Document of The World Bank Public Disclosure Authorized FOR OFFICIAL USE ONLY

Report No: 39708-LK

PROJECT APPRAISAL DOCUMENT

ON A

Public Disclosure Authorized PROPOSED CREDIT

IN THE AMOUNT OF SDR 41.1 MILLION (US$65.33 MILLION EQUIVALENT)

TO THE

DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA

FOR A

DAM SAFETY AND WATER RESOURCES PLANNING PROJECT Public Disclosure Authorized

February 26,2008

Sustainable Development Department Agnculture and Rural Development Unit Sri Lanka Country Management Unit

Public Disclosure Authorized South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective - January 2008)

Currency Unit = Sri Lankan Rupees 108.0 = US$1

FISCAL YEAR January 1 - December 3 1 ABBREVIATIONS AND ACRONYMS AEP Annual Exceedence Probability FMR Financial Monitoring Report BOQ Bill ofQuantities FO Farmers’ Organization CAS Country Assistance Strategy FY Financial Year CEB Ceylon Electricity Board GOSL Government of Sri Lanka CECB Central Engineering GPN General Procurement Notice Consultancy Bureau CFAA Country Financial HMIS Hydro-meteorological Information Accountability Assessment System CQS Selection based on Consultant’s IAS Implementing Agencies Qualification DC Direct Contracting IBRD International Bank for Reconstruction and Development DD Deputy Director ICB International Competitive Bidding DG/DGs Director GeneraVDirectors - ICOLD International Commission on Large General Dams DL Disbursement Letter ICR Implementation Completion Report DMC Director Disaster Management ID Irrigation Department Center DOM Department of Meteorology IDA International Development Association DSMC Dam safety Management Center IEC Information, Education and Communication DSRP Dam Safety Review Panel IESL Institution ofEngineers of Sri Lanka DSS Decision Support System IFC International Finance Corporation EA Environmental Assessment ISC Implementation Support Consultant EAP Emergency Action Plan ISDS Integrated Safeguard Data Sheet EAMF Environmental Assessment and IT Information Technology Management Framework ED Executive Director JICA Japan International Cooperation Agency EIA Environmental Impact Kwh Kilowatt Hour Assessment EMP Environmental Management LCS Least Cost Selection Plan EO1 Expression of Interest LSA Livelihood Support Assistance ERD External Resource Department MADAS Ministry ofAgriculture Development & Agrarian Services ERR Economic Rate ofReturn MASL Mahaweli Authority of Sri Lanka FA Financing Agreement M&E Monitoring and Evaluation FBS Fixed Budget Selection MIWM Ministry of Irrigation & Water Management

FM Financial Management MOFP Ministry of Finance and Planning FMECA Failure Mode Effect and MOU Memorandum ofUnderstanding Criticality Analysis M&E Monitoring and Evaluation PRA Portfolio Risk Assessment MIS Management Information PSC Project Steering Committee

.. 11 FOR OFFICIAL USE ONLY

MW Mega Watt QBS Quality Based Selection NBD National Budget Department QCBS Quality and Cost Based Selection NCB National Competitive Bidding RBPM River Basin Planning & Management NGO Non-Governmental RBPS Risk Based Profile System Organization NPD National Planning Department RDI Regional Director of Irrigation NPOC National Project Oversight RPM Resident Project Manager Committee NPV Net Present Value Rs Rupees NWSDB National Water Supply and SBD Standard Bidding Document Drainage Board NWUP National Water Use Plan SDR Special Drawing Right O&M Operation and Maintenance SEA Strategic Environmental Assessment OP/BP Operational PolicyBank Policy SIUC Specific Investment Loadcredit PAD Project Appraisal Document SLK Rs Sri Lanka Rupees PD Project Director SLNCOLD Sri Lanka National Committee of Large Darns PDO Project Development Objective SPN Special Procurement Notice PHRD Policy and Human Resources SSS Single Source Selection Development PIP Project Implementation Plan tma Tons per Hectare PM Project Manager TA Technical Assistance PMC Project Management Committee TEC Technical Evaluation Committee PMU Project Management Unit TOR Terms of Reference PPF Project Preparation Facility nL Task Team Leader PRA Portfolio Risk Assessment TWG Technical Working Group PSC Project Steering Commitlee US$ United States Dollar PY Project Year WRB Water Resources Board

Vice President: Prafbl C. Pate1 Country Director: Naoko Ishii Sector Director: Constance A. Bernard Sector Manager Adolfo Brizzi Task Team Leader: Nihal Fernando

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. SRI LANKA DAM SAFETY AND WATER RESOURCES PLANNING PROJECT

TABLE OF CONTENTS

Page

STRATEGIC CONTEXT AND RATIONALE: Country and sector issues ...... 1 Rationale for Bank involvement ...... 3 Higher level objectives to which the project contributes ...... 4

PROJECT DESCRIPTION: Lending instrument ...... 4 Project development objective and key indicators ...... 4 Project components ...... 4 Lessons learned and reflected in the project design ...... 6 Alternatives considered and reasons for rejection ...... 6

IMPLEMENTATION: Partnership arrangements ...... 7 Institutional and implementation arrangements ...... 7 Monitoring and etaluation of outcomes/results ...... 9 Sustainability ...... 9 Critical risks and possible controversial aspects ...... 10 Loadcredit conditions and covenants ...... 12

APPRAISAL SUMMARY: Economic and financial analyses ...... 13 . Technical...... 13 Fiduciary ...... 14 Social ...... 15 Environment ...... 15 Safeguard policies ...... 16 Policy Exceptions and Readiness ...... 18 FOR OFFICIAL USE ONLY

Annex 1: Country and Sector or Program Background...... 19

Annex 2: Major Related Projects Financed by the Bank and Lessons Learnt...... 24

Annex 3: Results Framework and Monitoring...... 26

Annex 4: Detailed Project Description and ImplementationSchedule ...... 34

Annex 5: Project Costs and Financing Plan...... 59

Annex 6: Implementation and Coordinating Arrangements ...... 61 Attachment to Annex 6: Corruption Risk Mapping and Mitigation Action Plan...... 67

Annex 7: Financial Management and Disbursement Arrangements...... 74

Annex 8: Procurement Arrangements...... 84

Annex 9: Economic and Financial Analysis ...... 91

Annex 10: Safeguard Policy Issues ...... 98

Annex 11: Project Preparation and Supervision ...... 105

Annex 12: Documents in the Project File...... 107

Annex 13: Statement of Loans and Credits...... 108

Annex 14: Country at a Glance ...... 109 MAP(s) IBRD Map No. 35864

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization .

V SRI LANKA

DAM SAFETY AND WATER RESOURCES PLANNING PROJECT

PROJECT APPRAISAL DOCUMENT

SOUTH ASIA

SASSD

[ ] Loan [x 3 Credit [ 3 Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 65.33 (includes $0.5 million PPF recovery) Proposed terms: Hardened IDA Terms, with 20 (twenty) years maturity and 10 (ten) year grace.

Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 o Yes xo No Have these been approved by Bank management? oYes oNo Is approval for any policy exception sought from the Board? oYes oNo Does the project include any critical risks rated “substantial” or “high”? XoYes oNo Re$ PAD C.5

Does the project meet the Regional criteria for readiness for implementation? Xo Yes o No

vi Project development objectives - Ref PAD B.2, Technical Annex 3

(i)Establish long-term sustainable arrangements for operation and maintenance of large dams; and (ii) improve water resources planning. Project description: Ref PAD B.3, Technical Annex 4.

Component 1. Dam Safety and Operational Efficiency Improvement (Project cost $53.14 million, of which IDA Credit $47.36 million) This component would enhance public safety of 32 selected high risk large dams, improve operational efficiency of 80 dams (including the 32 dams), and establish sustainable institutional arrangements for dam safety management and O&M. The subcomponents would include: (i)remedial works for 32 high- risk dams; (ii)provision ofbasic safety facilities for 80 large dams; (iii)implementation support for subcomponents (i)and (ii);(iv) training for strengthening dam-owning organizations; and (v) studies and supply ofspecialized equipment. This component also includes provisions to implement Livelihood Assistance Plan (LSA) to provide coping assistance to the communities affected by water flow interruptions likely to occur in about 9-10 out of the 32 dams under subcomponent (i)above.

Component 2. Hydro-meteorological Information System Improvement (Project cost $8.48 million, of which IDA Credit $8.48 million) This component would enhance institutional capacity and physical and analytical infrastructure for monitoring hydro-meteorological data, detecting and forecasting water hazards, and water resources planning and management. The subcomponents would include: (i)establishment and upgrading of 50 hydrometric stations; (ii)establishment of a database at the Irrigation Department (ID); (iii)improvement ofthe analytical capacity of the ID; (iv) flood protection procedures, tools and training for analysis of flood inflows to major reservoirs; (v) establishment of a groundwater monitoring system; and (vi) implementation support.

Component 3. Multi-sectoral Water Resources Planning (Project cost $6.49 million, of which IDA Credit $6.49 million) This component would improve institutional capacity for integrated and multi-sectoral water resources planning and assist in selection and prioritization ofwater resources development investments. The subcomponents include: (i)preparation of a National Water Use Plan; (ii)updating the Mahaweli Water Resources Development Plan; (iii)preparation of a Water Resources Development Plan for Mundeni Aru River Basin; and (iv) prepare feasibility studies of priority developments identified by subcomponents (ii) and (iii).

Component 4. Project Management, Monitoring and Evaluation (Project cost $3.05 million, of which IDA Credit 3.00 million) This component would support the management, coordination and monitoring efforts related to this Droiec t.

Which safeguard policies are triggered, if any? Ref PAD D.6, Technical Annex 10 OP 4.0 1 Environmental Assessment OP 4.12 Involuntary Resettlement OP 4.37 Safety ofDams would be triggered, and OP 4.1 1 on Cultural Property

vii Significant, non-standard conditions, if any, for: Ref: PAD C. 7 Board presentation: None Loadcredit effectiveness: None

Covenants applicable to project implementation: The Government ofSri Lanka (Government) shall: at all times maintain a Project Management Unit (PMU) headed by a full time Project Director, who shall be an experienced officer, and staffed with full time competent staff in adequate skills, number and resources; Implement the project in accordance with the Financing Agreement (FA), the Project Implementation Plan (PIP), the Financial Management Manual, the Procurement Administration Manual, the Environmental Assessment & Management Framework (EAMF) and the Process Map for the LSA; not disburse any project funds for dam safety remedial works until: (a) specific Environmental Impact Assessments/Environmental Management Plans (EIAs/EMPs); and (b) provisions ofthe Process Map for the LSA subcomponent are completed where necessary and satisfactory to the IDA. not amend or waive any provisions ofthe above manuals, plans, frameworks and process map without IDA’Sprior approval; maintain the National Project Oversight Committee (NPOC), the Project Steering Committee (PSC), and the Dam Safety Review Panel (DSRP) with adequate staff, powers, functions, resources and terms ofreference to the satisfaction ofIDA; appoint project implementation support consultants to implement all the three components as a condition ofdisbursement to each ofthe respective components; furnish the IDA with all the required progress reports, financial management reports and Monitoring and Evaluation (M&E) reports on time according to the PIP and the Financial Management Manual; carry out a mid-tern review and furnish the evaluation reports of such a review to IDA by June 30, 2010; and assign staff and allocate resources sufficiently to carry out the provisions ofthe Process Map for LSA.

... Vlll A. STRATEGIC CONTEXT AND RATIONALE

Al. Country and Sector Issues 1. Water resources development in Sri Lanka has contributed significantly to the country’s economic growth, poverty reduction, and environmental health. Development of dams, barrages, reservoirs, trans-basin canals and irrigation systems, has remained a high investment priority of all successive governments. These hydraulic assets serve the critical irrigation, hydropower, domestic and industrial water supply needs of the country, provide flood control in the river basins, and sustain human settlements particularly in rural areas. The production of rice, Sri Lanka’s staple cereal, and the generation of its electricity are heavily dependent on these regulated water resources. At present, about 85% percent of the developed water resources are used for irrigated agnculture in the dry zone’, which covers nearly two-thirds ofthe country. Dry zone is the home for about 80% of the population. Livelihoods of a large majority of this population depend either fully or partially on irrigated agriculture.

2. The project has been designed to assist the Government to address the priority technical issues and needs of the water sector as outlined in the memoranda approved by the Cabinet of Ministers in September 2005 and September 2007. These issues are elaborated in Annex 1. The first issue is the escalating public safety threat posed by the large dams. The dam network in Sri Lanka comprises over 350 medium and large dams [of which 80 are classified as “large dams” according to the classification ofInternational Committee ofLarge Dams (ICOLD)*] and a large number of small dams which are hydraulically interlinked in the river basins. The large dams are ageing and have various structural deficiencies and shortcomings in operation and monitoring facilities. The Annual Report ofthe Central Bank of Sri Lanka in 20043 as well as a recent public consultation study4 highlighted the potential public safety hazards posed by the dams. These reports recommend early action to ensure: proper maintenance of dams and reservoirs; completion ofall urgent pending maintenance work as early as possible; setting up ofa competent independent committee to examine problems relating to sustainable maintenance of dams and reservoirs; formulation of standards to be maintained to minimize risk of dam failures; exploration of alternative funding sources for sustainable maintenance of dams; introduction of legislation on dam safety standards and regulations; and enforcement of periodic “engineering audit” on all large dams by qualified risk assessors.

3. Second, the damage caused by the tsunami disaster in Sri Lanka on December 26, 2004 has deepened the need and urgency for the country to protect the public from natural disasters. Consequently, a Ministry of Disaster Management has been created, a national Disaster Management Centre (DMC) has been established and Sri Lanka Disaster Management Act (No. 13 of 2005) has been passed by the Parliament. The Act establishes the National Council for Disaster Management, whose hnctions include formulation of a national policy and program which shall provide for protection ofhuman life and environment from natural disasters, effective

1 The rainfall pattern divides the country in to wet zone (average annual rainfall over 2,400 mm), dry zone (rainfall less than 1,200 mm) and intermediate zone (rainfall 1,200-2,400mm). * ICOLD defines a large dam as one which is over 15m high or between 10 and 15 m high but with a storage capacity in excess of 1 million cubic meters or more than 500 m long or its spill way is designed to discharge more than 2,000 cubic meters per second. Central Bank, Sri Lanka, Annual Report 2004, Chapter 3, pages 69-70. Concept Paper for a Dam-related Hazard Warning System in Sri Lanka: A Participatory Study on Actions Required to Avoid and Mitigate Dam Disasters, LIRNEasia, January 23, 2006. Available in ht~://w~w.limeasia.net/2006101/Dam- Safetv-Concept Paoer-Released/

1 use of national resources for disaster preparedness, mitigation and prevention, enhancement of public awareness to protect people from natural disasters, and taking all steps necessary to counter any disaster or impending disaster. The “Roadmap of the Disaster Risk Management in Sri Lanka”, which is the strategic action plan of the DMC proposes various interventions to protect the public from disaster from potential major dam failures. The action plan includes the following two major milestones: (i)conduct portfolio risk assessment studies for high risk dams - 32 identified high risk dams in years 2006-2007, for all other dams during 2008-2010, and reassessment and continuation of safety measures beyond 2008; and (ii)identify downstream areas of large dams vulnerable to submergence in the event of dam failures, and preparation of flood inundation maps. The project would collaborate with the DMC to support its dadpublic safety mandate.

4. Third, the Government’s national development framework for the ten year time horizon from 2006-20 16 (called Muhindu Chinthunuyu) contemplates investments in water resources development over the coming years as an important component of a strategy to accelerate economic growth and regional development. The framework highlights various measures to support this effort including: the completion of regional surface and ground water studies; development of river basin management capacities; conducting technical feasibility studies on potential trans-basin water diversions; continuation ofthe implementation of the remaining large water resources development projects identified in the master plan of Mahaweli Development Program’; and examination of the feasibility for new water resourcedinigation development projects. The framework also recognizes various constraints for achieving the development goals including the funding, human resources skills and capacity constraints, absence of adequate and reliable data for water resources planning, and the need for consistency in policies and strategies in the sub sectors using water resources. The project would contribute to achieving these outcomes and building capacity for systematic water resources planning, development and management in a multi-sectoral, integrated and sustainable development framework.

5. Fourth, availability ofadequate, timely and reliable hydrological and meteorological data is increasingly necessary for: dam safety risk assessments; seasonal water allocation planning and dam operations in major river basins; operation ofinterconnected reservoir systems and trans- basin diversions; planning for and feasibility studies of new water resources development projects; and forecasting and development of early warning systems to protect the public from floods, droughts and dam failures. The present national Hydro-meteorological Information System (HMIS)6, including its physical infrastructure, data and information management arrangements, adequacy and reliability of collected data, and capacity and shlls of the government staff, need to be enhanced to better serve these purposes. The need to upgrade the national HMIS is recognized as a priority in the ten year development framework. The project would support the enhancement of staff capacity and physical and analytical infrastructure for monitoring hydrometric data, detecting and forecasting water hazards and assessing water resources for multi-sectoral planning, development and management.

