIU established in each State shall at all times during LA, Schedule 5, Complied with. Project implementation be headed by a full-time Project Director para. 8 who shall be a senior civil servant authorized to make any decision affecting the Project at State level. S/he shall be assisted by a full- time Deputy Project Director, a senior administration officer, a senior accounts officer, technical and engineering staff, a public relations officer, and a management information systems specialist. Each of the senior staff shall be supported by sufficient qualified junior staff. Each SIPMIU shall establish small engineering cells, as needed, with staff deputed from relevant departments and ULBs. Each engineering cell, headed by a superintending or executive engineer, shall be responsible for designing, contracting, supervising, and administering the work of that cell. Each SIPMIU shall be responsible for overall management and LA, Schedule 5, Partly complied with. implementation of the Project in its respective State, including (i) para. 9 Submission of audit recruiting consultants and NGOs; (ii) carrying out detailed surveys, reports were delayed. investigations, and engineering designs of investment activities prior to starting any tendering process; (iii) coordinating with agencies and obtaining all required statutory clearances; (iv) conducting all aspects of the procurement process in compliance with ADB's Procurement Guidelines; (v) ensuring compliance with Loan covenants; (vi) administering the contracts of consultants and contractors, certifying payments and preparing change orders; (vii) submitting disbursement requests to MOUD for forwarding to DEA for onward transmission to ADB; (viii) timely submitting reports, including audit reports, to the IPCC and ADB; (ix) supervising the implementation of the gender action plan for the Project as well as other social activities; (x) guiding awareness campaigns and participation programs; (xi) organizing and operating state-level Project performance monitoring systems, including collecting data for key indicators and conducting baseline and completion surveys; (xii) reviewing and facilitating the progress of the Urban Reform Program; and (xiii) designing and organizing capacity building programs. Financial and institutional issues The Borrower and the States shall ensure sufficient funds shall be LA, Schedule 5, Complied with. allocated to meet all operation and maintenance costs for all assets para. 10 created under the Investment Program. MOUD shall ensure that any claims received from any of the States LA, Schedule 5, Complied with. in relation to the Project, shall be reimbursed within 30 calendar para. 11 days after receiving such claim. Within three (3) months of the Effective Date, MOUD and the States LA, Schedule 5, Complied with. shall have established a Project website, including for procurement para. 12 issues. The website shall include at a minimum the following information: (i) bidding procedures, bidders, and contract awards for the Project; (ii) use of the funds disbursed under the Project; and (iii) decisions of the SSC.

46 Appendix 9

Reference in Covenant Loan Agreement Status of Compliance The Borrower and the States shall undertake, through their internal LA, Schedule 5, Complied with. audit wing, annual financial audits, including the investigation of all para. 13 financial records and transactions. The Borrower and the States shall ensure that all contracts financed LA, Schedule 5, Complied with. by ADB for the Project shall include provisions stipulating ADB's para. 14 right to examine the records and accounts of the contractor. Policy Reforms Each SEA shall fully and timely implement all actions specified in LA, Schedule 5, Partly complied with. the Urban Institutional, Financial, Regulatory, and Operational para. 15 Urban reforms program, in Program agreed between the Borrower, the States, and ADB and far as it is applicable to which is included in Appendix 12 to the RRP, in as far as it is Project 1 as defined by the applicable to this first Project under the Facility. updated DMF, have been complied with except for actions related to strengthening of property tax yields in Shillong. Project scope The Borrower and the States shall ensure that in the event there LA, Schedule 5, Complied with. are any changes to the Project scope as described in Schedule 1 para. 16 to this Loan Agreement, those changes shall be made in conformity with the selection criteria as set out in schedule 4 to the FFA. Environmental issues The Borrower and the States shall ensure that the design, LA, Schedule 5, Complied with. construction, operation and implementation of the Project facilities para. 17 are carried out in accordance with the EARF, the applicable IEEs as attached to Annex 5 to the PFR, and complies with the Borrower’s environmental laws and regulations and ADB’s Environment Policy (2002). The States shall ensure environmental mitigation measures shall be incorporated in bidding documents and civil works contracts. The IPCC shall prepare and submit annually to ADB an LA, Schedule 5, Complied with. environmental monitoring report that describes (a) progress in para. 18 implementation of the EARF and environmental management plan; and (b) problems encountered and measures adopted. Within nine (9) months of the Effective Date, each SIPMIU shall LA, Schedule 5, Complied with. publicize and make available information on water and effluent para. 19 discharge testing. This shall include posting of testing results in municipality offices in a place visible to all visitors. Resettlement The Borrower and the States shall ensure that, where applicable, LA, Schedule 5, Complied with. all land and right-of-way required for the Project shall be made para. 20 available in a timely manner, adequate compensations are provided prior to the signing of relevant civil works contracts, and involuntary resettlement is carried out in accordance with the resettlement framework (RF) and the resettlement plan for the Project, as attached to Annex 5 of the PFR, the Borrower’s National Policy on Resettlement and Rehabilitation, ADB’s Policy on Involuntary Resettlement (1995), and applicable laws and regulations of the Borrower and the States.

Appendix 9 47

Reference in Covenant Loan Agreement Status of Compliance Indigenous People In the event any issues related to indigenous people arise in the LA, Schedule 5, Complied with. course of Project implementation, the Borrower and the States shall para. 21 ensure to address those issues in accordance with the applicable laws and policies of the Borrower, ADB's Policy on Indigenous Peoples (1998) and the Indigenous Peoples Development Framework for the Facility as agreed between the Borrower, the States and ADB and incorporated by reference into Schedule 5 to the FFA. Other Social issues The Borrower and each State shall ensure to fully implement the LA, Schedule 5, Complied with. gender action plan for the Investment Program as it applies to the para. 22 Project. The Borrower and the States shall ensure to take all appropriate LA, Schedule 5, Complied with. and necessary measures to encourage adequate representation of para. 23 all sections of society in ULBs. The Borrower and the States shall ensure that all civil works LA, Schedule 5, Complied with. contractors comply with all applicable labor laws, including those on para. 24 occupational health and safety, equal pay for work of equal value between men and women, and do not employ child labor, as defined in national legislation, for construction and maintenance activities. Within six (6) months of the Effective Date, each State shall have LA, Schedule 5, Complied with. established a grievance reporting and redressal mechanism. para. 25 Construction supervision, recording, and reporting Within three (3) months of the Effective Date, each SEA shall have LA, Schedule 5, Complied with. approved a timebound plan, with budget allocation, to strengthen para. 26 construction supervision, recording, and reporting systems through the use of modern technology. Each SEA shall establish a quality control cell and operationalize an internal third-party technical audit mechanism. All Works contracts shall include provisions for third party inspection for quality control. Project Performance Monitoring and Evaluation Within three (3) months of the Effective Date, IPCC shall have LA, Schedule 5, Complied with. established an Investment Program performance monitoring para. 27 system (IPPMS) that shall be used to monitor and evaluate each project under the Facility, including the current Project. The IPPMS shall include: (i) procedures and data collection and reporting; (ii) performance indicators for physical infrastructure, capacity development, and program management support; and (iii) target dates for reaching the performance indicators. Within six (6) months of the Effective Date each State, through its SIPMIU, shall have established baseline indicators for each target. The Borrower, the States, and ADB shall jointly review the Project LA, Schedule 5, Complied with. at least twice a year and conduct a detailed mid-term review para. 27 towards the end of the third year of Project implementation. Use of Proceeds of the Loan The Borrower shall make the proceeds of the Loan available to LA, Article III, Complied with. MOUD and the States upon terms and conditions mutually Section 3.01 (a) agreeable between ADB and the Borrower and shall cause MOUD and the States to apply such proceeds to the financing of expenditures on the Project in accordance with the provisions of this Loan Agreement and the Project Agreements.

