AP Water Supply and Sanitation

PD000079-IND Dec. 7, 2018 Project Document of the Asian Infrastructure Investment Bank Republic of India Andhra Pradesh Urban Water Supply and Septage Management Improvement Project This document has a restricted distribution and may be used by recipients only in performance of their official duties. Its contents may not otherwise be disclosed without AIIB authorization. Currency Equivalents (As of Sep. 7, 2018) Currency Unit – Indian Rupee (INR) INR69.00 = USD1.00 Abbreviations AIIB Asian Infrastructure Investment Bank AMRUT Atal Mission for Rejuvenation and Urban Transformation APUWSSIP Andhra Pradesh Urban Water Supply & Septage Management Im- provement project; the Project APUFIDC Andhra Pradesh Urban Finance and Infrastructure Development Corpo- ration CIIP Critical Infrastructure Investment Plan CIM Clean India Mission (Swachh Bharat) DFI Development Finance Institution DMA Directorate of Municipal Administration DPR Detailed Project Report EIRR Economic Internal Rate of Return ENPV Economic Net Present Value ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan ESIA Environmental and Social Impact Assessment ESP Environmental and Social Policy ESS Environmental and Social Standards FMA Financial Management Assessment GDP Gross Domestic Product GoAP Government of Andhra Pradesh GoI Government of India IA Implementing Agency IOCT International Open Competitive Tendering JNNURM Jawaharlal Nehru National Urban Renewal Mission lpcd liters per capita per day MA&UD Municipal Administration & Urban Development Department NCT National Competitive Tendering PMC Project Management Consultant PMU Project Management Unit PHMED Public Health and Municipal Engineering Department RPF Resettlement Policy Framework SDG Sustainable Development Goals STP Septage Treatment Plant TPPF Tribal Peoples Planning Framework ULB Urban Local Body WWTP Waste Water Treatment Plant i Contents 1. Project Summary Sheet ........................................................................................... 1 2. Strategic Context ..................................................................................................... 4 A. Country Context ............................................................................................... 4 B. Sectoral and Institutional Context ..................................................................... 4 3. The Project ............................................................................................................... 7 A. Rationale .......................................................................................................... 7 B. Objectives ........................................................................................................ 9 C. Project Description and Components ................................................................ 9 D. Project Cost and Financing ............................................................................. 11 E. Implementation Arrangements ........................................................................ 13 4. Project Assessment ................................................................................................ 18 A. Technical Assessment .................................................................................... 18 B. Economic and Financial Analysis ................................................................... 19 C. Fiduciary and Governance .............................................................................. 20 D. Environmental and Social ............................................................................... 23 E. Risks and Mitigation Measures ....................................................................... 25 F. Next Steps ........................................................ Error! Bookmark not defined. Annex 1: Results Framework and Monitoring ................................................................ 28 Annex 2: Map of Andhra Pradesh and the proposed 50 ULBs (Source: GoAP) ............ 32 Annex 3: Detailed Project Description ............................................................................. 33 Annex 4: Economic and Financial Analysis ..................................................................... 43 Annex 5: Sovereign Credit Fact Sheet .............................................................................. 67 Annex 6: Procurement Principles Checklist and Procurement Plan .............................. 69 Annex 7: Organization of the Institutional Component .................................................. 73 ii 1. Project Summary Sheet Republic of India Andhra Pradesh Urban Water Supply and Septage Management Improvement Project Project Number 000079 Borrower Republic of India Project Implementing Entity Government of Andhra Pradesh (GoAP), supported by Andhra Pradesh Urban Finance and Infrastructure De- velopment Corporation (APUFDIC) and Public Health & Municipal Engineering Department (PHMED). Sector / Subsector Water / Water Supply and Sanitation. Project Objectives / Brief Project The project objective is to provide safe drinking water Description through piped water supply to 3.3 million people in An- dhra Pradesh, and to improve service levels and strengthen sustainable service delivery. The project is delivered as part of an integrated approach to water and sanitation comprising funding from the Asian Infrastruc- ture Investment Bank (AIIB) as well as the Government of In- dia through the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and the Clean India Mission (CIM), and the Government of Andhra Pradesh Critical Infra- structure Investment Plan (CIIP) program. The AIIB-financed Project includes the following components: 1. Water Supply: The construction of water supply sys- tems in the Project urban local bodies (ULBs), including intakes at raw water source, raw water transmission mains, water treatment plants, clear water transmission mains, treated water storage, distribution networks and household service connections with meters. 2. Sanitation and Drainage Pilots in five selected ULBs: Pilot Waste Water Treatment Plants for graywater treatment will be financed alongside critical drainage improvements by GoAP. 3. Institutional component: Capacity building to strengthen (i) overall project management and su- pervision and (ii) the institutional capacity in the ULBs in municipal services delivery and management, including financial, environmental and social aspects. 1 Project Implementation Period Start date: January 2019 (Start Date and End Date) End date: December 2023 Expected Loan Closing Date June 2024 Project Cost and Financing Plan Project cost: USD570 million GoAP: USD170 million AIIB: USD400 million AIIB Loan––Size and Terms Size: USD400 million Sovereign-backed. Loan with a maturity of 30 years, including a 5-year grace period. Payment currency of the Loan will be U.S. Dollars and the interest payment dates selected will be February 15 and August 15 in each year. Cofinancing––Size and Terms None. It is a standalone project. Environmental and Social Cate- A gory Project Risk (Low/Medium/ High) High Conditions for Effectiveness • Project Management Unit (PMU) to be established. • Adoption of Financial Management Manual. • Appointment of Project Management Consultant (PMC). • Grievance Redress Mechanism (GRM) to be established. Conditions for Disbursement • The tender documents for the water supply schemes for 29 ULBs of Phase 2 have been prepared, including all Safeguards Instruments in form and sub- stance acceptable to the Bank. • The DPRs for the water supply schemes of Phase 2 have been sanctioned technically and administra- tively by the Project Implementing Entity. Key Covenants • Quarterly Project Implementation Reports, including follow-up on the Environmental Management Plan and the Social Management Plan. • Memorandum of Understanding / Implementation Partnership Agreement between PHMED and ULBs, including ULB’s acceptance of establishing a desig- nated account for water supply services shall be in place before start of construction works. • APUFDIC to report on progress on planned septage and drainage infrastructure development in 50 ULBs. Policy Assurance To be confirmed prior to Board submission. 2 President Jin Liqun Vice President D.J. Pandian Director General Supee Teravaninthorn Senior Advisor Jonathan Kamkwalala Project Team Leader Jan Høybye, Senior Investment Operations Specialist Co-Project Team Leader Zacharias Ziegelhöfer, Infrastructure Sector Economist Project Team Members Giacomo Ottolini, Senior Procurement Specialist Maria João Kaizeler, Financial Management Specialist Somnath Basu, Senior Social Development Specialist Kishor Uprety, Senior Counsel Yongxi Liu, Project Assistant Maruthi Mohan Dharmapuram, Water Supply & Sanita- tion Engineering Consultant Geoffrey Reed, Senior Water and Urban Development Consultant Ghanasham V. Abhyankar, Senior Water Consultant BKD Raja, Environmental and Social Consultant 3 2. Strategic Context A. Country Context 1. India is a lower-middle-income country, with a population of 1.3 billion accounting for 17 percent of the world’s population1 and the world’s third largest economy based on gross domestic product (GDP)2 measured in terms of purchasing power parity. The country has achieved an average GDP growth rate of around seven percent per annum in recent years. The GDP per capita in India is USD1,8613. Despite India’s impressive growth, around 21 percent of India’s population

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