Mahaweli Development Plan means the “Mahaweli Ganga Irrigation and Hydropower Survey of FA0 1969”, which proposed a number of water resources development proposals for agriculture and hydropower development and flood control. Some of the water resources development projects were completed under the Accelerated Mahaweli Development Program, a subprogram carved out from the original master plan, during 1979-1985. Hydrologic Information System (HMIS) is an integrated water information system providing accurate, comprehensive and timely available hydrological data. It consists of a scientific hydrological and meteorological observation network; data processing and storage facilities; decision support tools and facilities, reliable data communication arrangement and a trained manpower to operate these.

2 6. Finally, the current ten-year development framework contemplates the need for sector policy and institutional reforms. However, past efforts to establish a national water sector policy and make legal and institutional reforms for integrated management of water resources have not been successhl because those efforts were mainly donor driven, the approach was top-down and hypothetical, and there was little realization of the related policy issues and urgency for such reforms by the lead water agencies as well as the public. As a result, water sector reforms have been highly sensitive and controversial and have raised high public concern. This situation is likely to continue for the foreseeable future. Therefore, this project does not address water sector reforms but would focus on the major technical issues and needs. But the project would provide an opportunity for policy and technical level staff ofthe water sector agencies to: (i)analyze the supply and demand and optimum use of the country’s water resources to meet emerging development and water resources management needs at the national level and in two selected river basins; and (ii)produce plans, and carry out priority feasibility and pre-feasibility studies for developing and managing water resources to meet those needs.

7. Sri Lanka is currently faced with an immense challenge of establishing political stability following more than two decades ofconflict in the Northern and the Eastern provinces. Recently the Government announced that the entire Eastern Province has been liberated and the hostilities are mainly concentrated in the Northern parts ofthe country. Noproject activities are planned in the areas of the Northern Province currently affected by the ongoing conflict. In the unlikely event that the hostilities resume in the Eastern province, the dam safety remedial repairs to Kantale dam under Component 1 and preparation of Mundeni Aru water resources plan under Component 3 might be affected. It is unlikely that the conflict would affect the implementation ofthe remaining activities ofthe project.

A2. Rationale for Bank Involvement 8. Development and management ofwater resources is a high priority for the country to: (i) provide adequate water supplies for human consumption; (ii)ensure food security; (iii)relieve poverty; (iv) promote regional development particularly in the lagging regions; and (v) mitigate water induced natural hazards. In September 2005, the Cabinet of Ministers of the Government approved the project scope and the preparation ofthe project to obtain IDA support. The Cabinet reconfumed its commitment and need to obtain IDA support through a second Cabinet memorandum approved in September 2007. The scope of the proposed project is fully in line , with the strategic sector priorities of the Government’s Development Framework as emphasized in the approved Cabinet memoranda. The project is expected to be a major instrument to address these urgent sector priorities as mentioned above.

9. The Sri Lanka Country Assistance Strategy (CAS) Progress Report presented to the Board ofExecutive Directors in 2005’ recognizes that the lending operations of IDA in Sri Lanka would have a strong bias, inter alia, towards assistance for imgation and roads. The indicative lending program of the CAS update earmarks this project as a lending operation in the Bank’s FY07. The project would strengthen public sector management by building capacity, establishing long term sustainable arrangements for dam operation and maintenance (O&M), contributing to protect the public against the risk of dam failures, and effectively manage the country’s water resources and major water assets. In this context, the proposed project has the right focus to address critical technical needs of the water sector in Sri Lanka, many of which are of a ‘public goods’ nature and therefore, have a relatively high strategic priority.

’ Country Assistance Strategy Progress Report for the Democratic Republic of Sri Lanka, January 6, 2006, Report No. 34054-LK, The World Bank. (The Board of Executive Directors discussed the CAS Progress Report on Dec 15,2005).

3 10. The project would be closely linked to the Bank’s water resources strategy’ that recognizes: (i)water resources management and development are central to sustainable growth and poverty reduction; (ii)the World Bank needs to assist countries in developing and maintaining appropriate stocks of well-performing hydraulic infrastructure; and (iii)the Bank’s water assistance must be tailored to a country’s specific circumstances and be consistent with the CAS and the Poverty Reduction Strategy. The Bank is currently supporting similar operations in the other countries within and outside the region. The Bank has sufficient global and regional experience to support this operation.

A3. Higher Level Objectives to which the project contributes 11. The project would contribute to protecting the public from potential water and dam induced hazards and enhance the long term capacity for sustainable planning and management of water resources and related hydraulic infrastructure ofthe country. By ensuring dam safety, and hence public safety, identifying water development and management priorities, building sector capacity, and investing on feasibility studies for priority development projects, the Project would contribute to economic growth. The project investments would contribute to achieving the broader goal ofpoverty reduction through higher productivity and incomes of small and marginal landholders, and increased employment for the rural population. The expected outcomes of the project would complement and supplement the efforts for rural development, growth and poverty alleviation and for protecting the public from natural hazards.

B. PROJECT DESCRIPTION B1. Lending instrument 12. The lending instrument would be an IDA Credit. This would be the most appropriate lending instrument given that the investment is well defined and would be implemented over four years.

B2. Project development objective and key indicators 13. The project development objectives (PDOs) are to: (i) establish long-term sustainable arrangements for operation and maintenance of large dams; and (ii) improve water resources planning. These PDOs would be achieved by investments in three main project components: (1) Improving dam safety and operational efficiency; (2) Upgrading and

, modernizing the existing hydro-meteorological information systems; and (3) Providing technical assistance for developing national water use plan and integrated water resources plans for two selected priority river basins. Each project component would include institutional development and capacity building for the implementing agencies (Us). The project would support project management and monitoring through the provision ofincremental staff, consultants, vehicles and office facilities.

14. The key performance indicators for measuring progress in achievement of the project development objective would include: (i)reduced number of dams with unacceptable risk index; (ii)number of dams with risk-based O&M plans operationalized; (iii)improved water database utilized by IAs for flood forecasting and dam operations; and (iv) national water use plan and at least one river basin development plan adopted by the Government. The detailed results monitoring framework is shown in Annex 3.

B3. Project Components 15. The project would have four components as described below (see Annex 4 for a detailed description). The total project cost is estimated at US$71.66 million, including recovery of the

8 Water Resources Sector Strategy, World Bank 2004 (Available at www.worldbank.org).

4 Project Preparation Facility (PPF) Advance ofUS$0.5 million (See Annex 5). Of the total cost of US$71.66 million, IDA would finance US$65.33 million, and the remaining US$6.33 million by the Government of Sri Lanka.

Component 1: Dam Safety and Operational Efficiency Improvement (Project cost $53.14 million, of which IDA Credit $47.36 million): 16. The outcomes of this component would be enhanced public safety of selected high-risk large dams, improved operational efficiency of large dams and sustainable institutional arrangements for effective dam safety management and O&M. This component would comprise: (i)essential remedial works for 32 high-risk large dams, which are managed by the Irrigation Department (ID) (16 dams), Mahaweli Authority of Sri Lanka (MASL) (11 dams), Ceylon Electricity Board, (CEB) (4 dams), and National Water Supply and Drainage Board (NWSDB) (1 dam); (ii)provision ofbasic safety and operational facilities for 80 large dams (including the 32 high-risk dams); and (iii)implementation support for: (a) collection of basic engmeering and operational information essential for sustainable operation and management ofthe 80 large dams; (b) risk assessment on the remaining portfolio of large dams, training in dam safety; (c) development ofO&M manuals, (d) preparation ofcodes ofpractice and operating procedures and manuals, including the procurement and adoption of modem software for hydrological and structural analysis of dams; (e) establishment of an inter-organizational arrangement for regular dam safety inspection and assistance for the establishment of dam safety regulation; (f) establishing a sustainable needs-based O&M funding mechanism; and (8) special studies.

17. It is expected that in about 9-10 out of the 32 dams, the essential dam safety repairs would cause low reservoir water storage and interruption of irrigation supplies temporarily and mostly for one cropping season. The cost estimate for this component includes provisions to provide coping assistance to the communities affected by water flow interruptions. The coping assistance to eligrble beneficiaries would be implemented through a Livelihood Support Assistance (LSA) subcomponent, which comprise four broad category of plans: (i)Coping Assistance Plan, to help cultivator households cope with the likely crop loss; (ii))Alternative Crop Plan would assist cultivators to raise alternative crops without irrigation; (iii)Wage Assistance would provide wage employment not only for farmers but also for fishers and landless laborers whose livelihoods depend on the reservoir water storage; and (iv) Gender Action Plan would address the requirements of women.

Component 2: Hydro-meteorological Information System Improvement (Project cost $8.48 million, of which IDA Credit $8.48 million) 18. The expected outcome ofthis component would be enhanced staff capacity and physical and analytical infrastructure for monitoring hydrometric data, detecting and forecasting water hazards and assessing water resources for multi-sectoral planning, development and management. This component will comprise: (i)establishment of 50 new and upgraded hydrometric stations to supplement and strengthen the existing hydrometric network; (ii)establishment of a data bank at the ID; (iii)improvement of the analytical capability of the ID; (iv) establishment of procedures and provision oftools and training for real-time analysis offlood situations in the influent streams ofsome major reservoirs; and (v) establishment ofa core groundwater monitoring system.

Component 3: Multi-sector Water Resources Planning (Project cost $6.49 million, of which IDA Credit $6.49 million) 19. The expected outcome of this component would be: national water use plan, water resources development plans for two selected river basins, pre-feasibility and feasibility studies for selected high priority strategic projects, and enhanced institutional capacity and skills for water resources planning and management. This component would comprise three

5 subcomponents: (i)development ofa National Water Use Plan CNWup) to achieve the country’s long-term social, environmental and economic development goals and objectives as expressed in the national development framework based on an analysis of updated estimates of present and future water demand and water supply in the 103 river basins in the country; (ii)preparation ofan updated Mahaweli Water Resources Development Plan for the Mahaweli Ganga and adjoining connected river basins, based on an optimization study of water supply and water demand in all sectors in this system ofriver basins. The updated Mahaweli Plan would include a new portfolio ofprioritized Mahaweli development proposals and the project would support pre-feasibility and feasibility studies for the highest priority investment projects recommended in the agreed plan; and (iii)preparation of a multi-sector, integrated and comprehensive Mundeni Aru Basin Development Plan (in the Eastern Province), and pre-feasibility and feasibility studies ofpriority investment projects.

Component 4: Project Management and monitoring (Project cost $3.05 million, of which IDA Credit 3.00 million) 20. The purpose ofthis component is to ensure smooth implementation ofproject activities as well as monitoring of and learning from project processes and outputs. This component would assist the Project Management Unit (PMU) and project implementing agencies to execute, manage and monitor the project by the provision of consultants, vehicles, equipment, and incremental staff and operating costs.

B4. Lessons learned and reflected in the project design 21. Many lessons learned from the implementation of related Bank-financed dam safety, hydrology, irrigation and water resources management projects outside Sri Lankag, Sri Lanka Mahaweli Restructuring and Rehabilitation project (MRRF’)’’ and from the Bank’s Water Resources Strategy have been incorporated in the project design. Those include: (i)a regulatory agency responsible for overseeing the dam safety program, adequate skills and capacity of dam operating agencies, and effective O&M arrangements are indispensable for public safety assurance; (ii)the Bank’s assistance must be tailored to the country’s specific circumstances; (iii) effective water resources planning and management are best undertaken within a river basin framework; (iv) projects of this nature need good understanding at and support of the highest levels ofthe government and the general public for successful implementation and sustainability; (v) high quality ofdesign and construction ofdam remediation work is indispensable and must be achieved by using qualified and experienced government staff and consultants to avoid “over- design” and cost over-runs; and (vi) practical application and utility of the improved hydro- meteorological system for the water users must be strengthened and complemented by introducing decision support tools for water related operations. The project has been conceived and its design has been built on the Implementation Completion Report (ICR) of MRRP, which strongly recommended a follow-on operation for dam safety assurance, HMIS and water resources management.

B5. Alternatives considered and reasons for rejection 22. The key alternatives considered for the project design include: (i)A Dam Safety Project without HMIS component: That alternative would be relatively simple in design and be able to address the need for strengthening the dam structures and institution.

Primarily the Implementation Completion Reports (ICRs) of Indonesia Dam Safety Project, Armenia Irrigation Dam Safety Project, India Darn Safety Project, Java Irrigation Improvement and Water Resources Management Project, and India Hydrology project. 10 Implementation Completion Report, Mahaweli Restructuring and Rehabilitation Project (MRRP), Report no 28927- LK, World Bank.

6 However, there would be a shortfall in ensuring the long-term safety against an extreme event, particularly in light of global climate changes, and operating efficiency as they both require reliable real time and long term hydrological and meteorological data.

(ii)Combining dam strengthening with new development works: Given the gravity and urgency ofaddressing public safety related to existing dams, as reflected in the possible imminent failures ofsome dams, it was agreed that higher priority be given to existing dam strengthening.

C. IMPLEMENTATION

C1. Partnership arrangements 23. The Government is receiving technical and financial assistance from the Government of Japan for a Comprehensive Study on Disaster Management and Improvement of Meteorological and Disaster Management Information Network (See Annex 2). The studies are scheduled for completion by early 2009 by the Japan International Cooperation Agency (JICA). The project team would work and coordinate closely with the JICA team and the concerned agencies (The Department of Meteorology - DOM and the Imgation Department - ID) through an established coordination mechanism to avoid duplication and ensure that interventions by the JICA program and this project are mutually complementary and supplementary.

C2. Institutional and implementation arrangements: 24. An organization chart showing the overall project oversight, implementation and coordination arrangements is shown in Annex 6. The overall responsibility for project implementation would rest with Ministry of Agriculture Development and Agrarian Services (MADAS). The Project would be managed by a Project Management Unit (PMU) already established within the MADAS. The PMU and the implementing agencies would include teams of multi-disciplinary professional staff and support staff throughout the implementation. The PMU has already been appointed with full time core staff, including Project Director (PD), Procurement Specialist, Project Accountant, Social Development Specialist, and M&E Officer. The Management Service Department of the Ministry of Finance and Planning has approved the recruitment of all remaining individual professional and support staff for the PMU and the implementing agencies in accordance with staffing list agreed with the Bank. Hiring of these staff is underway and will be a condition for disbursements. The PMU is also in the process of hiring the three international Implementation Support Consultants (ISCs) who would provide technical guidance, training and oversight to the MASL and ID for the execution of the three project components. Hiring of the ISCs will also be a condition of disbursement for each of the respective project components.

25. Component 1: The MASL, the ID, the CEB and the NWSDB are responsible for the construction planning and supervision of dam safety remedial repairs and provision of basic safety facilities to the dams under their jurisdiction. An internationally hired ISC would provide assistance to these implementing agencies in the design and quality assurance of remedial repairs and other major activities. The MASL and the ID are responsible for the procurement for Component 1 activities for the dams under their jurisdiction but with support and supervision of the PMU as prescribes in the Procurement Administration Manual of the Project. The PMU would be responsible for the selection of contractors for all works of the CEB and the NWSDB dams. An independent Dam Safety Review Panel (DSW) would work closely with the ISC and the implementing agencies to arrive at optimal designs and solutions to complex engineering issues. The PMU would hire and assign incremental local staff to the implementing agencies to supplement the government officers, who are already workmg in the respective units of these agencies on regular basis. The PMU would facilitate collaboration between the ISC, the dam

7 custodian agencies, the Disaster Management Centre (DMC) and the Ministry of Finance and Planning (MOFP) in the analytical and follow up work required for the establishment of long term sustainable institutional and O&M arrangements for dam safety.

26. Component 2: All activities under Component 2 would be implemented as a turnkey contract. The PMU would be responsible for the selection of the turnkey contractor. The implementation of all activities ofthe turnkey contract, except the establishment of ground water monitoring network, would be managed by the ID. The groundwater subcomponent would be managed by the Water Resources Board (WRB). An ISC would be hired to assist these implementing units for contract supervision, staff training and groundwater network design. The PMU would facilitate close collaboration and working arrangements with the JICA, DOM, ID and the DMC to ensure hardware and software compatibility between the activities funded by the JICA and this project.

27. Component 3: This component would be implemented by the ID (National Water Use Plan and Mundeni Aru Basin Plan subcomponents) and the MASL (Mahaweli Water Resources Development Plan subcomponent). Three special units would be established in the two agencies to carry out the tasks: In the ID - Water Resources Planning and Information Centre to prepare the national water use plan; and Mundeni Aru Planning Cell to prepare Mundeni Aru basin plan; and in the MASL - Mahaweli Water Resources Planning Centre to prepare updated Mahaweli Plan. These special units of the ID and the project implementation would be headed and overseen by Director (Planning and Design) and the Deputy Director (Water Planning and Project Preparation), and of the MASL, by the Executive Director (Technical Services) and the Director (Project Planning). These units would be staffed with teams of multi-disciplinary experts. The required mix of slulls and specialists would be assigned by the MASL and ID, seconded by the other water sector agencies (CEB and NWSDB) and hired as consultants. These three cells are being established by the DGs ofthe MASLand the ID.