48 Appendix 9

Reference in Covenant Loan Agreement Status of Compliance Of the Loan proceeds, the Borrower shall provide to MOUD and LA, Article III, Complied with. each State amounts as set out in the Attachment to Schedule 3 of Section 3.01 (b)a the Loan Agreement. The Goods, Works and consulting services and other items of LA, Article III, Complied with. expenditure to be financed out of the proceeds of the Loan and the Section 3.02 allocation of amounts of the Loan among different categories of such Goods, Works and consulting services and other items of expenditure shall be in accordance with the provisions of Schedule 3 to this Loan Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and ADB. Except as ADB may otherwise agree, all Goods, Works and LA, Article III, Complied with. consulting services to be financed out of the proceeds of the Loan Section 3.03 shall be procured in accordance with the provisions of Schedule 4 to this Loan Agreement. ADB may refuse to finance a contract where Goods, Works or consulting or services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB. Except as ADB may otherwise agree, the Borrower shall cause all LA, Article III, Complied with. Goods, Works and consulting services financed out of the proceeds Section 3.04 of the Loan to be used exclusively in the carrying out of the Project. The closing date for withdrawals from the Loan Account for the LA, Article III, Complied with. purposes of Section 9.02 of the Loan Regulations shall be 30 April Section 3.05 2016 or such other date as may from time to time be agreed between the Borrower and ADB. Particular Covenants The Borrower shall cause MOUD and each State to carry out the LA, Article IV, Complied with. Project with due diligence and efficiency and in conformity with Section 4.01 (a) sound administrative, financial, engineering, environmental, governance and urban development practices. In the carrying out of the Project and operation of the Project LA, Article IV, Complied with. facilities, the Borrower shall perform, or cause to be performed, all Section 4.01 (b) obligations set forth in Schedule 5 to this Loan Agreement. The Borrower shall make available to MOUD and each State, LA, Article IV, Complied with. promptly as needed, the funds, facilities, services, land and other Section 4.02 resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project. The Borrower shall ensure that the activities of its departments and LA, Article IV, Complied with. agencies with respect to the carrying out of the Project and Section 4.03 operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures. The Borrower shall take all action which shall be necessary on its LA, Article IV, Complied with. part to enable MOUD and each State to perform its obligations Section 4.04 under the Project Agreement, and shall not take or permit any action which would interfere with the performance of such obligations. The Borrower shall exercise its rights under the financing LA, Article IV, Complied with. arrangements between the Borrower and the States in such a Section 4.05 (a) manner as to protect the interests of the Borrower and ADB and to accomplish the purposes of the Loan. No rights or obligations under the financing arrangements shall be LA, Article IV, Complied with. assigned, amended, abrogated or waived without prior notice to Section 4.05 (b) ADB.

Appendix 9 49

Reference in Project Agreement with the five Covenant program States Status of Compliance Particular Covenants MOUD and the State shall carry out the Project with due diligence PA, Article II, Complied with. and efficiency, and in conformity with sound administrative, Section 2.01 (a) financial, engineering, environmental, governance and urban development practices. In the carrying out of the Project and operation of the Project PA, Article II, Complied with. facilities, MOUD and the State shall perform all obligations set forth Section 2.01 (b) in the Loan Agreement to the extent that they are applicable to MOUD and the State MOUD and the State shall make available, promptly as needed, the PA, Article II, Complied with. funds, facilities, services, equipment, land and other resources Section 2.02 which are required, in addition to the proceeds of the Loan, for the carrying out of the Project. In the carrying out of the Project, MOUD and the State shall employ PA, Article II, Complied with. competent and qualified consultants and contractors, acceptable to Section 2.03 (a) ADB, to an extent and upon terms and conditions satisfactory to ADB. Except as ADB may otherwise agree, all Goods, Works and PA, Article II, Complied with. consulting services to be financed out of the proceeds of the Loan Section 2.03 (b) shall be procured in accordance with the provisions of Schedule 4 to the Loan Agreement. ADB may refuse to finance a contract where Goods, Works or consulting services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB. MOUD and the State shall carry out the Project in accordance with PA, Article II, Complied with. plans, design standards, specifications, work schedules and Section 2.04 construction methods acceptable to ADB. MOUD and the State shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request. MOUD and the State shall take out and maintain with responsible PA, Article II, Complied with. insurers, or make other arrangements satisfactory to ADB for, Section 2.05 (a) insurance of Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice. Without limiting the generality of the foregoing, MOUD and the Sate PA, Article II, Complied with. undertakes to insure, or cause to be insured, the Goods to be Section 2.05 (b) imported for the Project and to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods. MOUD and the State shall maintain, or cause to be maintained, PA, Article II, Complied with. records and accounts adequate to identify the Goods, Works and Section 2.06 consulting services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition. ADB, MOUD, and the State shall cooperate fully to ensure that the PA, Article II, Complied with. purposes of the Loan will be accomplished. Section 2.07 (a)

50 Appendix 9

Reference in Project Agreement with the five Covenant program States Status of Compliance MOUD and the State shall promptly inform ADB and the Borrower PA, Article II, Complied with. of any condition which interferes with, or threatens to interfere with, Section 2.07 (b) the progress of the Project, the performance of its obligations under this Project Agreement or the financing arrangement, or the accomplishment of the purposes of the Loan. ADB, MOUD, and the State, shall from time to time, at the request PA, Article II, Complied with. of either party, exchange views through their representatives with Section 2.07 (c) regard to any matters relating to the Project, MOUD, the State, and the Loan. MOUD and the State shall furnish to ADB all such reports and PA, Article II, Complied with. information as ADB shall reasonably request concerning (i) the Section 2.08 (a) Loan and the expenditure of the proceeds thereof; (ii) the Goods, Works and consulting services and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of MOUD and the State; and (v) any other matters relating to the purposes of the Loan. Without limiting the generality of the foregoing, MOUD and the State PA, Article II, Complied with. shall furnish to ADB quarterly reports on the execution of the Project Section 2.08 (b) and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter. Promptly after physical completion of the Project, but in any event PA, Article II, Complied with. not later than three (3) months thereafter or such later date as ADB Section 2.08 (c) may agree for this purpose, MOUD and the State shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by MOUD and the State of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan. MOUD and the State shall (i) maintain separate accounts for the PA, Article II, Partly complied with. The Project; (ii) have such accounts and related financial statements Section 2.09 (a) submission of (balance sheet, statement of income and expenses, and related consolidated audited statements) audited annually, in accordance with appropriate project financial auditing standards consistently applied, by independent auditors statements for the five whose qualifications, experience and terms of reference are program states and EA acceptable to ADB; and (iii) furnish to ADB, through MOUD, were delayed throughout promptly after their preparation but in any event not later than nine project period due to (9) months after the close of the fiscal year to which they relate, delays in consolidation. certified copies of such audited accounts and financial statements Out of 66 APFS to be and the report of the auditors relating thereto (including the auditors' submitted, 6 APFS are opinion on the use of the Loan proceeds and compliance with the not yet due, 3 APFS are covenants of the Loan Agreement as well as on the use of the yet to be submitted and 3 procedures for imprest account/statement of expenditures), all in APFS need to be re- the English language. MOUD and the State shall furnish to ADB submitted. Submission of such further information concerning such accounts and financial APFS for FY2020 is due statements and the audit thereof as ADB shall from time to time by 31 March 2021. Out of reasonably request. 54 accepted APFS, 17 reports were submitted on time while rest 37

Appendix 9 51

Reference in Project Agreement with the five Covenant program States Status of Compliance reports were delayed. Audit opinions issued were mostly unqualified, with only 2 reports qualified. Specific opinions on use of funds were issued in most cases however there were instances of submissions with no opinions. Unresolved issues include, among others, following: i) non submission of management letters in certain years, and ii) unsigned financial report/statement in certain years. MOUD and the State shall enable ADB's representatives to inspect PA, Article II, Complied with. the Project, the Goods and Works financed out of the proceeds of Section 2.10 the Loan and any relevant records and documents. MOUD and the State shall, promptly as required, take all action to PA, Article II, Complied with. carry on its operations, and to acquire, maintain and renew all Section 2.11 (a) rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business. In relation to the Project, MOUD and the State shall at all times PA, Article II, Complied with. conduct its business in accordance with sound administrative, Section 2.11 (b) financial, environmental, governance and urban development practices, and under the supervision of competent and experienced management and personnel. In relation to the Project, MOUD and the State shall at all times PA, Article II, Complied with. operate and maintain its plants, equipment and other property, and Section 2.11 (c) from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, engineering, environmental, governance, urban development, and maintenance and operational practices. Except as ADB may otherwise agree, in relation to the Project, PA, Article II, Complied with. MOUD and the State shall not sell, lease or otherwise dispose of Section 2.12 any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement. Except as ADB may otherwise agree, MOUD and the State shall PA, Article II, Complied with. apply the proceeds of the Loan to the financing of expenditures on Section 2.13 the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all Goods, Works and consulting services financed out of such proceeds are used exclusively in the carrying out of the Project. DEA = Department of External Affairs, EARF = environmental assessment and review framework, FFA = framework financing agreement, IEE = initial environmental examination, IPCC = Investment Program Coordination Cell, IPEC = Investment Program Empowered Committee, IPPMS = investment program performance monitoring system, LA = loan agreement, PA = Project Agreement, PFR = periodic financing request, MOUD = Ministry of Urban Development, NGO = nongovernment organization, NSC = national steering committee, PA = Project Agreement, RRP = report and

52 Appendix 9 recommendation of the President to the Board of Directors, SEA = State Executing Agencies, SIPMIU = State Investment Program Management and Implementation Unit, SSC = State Steering Committee, ULB = urban local body. a The Article III, Section 3.01 (b) of the Loan Agreement for the Project 1 was amended once in 2009, and again in 2017. The above clause refers to the version amended in 2017.