28. National Proiect Oversight Committee RJPOC): An inter-ministerial NPOC would provide overall policy oversight and guidance and resolve inter-agency conflicts and issues. The NPOC would be chaired by the Secretary, MOFP and consist of the secretaries of participating ministries, heads of all participating agencies, DGs of External Resources Department (ERD), National Planning Department (NPD), National Budget Department (NBD), and the PD. The Secretary, MOFP, may appoint any professional(s) as member(s) of the NOPC as deemed necessary for its mandate. The PD would be the Secretary to the NPOC. The NPOC would meet every four months and review project implementation progress, approve bi-annual work plans, project budgets, resolve inter-ministerial conflicts and issues, if any, and provide policy and strategic guidance to the PMU and the implementing agencies. Particularly, the NPOC would provide policy and strategic guidance required development of water resources plans, establishment ofsustainable institutional and O&M arrangements for dam safety, and for efficient O&M and use ofthe improved HMIS system.

29. Proiect Steering Committee (PSC): While the NPOC would provide overall policy and strategic guidance to the PMU, project steering, and coordination and collaboration among the implementing agencies would be ensured through a PSC. This committee would be co-chaired by the Secretaries of MADAS and Ministry of Irrigation and Water Management (MIWM). The PSC would include the PD, DGs of the MASL, the ID, and designated representatives of the ERD, the NF'D and the NBD, the Ministry of Provincial Councils and Local Government, and heads of relevant units of the MASL, ID, CEB, NWSDB, WRB, and DMC responsible for the implementation and supervision of the project activities. The Co-Chairpersons, may appoint any professional(s) as member(s) ofthe PSC as deemed necessary for its mandate. The PD would be

8 the Secretary to the PSC. The PSC would meet once in every two months and be responsible for reviewing monthly progress, coordinating project activities among the partnering agencies, clearing project implementation plans and annual and quarterly project budgets, resolving issues during project implementation, and malung recommendations to the NPOC on issues that need the attention of and guidance from the NPOC. In addition, the PD would establish internal arrangements to plan coordinate and monitor project activities closely.

C3. Monitoring and evaluation of outcomeshesults: 30. Base line survey for the project included: a comprehensive risk assessment of 38 large dams (out ofwhich the 32 high-risk dams have been identified); a study ofthe country's physical and analytical infrastructure for HMIS; and a review of institutional capacity/skills related to the three components. The studies are available in the Project Feasibility Report submitted by the Government (in Project Files). The project outcomes and results would be measured against this baseline as reflected in Annex 3. PMU would be responsible for monitoring the outcomes with assistance from independent monitoring and evaluation (M&E) consultants.

31. The PMU would be responsible for preparation of annual work plans and related disbursement and cash-flow forecasts. It would submit quarterly reports in an appropriate format to the MOFP, NPOC, implementing agencies and the Bank no later than 45 days after the end of each quarter. Quarterly reports would describe physical and financial progress and expected completion dates of contracts, progress on institutional components, training, studies and the activities of the project's consultants with explanations for shortfalls between the plan and achievements. The reports would also include financial and procurement information, including: (i)comparison of actual and forecast physical and financial outputs and updated forecasts for the next six months; (ii)project financial statements, including sources and application of funds, statements of expenditure by category and reconciliation of special accounts; and (iii)a procurement management report showing status and contract commitments.

32. The PMU would also prepare an annual report to be submitted no later than 31 January each year. The report would cover: (i)the progress of each component, implementation of key features ofthe environmental management plan, key performance indicators, details of operation of project facilities and financial statements; and (ii)the annual work plan for implementation, annual funds required for implementation, an updated disbursement profile, planned actions for mitigating negative effects during construction and target indicators for the coming year. A midterm review of the project would be carried out by the Borrower by 30 June 2010 to enable the Bank to complete its midterm review of the project. The Borrower would submit its own implementation completion report to the Bank no later than six months after the closing date of the Credit.

C4. Sustainability 33. The project design examined key factors influencing the sustainability of project activities and outcomes and includes measures to enhance the likelihood of sustainability. From the technical sustainabilitv perspective, the project would support capacity and skill building of the dam custodian agencies to improve asset inventories, dam O&M, water resources planning and management, and the HMIS use and management. An effective mechanism, involving experienced international consultants and the Independent Dam Safety Review Panel (DSRP), would be established under the project to ensure the technical designs and quality of project activities are in line with international standards and best practice. New monitoring instruments to be installed as part ofthe remedial measures and modernized HMIS would provide the means to enable timely and effective detection ofproblems and risks in future dam operation.

9 34. From the institutional sustainability perspective, the project would have a strong institutional strengthening element with the aim of building the capacity of the implementing agencies in several specialized skills. Those include, but not limited to: modem state-of-art dam engineering principles; risk assessment and dam portfolio management; engineering design and construction quality control; social and environmental management of dams and basin water resources management; dam safety codes of practices; dam operation and risk-based maintenance; safety monitoring and inspection; dam emergency preparedness planning; hydrological & meteorological data management; flood forecasting; and multi-sectoral water resources planning, and so on. The implementation arrangement that anchors the implementation responsibility of all the three components with the concerned government departments would build a strong sense of ownership of the project and its outcomes, creating a favorable environment for sustainability of the project activities. The Water Resources and Information Centers in the MASL and ID would serve as the institutional, skill and information base for post- project water resources development and management planning. The project would also assist in the establishment of: institutional arrangements for sustainable dam safety monitoring, regulation and need based O&M funding; and sustainable institutional linkages between the dam custodian agencies; the DMC, and local professional bodies such as Institution of Engineers of Sri Lanka, National Committee of Large Dams for sustainable dam safety and public safety assurance arrangements .

35. From the financial sustainabilitv perspective, the project would support establishment of needs-based O&M system. To complement this, a study would be commissioned to examine options for optimizing social, economic and environmental benefits of large dams ofthe country as a means for income generation from providing ancillary public services (like recreational parks, eco-tourism etc.) to supplement O&M funding. Agreements have been reached with the Government on including a line item on overall O&M budget in the National Budget Plan in the concerned agencies, which would explicitly deal with O&M ofdams.

C5. Critical risks and possible controversial aspects: 36. The main risks associated with the projects and mitigation measures are summarized as follows:

Risks Risk Mitigation Measures Risk Rating with Mitigation Ibjective Poor ownership and Project would help the country to set up independent S commitment may delay dam safety regulatory arrangements based on the institutional and international best practices, tailored to local needs and O&M arrangements and conditions. The Government is in agreement for the lead to inefficient dam need for sustainable institutional arrangements for safety assurance and independent dam safety regulation. Adequate policy regulation and legal provisions exist within the mandate ofthe DMC and the Disaster Management Act to establish such institutional arrangements. Sufficient O&M budget The project would assess the O&M needs of project H may not be allocated for dams and help the Government to create a non-fungible dam safety and HMIS budget line for need-based dam O&M expenditures, or other means of ensuring sufficient O&M funding in future. The project would include provisions for a study ofoptions for optimizing social, economic and

10 environmental benefits oflarge dams of the country as a means to supplement O&M funding. Dam safety, O&M budget planning and allocation would be linked with the proposed institutional arrangements for independent dam safety inspection to be fostered and established under the project. Institutional capacity Institutional capacity and staff skill development for S may not be adequate to dam safety, HMIS management and water resources implement effective planning would be important parts of the project and dam safety assurance mostly in-built to project planning, design and and HMIS management implementation processes. ISCs to be hired would be used for skill transfer and human resources and institutional capacity building. Poor collaboration Several measures have been incorporated into the M among the IAs may project design to ensure collaboration, including: (i)a affect the timely strong PMU; (ii)an inter-ministerial NPOC; (iii)PSC; delivery of outcomes, and (iv) project implementation to be carried out by the particularly ofthe regular units of the ID and the MASL without creating Component 3 temporary project implementingunits outside these two agencies. To Project Outputs Procurement risk is A strong Procurement unit is established in the PMU. S considered high. There Close monitoring with a periodically updated may be gaps and delays procurement plan and procurement activity monitoring in procurement plan will be carried out by Bank team. In addition training will be provided by the Bank Team. Project specific, comprehensive Procurement administration Manual in line with Bank Guidelines has been prepared by the PMU. This would be used for training of all staff involved in the procurement. Communities may not Project would conduct Information, Communication M reach consensus with and Consultation campaign to educate communities on the Government on potential risks, prepare for informed decision making rehabilitating risky and reaching voluntary consensus. Detailed dams with fear of implementation plans for all the 32 dams have been loosing cultivation prepared and these plans would be closely monitored. seasons Project includes provision for Livelihood Support Assistance to communities to mitigate potential hardships arising out of dam rehabilitation works, where necessary. Technical capacity of Enhanced by ISCs, hired local consultants, and DSRP. M IAsmay be inadequate Corruption and rent The PMUhas developed a comprehensive Corruption S seeking related with Risk Mapping and Mitigation Action Plan, which is procurement ofcivil and included as an Attachment to PAD Annex 6. Business electro-mechanical standards (time norms) for each step ofmajor works and procurement types have been worked out and implementation of LSA established and would be used as a monitoring tool using the project Management Information System (MIS) to keep track of potential corruptiodrent seeking

11 implementation suppodreview missions. Low construction Works to be packaged in an appropriate manner to N quality due to lack of interest by capable contractors to undertake civil works Costs overrun Adequate investigations and robust designs; M procurement through competitive bidding; effective cost control mechanism by supervision teams; and inputs ofcompetent consultants for designs. Work program is reviewed and adjusted at review H situation may prevent missions to avoid operations in high security risk areas. operation in certain areas 1 Overall risk rating Is H-High, S-Substantial, 1 [-Moderate, N-Negligible

C6. Credit Conditions and Covenants applicable to project implementation: 37. There are no conditions for Board Approval or Credit Effectiveness. During negotiations assurance were obtained from the Government during the Credit negotiations for provision of sufficient O&M funding for the dams to be strengthened under the project.

38. The main legal covenants would include the following. The Government of Sri Lanka (Government) shall: at all times maintain a Project Management Unit headed by a full time Project Director, who shall be an experienced officer, and staffed with full time competent staff in adequate skills, number and resources; Implement the project in accordance with the Financing Agreement (FA), the Project Implementation Plan (PIP), the Financial Management Manual, the Procurement Administration Manual, the Environmental Assessment & Management Framework and Process Map for LSA; not disburse any project funds for dam safety remedial works until: (a) specific EIAsEMPs; and (b) provisions of Process Map for the LSA subcomponents are completed where necessary and satisfactory to the IDA. not amend or waive any provisions ofthe above manuals, plans, frameworks and process map without IDA’Sprior approval; maintain the National Project Oversight Committee, Project Steering Committee, and Dam Safety Review Panel with adequate staff, powers, functions, resources and terms ofreference to the satisfaction ofIDA; appoint project implementation support consultants to implement all the three components as a condition ofdisbursement to each ofthe respective components; furnish the IDA with all the required progress reports, financial management reports and M&E reports on time according to the PIE’ and Financial Management Manual; carry out a mid-term review and furnish the evaluation reports of such a review to IDA by June 30,2010; and assign staff and allocate resources sufficiently to carry out the provisions ofthe Process Map for LSA.

12 D. APPRAISAL SUMMARY

D1. Economic and financial analysis: NPV= LK Rs. 2.4 billion; ERR=18.8% 39. Economic analysis is undertaken of the benefits generated from project investments in improving dam safety & operational efficiency, modernizing the hydro-meteorological system, and developing institutional capacity, accounting for 84% of the project costs. Comparison of incremental economic benefits with incremental economic costs for the project as a whole yielded a Net Present Value (NPV) of Sri Lanka Rupees (LK Rs) Rs 2.4 billion over the 25-year project period with an estimated ERR of 18.8%. Sensitivity tests and risk analysis indicate that the project is able to absorb substantial negative impacts but still generates robust ERRS. For example, the project can sustain significant decreases in benefits and/or increases in costs. Various scenarios like 20% increase in costs, or a 20% decrease in benefits, or one year delay in implementation, do lower the ERR but still remains at or above 14.6%. hsk analysis is performed by simulating the distribution of critical risk variables and their combined impact on projected outcomes. The simulated ERR ranged from 12.7 to 17.9% and the project’s ERR is not likely to fall below 12.7% as the probability ofnegative outcomes is predicted to be zero by the risk model. Hence, the mean expected ERR of 15.1% with a coefficient of variation of 5.3%, estimated by the risk model, can be considered reasonably stable for the proposed project investments.

D2. Technical: 40. The project has been designed after a comprehensive technical review conducted by three Technical Workmg Groups (TWGs) of the Government with assistance from an internationally recruited consultant firm. Funds were provided through the World Bank (total US$ 1,050,000) for detailed technical preparation ofthe project through a Japanese Policy and Human Resources Development (PHRD) Grant and a Project Preparation Facility (PPF) advance. Each ofthe three TWGs, is headed and comprised ofthe senior technical specialists ofall the relevant government agencies, and was responsible for the design ofthe three project components. In summary, thirty two dams have been selected for major safety investments based on comprehensive risk assessment studies using internationally accepted techniques such as dam Portfolio Risk Assessments (PR4) from a list of 38 vulnerable dams. The risk profiles of the analyzed dams were ranked according to their hazard and risk levels using United States Bureau of Reclamation’s Risk Based Profile System. The Technical Design and detailed preliminary cost estimates is included in the Project Feasibility Study Report (filed in Bank’s Project Files). Individual reports and recommendations for each ofthe 38 dams are also available.

41. Regarding the HMIS, the establishment of a uniform and widely-accessible HMIS would represent a major breakthrough in the country where water quantity, quality, allocation and related environmental issues are ever increasing in importance. Much emphasis has now been placed on enhancement of HMIS in groundwater quality and pollution control. While the technologies proposed for the project are relatively new to Sri Lanka, they are being initiated sporadically in the country, but used in many instances outside the country. Technical risks associated with real-time telemetric data collectiodtransmission would be minimized by initial piloting in a few selected reservoirs, with support from technical consultants, followed by intensive training and learning programs. The system would be developed, based on well- established, internationally-acceptable methodology applicable to the local conditions. HMIS data

13 would be used to analyze and gradually customize future planning and design aids for the user agencies concerned.

42. The use oftechnical for multi-sectoral river basin water balance studies, water allocation and budgeting exercises would allow the decision maker and resources planners to use the results as tools in their investment decision making process. The practical application of these decision makmg tools would be applied directly to three or four feasibility studies within the Mahaweli and Mundeni river basins. The technologies proposed are not new neither to the country nor to the concerned agencies, and they would be developed with the help ofinternational and national consultants based on well-established, internationally acceptable methodologies. Technical risks associated with the multi-sectoral water resources planning would thus be minimized.

D3. Fiduciary 43. Financial Management: The proposed financial management procedures are in keeping with IDA’S fiduciary requirements as per OPBP 10.02. The project has a ‘Modest’ FM risk rating. The PMU on behalf of the Secretary, MADAS, would be responsible for the overall financial management of the project. The PMU, which would be a single point management unit, would record all financial transactions of the project and would be responsible for managing the proceeds of the credit as well as counterpart funds. A manual accounting and reporting system has been set up for the Project. This would eventually be computerized. The financial management system to be adopted by the PMU has been reviewed (see Annex 7) and the project has sufficient capacity to commence disbursement procedures under the Interim Financial Statement. The Bank cleared the project Financial Management Manual (dated February 1,2008) prepared by the PMU (in Project Files). The procedure for certification ofgoods and services for payments have been described in detail both in the FM Manual as well as in Procurement Administration Manual cleared with the Bank. Quarterly Interim Financial Statements for activities supported under the Project would be submitted to IDA within 45 days of the end of each quarter. The Auditor General of Sri Lanka would audit the project accounts each year. The project audit report would be submitted to IDA within six months after the end of each fiscal year. A comprehensive project-specific procurement and FM related Corruption Risk Mapping and Mitigation Action Plan has been prepared by the PMU, cleared with the Bank, and is included in the PIP and Project Files.

44. Procurement: The procurement ofgoods and works would be carried out in accordance with the World Bank Guidelines: Procurement under IBRD Loans and IDA Credits, dated May 2004. The works mainly would consist of dam remedial works and basic safety facilities, while goods would include basic safety facilities, monitoring equipment for dams, and equipment for operation and maintenance, for the HMIS and vehicles and office facilities for project implementation and management. Consultant services, including project implementation support, M&E, capacity building, and multi-sectoral water resources planning, would be procured in accordance with the World Bank Guidelines on Selection and Employment of Consultants by World Bank borrowers dated May 2004. The Bank cleared the Project Procurement Administration Manual (dated February 4, 2008) (in Project Files) and the initial Procurement Plan (dated December 26, 2007) for the full project period. A comprehensive project-specific procurement and FM related corruption risk mapping and mitigation action plan has been prepared by the PMU and cleared with the Bank and is included in the PIP and in the Project Files.

45. A procurement cell has been set up in the PMU to manage the recruitment of all consultant services, the supply & installation contract for HMIS, and common equipment and goods for all components. The respective units of the MASL and ID would be responsible for

14 procurement of their respective works and goods contracts, with the assistance and oversight of the PMU as prescribed in the Procurement Administration Manual.