Appendix 10 53

ECONOMIC AND FINANCIAL ANALYSIS

A. Re-evaluation of scope and methodology

1. The water supply and solid waste management (SWM) subprojects under the multitranche financing facility (MFF) were implemented under three tranches of the MFF. Therefore, while the economic internal rates of return (EIRR) for water supply and SWM subprojects under the MFF were calculated at appraisal, the EIRR for the specific interventions taken up under these subprojects under Project 1 were not calculated. The economic evaluation for all MFF subprojects were carried out at MFF appraisal; and all MFF subprojects were assessed as economically viable as their economic internal rates of return (EIRR) are above the economic opportunity cost of capital (EOCC) of 12%. As no separate economic evaluation was done for Project 1 separately, the reevaluation of Project 1 includes analysis of actual cost incurred and benefits realized for outputs at completion of Project 1 for (i) four water supply subprojects at Agartala, Aizawl, Gangtok, and Kohima; and (ii) two SWM subprojects at Kohima and Shillong. Economic reevaluation also includes sensitivity analysis, at a 20% reduction of future benefits.

2. Financial analysis assessed the ability of the five State Governments and the line agencies responsible to operate the water supply assets created sustainably to meet its operation and maintenance (O&M) costs and further assessed the ability of the ULBs to operate project SWM assets.

3. The line agencies include Drinking Water and Sanitation (DWS) wing under Public Works Department (PWD) of Government of Tripura (GOTR) and Public Health Engineering Department (PHED) of Government of Mizoram (GOMZ), Government of Sikkim (GOSK), and (GONL) for operating the four water supply subproject in each of the respective State. The SWM subprojects at Kohima and Shillong are under the operational jurisdiction of Kohima Municipal Council (KMC) and Shillong Municipal Board (SMB) respectively.1 As the Project 1 assets were not designed for capital cost recovery, operating ratios were calculated for the ULBs, and a review of the overall finances of PHED, PWD, and the State Governments were undertaken in accordance with ADB guidelines.

4. The economic and financial analysis was based on ADB’s Guidelines for the Economic Analysis of Projects (2017);Guidelines for the Economic Analysis of Water Supply Projects (1998); Financial Analysis and Evaluation Technical Guidance Note (2019), Financial Management and Analysis of Projects (2005); and Financial Due Diligence, A Methodology Note(2009). Detailed assumptions for the analyses narrated separately. Data from the respective State Governments, PHED and PWD, state investment program management and implementation unit (SIPMIU) of each State, the Report and Recommendation of the President (RRP) of the program, the supplementary appendixes prepared during the MFF appraisal, the project financing request for Project 1, and the project completion report prepared by each of the five SIPMIU were used for analyses. Census 2001 and 2011 data published by GOI were used for population projections.2 Project 1 costs were derived from the actual disbursement summary for each contract package by ADB, the five State Governments – GOTR, GOMZ, GOSK, GONL,

1 All these agencies are considered a general government sector unit (GGSU) in line with the explanation in paragraph 2.4, page 4 of the Financial Analysis and Evaluation Technical Guidance Note (2019). 2 For Census 2011 population within the municipal jurisdiction refer https://www.census2011.co.in/states.php. Municipal jurisdictions of Aizawl, Gangtok, and Kohima were defined after Census 2001. Hence, secondary data available used to assume the population for 2001 of these ULBs. Municipal jurisdictional area of Agartala increased after Census 2001.

54 Appendix 10

and Government of Meghalaya (GOML) and Government of India (GOI) for the program management and monitoring consultants (PMMC).

B. Data input for Valuation of Economic Costs and Benefits

5. The thirteen subprojects of the MFF were designed in multiple sectors for increase of economic benefits from availability of regular piped water supply (mostly migrated from ground water to surface water), linking of house septic tanks to sewer network, and scientific disposal of municipal solid waste. At the end of the first tranche of the MFF, Project 1 costs were for capacity development and investment program management(43.4%), for two SWM interventions (27.6%) at Kohima and Shillong, for four water supply interventions (18.7%) at Agartala, Aizawl, Gangtok, and Kohima, taxes and duties (5.1%), and for financing Charges during Implementation (5.2%).

6. The financial value of subproject costs (in ₹ millions) include disbursements made by ADB and local costs incurred by the state government until 23 October 2019. 3 At completion of Project 1, the financial costs for subprojects including taxes and duties concluded at (i) for water supply in Agartala at ₹53.60 million, in Aizawl at ₹81.99 million, in Gangtok at ₹153.03 million, and in Kohima at ₹83.75 million, and (ii) SWM in Kohima at ₹526.46 million and in Shillong at ₹72.91 million.

7. Financial costs without taxes and duties converted to economic costs as shown in tables A10.1 to A10.2 below. The conversion factors include (a) shadow wage rate factor (SWRF) used to value the economic price of local labor in different cities were calculated as the five cities are geographically apart and labor laws, availability of labor, and minimum wage rate differs for each city 4 (b) the shadow exchange rate factor (SERF) taken for traded goods and services and standard conversion factor (SCF) were also applied to convert the financial cost to economic cost.5 Parameters assumed are drawn from the supplementary appendixes of the RRP prepared during the MFF appraisal document, and the project completion report prepared by the respective SIPMIU at completion of Project 1.6 Information also drawn from SIPMIUs and PMMC, which were requested as part of the project completion report preparatory exercise.7

Table A.10.1 Determination of Economic Costs for Water Supply Sub-projects at Completion

Parameters Agartala Aizawl Gangtok Kohima Financial capital costs derived without taxes and duties 52.45 78.03 153.03 83.75 (₹ million) SWRF– Unskilled local labor assumed 75% 0.78 0.72 0.59 1.00 SERF- traded goods and services assumed 10% 1.03 1.03 1.03 1.03

3 Project 1 closed on 22 June 2019 and financial closure happened on 23 October 2019. 4 Different SWRF were applied to reflect the surplus of unskilled labor in the five different subproject areas as they are geographically separate and wage rates are guided by different legislation of the State. (Source: https://nrega.nic.in/netnrega/writereaddata/Circulars/2325Revised_Wage_Rates_2018.pdfandhttps://www.labourla wreporter.com/minimum-wages-tripura/, https://www.labourlawreporter.com/minimum-wages-mizoram/, https://www.labourlawreporter.com/minimum-wages-sikkim/, https://www.labourlawreporter.com/minimum-wages- nagaland/, https://www.labourlawreporter.com/minimum-wages-meghalaya/) 5 Calculation method based on ADB. 2004. Shadow Exchange Rate for Project Economic Analysis. ERD Technical Note Series No. 11. Manila. Average from 2016-2019 was 1.03. Source: Handbook of Statistics on Indian Economy, 2018-19 (RBI). 6 RRP Supplementary Appendix L and M. 7 No site visits and discussions with beneficiaries were possible due to travel restrictions for the COVID-19 pandemic. Reliance were placed on information shared by the executing agencies – SIPMIUs and PMMC.