D4. Social 46. Project’s social aspects were identified and remedial measures to mitigate social risks were designed on the basis ofa comprehensive Social Assessment conducted by the Government. The Social Assessment Report is cleared by the Bank and is filed in Infoshop and project Files. The overall social impacts are expected to be mostly positive. However, interventions under Component 1 may give rise to some social issues. Water flows into and from some reservoirs are likely to be interrupted during the dam safety remediation works, particularly when the repair works demand the lowering of reservoir water level and keeping the level low until the repair works are completed. This could temporarily affect the livelihoods of some local communities. Key social development issues relating to project implementation that could arise from this situation would be: (i)poor participation by the local communities; (ii)inclusion - particularly of the poor and vulnerable sections including landless laborers, women, and women headed households; (iii)human and institutional development support - involving the community-based organizations as well as joint management committees (comprising both government and people representatives); and (iv) Information, Education and Communication (IEC) campaigning to ensure informed decision making as well as transparency in transactions (See Annex 10). The PMU has prepared an information brochure in local languages to be used for the IEC. Project Files also includes the information brochures, and Integrated Safeguard Data Sheet cleared by the Regional Safeguard Coordinator.

D5. Environment: Category B 47. The project would not finance construction ofnew dams or alternation ofprimary design profiles and operation regimes of the existing dams of the country. No new developments, particularly reservoir capacity augmentation, are camed out in the remedial works design. Only essential dam safety repair and safety for existing dams are financed. Therefore, environmental impacts triggered by the proposed rehabilitation are not anticipated to be significant or irreversible. Overall, the project would result in positive environmental benefits, due to reduced risks from the rehabilitated dams. Therefore, this project has been classified as a Category B project for safeguards purposes.

48. The environmental issues would be largely off-site issues of resource extraction. Since most of the dams are earthen, work involved in strengthening of the dam slopes and peripheral areas would require large amounts of sand, soil and rocks. The selection ofborrow areas should be made after careful evaluation of resource availability and in conformity with the Government regulations for selection and designation of such sites. The borrow areas, if not properly identified and managed (subsequent to extraction) could have serious environmental repercussions. The unintended spread ofinvasive species through the conveyance of material to the site would need to be monitored when selecting the borrow areas. Impacts on water and air in the project site would be minor and temporary in nature. Since the project would not require water in any of the reservoirs to be emptied below its normal dead storage level, no permanent impact on the aquatic life is anticipated. Similarly, the project would not finance any activity that would result in increasing the storage volume of the reservoirs and thus eliminates any environmental impacts associated with additional inundation of land. However, dam rehabilitation works would result in removal of large quantities of topsoil, rock boulders and in the generation of concrete debris and other construction wastes. In addition, wastes would be generated from worker camps. Solid waste/debris disposal would be specified in civil works contracts.

15 49. Resources available in ongoing and future government and donor-funded schemes would be used for proper management of the catchment areas above project dams. Limited resources would be provided under the project to demarcate and preserve vulnerable reservoir reservations ofthe selected dams.

50. The environmental impacts arising out of project interventions cannot be completely assessed until the works are designed after detailed technical investigations. Therefore, an Environmental Assessment and Management Framework (EAMF) has been prepared to serve as a template for guidance in undertalung environmental analysis and developing mitigation measures. It is available in Project Files. The EAMF identifies the generic environmental issues typically associated with rehabilitation of existing dams and suggests ways and means of addressing such issues in a project specific way. It has also analyzed the relevant legislation and regulations existing in Sri Lanka that governs natural resource extraction in the country. Institutional arrangements for implementation of the Environmental Management Plans for each dam and for environmental monitoring are described in the EM. The EAMF has been approved by the Central Environmental Authority of Sri Lanka, translated to local languages and disclosed for public comments.

D6. Safeguard policies 5 1. The project's key social issues and the social risk mitigation measures are highlighted in Annex 10 as well as in the Social Assessment Report and Integrated Safeguard Data Sheet (ISDS) which are in the Project Files. The project components would neither require any land to be acquired nor any permanent displacement of people. With respect to any temporary land needs during the construction phase; such as for borrow pits or lay-down areas, such land would be rented on a willing-rentedwilling-leaser basis and that borrow materials will be purchased on a commercial basis. Specifications for restoration ofborrow pits will be given in EMPs.

52. However, in a few cases, water flows into the reservoir and consequently, irrigation flows might have to be stopped for prolonged periods to conduct detailed technical investigations and repair/ rehabilitation works. This could impact adversely on the livelihoods of some downstream users. A Livelihood Support Assistance (LSA) Plan has been developed, to deal with livelihood hardships faced by the people due to such interruption of irrigation supplies. The LSA Plan has been discussed with a sample of project-affected people and agreed with the Government. The Plan would comprise cash assistance to affected households and wage assistance for landless laborers and fishers. A Process Map describing the planning, implementing and monitoring of the LSA Plan has been prepared and included in the ISDS.

53. A guiding principle is that the proposed dam safety remedial works should have the full and voluntary support ofpotentially affected communities. The IEC campaign would be used to enable them to take well informed and voluntary decision malung and reach agreement with the Government staff toward the remedial works and implementation schedules. However, if there would be a possibility that people would be adversely affected for prolonged periods, for example due to remedial repairs are not completed on planned schedules to assure irrigation supply, it would be necessary to triggering the Bank's &erational Policv on Involuntaw Resettlement. OP =for those dams. Modem engineering solutions would be considered in dam safety remedial works to minimize adverse social effects. Accurate assessments and planning of the nature, engineering solutions, and timing of the rehabilitation works for the dams to be rehabilitated would be critical and conducted for mitigating this risk.

54. Cultural Propertv (OP 4.11): Some of the dams included in the project are "ancient dams" meaning that those were originally built by ancient lungs centuries ago, but were renovated

16 after 1900. Certain structures in ancient dams, such as sluices, could be of high archaeological significance, as the design ofthe sluice is thought to reflect the irrigation engineering skills ofthe ancient dam builders. If such structures are replaced, the old structure may need to be preserved as a cultural property. To achieve this purpose, the project would undertake an archeological Impact Assessment study with technical assistance from the Department ofArchaeology. Based on this assessment, the Department of Archaeology would draw an implementation action plan, as deemed appropriate. This apart, chance finds would also be subject to enquiry and technical assistance would be needed from the Department of Archaeology. Details of the role and responsibilities of the project as well as the department would be as outlined in the provisions of the Antiquities Ordinance’ and as per Projects Procedure Regulations No. 01 of 2000 of the Government of Sri Lanka. As per the recommendations ofthe department, procedures for dealing with the cultural property would be incorporated in the contract documents with a provision for an orientation program for the project authorities as well as contractors.

55. Environmental Safeguards: Two environmental safeguard policies are triggered under this project. These are OP 4.01 on Environmental Assessment and OP 4.37 on Safety of Dams. The measures required to address the provisions of the policies, enhance positive environmental and mitigate negative impacts are described below.

56. Environmental Assessment (OP 4.01): From a dam safety point of view two categories of dams are relevant for the application of environmental safeguards: category (i)dams that require urgent physical rehabilitation, mostly earth dams operated and maintained by the ID; and Category (ii)Dams that would have a significant impact if breached but would not require any physical intervention at present. Interventions in the second category ofdams would be primarily on the limited replacement of and provision of basis safety facilities and intensive vigilance and monitoring. Remedial works that are proposed for the dams falling under the Category (i)may include one or more of the following activities; (i)strengthening of the existing dams; (ii) repairing or replacing of sluices; and (iii)repairing or improving existing spillways; and (iv) replacing essential electro-mechanical equipment. Activity (i)would warrant an environmental analysis (EA) and an EMP as it is associated with a number of potential environmental impacts. The scope of the EA for such dams would vary depending on the type of interventions planned and the site characteristics. However, for activities (ii)to (iv), interventions based on best practice would be most likely adequate for inclusion in the EMP.

57. The Category (ii)dams would not require extensive environmental analysis and hence could be limited to the preparation of an EMP for any physical maintenance work planned to be carried out. Environmental Assessments reports for four dams to be undertaken in the year 1 have been completed by the PMU. The Bank is in the process of providing clearance to these reports. Agreements have been reached with the Government that dam-specific EIAs/EMPs would be prepared as an integral part ofthe design, be reviewed and cleared by the Bank before tendering, and would be a condition for disbursement for remedial works for each dam.

58. Safetv of Dams (OP/BP 4.37): The dams that are financed by this project are those where the risk involved in case of a malfunction or a structural breach is high and hence provisions made under the dam safety policy would be incorporated into the project design and implementation. Accordingly, the Government would hire experienced and competent professionals for design and for supervision of civil works and also adhere to certain stipulated dam safety measures for the design, tendering, construction, operation and maintenance of the dam and associated works.

17 59. The Government is in the process of appointing a Dam Safety Review Panel (DSRP) whose primary responsibility would be to review and advise the IA on matters related to dam safety and other critical aspects of the dam, its appurtenant structures, the catchment areas, the area surrounding the reservoir and downstream areas. The TOR for the DSRP has been agreed between the Bank and the Government.

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, being revised as OP 4.1 1) [XI [I Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety ofDams (OP/BP 4.37) [XI [I Projects in Disputed Areas (OP/BP/GP 7.60) [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI

D7. Policy Exceptions and Readiness 60. The project complies with all IDA policies so there are no policy exceptions requiring management approval. The project is ready for implementation and to start its first year work program. The key project management staff are in place, project implementing agencies identified and mobilized; the project implementation plan (PIP) including the procurement plan for the first 18 months are prepared; recruitment ofimplementation support consultants and M&E consultants are underway; technical design for the high-priority dams has been initiated, procurement of the hydro-meteorological system has started. The ISDS has been cleared. An environmental assessment & management framework has been cleared by the Bank and disclosed to the public.

18 Annex 1. Country and Sector Background

SRI LANKA: Dam Safety and Water Resources Planning Project

1. Water resources development in Sri Lanka has contributed significantly to the country’s economic growth, poverty reduction, and environmental health. Although, the annual average precipitation in the country is about 2000 mm, there is a wide temporal and spatial variability of rainfall. Consequently, development of surface water resources, by means of dams, barrages, reservoirs and conveyance systems, has remained a high priority of all successive governments both before and after the country gained political independence from British rule in 1948. The developed hydraulic infrastructure, particularly large dams, are important elements of the country’s economic, cultural and physical landscape serving the critical irrigation, hydropower, domestic and industrial water supply needs of the country, providing flood control in most river basins and sustaining human settlements particularly in rural areas. At present, about 85% percent ofthe developed water resources are used for irrigated agnculture in the dry zone ofthe country which covers nearly two-thirds of the country and where about 80% of the population lives. The livelihoods of about 58% of the rural population depend on agriculture at least partially. Water has been instrumental in creating and sustaining employment opportunities, particularly in the irrigated agriculture sub sector. Water related investments continue to underpin the industrial growth through the development ofhydropower.

2. The dam network in Sri Lanka comprises over 350 medium and large dams and over 12,000 small dams. Of the 350 dams, 80 dams are classified as “large dams’ according to the classification of International Committee of Large Dams (ICOLD)”. There are three main categories of major dams: (i)ancient earthen dams built many hundred years ago by the ancient rulers, that were renovated and upgraded to varying degrees between 1900 and the 1960s; (ii) recent dams constructed during the mid- 20th century all over the country mainly for irrigation development, hydropower generation and flood control; and (iii)modem dams and barrages (concrete, rock-fill and earthen dams) built after 1973 up to about 1988 mainly in Mahaweli river basin, first under the Mahaweli Development Plan and later under the Accelerated Mahaweli Development Program (See Annex 4 for details). The first two categories of dams were developed by the Public Works Department (now dissolved) and the Irrigation Department (ID) while dams in the last category (modem dams) were built by the Mahaweli Authority of Sri Lanka (MASL). These dams have been renovated and built primarily as a part of the long sustained national strategy to achieve self sufficiency in rice production, develop new lands for irrigated rice production, and provide housing and employment opportunities in irrigated agriculture by settling poor landless people in the newly developed lands under the major water resources infrastructure projects.

3. There are a number of major sector issues that this project aims to address. First, the major dams of the country vary in age, design and construction and even the last major dam built in the country is now about 20 years old. Most of the major dams suffer from various structural deficiencies and shortcomings in operation and monitoring facilities. This is mainly due to poor maintenance and lack of adequate funding ofthe maintenance by the Government. The situation threatens the safety and operational efficiency of the dams and their appurtenant structures and consequently the risk to public safety is far reaching and increasing as development takes place

” ICOLD defines a large dam as one which is over 15m high or between 10 and 15 m high but with a storage capacity in excess of 1 million cubic meters or more than 500 m long or its spill way is designed to discharge more than 2000 cubic meters per second.

19 downstream of the dams. The Annual Report of the Central Bank of Sri Lanka in 200412 recognizes the current status of the major dams and consequent potential hazard to public safety. It emphasizes that: (i)the postponement of required maintenance of major dams will not only result in an increase in the maintenance cost substantially, but would also add a large additional cost resulting from an exponential rate of deterioration leading to additional (repair) work or even displacement; and (ii)the weakening ofstructures as a result ofinadequate maintenance increases the risk of structural failure which can potentially cause a massive destruction of human lives, physical property, the eco-system and retard the economic growth of the country. The Annual Report recommends early action to ensure: proper maintenance of dams and reservoirs; completion ofall pending urgent pending maintenance work as early as possible and giving high priority to: setting up a competent independent committee to examine problems relating to sustainable maintenance ofdams and reservoirs; formulate minimum standards to be maintained to minimize risk of dam failures; explore alternative funding sources for sustainable maintenance of dams; introduce legislation on dam safety standards and regulations; and enforce periodic “engineering audits” on all large reservoir schemes by qualified risk assessors.

4. The issue of dam safety and consequent potential threat to human lives and public and private property became more evident from the safety risk assessment ofselected dams conducted by the IDA-funded Mahaweli Restructuring and Rehabilitation Project (MRRP Cr. 3058 CE) in 2004. The review categorized a number of major dams as high risk dams and warranted an urgent need to: (i)upgrade and modernize the dams and their appurtenances; (ii)develop dam- related disaster preparedness and management plans; (iii)manage watersheds; (iv) enhance dam safety management and operation and maintenance skills and capacity ofthe major dam-owning agencies and their technical staff; and (v) strengthen institutional arrangements for dam safety assurance. A risk assessment of38 selected major dams carried out during the preparation ofthis project by an independent international consultant confirmed the risk status ofthose dams. If the dam safety risks are not addressed before it is too late, the safety ofmany human lives and public and private infrastructure downstream of many dams are at serious threat. Major floods in Sri Lanka in 1957 caused the failure of a number of major dams, brought most major dams to the brink of failure, breached a large number of small dams due to cascading effects, and caused a socio-economic disaster. The tragic failure of Kantale dam’3 in the east of Sri Lanka in 1986, which lulled 127 people, destroyed thousands of houses and productive paddy lands, and displaced more than ten thousand residents, illustrates the far reaching consequences of a dam disaster. A national intervention that remedies the urgent structural defects ofhigh risk dams and that mitigates the risks to public safety in a sustainable manner is therefore essential.

5. A participatory country-wide consultation on actions required to avoid and mitigate dam disasters was conducted in Sri Lanka by a leading international NGO in 2005. This consultative process generated useful recommendations to ensure public safety against potential dam fail~res’~.The recommendations include that: (i)dam emergency operation procedures are in place, reviewed periodically and operators be trained to ensure that major dams are operated and maintained in a safe manner; (ii)hazardrisk category of each dam and nature ofhazard posed by each dam is known and regularly reviewed; (iii)dam surveillance programs appropriate for the hazard category are implemented; (iv) dam safety emergency plans are prepared for high risk

I’ Central Bank, Sri Lanka, Annual Report 2004, Chapter 3, pages 69-70. l3The Report of the Findings of the Commission of Inquiry into the Breach of the Kantalai Tank Bund - Sessional Paper No. VII-1987, September 1987, estimated the number of people killed as 127 and the total loss of property and the cost of rehabilitation ofpersons affected and the tank as Rs 575 million. l4Concept Paper for a Dam-related Hazard Warning System in Sri Lanka: A Participatory Study on Actions Required to Avoid and Mitigate DamDisasters, LIRNEasia, January 23,2006. Available in httu:/iwM,w.iirneasia.net/~~[~~/~l/Dam-Safety-Concept Paper-Released/

20 dams and, where appropriate, warning information and inundation maps are provided to emergency response agencies; (v) qualified and trained personnel are engaged on dam design, construction, O&M, and dam inspections and surveillance; (vi) suitable regulatory and governance structures and internal reporting procedures are in place; (vii) comprehensive reviews ofstructural, hydrological, hydraulic, and geotechnical design ofdams and their behaviors should be undertaken; (viii) dam safety risk assessments are undertaken and risks addressed on priority basis; and (ix) dam safety program be quality assured by periodic independent reviews. The study recommended sustainable arrangements for independent dam safety regulatory and fimding for dam safety risk mitigation. It can be concluded from this paper that protecting the public from dam induced hazard is a national priority.