Appendix 10 55

SCF 1.00 1.00 1.00 1.00 Economic capital costs derived (₹ million) 35.48 54.53 87.27 66.00 Economic O&M costs derived (10% of capital costs and 40.41 75.37 100.15 76.24 adjusted for SWRF, SERF, and SCF) (₹ million) Economic replacement costs derived (15% of capital 5.57 8.70 13.66 10.40 costs and adjusted for SWRF, SERF, and SCF) (₹ million) Source: ADB estimates; Average conversion rate used for calculation $1=₹70, where applicable

Table A.10.2 Determination of Economic Costs for SWM Sub-projects at Completion

Parameters Kohima Shillong Financial capital costs derived without taxes and duties (₹ 526.46 72.41 million) SWRF– Unskilled local labor assumed 75% 1.00 0.56 SERF- traded goods and services assumed 10% 1.03 1.03 SCF 1.00 1.00 Economic capital costs derived (₹ million) 412.07 39.34 Economic O&M costs derived (10% of capital costs and 498.61 45.26 adjusted for SWRF, SERF, and SCF) (₹ million) Economic replacement costs derived (15% of capital costs 67.99 6.79 and adjusted for SWRF, SERF, and SCF) (₹ million) Source: ADB estimates; Average conversion rate used for calculation $1=₹70, where applicable

8. The valuation of economic benefits for the water supply and SWM subprojects at completion is provided in Table A10.3 to A10.4

Table A.10.3 Determination of Economic Benefits for Water Supply Sub-projects at Completion

Particulars Agartala Aizawl Gangtok Kohima Average cost of procuring water from piped water 8.24 154.91 107.70 164.50 supply (incremental water) (₹ Million) Assumption: Tariff on Additional Water (tariff source: PMMC 0.004 0.023 0.07 0.21 details on beneficiary response on monthly charges as a proxy for WTP survey rates) (₹/Litre) Annual cost incurred for procuring water from alternate 0.68 47.68 56.22 75.41 sources to meet the demand supply gap (₹ Million) Assumption: Average cost of procuring water from 0.04 0.30 0.10 0.30 alternative sources (since no surveys was conducted, no site visits were possible, and EA could not provide necessary data, hence, secondary information were collected from local sources) (₹/Litre) Savings from health costs (₹ Million) 181.31 97.59 141.05 95.51

56 Appendix 10

Assumption: Percentage of Households Suffering from 34.00% 34.00% 34.00% 34.00% Water Borne Diseases (National Health Profile 2019, and 12.83% and 12.83% and 12.83% and 12.83% published by Central Bureau of Health Intelligence, Directorate General of Health Services, Ministry of Health & Family Welfare, Government of India - morbidity cases reported on (a) Acute Diarrheal Diseases, 21.83% and (b) Enteric Fever (Typhoid), 3.82%. Total HH affected considered for water-borne diseases at 25.65%. Of that the analysis assumes 50% attributable for water related i.e. 12.83%. Health benefit apportioned for water supply (34%) referred from UNICEF, 2016. 'THE IMPACT OF WATER, SANITATION AND HYGIENE ON KEY HEALTH AND SOCIAL OUTCOMES: REVIEW OF EVIDENCE', Joanna Esteves Mills & Oliver Cumming, JUNE 2016

Labour cost saved from time savings to fetch water (₹ 23.69 16.65 111.86 53.37 Million) Assumption: Estimation of water collection avoidance cost 18.57 24.65 68.24 66.74 (₹) based on the wages of marginal workers assumed

Note: In absence of field missions for COVID-19 pandemic, public/beneficiary surveys and a detailed willingness to pay (WTP) survey could not be conducted; hence, reliance placed on the survey results shared by PMMC for water charges that the respondents in each city reported to be paying every month. The proxy WTP assumed to be the sum of what the consumers reportedly pay and 50% of the with-project (i.e., the existing tariff) and without-project (i.e., cost of alternative supply, e.g., bottled water, collected water from source measured by resource saving, etc.) prices..

Table A.10.4 Determination of Economic Benefits for SWM Sub-projects at Completion

Particulars Shillong Kohima Savings from health costs (INR Million) 175.37 1925.89 Assumption: Percentage of population suffering from 7.33% 7.33% sanitation related like diarrheal diseases, vector borne diseases, and respiratory infectious using data from World Health Organization, Department of Information, Evidence and Research, June 2018 for India Assumption: Health Benefit Apportioned for SWM (reduced 10.00% 60.00% apportionment for Shillong considered as the SWM facility under project 1 is temporary) C. Economic Evaluation

9. For the purpose of economic analysis, the financial cost was converted into economic costs by applying prescribed conversion rates, adjusting for contingencies, excluding taxes and duties and the financing costs (interest during construction and commitment charges).

I. At Appraisal

10. The selection criteria for the subprojects require an EIRR exceeding EOCC of 12% for investments under the MFF. The economic net present value (ENPV) for the identified subprojects under Project 1, assessed during MFF appraisal in 2009, were positive, applying discount rates of 12%. Sensitivity analysis indicated that EIRR was most sensitive to delays in realization of benefits, though EIRR remained above 12% in all sensitivity analyses (except for SWM of Kohima). The project life was assumed at 20 years. The shadow wage factor of 0.70 (common

Appendix 10 57 for all cities) and the shadow exchange factor of 1.06 are applied to convert financial values to economic values.8

II. At Completion

11. The approach used during appraisal was applied for the recalculation of the EIRR of interventions at completion of Project 1 and compared with EOCC of 12%. However, the activities considered under Project 1 are part of the planned subproject design; hence, these part activities achieved part of the planned outputs and benefits of the identified subproject at end of Project 1. For calculating population growth, the compounded annual growth rate of the population between 2001 and 2011 was used for projecting the population.

12. The economic viability of the sectors is evaluated over a period of 20 years from the base year (2010) to maintain the same timeframe as was considered at appraisal. Cost benefit analyses were undertaken from completion of each subproject considering the economic cost of interventions. Analysis for determination of costs and benefits shown in Table A10.1 to A10.4.

III. Analysis and re-evaluation of Findings

13. EIRR calculated at completion of all interventions of Project 1 is 16.68% which is higher than the benchmark EOCC of 12%, justifying Project 1 investments, being the first project of the MFF, several indirect and direct benefits could not be quantified and hence have not been captured in the analysis, though qualitative assessments demonstrate their contribution in providing basic municipal services, improving urban environment and quality of life of Project 1 cities. The summary of EIRR for executed project components at completion is in Table A10.5.

Table A10.5. Summary of Economic Internal Rate of Return (EIRR) at Completion ENPV at EIRR at EIRR at EIRR at Completion of Completion of Appraisal9 Completion (Base) Project 1 (20% Reduction Component Project 1 of Project 1 of Benefits) Water supply Agartala 13.69 17.0% 19.45% 15.31% Aizawl 9.10 18.9% 14.36% 10.82% Gangtok 9.58 25.2% 14.32% 10.27% Kohima 20.74 23.4% 17.89% 13.93% Solid waste management Kohima 73.83 15.2% 17.33% 12.07% Shillong 6.56 29.4% 17.78% 12.23% Project 1 All interventions together 133.50 16.68% 12.09% EIRR = economic internal rate of return, ENPV = economic net present value (₹million)

14. The discounted cash flow statement combining the water supply and solid waste management subprojects under Project 1 is shown in Table A.10.5.1.

8 RRP Supplementary Appendix L and M Economic and Finance Analysis, 2009. 9 These EIRRs are not specific to Project 1 but were calculated for entire interventions (all three tranches) under the MFF.

58 Appendix 10

Economic Benefits (Avoidance Economic Economic Benefits: Benefits Total Sl. Economic O&M Replacement Incremental of Loss of Savings in Time Net Economic Year Total Cost Resource (Avoidance of Economic No. Cost CAPEX Cost Cost Water Income Cost (Water) Benefits due to Cost Saving Loss of Income Benefits reduction (Water) - Water) in Sick Days - SWM) 1 2009 ------2 2010 6.72 - - 6.72 ------(6.72) 3 2011 39.61 - - 39.61 ------(39.61) 4 2012 59.99 - - 59.99 ------(59.99) 5 2013 203.50 - - 203.50 ------(203.50) 6 2014 93.57 - - 93.57 ------(93.57) 7 2015 74.18 - - 74.18 ------(74.18) 8 2016 71.70 5.80 - 77.49 10.21 - 3.14 - 1.10 14.44 (63.05) 9 2017 90.97 5.80 - 96.77 10.46 - 3.22 - 1.12 14.81 (81.96) 10 2018 13.65 70.84 - 84.49 33.49 154.14 14.02 43.51 16.77 261.93 177.44 11 2019 40.81 75.36 - 116.17 34.27 174.97 14.35 44.14 17.09 284.82 168.65 12 2020 - 75.36 - 75.36 35.07 179.08 14.68 44.77 17.42 291.02 215.66 13 2021 - 75.36 - 75.36 35.89 183.28 15.03 45.43 17.75 297.38 222.02 14 2022 - 75.36 - 75.36 36.73 187.59 15.38 46.10 18.10 303.90 228.54 15 2023 - 75.36 - 75.36 37.59 192.01 15.74 46.78 18.45 310.57 235.21 16 2024 - 75.36 - 75.36 38.48 196.53 16.11 47.48 18.81 317.41 242.04 17 2025 - 75.36 - 75.36 39.38 201.17 16.49 48.20 19.17 324.41 249.04 18 2026 - 75.36 38.32 113.69 40.30 205.92 16.88 48.93 19.55 331.58 217.89 19 2027 - 75.36 - 75.36 41.25 210.79 17.27 49.68 19.93 338.92 263.56 20 2028 - 75.36 74.78 150.14 42.22 215.78 17.68 50.45 20.32 346.45 196.30 Total 694.70 836.05 113.10 1,643.86 435.35 2,101.26 179.99 515.46 205.57 3,437.64 1,793.78 ENPV @ 12% 133.50 EIRR 16.68%

Appendix 10 59

15. EIRR at completion for water supply subprojects in Agartala, Aizawl, Gangtok, and Shillong components are EIRRs are above the EOCC, and expecting that there would be further improvements as beneficiaries’ welfare would increase significantly after completion of the subprojects under the subsequent tranches/projects. In case of SWM subprojects, EIRR is also higher than EOCC at Kohima and Shillong and would expect to increase further upon completion of all the subsequent tranches/projects.

D. Financial Evaluation

I. At Appraisal

16. Financial viability evaluation of all 13 subprojects and financial sustainability analysis of the agencies responsible for O&M for all subprojects were carried out during the MFF appraisal. The weighted average cost of capital (WACC) was considered at 2.9%.1

17. The financial evaluation at MFF appraisal for water supply subprojects considered water tariffs (based on a financial improvement action plan, FIAP), water demand assessment, the number of connections, and the gradual reduction of non-revenue water. The base financial internal rate of return (FIRR) was assessed to be (i) 3.1% for water supply in Agartala, (ii) 8.8% for water supply in Aizawl, (iii) 9.7% for water supply in Gangtok, (iv) 14.7% for water supply in Kohima, (v) 3.1% for solid waste management in Kohima and (vi) 3.0% for SWM in Shillong. The evaluation also considered sensitivity analysis under situations of (i) capital cost + 10%, (ii) O&M Cost + 10%, (iii) benefit ‑10% and (iv) 1-year delay in service.

18. The analysis at appraisal concluded that O&M costs for all water supply and SWM subprojects would be fully covered by the proposed tariff in the FIAP. The analysis further concluded that for the subprojects the FIRRs are the most sensitive to decrease in incremental revenues, hence, the FIAP further proposed for improvement in revenue collection, increase in coverage, and tariff revisions to make the subprojects financially sustainable.

II. At Completion

19. As the project or the tariff policy was not designed for capital cost recovery of water supply and SWM, the standard approach of FIRR analysis that was adopted at appraisal was not considered appropriate to assess project sustainability at completion, in line with ADB Guidelines. 2 Instead, a financial sustainability analysis of the asset operating agencies was carried out to evaluate the capacity of respective agencies to meet the O&M costs required to manage the Project 1 assets. The DWS wing under PWD of GOTR, and PHED of GOMZ, GOSK, and GONL manage the water supply assets created under Project 1. KMC and SMB manage the SWM systems in Kohima and Shillong, respectively. Revenues of all the five state governments are structured on a Constitutionally mandated revenue sharing model between the three tiers of the government, comprising grants, share of central taxes, and devolution from GOI (ranges between 80%-90% as evidenced from the analysis of the state government finances of last five

1 ADB. 2009. RRP Supplementary Appendixes L and M. Manila; and ADB. 2009. NERCCDIP: Tranche 1 Periodic Financing Request. Manila. 2 Refer paragraph 32 (page 16) Financial Due Diligence, A Methodology Note, ADB January 2009 – “Non-revenue- generating projects are not subject to FIRR and WACC assessment. Instead, reliance is placed on financial sustainability”.

60 Appendix 10 fiscal years).3 Analysis of the departmental finances indicate that the O&M of capital assets and management of services of water supply and sanitation systems by the five State Governments, including those created under externally aided projects, are through well-structured annual budgetary allocations.

20. The analysis of State Government finances is in Table A10.6 to Table A10.10 show that during the last five years on an average all the five State Governments maintained a favorable revenue surplus and the operating ratio (operating expense / operating revenue) were below 1.0. A ratio below 1.0 means each state government revenues are enough to meet the O&M expenses of all infrastructure of the State, including those being created using funds of ADB under Project 1.

Table A10.6: Financial Performance of Government of Tripura (in ₹Million) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Operating Receipts - Total (1) = A + B + C + D 92,397.30 94,267.40 96,454.60 100,679.50 120,309.00 A. State's Tax Revenue 11,742.60 13,322.50 14,220.10 14,220.20 17,659.10 B. Non-Tax Revenue 1,956.40 2,626.00 2,188.50 4,934.80 3,722.00 C. Share of Union Taxes & Duties 17,301.30 32,660.20 39,091.20 43,220.80 48,889.50 D. Grants-in-aid / Union Grant 61,397.00 45,658.70 40,954.80 38,303.70 50,038.40 Capital Receipts - Total (2) = E + F + G 8,382.80 14,609.70 15,364.70 18,558.50 21,706.40 E. Recovery of Loans 21.80 11.40 9.10 16.90 6.00 F. Borrowings 5,372.70 11,197.90 11,395.50 13,334.10 17,075.70 G. Receipts / Drawings from Public Account 2,988.30 3,400.40 3,960.10 5,207.50 4,624.70 Total Receipts (3) = (1) + (2) 100,780.10 108,877.10 111,819.30 119,238.00 142,015.40 Non-plan Expenditure or Consolidated/a (4) = H+ I + 57,876.30 64,620.90 71,288.20 124,421.00 138,692.40 J+ K H. On Revenue Account - Interest Payment 6,816.80 7,293.90 7,943.20 8,868.90 10,189.50 I. On Revenue Account - Others 47,947.80 52,725.60 58,022.50 94,703.30 108,702.50 J. On Capital Account - Repayment of Loans 3,000.00 4,472.80 5,126.30 3,008.20 4,980.50 K. On Capital Account - Others 111.70 128.60 196.20 17,840.60 14,819.90 Plan Expenditure/a (5) = L + M 48,033.00 50,635.30 55,597.90 - - L. On Revenue Account 19,664.60 18,665.20 22,585.60 - - M. On Capital Account 28,368.40 31,970.10 33,012.30 - - Total Expenditure (6) = (4) + (5) 105,909.30 115,256.20 126,886.10 124,421.00 138,692.40 N. Operating Expenditure = H + I + L 74,429.20 78,684.70 88,551.30 103,572.20 118,892.00 O. Capital Expenditure = J + K + M 31,480.10 36,571.50 38,334.80 20,848.80 19,800.40 Operating (Deficit) / Surplus = (1) - N 17,968.10 15,582.70 7,903.30 (2,892.70) 1,417.00 Operating Ratio [Operating Expenditure or N / 0.81 0.83 0.92 1.03 0.99 Operating Receipts or (1)] Average - Last 5-years 0.92 Source: GOTR Annual Financial Statements (https://tripura.gov.in/state-budget-page) and ADB Estimates /a GOI and State Governments discontinued presentation of annual financial statements and budget documents showing "plan" and "non-plan" items and instead adopted presentation of "revenue" and "capital" expenditure, effective Fiscal Year 2017-18.