6. Second, the tsunami disaster in the Indian Ocean in December 2004 has increased the realization of Sri Lanka’s need to protect the public from natural disasters. In order to protect human life, property and the environment from various natural disasters, a new Ministry of Disaster Management has been created, a Disaster Management Centre (DMC) has been established and Sri Lanka Disaster Management Act (No 13 of 2005) has been passed by Parliament. The Act establishes the National Council for Disaster Management, whose functions include formulation ofa national policy and program which shall provide for protection ofhuman life and the environment from natural disasters, use national resources for disaster preparedness, mitigation and prevention; enhance public awareness to protect people from natural disasters, and take all steps necessary to counter any disaster or impending disaster. In this context, the strategic action plan for the DMC recognizes the dam induced floods as a major risk to public safety and proposes various interventions to protect the public from disaster from any potential dam failures. The “Roadmap of the Disaster Risk Management in Sri Lanka” prepared by the DMC identifies the following two objectives: (i)to conduct portfolio risk assessment studies for high risk dams for 30 identified high risk dams in years 2006-2007, for all other dams during 2008 to 2010 and reassessment and continuation of safety measures beyond 2008; and (ii) develop flood inundation maps for downstream areas of main dams for identification of areas vulnerable to dam break. However, the DMC requires technical and financial assistance to fulfill its mandate.

7. Third, the national development framework for the ten year time horizon from 2006 to 2016 (called Mahinda Chinthanaya) envisions that “by the year 2016, irrigated agnculture would be transformed into a commercially viable and technologically advanced sector producing for local consumption and processing as well as for export”. The development strategy envisions the development of new water resources and trans-basin diversions leading to increased supply of irrigation and water for other priority uses. The strategy appropriately highlights the need to fix the current gaps in the policies related with water sector institutions, irrigation management, operation and maintenance, water allocation, and irrigation financing. It also recognizes a number oftargets to achieve the vision, including the completion ofregional surface and ground water studies, development of river basin management capacities, conducting a number of technical feasibility studies on potential trans-basin water diversions, continuation of the implementation of the remaining large water resources development projects identified in the master plan of Mahaweli Development Pr~gram’~;and examination of the feasibility for new water resources/irrigation development projects. The framework presents a proposal for long term public and private investments on the contemplated water resources development

Mahaweli Development Plan means the “Mahaweli Ganga Irrigation and Hydropower Survey of FA0 1969”, which proposed a number of water resources development proposals for agriculture and hydropower development and flood control. Some of the water resources development projects were completed under the Accelerated Mahaweli Development Program, a subprogram carved out from the original master plan, during 1979-1985.

21 interventions. It recognizes various constraints for achieving the development goals including the funding and human resources slulls and capacity constraints, absence of adequate and reliable data for water resources planning and the need for consistency in the policies and strategies in the sub sectors using water resources. The development of a national water use master plan and strategy takmg cognizance of the sectoral demands and regional priorities and reexamination of development potential ofselected major river basins is therefore a priority ofthe Government.

8. Fourth, the dam safety risk assessments, development ofearly warning systems to protect public from floods, droughts and dam failures, and planning, development and management of water resources require adequate and reliable hydrological and meteorological data. Availability of reliable data is fundamental for systematic and scientific water allocation and management in the river basins, feasibility studies, and development ofriver basin development and management plans. Unfortunately, the present national Hydro-meteorological Information System (HMIS)16 is out dated, data and information are inadequate, unreliable and inappropriate for the priority emerging needs of the country as outlined in the preceding paragraphs. For example, essential hydrological parameters such as water quality, ground water use, and environmental flows are not monitored. The drought and flood hazard forecasting and warning systems as well as the use of modem decision support tools for water planning and management are virtually non-existent. Japan International Corporation Agency (JICA) is providing support to the Government to set up flood warning systems in four selected major river basins, set up 38 meteorological stations and for development of a database linlung the DMC with the ID and MOD to improve the flood warning and public hazard mitigation capacity of the Government. However, the intervention does not address the data and information generation and management needs for water resources planning, operation and management.

9. Fifth, Government’s past efforts to establish a national water sector policy, legal and institutional framework for integrated management of water resources have been unsuccessful. Consequently, the realization ofthe policy and institutional reforms in Sri Lanka, as contemplated in the Government’s recent ten-year water sector development framework, has been slow. The ICR of the IDA-funded MWindicated that what is feasible in Sri Lanka is a “bottom up” approach for policy and institutional reforms. A key lesson learned fi-om MRRP was the need to get the major water sector agencies, as well as water users, involved in addressing the emerging water resources development and management needs, takmg cognizance of competing demands for water in selected river basins and associated social, economical and environmental needs of water resources development and management. To this end, the water resources assessments in major river basins, including the reexamination of water resources development options of the Mahaweli river basins, would provide an opportunity to engage the water sector stakeholders in a bottom up approach toward integrated water resources development and management.

10. The proposed project is expected to address the urgent sector priorities and challenges mentioned above. The Sri Lanka Country Assistance Strategy (CAS) update in 2005” recognizes that the lending operations of IDA in Sri Lanka would have a strong bias, inter-alia, towards assistance for irrigation and roads, as the core infrastructure needed to support pro-poor growth via reduced transport cost and sustained access to water for apculture. The indicative lending l6 Hydrologic Information System (HMIS) is an integrated water information system providing accurate, comprehensive and timely available hydrological data. It consists of a scientific hydrological and meteorological observation network; data processing and storage facilities; decision support tolls and facilities, reliable data communication arrangement and a trained manpower to operate these.

Country Assistance Strategy Progress Report for the Democratic Republic of Sri Lanka, January 6, 2006, Report no 34054-LK, The World Bank, page 10.

22 program of the CAS earmarks a lending operation on water management. In this context, the proposed project has the correct focus on addressing critical technical needs of the water sector in Sri Lanka, many of which are of a public good nature and therefore have a relatively high strategic priority. The Cabinet of Ministers of the Government recognized the strategic importance of the project for reducing potential water induced public hazards and enhancing water resources planning and management when it approved the project in September 2005 and September 2007. The scope of the proposed project is in line with the strategic priorities of the approved cabinet memoranda.

11. The Implementation Completion Report of the MRRP'' strongly recommends the need for continued support for: (i)a dam safety assurance program; (ii)dam safety legislation, institutional arrangements and capacity building; and (iii)management of major watersheds. In addition, the ICR recommended that it is necessary to upgrade and modernize the national hydro- meteorological network and enhance the national capacity for related data and information management. The latter intervention is crucial to support planning and management of: dam operations; public safety assurance; water resources and hydraulic assets; and drought and flood hazards.

12. Addressing dam safety for operational efficiency and public safety, modernizing the hydro-meteorological data and information system, generating a reliable hydrological knowledge base and river basin planning and management are critically needed in the country, especially for future reforms. In this context the proposed project would provide a sound technical base to focus on operation-level institutional reforms, such as establishing unified dam safety management regulation arrangements, introducing international best practice in dam safety and effective hydro-meteorological data management, and multi-sectoral, participatory and collaborative decision-making mechanisms in water resources planning and management. It also provides an opportunity for dialogue within the government and with the public for an overall water sector policy fi-ameworkktrategy based on sound technical assessment of the sector issues.

13. The Bank has been an active partner in the water sector in Sri Lanka in the past. Given the strategic importance of water management in Sri Lanka for rural development and growth and the Bank's commitment to rural development, the Bank has a strategic importance in continued engagement in the sector. The proposed operation is also closely linked to the Bank's Water Resources Management Strategy (World Bank 2003). The Bank is currently supporting similar operations in the other countries within and outside the region. In addition the Bank has sufficient global and regional knowledge and experience both on policy and technical fronts to support this operation. It also has the capacity to tailor such needs to the country's circumstances consistent with the CAS and the country's poverty reduction strategy.

'* Implementation Completion Report, Mahaweli Restructuring and Rehabilitation Project (MRRP), Report no 28927- LK, World Bank.

23 Annex 2. Major Related Projects Financed by the Rank

SRI LANKA: Dam Safety and Water Resources Planning Project

1. Sri Lanka Mahaweli Restructuring and Rehabilitation Project (WB Financed): This project included a dam safety component whose objectives were to: (i)review and improve O&M procedures and practices of MASL, ID and CEB for dams and associated hydraulic structures (tunnels, intake, outlets etc.); (ii)carry out a structured training program of O&M staff; (iii)Institutionalize a Dam Safety Inspectorate at national level; and (iv) Provide TA to assist MASL to produce an action plan addressing dam safety and reservoir conservation management.

2. The MRRP achieved the objectives of the Dam Safety component that included reviewing and improving O&M practices, carrying out a structured training program of O&M staff, and providing TA to assist MASL to produce an action plan addressing dam safety and reservoir conservation management. In addition, the awareness of the need for improved dam safety procedures and practices has been instilled into senior managers ofMASL, ID and CEB and others. However, a Dam Safety Inspectorate at national level has not yet been achieved as contemplated.

3. Under the MRRP, safety of selected major dams was reviewed, shortcomings identified and the important faults rectified. A plan for improved dam safety and reservoir conservation was prepared and implemented. The plan includes program management, training, dam instrumentation and monitoring, operation and management ofdams, assessment ofadequacy of spillways and stability of dams and risk assessment for 32 dams. A Code of Practice for Safe Operation and Maintenance ofDams has been drafted and reviewed by MASL, ID, CEB, the Sri Lanka National Committee for Large Dams and others. A Joint Committee of dam owners (MASL, ID and CEB) was formed and a Dam Safety Data Centre established to collect all available data for the 32 dams included in the component. This would be capable of expansion to hold data concerning the approximately 80 large dams that exist throughout the country and eventually to all 300 or so dams in Sri Lanka. This Data Centre is located in the Dam Safety Unit of the MASL.

4. Recommendations made in the ICR of the MRRP are as follows. There is scope for a Dam Safety and Hydrology Network Project to: (a) implement remedial works on the dams identified as high risk dams; (b) carry out independent inspections of all other large dams; (c) ensure adequate legislation for dam safety exists; (d) prepare O&M manuals for all large dams that do not have adequate O&M manuals; (e) prepare emergency preparedness plans for selected dams; (0 implement high priority remedial works for dams inspected under (b) above; (8) review the hydrological network, particularly in the north and east where it has been severely damaged, and make recommendations for improvement ofthe network; (h) implement selected works to improve the hydrological network; (i)design and install flood forecasting systems for vulnerable areas; (j) review the hydro geological network and make recommendations for improvement; (k) implement selected improvements of the hydro geological network; and (1) train staff of MASL, ID and CEB and other organizations in all appropriate subjects associated with the project.

5. Comprehensive Study on Disaster Management in Sri Lanka (funded by JICA): JICA is financing a study in close cooperation with the DMC the ID, Meteorology Department and the National Building research Organization to: (i)formulate integrated flood management plans for selected four river basins in the South-Western region of Sri Lanka; (ii)

24 support establishing early warning and evacuation systems; (iii)support community based disaster management activities; and (iv) strengthen capacity of organizations concerned. The project cost is about US$ 3 million and the project period is October 2006 till March 2009. The project is ongoing satisfactorily.

6. Improvement of Meteorological and Disaster Information network (JICA funded): Objectives of the project is to improvehpgrade the meteorological information network system, which enables real-time collection ofhigher precision weather observation in order to predict possible disaster and provide proper weather forecasts and issuance ofweather alerts and warnings. The grant aid would be used to procure and install equipment and materials for automatic weather observation systems at 20 synoptic meteorological stations and 18 collaborator stations, a satellite communication system to automatically transmit observed data to the headquarters of Department of Meteorology, and a central operating system to collect, edit and analyze the observed data. Technical Assistance would also be given for the purpose of smooth setup, operation and maintenance of these systems and securing continuity ofcooperation based on the results. The project cost is about US$7 million and the equipment would be installed by March 2008. The project is ongoing satisfactorily.

25 Annex 3. Results Framework and Monitoring

SRI LANKA: Dam Safety and Water Resources Planning Project

I.Results Framework PD Project Outcome Indicators Use of Outcome Information

Establish long-term 1. Reduced number of large (i)Data on risk index would be used sustainable arrangements for dams with unacceptable risk by the IAs for assessing dam safety operation and maintenance of index; conditions, and by dam operators for large dams and improve water need-based O&M and emergency resources planning. 2. Number ofdams with need- planning; based O&M Plans operationalized; (ii)The information on usage of HMIS databases would be used to 3. Improved water database measure the results ofComponent 2; utilized by IAs for flood forecasting, dam operations (iii)The master plan would be used and water allocations; by the government to guide water resources development and 4. National water use master management, and basin plans to plan and at least one river guide decision malung for water basin development plan resources investments. adopted by the cabinet. (iv) At MTR, information on the outcomes would be used by the Bank and government teams to confirm if the initial design assumptions are valid, and provide suitable

Component One: Component One: Component One:

Potential public safety hazards 1. Number oflarge dams (i)Shortfall ofthe progress and ofselected high-risk large rehabilitated with necessary outcomes would indicate poor dams reduced and sustainable remedial measures; ownership by the IAs andor staff and arrangements for effective skill gaps or serious bottlenecks in dam safety management and 2. Number oflarge dams procurement ofthe necessary inputs. operation in place. provided with basic safety facilities (ii)IAs, PMU and the Bank team would use the progress information to 3. Dam Safety Inspectorate measure achievement ofthe desired with essential guidelines and results under Component 1 and take procedures established and mid-course remedial measures to operational. adjust project design as necessary. Component Two: Component Two: Component Two

Modem hydro meteorological 1. Number ofhydrometric (i)Outcome information would be

26 information system stations and agro- used for adaptive project design and established and improved meteorological stations supervision planning. database used for dam establishedupgraded and operation and flood functional. (ii)IAs and PMU as well as the Bank forecasting team would use the information of 2. Hydrology and meteorology project progress to gauge databases developed and performance ofproject accessible by different users; implementation and decide on necessary remedial actions to ensure 3. Basic groundwater achievement ofthe expected monitoring system with outcomes. sufficient number of observation points established;

4. Number ofstaff trained for O&M ofHMIS. Component Three: Component Three: Component Three:

Integrated water use master 1. A national water use master (i)The IAs, the PMU and Bank team plan at national level and plan developed. would use the outcome information water resources development to decide on mid-course corrective plans for two selected basins 2. Mahaweli Basin measures as needed, including and improved institutional Development Plan updated resource allocation, staffing and capacity for multi-sectoral scheduling, etc. water resources planning 3. Water resources development plan for Mundeni Aru river basin developed.

4. A core team trained for integrated multi-sectoral water resources planning Component Four: Component Four: Component Four:

Project is well coordinated 1. Timely completiodupdate The information would be used by and managed among all the ofannual work programs, NF'OC, PSC, IAs, MOFP, and Bank IAs and Ministry ofFinance progress reports, FMRs, for oversight andor supervision, and and Planning and program procurement plans; review of project implementation and targets and outcomes are compliance with the agreed PIP, FM achieved as planned. 2 The cumulative physical and and Procurement Manuals and disbursement performance provisions ofthe financing targets do not fall below 80% agreement. ofthe cumulative targets after Year 1.

27 11. Arrangements for Results Monitoring

1. A results-based M&E system, as described below, is designed to promote learning and improvement through implementation performance monitoring and impact evaluation.

Overall Framework

2. The main emphasis of the project M&E system would be to timely monitor and evaluate project activities in order to: (i)track the major project inputs; (ii)monitor progress of project activities; (iii)identify what is worlung well and what is not and help adaptive management during the course of implementation; (iv) evaluate the performance of different implementing agencies, units, contractors and consultants; and (v) evaluate project outcomes and impacts. M&E mechanisms would emphasize stakeholder participation and be designed to facilitate rapid identification of shortcomings and problem areas and facilitate mid-term corrections, where necessary, to project design and implementation arrangements to enhance the chance of the project meeting its development objectives.

Organizationalarrangement

3. M&E would be undertaken in parallel by the PMU as well as the project implementing agencies for the project components and subcomponents for which they are responsible. The PMU would be responsible for the overall M&E. It would employ and maintain throughout the project period, a senior fill-time M&E officer and a local M&E consultant firm to design and manage the M&E system. The PMU would also develop and maintain a computerized management information system (MIS) to collect, consolidate and manage data from the various implementing agencies and its own staff. Data would be used to update key performance indicators shown in the Results Matrix and to prepare quarterly, semi-annual and annual progress reports. The PMU would carry out a mid-term evaluation and submit the evaluation report to the Bank to complement the formal mid-term review of the project carried out by the Bank team. The M&E system would use modern information tools (e.g. GIs) to collate, compare, analyze and visualize the information. The M&E consultants would be appointed by the time of Credit effectiveness with terms ofreference acceptable to the IDA.

4. Environmental and social safeguard monitoring would be a key activity of the project particularly for the implementation ofComponent 1. The PMU would employ and maintain a full time and qualified environmental officer and a community development specialist throughout the duration of the project to oversee and monitor the environmental and social safeguard performance of the project respectively. The environmental officer would oversee, guide and monitor the environmental safeguard management in accordance with the agreed TORS for EAs and EMPs. Similarly, a Process Map depicting step by step procedure for addressing and mitigating adverse social impacts of dam repair works has been prepared. The community development specialist, with assistance from external NGOs, RPMsPMs, etc. would be responsible for monitoring the implementation ofthe activities ofthe process map and evaluation ofthe impacts.

Baseline and other periodic surveys

5. The project scope and key components have been designed on the basis of comprehensive risk assessment of existing large dams, study of country's physical and analytical infrastructure for HMIS, and the institutional capacity of IAs, and the current practices of water

28 resources planning in Sri Lanka. This assessment is considered as the broad baseline survey of the project that shaped the project design. The project outcomes and results would be measured against this baseline as reflected in this Annex. Nevertheless, during the project implementation, the baseline for the main project components would be further developed by PMU with inputs from surveys and analysis of the M&E consultants, as well as the assessment done by the preparatory consultants and the government counterparts. The focus would be on tracking the indicators specified in this Annex. Special attention would be given to ensure uniformity of the survey between the two stages to ensure consistence in the methodology that would affect the reliability and usefulness of the data. Besides, periodic surveys would be carried out throughout project implementation in the project areas to compare the with- and without-project situations. Evaluation for different components and subcomponents would be an ongoing process culminating in one major interim review of the project, prior to the mid-term review and a final project completion review.

Reporting

6. PMU would furnish to the Bank quarterly progress reports. These would include: (a) up- to-date physical and financial expenditure data compared to annual and end ofproject targets; (b) updated project performance indicators compared to annual and end of project targets; (c) successes and problems encountered during the reporting period, with suggested remedial actions; and (d) socio-economic and environmental impacts of the project. In addition, the Project's Annual Work Program would be prepared and submitted for Bank review and comments prior to the start ofthat fiscal year.

7. The M&E team would submit: (i)brief monthly reports summarizing concurrent monitoring observations to the PMU and respective implementing agencies; (ii)quarterly reports summarizing project M&E of the preceding quarter, main issues and recommendations, and updated project performance indicators and; (iii)the detailed baseline survey and the two main impact evaluation assessments at the time ofthe project mid-term review and project completion. The reports would be discussed at the PMU with the implementing agencies and key stakeholders concerned to facilitate cross learning and adaptive management decisions required. In addition to the regular monitoring reports, the M&E consultants are to help with the preparation of the government's MTR Report and Implementation Completion Report (ICR).

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SRI LANKA: Dam Safety and Water Resources Planning Project

Component 1: Dam Safety and Operational Efficiency Improvement

1. Background. River flow regulation by dams and diversion structures, a feature in Sri Lanka’s ancient hydraulic civilization, was revived in the late 19th century under British rule. Restoration of dams and construction at new sites continued throughout the 20th century culminating in the large multi-purpose dams built in the 1980s under the Accelerated Mahaweli Development Program. These storages are used for water supply, power generation, flood control, irrigation, and recreation. High safety standards for these dams are imperative to prevent failure that would cause devastating environmental and property damage, economic hardships, and, in the worst cases, loss oflife.

2. The dam network of Sri Lanka comprises about 350 large and medium dams and over 10,000 small dams. Of the 350 dams, 80 dams are classified as “large dams’ according to the International Commission on Large Dams (ICOLD) classification. These dams can be divided into three types on the basis oftheir period ofdevelopment, namely:

0 Ancient Dams, mostly earth-fill, originally constructed during ancient periods but which subsequently became dysfunctional and were restored, rehabilitated and improved successively by the British and the Government of Sri Lanka (Government) between 1860 and 1960; Recent Dams, mostly earthen or composite earthhock fill dams, that were newly constructed mainly for hydropower development, irrigation and flood control from 1938 to about 1985; Modem Dams mainly multi-purpose concrete gravity and arch dams and barrages, composite dams, and rock- and earth-fill dams that were constructed between 1973 -and 1988.

3. Almost all large and medium dams are owned and operated by four State Agencies, namely: the ID, the MASL, the CEB and the National Water Supply and Drainage Board (NWSDB). Of the 80 large dams of the country, the ID owns more than 60, the MASL 13 and Polgolla Barrage and the CEB owns 7. A few dams are managed by the Provincial Irrigation Departments. Most ID dams (over 300) are single purpose. The MASL is the developer and owner of some 12 modem dams in the Mahaweli river basin. The CEB owns and operates about 7 dams all of which are linked to hydro-electric power stations. The CEB also operates hydropower stations at MASL dams.

4. All these dams warrant systematic Dam Safety Assurance for reasons mentioned below:

0 The dams are designed for an effective life period of 50 years, although dams may stand robust for many more years. The majority of dams in the country are 50 or more years old and safety assurance of these dams is a major concern, as large populations live and developed cities and townships exist downstream ofthese dams;

34 0 Many of the large dams assessed in the late 1990s were determined to be high-ha~ard’~ with some deemed unsafe. Many ofthem lack basic safety facilities. Unsafe dams have been found to have deficiencies which leave them more susceptible to failure. Funding for dam safety assurance is becoming increasingly scarce.

5. Hazard rating and vulnerability and risk assessment of dams are priority actions recognized in the ‘Road Map’ for disaster risk management in Sri Lanka prepared by the DMC. The first systematic risk assessment of the dams ofthe country was carried out in late 1990s with assistance ofan international team ofconsultants under the MRRP for 32 out ofthe 80 large dams (1 3 ID, 13 MASL and 6 CEB dams). The safety risk assessment categorized a number ofdams as high risk dams calling for urgent needs to: (i)upgrade and modernize them; (ii)develop disaster preparedness and management plans; (iii)manage their reservoirs and watersheds; (iv) enhance and institutionalize dam safety management and operation and maintenance slulls and capacity of the major dam owning agencies; and (v) strengthen the nation’s institutional arrangements for dam safety assurance. A Participatory Study conducted by an independent NGO in 2006 confirmed and urged those recommendations (Study report is available in http://www.lirneasia.net/2006/01/Dam-Safety-Concept Paper-Releasedo.

6. During preparation of DSRPP, a total of 38 dams (including the above-mentioned 32 dams) were systematically reanalyzed using the widely accepted methods for dam Portfolio Risk Assessment (PRA). The dams were ranked according to their hazard and risk levels to identify and prioritize dams requiring urgent attention and remedial action. The risk profiles ofthe dams were deduced according to their safety deficiencies determined by the United State Bureau of Reclamation’s Risk Based Profile System (RBPS) method to identify those structures that represent the greatest risk to the public. The concept of the RBPS is based on the product of Failure Index and the Loss ofLife Factor (Consequences) as: bisk = (Probability ofLoad) (Probability ofAdverse Response) (Consequences]

The method characterizes the risk associated at instant of individual loading conditions such as hydrologic/hydraulic, seismic, or static (normal) loads, or can be used to sum the total risk imposed by a given structure. The probability of failure of a structure, or the risk of loss of life can be portrayed in the form of “Failure Index” (= Load x Response) for the hydrologm hydraulic, seismic, and static cases which is the foundation for the RBPS. These three cases are viewed as being the primary categories ofhow dams can fail. Operation &, maintenance level is also included in quantitative assessment. The RBPS assesses a dam by assigning a maximum of 1000 points (static = 300; hydrologic=300; seismic =300; and O&M=100) to any structure. The higher the point total, the greater the potential risk associated with a given dam.

7. The risks posed by the 38 dams as determined by the RBPS and priority ranlung according to the RBPS risk index are shown in Appendix Tables land 2 respectively. Out of those 38 vulnerable dams 32 mostly high risk and important dams (see risk ranking below) have been chosen for first phase dam safety implementation under the project.

8. Scope of the Component: Typical safety issues commonly observed in the earthen dams that need Remedial Works are: (i)seepage boils and leakages in the downstream ofdams;

19 High-hazard is a term used by a majority of dam safety programs. While the definition varies slightly from place to place, it generally means if failure of a high-hazard dam occurs, there is a potential for loss of life and hundreds of thousands of dollars worth of property damage. Unsafe dams have been found to have deficiencies which leave them more susceptible to failure

35 (ii)deformity and some localized erosion ofupstream (due to wave) and downstream slopes; (iii) slope sloughinghlips, erosion ofabutments, settlement and cracks along dam crests; (iv) cracks in concrete spillway and outlet gate sections, etc. In the case ofconcrete gravity dams, the common issues are: (i)mal-functioning of dam monitoring instruments (due to aging as well as lack of maintenance, and needs for replacement and repairs); and (ii)needs for repair and replacement of spillway and outlet gates and gate hoisting mechanism.

9. Apart fiom these major deficiencies, almost all the large old dams and some modern dams lack “Basic Safety Facilities”. Most dams lack: (i)monitoring and deformation measuring instruments including micro-seismographs, pore water pressure gauges etc.; (ii)functioning communication and observation system (wireless or telephone at site, upstream and downstream flush lighting system with standby generators); (iii)all weather access roads; and (iv)some equipment for O&M and for emergency situations. Some reservoirs have undergone excessive sedimentation and reservoir rim deformation and do not have basic up to date engineering and operational information (such as updated reservoir elevation-capacity curves).

10. “Institutional Strengthening” is important for systematic dam safety and operation of the dams. Important elements of institutional strengthening for future dam safety assurance would include: establishment ofa uniform code of practice and mandatory dam safety inspection and safety assurance practices, setting up dedicated Dam Safety Units within each dam owning organization, establishment of dam safety regulation, institutionalizing a sustainable dam safety and O&M funding mechanism and arrangement, skill and capacity building of the technical and operational staff, institutional strengthening of the dam safety agencies as well as other institutions that can potentially play important dam safety roles, such as Sri Lanka National Committee ofLarge Dams (SLNCOLD) .

11. It is important to set up an independent Dam Safety Excellence Centre (DSEC) to undertake regular inspections for all important dams. It is also important to mention relevant key elements ofthe safety surveillance ofdams such as:

0 Retention ofa central records ofcharacteristics of dimensions ofimportant dams 0 Hazard rating of all reservoirs dams in accordance with universally recognized criteria (reference given SLNCOLD Bulletin of July 1998) 0 Retention on site ofa comprehensive Reservoir Operating Record Book 0 Adoption of written Standing Operating Procedures (SOPS) covering normal operation, actions to be taken in an emergency, including training ofstaff in use ofthese procedures 0 The commissioning of routine independent inspections of each dam at predetermined intervals, 0 Commitment to implement any recommendations that the inspector may make in the interest of Dam Safety Management Program.

12. Current Institutional Set-up in the Dam Owning Organizations: MASL: Three main groups within the MASL concerned with the safety of Mahaweli dams are: (i)Dam Safety Management Centre (DSMC) under the Technical Services Division that is responsible for undertaking dam inspection, preparing status reports, and coordinating the dam safety efforts of the three main dam organizations, MASL, ID and CEB; (ii)Headwork Administration, Operation and Maintenance Division which is responsible for guiding, overseeing and monitoring the operation and O&M ofHeadwork structures: this has seven operational units located close to the MASL major dams; and (iii)Field based Resident Project Managers (RPM) responsible for management of eight imgation systems that are fed by about 40 other medium sized dams.

36 Although DSMC was functioning as an effective unit previously, its current role is limited to addressing MASL dam surveillance and monitoring issues only and not overall dam safety management in the country. At present there does not appear to be clear lines of interaction established between the DSMC and the DMC.

13. In the Irrigation Department (ID) responsibility for dam safety management is divided between the Dam Safety Branch (DSB), and the Regional Directors of Irrigation (RDI) based in the various irrigation regions. Each Imgation Region is headed by a Regional Director of Irrigation (RDI), who oversees divisional offices located close to the dams and headed by Divisional Irrigation Engineers. Day to day O&M of the ID dams are canied out by divisional irrigation engineers. The ID has well established units responsible for engineering designs, hydrology, engineering geology and engineering materials, and hydraulic modeling.

14. The DSB comes under Director of Asset Management. The functions of DSB include: monitoring and evaluation of periodic inspections of dams; Preparation of guidelines to streamline dam safety practices; Compilation of dam related data; Developing and updating Operation Standing Orders; Coordination of specialized divisions in ID to carry out inspections; Liaison with outside service organizations and professional bodies; Monitoring annual work programs for strengthening of headworks; Maintaining the Secretariat of the SLNCOLD; and Coordinating with the DMC. Monthly dam inspections are mandatory and are to be canied out by divisional engineers under the supervision of the RDI using the ID Code of Practice. Quarterly dam inspection reports are sent to the DSB from the irrigation divisions of RDI. Although the ID has well established institutional arrangements to manage a portfolio of 300 - 400 earthen dams, its capacity has been undermined over time due to lack offunding for O&M, lack of slulled staff and workers, and need for training on modem and best dam safety assurance practices.

15. The Ceylon Electricity Board (CEB): The CEB dams are managed by the Dam Safety and Environment and Civil Structure (DSECS) Branch overseen by a Deputy General Manager (DGM). At present, this unit carries out the maintenance of civil structures related to residential quarters, complexes and power stations oftheir dams. Little attention is paid to safety aspects of the dams. Since the quantum of maintenance work on infrastructure of these complexes is very large, the engineers have little time to devote to dam safety maintenance, surveillance and monitoring.

16. Other Civil Engineering Organizations which are interested in dam safety aspects are: the Central Engineering Consultancy Bureau (CECB), the largest, semi-government, water resources engineering consultancy organization in Sri Lanka, which has a strong design capability in-house in the various civil and electro-mechanical disciplines and in project management and procurement. Until recently, the CECB used to provide services to carry out dam safety assurance inspections of the MASL and the CEB dams and appurtenant structures. The Institution of Engineers Sri Lanka (IESL) which was established in 1906 and incorporated by Act of Parliament in 1968 is the premier professional engineering association in Sri Lanka and has a large membership ofprofessional engineers ofall engineering sub-disciplines. The IESL is active in promotion of best-practice in engineering, but does not at present have a dam safety special interest group. The Sri Lanka National Committee on Large Dams (SLNCOLD) is active in promoting dam engineering knowledge in Sri Lanka through its journal and regular meetings and seminars. While the SLNCOLD has an enthusiastic membership it suffers badly from a lack offunding.

17. The recently established Disaster Management Centre -DMC is the premier national agency mandated for safeguarding the public from natural disasters. It has prepared a Road Map

37 for Disaster Risk Management in Sri Lanka, a 10 year framework that covers the areas ofpolicy, institutional mandates and institutional development to fulfill its mandate. The Road Map covers dam safety related issues such as: Flood Risk Assessment, Dam Safety Risk Assessment, Development of Unified Seismic Monitoring and Data Processing and Archival Network, Early Warning for Hazards Associated with Major Dams, Flood Response Plans, and Enhancing Dam Safety. The Disaster Management Act of 2005 provides scope to prepare regulations to ensure dam related public safety. However, the DMC needs support to carry out its public safety mandate related to dam induced public hazards.

18. The Main Outcomes of this component would be enhanced public safety of selected high-risk large dams, improved operational efficiency of large dams and sustainable institutional arrangements for effective dam safety management and O&M. The purpose of this component would be to: (a) adopt defined methodology to assess safety risks of dams and appurtenant structures; (b) upgrade and modernize the core structures as deemed appropriate; and (c) institutionalize dam inspection, operation and management processes and procedures. In addition, it is expected that at the end of the project, the country would have a unified code of practice and procedures for dam safety assurance; hazard rating of all reservoir dams; and an independent DSEC manned with trained and skilled professionals. The major water resources departments ofthe country would also posses a common code ofpractice for dam management, a unified discipline for operation, inspection and maintenance of the dams and major headwork, and trained manpower.

19. The component would finance the following activities: (a) Remedial repairs to improve dam stability and modifications and upgrades to civil and electromechanical components of 32 large dams, prioritized in the context of hazard and risk. This would include the provision ofa dam safety review panel, incremental staffing costs of field units and operation costs of the implementing units, and livelihood support assistance to help communities to cope up with food security at about six dams where it may be required to limit cultivation due to possible interruption ofirrigation supplies during dam rehabilitation works. (b) Provision of necessary Basic Safety Facilities such as accessibility, lighting, communications, security, facilities to carry out emergency repairs, facilities to operate gates in an emergency and equipment or access to equipment to handle emergencies for 80 ‘major’ dams. (c) Collection of essential Basic Engineering Information for 80 hazardous dams including as built drawings, recorded history offailures or near to failures ofthe dam, records of geotechnical investigation, surveys and physical measurement (pore water pressure, seepage through foundation, structures, and abutments, lateral and vertical movements, settlements). Provision has been made for collecting existing information and for surveys, investigations and preparation ofthese where they are lacking. The records in future would be archived in the form of“History of Dams”. System checlung downstream area development using satellite imagery periodically would also be recorded using possible inundation maps. (d) Institutionalize Portfolio Risk Assessment (PRA) techniques using selected dams; full PRA and FMECA (Failure Mode Effect and Criticality Analysis) for Electrical, Mechanical and Hydraulic Control Systems of about 5 Major Dams in accordance with an internationally accepted standard such as British Standard BS 5760 or equivalent, and the adoption ofrisk based 0 & M practices through workshops and hands-on training. (e) Need based O&M analysis before and after major remedial measures foreseen under the project and recheclung ofexisting Early Warning Systems and enhancement. (f) Training (in Sri Lanka and abroad) and strengthening of MASL, ID, CEB and NWSDB skills and capacity to carry out dam safety management, surveillance, monitoring and evaluation and formation of Dam Safety Excellence Centre to satisfy the short to medium-term needs of the dam owning agencies.