Table A10.7: Financial Performance of Government of Mizoram (in ₹Million) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Operating Receipts - Total (1) = A + B + C + D 55,111.05 66,764.00 73,982.97 85,801.97 90,394.98 A. State's Tax Revenue 2,665.31 3,584.06 4,418.07 5,459.10 7,267.00 B. Non-Tax Revenue 2,419.63 2,976.34 3,652.15 3,906.50 4,499.54 C. Share of Union Taxes & Duties 9,106.63 23,481.10 28,006.30 30,970.50 35,029.60 D. Grants-in-aid / Union Grant 40,919.47 36,722.50 37,906.45 45,465.87 43,598.84 Capital Receipts - Total (2) = E + F + G 14,147.05 5,889.11 7,779.65 9,157.83 1,563.78 E. Recovery of Loans 316.26 258.44 224.52 216.42 221.58 F. Borrowings 13,830.78 5,630.68 7,555.13 8,941.41 1,342.21 Total Receipts (3) = (1) + (2) 69,258.10 72,653.11 81,762.62 94,959.80 91,958.76

3 Except Tripura, the other States are special category states as mandated by the Constitution of India. Hence, they have the mandate of not levying direct taxes like income and wealth tax. In addition, due to their geographical position and lack of economic opportunities, economic activities are less to generate enough internal state finances. Hence, GOI grants and devolution are unavoidable.

Appendix 10 61

Non-plan Expenditure or Consolidated/a (4) = H+ I + 48,285.34 42,576.17 44,691.66 93,950.27 96,588.11 J+ K H. On Revenue Account - Interest Payment - - - - - I. On Revenue Account - Others 35,006.18 36,229.94 40,781.23 68,807.64 75,055.91 J. On Capital Account - Repayment of Loans 11,916.70 5,574.05 3,399.69 5,179.14 2,847.47 K. On Capital Account - Others 1,362.47 772.18 510.74 19,963.50 18,684.73 Plan Expenditure/a (5) = L + M 29,430.84 25,816.09 30,125.52 - - L. On Revenue Account 21,518.19 19,478.61 21,522.18 - - M. On Capital Account 7,912.66 6,337.48 8,603.34 - - Total Expenditure (6) = (4) + (5) 77,716.18 68,392.26 74,817.18 93,950.27 96,588.11 N. Operating Expenditure = H + I + L 56,524.37 55,708.55 62,303.41 68,807.64 75,055.91 O. Capital Expenditure = J + K + M 21,191.82 12,683.71 12,513.77 25,142.63 21,532.19 Operating (Deficit) / Surplus = (1) - N (1,413.32) 11,055.45 11,679.56 16,994.33 15,339.07 Operating Ratio [Operating Expenditure or N / 1.03 0.83 0.84 0.80 0.83 Operating Receipts or (1)] Average - Last 5-years 0.87 Source: GOMZ Annual Financial Statements (https://finance.mizoram.gov.in/page/regular-budget) and ADB Estimates. /a GOI and State Governments discontinued presentation of annual financial statements and budget documents showing "plan" and "non-plan" items and instead adopted presentation of "revenue" and "capital" expenditure, effective Fiscal Year 2017-18.

Table A10.8: Financial Performance of Government of Sikkim (in ₹Million) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Operating Receipts - Total (1) = A + B + C 44,619.52 37,842.86 46,102.99 52,127.91 59,203.62 A. State's Tax Revenue 13,368.71 24,370.96 27,217.54 33,229.93 36,875.95 B. Non-Tax Revenue 6,980.83 4,129.94 4,516.37 6,543.76 6,577.81 C. Grants-in-aid / Union Grant 24,269.98 9,341.96 14,369.08 12,354.22 15,749.87 Capital Receipts - Total (2) = E + F + G 78,871.76 102,023.50 96,511.94 123,802.39 130,376.81 E. Recovery of Loans 8.83 13.77 13.71 9.13 17.65 F. Borrowings 4,117.92 6,548.77 7,833.40 10,534.61 11,452.07 G. Receipts / Drawings from Public Account 74,745.02 95,460.97 88,664.84 113,258.66 118,907.09 Total Receipts (3) = (1) + (2) 123,491.28 139,866.36 142,614.93 175,930.30 189,580.43 Non-plan Expenditure or Consolidated/a (4) = H+ I + 103,253.62 120,451.10 123,925.57 156,015.64 181,436.32 J+ K H. On Revenue Account - Interest Payment 2,515.49 2,740.74 3,363.94 3,741.73 4,450.47 I. On Revenue Account - Others 23,426.82 20,998.23 22,007.09 37,776.72 47,815.31 J. On Capital Account - Repayment of Loans 1,136.06 2,231.58 2,632.61 3,595.77 4,224.46 K. On Capital Account - Others 76,175.24 94,480.56 95,921.93 110,901.41 124,946.07 Plan Expenditure/a (5) = L + M 21,174.27 19,046.65 19,712.64 15,067.80 12,913.07 L. On Revenue Account 11,367.16 12,706.82 12,509.77 - - M. On Capital Account 9,807.10 6,339.83 7,202.87 15,067.80 12,913.07 Total Expenditure (6) = (4) + (5) 124,427.88 139,497.75 143,638.21 171,083.44 194,349.39 N. Operating Expenditure = H + I + L 37,309.48 36,445.79 37,880.80 41,518.46 52,265.79 O. Capital Expenditure = J + K + M 87,118.40 103,051.96 105,757.42 129,564.98 142,083.60 Operating (Deficit) / Surplus = (1) - N 7,310.04 1,397.07 8,222.19 10,609.45 6,937.83 Operating Ratio [Operating Expenditure or N / 0.84 0.96 0.82 0.80 0.88 Operating Receipts or (1)] Average - Last 5-years 0.86 Source: GOSK Annual Financial Statements (http://www.sikkimfred.gov.in/user/Budget_Main_Page.aspx#) and ADB Estimates /a GOI and State Governments discontinued presentation of annual financial statements and budget documents showing "plan" and "non-plan" items and instead adopted presentation of "revenue" and "capital" expenditure, effective Fiscal Year 2017-18.

Table A10.9: Financial Performance of Government of Nagaland (in ₹Million) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Operating Receipts - Total (1) = A + B + C + D 76,509.41 80,435.68 94,422.81 110,192.11 114,374.12 A. State's Tax Revenue 3,886.10 4,270.98 5,107.60 6,382.85 8,464.33 B. Non-Tax Revenue 2,706.12 2,563.88 3,455.23 3,885.26 2,552.40 C. Share of Union Taxes & Duties 10,626.80 25,407.20 30,326.20 33,531.30 37,924.10 D. Grants-in-aid / Union Grant 59,290.39 48,193.61 55,533.78 66,392.71 65,433.30 Capital Receipts - Total (2) = E + F 24,155.74 35,464.40 54,454.44 51,421.07 29,083.01 E. Recovery of Loans 7.06 4.98 10.95 10.85 10.80 F. Borrowings 24,148.69 35,459.42 54,443.49 51,410.22 29,072.22 Total Receipts (3) = (1) + (2) 100,665.15 115,900.08 148,877.25 161,613.18 143,457.13

62 Appendix 10

Non-plan Expenditure or Consolidated/a (4) = H+ I + 88,627.41 102,242.08 130,600.01 133,128.24 128,641.50 J+ K H. On Revenue Account - Interest Payment 5,553.40 5,864.50 6,355.00 6,777.50 7,717.40 I. On Revenue Account - Others 49,779.70 58,729.90 62,848.10 69,080.30 78,953.00 J. On Capital Account - Repayment of Loans 23,062.62 27,055.34 50,652.13 44,521.98 26,015.52 K. On Capital Account - Others 10,231.69 10,592.35 10,744.78 12,748.46 15,955.58 Plan Expenditure/a (5) = L + M 12,293.00 11,226.60 17,316.30 26,055.70 22,529.50 L. On Revenue Account 12,293.00 11,226.60 17,316.30 26,055.70 22,529.50 M. On Capital Account - - - - - Total Expenditure (6) = (4) + (5) 100,920.41 113,468.68 147,916.31 159,183.94 151,171.00 N. Operating Expenditure = H + I + L 67,626.10 75,821.00 86,519.40 101,913.50 109,199.90 O. Capital Expenditure = J + K + M 33,294.31 37,647.68 61,396.91 57,270.44 41,971.10 Operating (Deficit) / Surplus = (1) - N 8,883.31 4,614.68 7,903.41 8,278.61 5,174.22 Operating Ratio [Operating Expenditure or N / 0.88 0.94 0.92 0.92 0.95 Operating Receipts or (1)] Average - Last 5-years 0.92 Source: GONL Annual Financial Statements (http://finance.nagaland.gov.in/subpage.aspx?Sel=3) and ADB Estimates /a GOI and State Governments discontinued presentation of annual financial statements and budget documents showing "plan" and "non-plan" items and instead adopted presentation of "revenue" and "capital" expenditure, effective Fiscal Year 2017-18.

Table A10.10: Financial Performance of Government of Meghalaya (in ₹Million) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Operating Receipts - Total (1) = A + B + C + D 64,282.54 70,431.31 89,389.49 92,734.81 97,186.22 A. State's Tax Revenue 9,392.04 10,568.19 11,860.06 14,500.95 18,046.22 B. Non-Tax Revenue 3,432.86 2,285.99 6,852.37 3,666.35 4,277.02 C. Share of Union Taxes & Duties 13,816.80 32,764.60 39,110.50 43,231.40 48,776.90 D. Grants-in-aid / Union Grant 37,640.84 24,812.54 31,566.55 31,336.12 26,086.08 Capital Receipts - Total (2) = E + F 7,467.21 8,560.09 12,292.40 12,425.92 13,427.03 E. Recovery of Loans 197.62 190.77 188.09 174.53 180.14 F. Borrowings 7,269.59 8,369.32 12,104.31 12,251.39 13,246.89 Total Receipts (3) = (1) + (2) 71,749.75 78,991.40 101,681.89 105,160.74 110,613.25 Non-plan Expenditure or Consolidated/a (4) = H+ I + 43,137.03 46,626.60 51,246.26 84,269.41 67,011.82 J+ K H. On Revenue Account - Interest Payment 4,051.00 4,658.80 5,222.26 5,911.80 6,568.07 I. On Revenue Account - Others 36,662.78 38,417.59 41,189.96 74,840.92 55,915.25 J. On Capital Account - Repayment of Loans 2,026.63 3,373.44 4,144.07 3,296.16 3,959.45 K. On Capital Account - Others 396.62 176.78 689.98 220.54 569.04 Plan Expenditure/a (5) = L + M 33,154.19 32,916.54 49,469.45 14,308.54 54,574.72 L. On Revenue Account 21,804.83 20,400.89 36,953.15 3,474.10 40,076.09 M. On Capital Account 11,349.36 12,515.65 12,516.30 10,834.44 14,498.63 Total Expenditure (6) = (4) + (5) 76,291.22 79,543.14 100,715.71 98,577.95 121,586.53 N. Operating Expenditure = H + I + L 62,518.61 63,477.28 83,365.37 84,226.81 102,559.41 O. Capital Expenditure = J + K + M 13,772.61 16,065.87 17,350.34 14,351.14 19,027.12 Operating (Deficit) / Surplus = (1) - N 1,763.93 6,954.04 6,024.12 8,508.00 (5,373.19) Operating Ratio [Operating Expenditure or N / 0.97 0.90 0.93 0.91 1.06 Operating Receipts or (1)] Average - Last 5-years 0.95 Source: GOML Annual Financial Statements (http://megfinance.gov.in/state_budget.html) and ADB Estimates. /a GOI and State Governments discontinued presentation of annual financial statements and budget documents showing "plan" and "non-plan" items and instead adopted presentation of "revenue" and "capital" expenditure, effective Fiscal Year 2017-18

21. As reported by PMMC (the data requested during the PCR preparation), the average water charges (₹/month/HH) that households are reported to be paying are – (a) Agartala ₹40.00 flat (volumetric basis approved, charges yet to start), (b) Aizawl ₹375 (on volumetric basis), (c) Gangtok ₹212 (on number of taps basis), and (d) Kohima ₹293 (on volumetric basis). Charges are approved by the respective State Governments. The State Government through its department (PWD or PHED) is collecting the revenue, which is insufficient to meet all operating expenses to provide the water services (refer the financial analysis in Table A10.11 to Table A10.15). The State Governments’ meet the expenditure gap through regular budget allocation from other “non-exchange receipts” like taxes and transfers (revenue grants and aids) from GOI.

Appendix 10 63

The tariffs that are levied now are affordable to the community and may increase upon improvement of services after completion of works under the subsequent projects of the MFF and other interventions of the State Government.

22. The financial performance of the PWD and PHED of the five States were considered (refer Table A10.11 to Table A10.15) to assess the expenditure capacity and the capacity of the respective Department to support O&M of water supply assets created with ADB funds and other funds out of the respective State’s budget allocation. Respective departments of all five states depend on the user/service charges and the budget allocation out of the Consolidated Fund of the State to meet departmental expenditure.

Table A10.11: Financial Performance of Government of Tripura – Public Works Department (GOTR –PWD) (Drinking Water & Sanitation Wing) [Codes 0215, 2215, 4215, 6215] (in ₹Million) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Revenue & Receipts 1. Operating Receipts (0215) 19.22 17.62 24.46 23.61 18.83 2. Loans and Borrowings (6215) - - - - - Total Receipts (1) + (2) 19.22 17.62 24.46 23.61 18.83 Expenditure 3. Operating Expenditure (2215) = A + B 738.46 988.01 1,106.36 1,404.37 1,749.35 A. Non-Plan Expenditure (Net of Recoveries) 407.74 539.71 1,106.36 1,404.37 1,749.35 B. Plan Expenditure 330.72 448.30 - - - 4. Capital Expenditure (4215) = A + B 1,170.69 943.48 1,110.61 722.06 2,481.14 A. Non-Plan Expenditure - - - - - B. Plan Expenditure 1,170.69 943.48 1,110.61 722.06 2,481.14 Total Expenditure (3) + (4) 1,909.15 1,931.49 2,216.98 2,126.43 4,230.49 Source: GOTR Annual Financial Statements (https://tripura.gov.in/state-budget-page) and ADB Estimates.

Table A10.12: Financial Performance of Government of Mizoram, Public Health Engineering Department (GOMZ, PHED) [Codes 0215, 2215, 4215, 6215] (in ₹Million) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Revenue & Receipts 1. Operating Receipts (0215) 234.72 341.70 375.06 394.94 446.39 2. Loans and Borrowings (6215) - - - - - Total Receipts (1) + (2) 234.72 341.70 375.06 394.94 446.39 Expenditure 3. Operating Expenditure (2215) = A + B 1,585.28 1,553.43 1,897.77 2,135.12 2,119.57 A. Non-Plan Expenditure (Net of Recoveries) 994.43 861.30 1,294.27 2,135.12 2,119.57 B. Plan Expenditure 590.85 692.13 603.51 - - 4. Capital Expenditure (4215) = A + B 602.22 417.40 626.86 763.35 1,506.40 A. Non-Plan Expenditure - - - - - B. Plan Expenditure 602.22 417.40 626.86 763.35 1,506.40 Total Expenditure (3) + (4) 2,187.50 1,970.83 2,524.63 2,898.47 3,625.97 Source: GOMZ Annual Financial Statements (https://finance.mizoram.gov.in/page/regular-budget) and ADB Estimates.