38 (g) Development of O&M manuals and Standing Operating Procedures and Emergency Action Plans for 15 sample Dams of three main agencies, ID, MASL and CEB with 5 dams of each agency. (h) Procurement and installation ofequipment for establishment ofa pilot Data Acquisition and Control System mainly for data acquisition (SCADA) for 7 MASL large dams; 5 CEB dams and selected ID dams and for display of selected dam and reservoir parameters at Laxapana Complex, CEB Systems Operations Centre and MASL Water Management Secretariat and selected ID locations. (i)Procurement of Software for hydraulic, hydrologic and structural analysis of dams and appurtenances. (i) Establishment of an Inter-OrganizationalArrangement, including the dam owner-operator organizations and the DMC for regular dam safety inspection and assurance and progress towards the establishment of Dam Safety Legislation within the public safety act and an independent regulator. (k) Prepare Emergency Action Plans (EAPs) for Kotmale, Polgolla, Victoria, Randenigala, Rantembe, Inginimitiya, Nachchaduwa and Maussakele dams and train dam owners’ staff in flood mapping, dam break modeling and preparation ofEAP. (1) Provide software for computer-based maintenance management system. It is expected to introduce a computer based maintenance management system to Kotmale, Polgolla, Victoria, Samanalawewa, Randenigala and Rantembe dams as a pilot project in improving the O&M practices ofthe main dam owners. (m) Analyze and evaluate instrumentation data for selected dams. Although the modem dams have many instruments installed to monitor the behavior of the dam and the foundation, most ofthe data have not been evaluated. Hence it is expected to process, enter into a data base plot, archive, evaluate and sign off the instrumentation data gathered over the years at Kotmale, Victoria, Randenigala, Rantembe and Samanalawewa dams. Further dam owner’s staff would be trained in evaluation and interpretation ofdata and actions to be taken under different conditions. (n) Safety review inspections for Minipe Transbasin canal, Polgolla tunnel and New Laxapana power tunnels and make proposals for remedial measures. (0) Identify secondary benefits available from existing reservoirs. Many reservoirs have potential for generating benefits, which, is often not yet developed, for generating revenue from secondary sources, such as tourism, fisheries and retrofitted hydroelectric generation. Even when these benefits are developed, the dam owner does not always receive any payment that could be used to cover the costs of O&M of the dam and reservoir. This study would investigate the possibility of increasing the revenue earned by reservoirs and its possible use for O&M of the dams and reservoirs. (p) Carry out special studies and provide specialized equipment as described in the PIE’. (9) Livelihood Assistance Plan to provide coping assistance to affected people in about 9-10 out of the 32 dams of activity (a) above, where remedial repairs might cause low reservoir storage volumes and curtail irrigation supplies to farm lands temporarily.

Cost Estimate: The total cost of the component including contingencies is SLK Rs. 6121.2 million or US$ 53.14million equivalent. The component costs include livelihood support assistance activities, which amount to about SLK Rs. 1081.3 million or US$9.43 million.

Note on RBPS: By using readily available data and information, and engineering and scientific judgment, estimates of point’s distributions are made for a dam using these categories. In quantitative assessment and assigning the points, it considers the characteristics of the dam such as: Configuration, location and condition of outlet works; Reservoir filling history; Seepage and deformation; Embankment and concrete dam foundation/geology, dam design, construction condition and monitoring; Hydrologic capacity - capacity of spillway, surcharge storage capacity of reservoir, resistance to overtopping, size of drainage basin etc.; Resistance to seismic events, based on foundatiodgeology, dam

39 Risk factor Extreme High Moderate Low I Risk components I Reservoir storage (Mm’) >120 120- 1 1-0.1 45 45-30 30-15 45 Score (6) (4) (2) (0) Population at risk >loo0 1000-100 100-1 0 Score (12) (8) (4) (0) Potential damage High Moderate Low None Score (12) (8) (4) (0) I I I I I I product is called the “Risk Index.” The Loss of Life Factor is determined by a consideration of several factors including the total population at risk, the location of this population below the dam, the severity of the flooding expected should the dam fail, and the severity of the failure mode in question. This Risk Index is calculated separately for each category of Failure Index and then summed to represent the Total Risk Index. In addition to the Risk Index a measure of potential social and economic impacts are reflected through use of the Socio-Economic Index. The Socio- Economic Index is determined by multiplying the Failure Index by the total population at risk and dividing by 1000. Specific and more refined factors that may enter significantly into the decision-making process related to social, economic, cultural and environmental consequences could be incorporated into the RBPS in the future by dam safety program managers. The final scoring for any particular dam is calculated by comparing its score to the highest score found for all the dams in the inventory, expressed as a percentage. This ranking is calculated for all the Failure Indexes, Risk Indexes, and Socio-Economic Indexes. This thus provides for consideration of risk in a variety of ways. Qualitative Risk Assessment: According to ICOLD the risk can be categorized as given in the above tabulation. The limitation of this method is that it takes no account of the type of the dam or any assessment of its safety, but concentrates solely on its potential for causing downstream damages. The scores are summed and the overall risk classified as follows:

Total risk score Risk classification 0-6 I(low) 7-18 I1 (moderate) 19-30 I11 (high) 31 -36 IV (extreme)

40 Table 1 - Risk Classification of 38 Dams According to ICOLD Criteria (Note: Damheights and reservoir volumes shown in the Table are rounded off figures) eservoir vol. Dam height Population at Dam -Owner (Mm3) (m) risk Damage Risk Category Kotmale MASL 174 94 >IO00 high 36 extreme Polgolla MASL 4 15 0 low 4 low Victoria MASL 721 122 >IO00 high 36 extreme Randenigala MASC 861 94 >IO00 high 36 extreme Rantembe MASL 7 42 0 moderate 12 moderate Ulhitiya MASL 145 25 >lo00 moderate 28 high Maduruoya MASL 597 41 >IO00 moderate 30 high Bowatenna MASL 52 30 >IO00 moderate 28 high Dambuluoya MASL 12 12 >IO00 moderate 24 high Kalawewa MASL 127 24 >IO00 moderate 26 high Kandalama MASL 34 17 >IO00 moderate 26 high Udawalawa MASL 287 36 >IO00 moderate 30 high Chandrikawewa MASL 28 19 >IO00 moderate 26 high Ridiyagama ID 27 8 >IO00 moderate 24 high Tabbowa ID 19 9 >IO00 moderate 24 high Lunugamwehera ID 209 26 >IO00 moderate 28 high lnginimitiya ID 72 18 >IO00 moderate 26 high Pahala Andarawewa ID 8 2 >IO00 moderate 20 high Usgala Siyambalangamuwa ID 27 8 >IO00 moderate 24 high Minneriya ID 136 23 >IO00 moderate 28 high Giritale ID 23 14 >lo00 mod e ra t e 24 high Kaudulla ID 128 17 >io00 moderate 28 high Kantale ID 135 18 >IO00 moderate 28 high Vendrason ID 25 16 >IO00 moderate 26 high Parakrama Samudraya ID 134 15 >IO00 moderate 28 high Huruluwewa ID 68 12 >IO00 moderate 26 high Nalanda ID 15 31 >lo00 moderate 28 high Rajanga ID 100 18 >IO00 moderate 26 high Angamuwa ID 16 9 >IO00 moderate 24 high Nachchaduwa ID 56 11 >IO00 moderate 26 high Nuwarawewa ID 44 11 >IO00 moderate 24 high Tissawewa ID 4 2 >IO00 moderate 24 high Castlereigh CEB 60 48 >IO00 moderate 30 high Moussakele CEB 115 42 >lo00 moderate 28 high Norton CEB 0 29 o moderate 12 moderate Canyon CEB 183 27 o moderate 16 moderate Laxapana CEB 0 30 o moderate 12 moderate samanaiawewa LtU 254 1uu >IO00 moderate 32 extreme

41 Tab

42 BtS -00 'I' ' I' '1'11

, , j , , , , * , I . M d Component 2: Hydro-meteorological Information System (HMIS) Improvement

1. Background: Component 2 of the Project is intended to develop a nationwide Hydro- meteorological Information System (HMIS). This system would result from strengthening hydro-meteorological data collection and analysis in Sri Lanka, and establishmg a robust data bank to be maintained by the hydrology unit of the Irrigation Department (ID). Data and information drawn fiom the data bank would support public safety related disaster management planning, and dam operations, flood forecasting, flood and drought frequency analysis, water resources assessment, planning and management.

2. The HMIS would have the following subcomponents: (i)establishment and upgrading of 50 hydrometric stations; (ii)establishment of a data bank at the ID; (iii)improvement of analytical capability of the ID; (iv) establishing procedures and providing tools and training for real-time analysis of flood situations in the influent streams of some selected reservoirs; and (iv) establishment of a core groundwater monitoring system.

3. In parallel with this project, the Japan International Cooperation Agency (JICA) is financing a project entitled: “The project for improvement of meteorological and disaster information network”. The objective of that project is to ‘improve and upgrade weather information network system for real-time collection of observation information, to forecast possible disasters’. The executing agencies include the DOM, the DMC and the ID. It is understood that the JICA-funded project would provide installatiordupgrading of 38 automatic meteorological stations nationwide with satellite transmission facilities, and a central operating system (incl. a data bank) for data processing, analysis and communication at DOM in Colombo. In addition, it would finance the development of an early flood warning and evacuation system for the flood-prone Kelani, Kalu, Gin, and Nilwaia river basins, for which the DMC is the executing agency.

4. Ths project component has been prepared in close consultation with the ID, the DOM, the DMC, the JICA and its consultants to promote mutual complementarities and avoid duplication between the two projects. Assurance was obtained during project appraisal that the Project Management Unit (PMU) would continue their close liaison with the staff of the JICA funded project to ensure networldsystem compatibility and leave no major gaps in hydro- meteorological information system.

5. Subcomponent 2.1. Establishment and Upgrading of Hydrometric Stations: The component would replenish many of the basic equipment and tools that the ID uses for manual stream monitoring and introduce more robust and modem automated data-collection tools. The basic tools at 50 hydrometric stations include: (i)boats and motors for measuring low-flow discharges at hydrometric stations; (ii)cableways and associated equipment for measuring high- flow discharges during floods; and (iii)civil works at selected sites to shelter equipment, facilitate traditional water-level and precipitation monitoring, and assure safe river access by staff. The more automated tools include: data loggers to control automated sensors and locally store their data; various water-level, precipitation and other sensors to provide data to the loggers; solar-powered and other power supply subsystems; technologies to telemeter data from stations to an ID data bank via telephone, radio, or other technologies; the capacity to download data directly from the data logger via a laptop computer or other portable digital devices; and other tools and equipment, including lightningprotection.

6. Technical assistance would be provided to the ID staff in defining streamside data- collection system for these sites. Support also would be provided to select and accept test instruments, and install, operate and maintain traditional and modern data collection facilities. The contractor would assure that the collected data are compatible for transportation to and entry into data banks discussed below, and thus provide an end-to-end data system. Midway

44 through the implementation of the project, a network review would be conducted of the hydrometric network.

7. Subcomponent 2.2: Establishment of a Data Bank at the Irrigation Department: Hydrometric data collected by the ID would be aggregated in a new data bank. It would become the repository of all the historical data that exists from the ID network, part of which is already in digital format and the data that are produced by the network to be modernized. Real- time data that flow into the data bank from: (a) the modernized network under the project; and (b) the JICA-funded network, would be available for flood-forecasting and warning, real-time assessment of water resources, and water-management in general. The ID would ensure the compatibility and complementarities of the facilities under this subcomponent funded by the JICA and the Bank.

8. Historical records would be available for a wide range of applications, ranging from planning studies of flood and drought frequencies to network assessments. Combinations of historical and real-time hydrometric data, along with historical data on the operations of dams and other structures, can provide the framework of a decision-support system for optimizing reservoir operations for damlpublic safety and flood management as well as hydroelectric power generation and irrigation and municipal water supply.

9. A wide range of applications would be established at the data bank. Some of these applications need to be available early in the implementation of the project and would focus on configuration, control and operation of the data-collection elements in hydrometric stations, such as sensors, data loggers, power supplies, and telemetry modules. These provide for management of the network, detecting patterns of equipment failure, identifying maintenance needs, and prioritizing station visitation by hydrologc field assistants who maintain stations. Other early on applications would focus on real-time decoding of incoming messages, processing and storing the data, providing quality checks, examining data consistency among stations, and real-time consistency checks.

10. Contractor support would facilitate the selection, installation, and implementation of the ID data bank, as well as assist in the selection, implementation, and development of applications and entry of all available historical data in the date base. Such support would be provided largely on site, but selected travel by ID project staff would be facilitated to contractor offices as well as counterpart hydrometric institutions overseas.

11. As noted above, a hydrometric data bank for aggregating meteorological data would be established at DOMunder the JICA-funded project. It would become the repository of all the historical data that exists from the meteorological network and new data to be produced by the modernized networks. Historical and real-time meteorological data, along with data available on the WMO Global Telecommunication System (GTS) would strengthen the availability of information for real-time weather forecasts and warnings. Analysis of historical meteorological data in the data bank can be used for various climate analyses and studies, so as to document possible effects of climate change, the effect of land use changes on weather patterns, and the status and trends of climate in general. Real-time data that flow into the data bank would be available for flood-forecasting and warning, real-time assessment of rainfall and weather patterns, and meteorological assessment in general.

12. Subcomponent 2.3: Improvement of Analytical Capability of Irrigation Department and Department of Meteorology: Subcomponent 2.1 - 2.3 would provide a more modern data-collection and analysis infrastructure, and the framework for improvement of their analytical capabilities. Advanced applications of hydrologic and meteorological data, and integration of historical and real-time data with remote-sensing data available on the WMO- GTS, existing spatial data sets of topography, land use, soils, population, and other data would be undertaken under this subcomponent.

45 13. With respect to the hydrometric data bank, additional and more advanced applications can be made available during project implementation that would allow for more far reaching hydrologic analysis. When precipitation data are imported into the ID data bank from the DOM data bank, hydrologic data can be used to calibrate rainfall-runoff and channel-routing models that would strengthen flood forecasting and warning, decision-support systems, and water management in general. There are different emerging methodologies that can benefit from combing hydro meteorological data with remote sensing and GIS data, which would facilitate even more advanced applications. For example, satellite-based rainfall estimates are being carried out in South and Southeast Asia that can be combined with ID network data, GIs-based hydrologic models, and spatial data sets of topography, land use, soils and evapotranspiration to compute and issue flash-flood warnings or flow forecasts. Although some of the applications would be more refined and qualified during the coming years, the project staff would have the opportunity to become familiar with all these applications to assure that those selected for implementation in the ID data bank are in line with needs and developing capacities.

14. Similarly after the meteorological data bank is established at DOM under the JICA- funded project, additional and more advanced applications would be possible. With the availability of historical and real-time hydrometric data from the ID data bank discussed above, data could be used to operate flood forecasting models that would facilitate the issue of warnings to communities at risk. Real-time spatial data from both polar-orbiting and geostationary satellites that would be accessible via the WMO-GTS could be combined with network station data to greatly strengthen weather forecasting in Sri Lanka. Also atmospheric and other weather forecasting models could be developed to take advantage of HMIS data to facilitate weather forecasting in the country.

15. Strategy for Implementation of subcomponents 2.1-2.3: These would be core elements within an overarching HMIS system that is intended to collect hydro meteorological data throughout Sri Lanka, provide them to data bases at the ID and DOM, analyze and combine them with other data, and operate hydrological and meteorological simulation models. Together they would become robust tools for early warnings and mitigating the effects of hydro meteorological hazards on dams and other structures, and the public at large, as well as for research and water resources planning and management.

16. Systems Integration. As with any complex system, care must be taken to assure that all data handing within subcomponents 2.1-2.3 are internally compatible within the element and between different elements of the system. Instances ofincompatibility would prevent data being collected by sensors at remote locations throughout the country from being available for the data-bank applications described above. Even if all the elements work perfectly, subtle incompatibilities can occur if interfaces withm elements fail, e.g. the interfaces through which data loggers acquire data from sensors and pass them on to communication modules, or interfaces between elements fail, such as those between a communications module and data bank input port. Moreover, synchronization failures occur when one subsystem expects data to be provided in a particular form, sequence, and time, and an unrecognized format or sequence actually occurs at an unexpected time. The challenge of defining such incompatibilities is compounded by the fact that sophisticated tools and experiences are required by the system integrator to prevent, detect, and remediate such oft-times subtle incompatibilities.

17. If different contractors are involved to deliver different subcomponents, the task of system integration would be the responsibilities of the government department and the responsibility for identifying which contractor is responsible for curing system failures would remain in the department which has no experience with implementing such a complex system. It would thus be prudent to procure a turn-key system. With this strategy, one contractor would be responsible for undertaking all the consultant support functions inherent in each element above, and implementing all the technical aspects of integrating sensors, data loggers, power

46 supplies, communication links, provision of data to the data banks, operation of applications software, and so forth. This strategy would also allow the department to implement the HMIS in phases and establish milestones that the contracted HMIS system’s integrator would be required to meet prior to implementing subsequent phases. For example, the department may opt to install only a small number of remote stations and basic data bank applications during the first year of HMIS implementation. During this phase, the contractor could provide formal training, on-the-job training, and documentation to the project staff as both the contractor and department staff participate in equipment installation. Upon the successful demonstration of HMIS phase-1 performance milestones, the systems contractor could then proceed to subsequent phase(s) in which additional remote stations are installed and more complex data applications and products are developed and implemented. Throughout the preparation ofphase 2, responsibility for operating the HMIS phase 1 would be assumed by the department staff and the pattern would be repeated throughout the phased HMIS implementation. In this way, the department capacity would be able to build up gradually through formal training and on-the-job experience in installing and operating the system.