Table A10.13: Financial Performance of Government of Sikkim, Public Health Engineering Department (GOSK, PHED) [Codes 0215, 2215, 4215, 6215] (in ₹Million) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Revenue & Receipts 1. Operating Receipts (0215) 32.45 38.00 40.45 48.76 42.89 2. Loans and Borrowings (6215) - - - - - Total Receipts (1) + (2) 32.45 38.00 40.45 48.76 42.89 Expenditure 3. Operating Expenditure (2215) = A + B 283.72 398.10 392.46 379.13 603.50 A. Non-Plan Expenditure (Net of Recoveries) 147.10 186.68 197.02 379.13 603.50 B. Plan Expenditure 136.62 211.41 195.44 - - 4. Capital Expenditure (4215) = A + B 849.15 562.89 709.68 1,104.46 878.77 A. Non-Plan Expenditure - - - - -

64 Appendix 10

Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 B. Plan Expenditure 849.15 562.89 709.68 1,104.46 878.77 Total Expenditure (3) + (4) 1,132.87 960.98 1,102.13 1,483.59 1,482.26 Source: GOSK Annual Financial Statements (http://www.sikkimfred.gov.in/user/Budget_Main_Page.aspx#) and ADB Estimates

Table A10.14: Financial Performance of Government of Nagaland, Public Heath Engineering Department (GONL PHED) [Codes 0215, 2215, 4215, 6215] (in ₹Million) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Revenue & Receipts 1. Operating Receipts (0215) 19.50 24.27 26.48 32.07 28.82 2. Loans and Borrowings (6215) - - - - - Total Receipts (1) + (2) 19.50 24.27 26.48 32.07 28.82 Expenditure 3. Operating Expenditure (2215) = A + B 598.06 787.93 810.83 908.08 967.94 A. Non-Plan Expenditure (Net of Recoveries) 598.06 787.93 810.83 908.08 967.94 B. Plan Expenditure - - - - - 4. Capital Expenditure (4215) = A + B 1,046.52 1,032.36 1,589.13 1,205.72 1,060.09 A. Non-Plan Expenditure - - - - - B. Plan Expenditure 1,046.52 1,032.36 1,589.13 1,205.72 1,060.09 Total Expenditure (3) + (4) 1,644.58 1,820.29 2,399.97 2,113.79 2,028.03 Source: GONL Annual Financial Statements (http://finance.nagaland.gov.in/subpage.aspx?Sel=3) and ADB Estimates.

Table A10.15: Financial Performance of Government of Meghalaya, Public Health Engineering Department (GOML, PHED) [Codes 0215, 2215, 4215, 6215] (in ₹Million) Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 Revenue & Receipts 1. Operating Receipts (0215) 33.92 46.53 44.51 51.33 56.70 2. Loans and Borrowings (6215) - - - - - Total Receipts (1) + (2) 33.92 46.53 44.51 51.33 56.70 Expenditure 3. Operating Expenditure (2215) = A + B 1,674.02 1,788.68 1,863.63 2,122.34 2,545.97 A. Non-Plan Expenditure (Net of Recoveries) 1,674.02 1,788.68 1,863.63 2,122.34 2,545.97 B. Plan Expenditure - - - - - 4. Capital Expenditure (4215) = A + B 1,906.15 1,426.66 1,854.26 2,839.71 2,222.63 A. Non-Plan Expenditure - - - - - B. Plan Expenditure 1,906.15 1,426.66 1,854.26 2,839.71 2,222.63 Total Expenditure (3) + (4) 3,580.17 3,215.34 3,717.89 4,962.05 4,768.59 Source: GOML Annual Financial Statements (http://megfinance.gov.in/state_budget.html) and ADB Estimates.

23. As per the Constitution of India, ULBs’ of India are responsible to manage the solid waste management facilities amongst other responsibilities. ULBs shall operate and manage all civic assets out of the internal revenues. ULBs of Kohima and Shillong operate and manage SWM facilities while levying nominal user charges for disposal of municipal waste by households, which are not sufficient to cover the cost of O&M. 4 ULBs finances are dependent on own source revenues, the compensation grants (in lieu of Octroi-tax on goods, since abolished, and other taxes subsumed under the Goods and Service Tax Act, 2017) and transfers from State Finance Commissions (SFCs) and Central Finance Commissions (CFCs), which are used for O&M of municipal assets.

24. The overall performance of the two ULBs of Shillong, and Kohima considered for the Project 1 analysis to assess the financial capacity to manage urban infrastructure including the solid waste management facility created under Project 1 that exhibited in Table A10.16 to A10.17.

4 ULB of Shillong proposed to charge ₹50 per household per month, however, awaiting approval from Government.

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The financial analysis of Shillong and Kohima was finally considered based on the available budget and other financial documents shared by the EAs.5

Table A10.16: Financial Performance of Shillong Municipal Board (in ₹ Million) Particulars 2013-14 2014-15 2015-16 2016-17 Operating Receipts 90.41 105.86 92.47 148.87 Total Operating Receipts (A) 90.41 105.86 92.47 148.87 Operating Expenditure 114.02 124.66 119.27 129.74 Total Operating Expenditure (B) 114.02 124.66 119.27 129.74 Operating Surplus / (Deficit) (A) - (B) (23.62) (18.81) (26.80) 19.13 Operating Ratio [Operating Expense or (B) / Operating Receipts or (A)] 1.26 1.18 1.29 0.87 Average Operating Ratio 1.15 Note: Due to the operational constraints arising out of the ongoing pandemic the complete set of annual financial statements could not be shared by SIPMIU-Shillong; hence, the analysis relied on Budget Statements of SMB as available in the municipal website (source: http://smb.gov.in/) and ADB Estimates.

Table A10.17: Financial Performance of Kohima Municipal Council (in ₹ Million) Particulars 2014 -15 2015 -16 2016 -17 2017 -18 2018 -19 Operating Receipts Own Source Revenue 46.22 58.09 50.52 58.44 55.49 Total Operating Revenue (A) 46.22 58.09 50.52 58.44 55.49 Operating Expenditure 45.70 47.28 54.78 66.24 55.73 Total Operating Expenditure (B) 45.70 47.28 54.78 66.24 55.73 Revenue Surplus / (Deficit) (A) - (B) 0.53 10.81 (4.27) (7.81) (0.24) Operating Ratio [Operating Expenditure or (B) / Operating 0.99 0.81 1.08 1.13 1.00 Revenue or (A)] Average Operating Ratio 1.00 Note: Due to the operational constraints arising out of the ongoing pandemic receipts and payments statement was shared late by SIPMIU-Kohima; hence, the analysis considered after the first draft of this Appendix. Source; ULB information shared by EA and ADB Estimates.

25. The annual O&M cost for SWM as reported by the respective EAs for Shillong is ₹77.35 million and for Kohima is ₹12.23 million after close of Project 1. This includes cost for staff and establishment, consumables, transportation cost, and for repairs and maintenance. During FY2018-19 KMC collected ₹1.05 million as sanitation fee (yearly account statement of KMC for FY2018-19) and Shillong yet to charge any SWM fees as State Government approval is pending (reported by EA). Hence, the ULBs are unable to collect the required user fees from SWM assets to support O&M cost and depend on combination of own-source revenue as well as grants from State Government and GOI.

26. For the SMB and KMC, in most of the years analyzed the operating ratio is more than 1.0 indicating that the SMB and KMC have less financial capacity to meet its operating expenses out of its internal revenue. For this SMB and KMC, beyond their own-source revenue, would continue its dependence on assigned compensations from the State Government, untied revenue grants and its cash reserves along with the implementation of the Fourteenth CFC recommendations, the Centre is transferring 42% of the divisible pool as untied and non-conditional grants to meet the incremental operating expenses. The introduction of fiscal reforms in the last three financial years, at Centre and State Government levels in the form of Goods and Service Tax, which subsumed many local body taxes like entry tax, octroi, and advertisement tax (most levied by the ULBs across India), is also being compensated by the Centre and the State Government.

III. Analysis and Re-evaluation Findings

5 Other three ULBs of Agartala, Aizawl, and Gangtok also shared audited annual financial statements that were prepared as part of the accounting reforms and implementation of double-entry accounting system and shared by respective SIPMIUs. Project 1 supported financial and accounting reforms at Agartala and Shillong ULBs.

66 Appendix 10

24. The water supply and solid waste management subprojects have been necessary to provide basic services to citizens of the five capital cities of NER and to protect the environment by reducing (i) ground water depletion, (ii) discharge of untreated wastewater to water bodies, and (iii) improved and scientific disposal of municipal solid waste. With the recent changes in state policies (for implementation of piped water supply, scientific disposal of sewerage and municipal solid waste) and introduction of Goods and Service Tax (unified indirect taxes) at the national level, the Centre and the State Governments duly fulfill their obligations mandated by the Article 243X and Schedule Twelve of the Constitution of India, by consistent and timely support toward O&M of municipal assets, including project assets, and ensure citizens have continued access to basic urban services. Fiscal reforms and policies at both the State Government level and ULB levels, and innovative taxes and charges at the ULB levels, such as like levy of property tax, value capture financing, destination-based charges on display of commercial and non-commercial hoardings/billboards, could be leveraged to strengthen municipal services delivery and governance.