18. HMIS and JICA Complementarities. If the JICA funded project is materialized in time, the HMIS system integrator contracted under DSWRPP can provide technical assistance to the ID and DOM during negotiations with JICA’s designer/contractor staff. The purpose of such negotiations is to assure complementarities between the two interventions, and would involve the following aspects: (i)Remote Stations: If the JICA project includes modernizing stations that DSWRP does not cover, or if the JICA project seeks to add sensors or other capabilities to DRWRPP-funded stations, collaborations between the HMIS system integrator and JICA counterparts can identify and prevent incompatibilities where implementation of the two projects overlaps; and (ii)Data Banks: As the JICA project is to support the data-bank development for DOM, technical negotiations need to assure that data transfer among data banks is possible and robust. Moreover, such negotiations should include using both the ID data bank provided under the project and JICA-funded DOM data bank as the repository for data collected from different sources. It is intended that the HMIS system integrator would: (a) resolve any apparent incompatibilities of size, capacity, and speed of the extant data base that might hinder integration; and (b) assist the ID and DOMto decide how best to resolve possible incompatibilities with JICA-funded counterparts.

19. HMIS Performance Specification. The most important aspect in planning for a turn- key system is the preparation of an HMIS performance specification. The specification must convey to potential bidders the purchaser’s requirements for implementing, operating, and maintaining the HMIS system. It also puts the purchaser in the position of having to decide how the system would be configured and operated, long before the system actually is implemented. This should be prepared with attention to detail by the department staff with the assistance of a consultant who has knowledge of implementing hydro meteorological data collection systems, information systems, and systems integration.

20. Network analysis. A network analysis is called for in subcomponent 2.1, in which the existing station network of hydrometric and ago-meteorological networks would be reviewed and recommendations solicited for cost-beneficial adjustments in the distribution of stations. The intent is to maximize the value of data and information that the network provides, which could call for the discontinuation of selected stations and establishment of stations in new locations.

21. Subcomponent 2.4. Establishing procedures and providing tools and training for real-time analysis of flood situations for selected reservoirs: Consistent with the important dam-safety theme of the project, the consortium of project agencies have identified two important dam-safety scenarios, both related to flood warning under different criteria. The first criterion with highest priority is to safeguard dams in the Mahaweli catchments above the Randenigala Dam. Dam operators need to know with sufficient lead time likely impending

47 hydrologic events that would require them to change the normal reservoir operating rules with respect to reservoir levels, turbines discharges and spillway gate operation. This is especially critical because three dams, Kotmale, Victoria, and Randenigala dams, would be at risk if Randenigala dam is not properly operated. The second criterion concerns dams on rivers in remote areas in national parks, where no operating staff is stationed to monitor their status and risks. Rivers that meet this criterion include Menik Ganga, Mau Ara and Samanalawewa of the Walawe Rwer Basin, and Lunugamvehera in the Grindi Oya Basin. Other rivers that would qualify under this criterion are the Kalawewa; Rantembe; Rajangana, Minipe LB and RE%, Kantale, Muruthawela, Uda Walawe, Nachchaduwa, Mahakanadarawa, Muthukandiya, Tabbowa and Handapanagala.

22. Under this subcomponent a three-phase approach would be implemented. The first would be to make a reconnaissance survey of the areas at risk and prepare a financial and technical proposal to instrument hydro meteorological stations in the catchments above selected reservoirs. The second phase would be to implement the proposal and facilitate the flow ofreal- time data to dam management offices. The final phase would be to prepare decision support tools that would provide guidance to dam management officials about possible dam- management scenarios. This shall first be implemented in a pilot program in the Mahaweli system. The turnkey contractor together with the system integrator consultant shall be required to ensure that the dam-safety specific data collection and telemetry system provide data which could also be fed into the project data bank.

23. Subcomponent 2.5. Groundwater Monitoring: This subcomponent concerns monitoring, assessing and safeguarding groundwater resources in Sri Lanka, which have reportedly been overexploited in some places. Many aquifers in the country are shallow and highly vulnerable to pollution, which is of important public health concern because most rural self-supplied domestic water supplies rely on ground water. Over extractions of groundwater for imgated apculture in many coastal areas induces salt-water intrusion, which coupled with the salt-water contamination by the 2004 tsunami, has put many aquifers at risk. Other natural and human-induced contaminants include fluoride, iron, nitrates, industrial contaminants; fecal coli form bacteria from faulty wastewater systems and a range of agricultural chemicals.

24. There exists no systematic monitoring of groundwater level and quality in Sri Lanka. Data on the location of existing wells that were drilled by the Water Resources Board (WRB) and the National Water Supply and Drainage Board (NWSDB) are listed in well databases maintained by the two organizations. These data bases need to be quality assured, integrated, and populated with data from other groundwater wells known to exist in the country. Other pressing issues include: (i)the need for a coordinated groundwater information program; (ii) lack of institutional authority for the control or regulation of groundwater; (iii)lack of in-house capacity in systemic analysis and assessment of groundwater situation; (iv) the lack of a groundwater planning system; and (v) the need for a public information or awareness program regarding groundwater.

25. In response to these issues, this subcomponent would promote groundwater monitoring and assessment, and facilitate sustainable management of groundwater in Sri Lanka by: (i) establishrng a information system to inventory groundwater use and catalogue groundwater issues and complaints; (ii)monitoring groundwater quality and quantity/level in critical/pilot areas and disseminating the rnonitoringhssessment results; (iii)establishmg a groundwater data base, coupled with GIS and other applications; (iv) building the analytical capacity of WRE3 staff for groundwater monitoring and assessment; and (v) undertalung a public awareness campaign on groundwater.

26. Strategy for Implementation of Subcomponent 2.5: Techcal assistance consultants as part of the implementation support consultant team for Component 2 would be engaged from the start of implementation. The consultants shall have extensive expertise and experience in

48 groundwater monitoring and assessment, and shall be required to liaise with the system integrator contractor to assure that the groundwater data base be as compatible as possible with the ID and DOM data banks. If the security conditions permit, a ground water monitoring intervention would be planned and implemented in Jaffna in the North, where ground water is the main sources of water for agriculture and drinlung, and there are major issues with the groundwater resources use at present.

27. Expected Outcomes: Component 2 of the project is intended to strengthen the hydro- meteorological data collection and analysis programs in the country via an integrated implementation of most of its subcomponents. The subcomponent 2.4 would provide for special studies of data-collection and telemetry needs of selected vulnerable dams in the country, implement critical data-collection sites to provide early warning, and provide decision- support analysis to mitigate risks to these dams. The subcomponent 2.5 would provide for the systematic aggregation of extant groundwater data and establish a core system of ground water quantity and quality monitoring so as to provide the basis for future legislative action to protect the resource. Concurrent with the implantation of this component project staff would continue to liaise with the JICA funded “The project for improvement of meteorological and disaster information network” to assure that compatibility and complementarities can be developed between both programs.

49 28. Cost Estimates of Component 2:

. of35 0190 0114 . ow . ow2 ow2 ow1 . OW5

069s 2850 3110 osis . 7515 om 0028 0027 ow? . ow . 4281 3~18 3887 . iim . 0038 now 003 . om? . 0275 0217 0229 . 0722 . OW2 OW2 OW7 . OWB 0695 7506 8714 4615 . 19531 OWB OW6 0058 0039 . 0170

. 2613 PI21 1274 . 6W8 -0023 0018 0011 . 0052

. 4225 3481 2097 . 8803 . 0037 OW0 0018 . OM5 ------. 18- n~iz 63si . 39187 . 0148 0121 oon - 0340 . 21119 17594 10478 . 48981 . 0185 0151 0069 . 0428

. 2332 1949 1175 . 5485 . 0021 0017 0010 . OM . 28451 23012 13815 . 65278 . 0250 OZOO 0118 . 0887 . 2946 468 . . 7545 . 0026 OW1 . 0 ffi? ------. 11199 9058 541 . 25695 .----- 0094 0079 OM . 0223 I 44998 33878 2O428 . IO4103 . 0395 0336 0174 . OW5 . 381 2979 1780 . 84s 0032 0026 0015 o on ------0513 . 1404 ------. mn? 59051 32694 . mu2 . 0612 0278 22052 246763 243232 11S88 . 628945 0197 2165 2115 0906 . 5471

23986 57118 3333 14065 . 128SBO 0214 0501 0290 0120 . 1125 ------. 11213 10405 4102 25720 OB8 OW 0035 . 0224 2398~ 68329 43799 18167 . 154280 0214 ow 011 01% . 1349

$505 44803 41438 5442 . 1011M 0085 0393 OW 0048 . 0884 rim 1250s 13208 13917 . 51407 01% 0110 0115 0118 . ow

------3018 3212 . . 8240 0027 0028 . . . OM5 ------31407 64118 62706 27854 . 190095 02BD 0598 0545 0237 I 850 77455 333210 349757 182919 . 973320 0892 3381 3C41 1387 . 8481

50 Component 3: Multi-sector Water Resources Planning

1. Background: Beginning in the 1950s and 1960s a number of water master plans were prepared in Sri Lanka focusing on both irrigation and multipurpose development to expand irrigated agriculture and hydropower production. These included the Irrigation Department’s Master Plan in 1959, and the Mahaweli Development Plan completed in 1970s by UNDP. The current portfolio includes 54 reservoir projects and 27 hydroelectric projects. While some of these reservoir projects are multipurpose, most ofthe portfolio has been identified and planned on the basis of a narrow single sector perspective. While many of the projects proposed in these plans were constructed, a large number remain to be financed and implemented. More recently a master plan for electricity supply, including a comprehensive review of potential hydropower sources, was completed in 1989 for the CEB, and a 20 year plan prepared for urban water supply and sanitation for the National Water Supply and Sanitation Board (NWSDB).

2. The production of Sri Lanka’s staple cereal, rice, and the generation of its electricity needs are heavily dependent on these regulated water resources. By 2025, less than 20 years hence, an estimated 50% of the country’s population is expected to live in towns and cities. Although the agriculture sector continues to be important for rural and economic growth, the economy is increasingly powered by the services and manufacturing sectors. These trends would result in greatly increased demand for agnculture, safe and reliable water supply for domestic, commercial and industrial use, and demand for increased and more reliable electricity supply. The agriculture sector must undergo a transformation to increase its productivity and become more commercially oriented producing staple food as well as higher value crops for domestic consumption and export. This transformation would depend in part on expanded and more reliable supplies of irrigation water, especially in the dry yala season, which in turn places renewed emphasis on water storage development. These economic and social developments and trends, along with heightened sensitivity to threats to the country’s valued environmental assets, are resulting in increased competition for water among different uses and sectors and disputes over where water resources are available for development (especially in the case of inter-basin transfers) and what adverse as well as beneficial impacts these may have.

3. Investment in water resources development over the coming years is seen by the Government as an important component of its strategy to accelerate broadly shared economic growth. But it is clear that the context for accelerated investment in water resources is changing in fundamentally important ways that are characterized by expansion of water demand in many sectors, water scarcity, competition, uncertain reliability, increasingly negative externalities that result from isolated sector developments, and lack of consensus on priorities. While single sector water projects are needed to provide relief and address short-term needs, this strategy risks forgoing significant benefits, increasing long-term costs, and creating problems that are far more difficult to solve later, if projects are not planned in an integrated multi-sectoral and basin-wide context. For wise and sustainable use of increasingly limiting water resources, an integrated basin approach to water resources planning is essential for identifying options and priorities and selecting and implementing water investment projects that are sustainable, achieve long term objectives, provide for future needs, and avoid major externalities such as environmental degradation. Hence, a program that reassesses long term water supply availability and water

51 demands in each of the country’s 103 river basins as a basis for deciding where and in what manner a major increase in water investment should be undertaken and would be very timely.

4. Undertalung to assess the long term balance ofwater supply and water demand in each of the country’s 103 river basins is a daunting task, especially in light of the many changes that have taken place over the last 50 years, and the changes that are anticipated in the future. A great deal of data must be compiled and organized to describe this increasingly complex system, and systematic methods and tools applied to analyze both the options for development (including the many projects proposed in the past but not yet implemented) and their consequences in order for stakeholders and the Government to make informed decisions. The criteria to be applied to screen these options are as diverse as the many stakeholders, encompassing a range ofeconomic, financial, social, environmental, and risk mitigation (drought, flood) factors. Hence, the development and application of modern Decision Support System (DSS) approaches would be necessary to carry out this task.

5. The expected outcome of this component would be development of water resource development plans at national level and for two selected river basins, pre-feasibility and feasibility studies for selected high priority strategic projects, and enhanced institutional capacity and slulls for water resources planning and management. Component 3 comprises three subcomponents.

6. Subcomponent 3.1: Development of a National Water Use Plan (NWUP) to achieve the country’s long-term social, environmental and economic development goals and objectives as expressed in the national development fkamework based on an analysis of updated estimates of present and future water demand and water supply in the 103 river basins in the country. The NWUP would provide detailed guidance on how the undeveloped water sources in the country could be used to meet future drinking, irrigation and industrial water supply demands, expand hydropower and provide flood control, as well as provide environmental flows for maintenance of water quality and river health and satisfy other ecological needs such as in wetlands, estuaries and littoral zones. The Nwup would also provide recommendations for pre-feasibility and feasibility studies ofpriority investment projects to be supported by the project.

7. Subcomponent 3.2: Preparation of an Updated Mahaweli Water Resources Development Plan for the Mahaweli Ganga and adjoining connected river basins based on an optimization study utilizing a DSS ofwater supply and water demand in all sectors in this system of river basins. The updated Mahaweli Plan would include a new portfolio of prioritized Mahaweli development proposals based on a reassessment of water resources available and present and future needs in the basin and a strategic environmental assessment (SEA) of the basin. The plan would also summarize the expected social, environmental and economic impacts, both positive and negative. The project would support pre-feasibility and feasibility studies for the highest priority investment projects recommended in the agreed plan.

8. Subcomponent 3.2: Preparation of a multi-sector, integrated and comprehensive Mundeni Aru Basin Development Plan (in the Eastern Province), and pre-feasibility and feasibility studies of priority investment projects. Present water resources development and management proposals for the Mundeni Aru river basin would be studied along with all other options during preparation of the plan, which would be based on the development of a comprehensive knowledge base for the basin, structured stakeholder consultations (within different ethnic communities and between upstream and downstream communities), and a strategic environmental assessment (SEA).

52 9. Key Common Elements of the Planning Approach: While there are unique differences between each subcomponent, not only in terms ofscope and geographic focus but also in terms of the basic planning problems and issues to be addressed, there are important commonalities in the overall approach to be taken. These important common elements are as follows.

10. Decision Support Systems (DSS): The project would support the development of appropriate DSS to enable and facilitate integrated water resources planning and management and investment project preparation to be undertaken under each of these subcomponents. DSS development would include: (i) Knowledge base development that includes systematic collection and compilation of water-related information and data for all development sectors including environment, and a spatial data management system using GIS and incorporating available remote sensing data, and GIS and globalh-egional datasets; Attachment A outlines the potential scope a geospatial water resources knowledge base. (ii) Modeling tools for simulation, optimization, and multi-criteria analysis and comparison ofbasin development scenarios, options and alternative plans; (iii) Structured stakeholder participation and consultation processes and activities to identify basin planning objectives, problems and issues, and promote consensus on development options and plans. The project would support the development of Strategic Environmental and Social Assessments as an integral part of the preparation of the NWUP and the water resources planning process in the Mahaweli and Mundeni Aru basins.

11. Strategic EnvironmentalAssessments: An important element ofthe planning approach for each of the subcomponents would be the preparation of a basin strategic environmental assessment (SEA). The geographic focus of the SEA is quite clear in the case of Subcomponent 2, Updating the Mahaweli Basin Plan, and Subcomponent 3, preparing the Mundeni Aru Basin Plan. In these cases the respective basin is the focus of the survey and study, i.e. the Mundeni Aru basin, and the Mahaweli and adjacent connected basins. In the case of the NWUP, such an approach would seem at first to be nearly tantamount to a national environmental assessment since it would survey and study all 103 basins. Nevertheless, that is the correct geographic focus for the NWUP SEA. However, the study should be limited to the water sector and to identifying the big issues in the various basins that would have a strong impact on the future balance ofwater supply and demand, and on the assessment of options. Details and approach for SEA are outlined in the PIP.

12. Planning Framework: The comparison of alternative options or plans would be based on how each option or plan responds or performs with respect to the indicators for achievement of the planning objectives developed as a part ofa planning framework and in the context ofone or more planning scenarios. Planning scenarios reflect alternative views ofthe future particularly in terms of national strategies, or alternative views of future exogenous conditions that have an important influence on the course of action or plan: for example, storage strategies (few large vs. many small & medium); sector development strategies (urban water supply service level, sewerage coverage, agriculture (intensification, emphasis on rice, diversification, etc); industrial development policy, demand management strategies (level of effort required and viability, incentives, etc.); climate change and variability; financial and budget constraints (low, medium or high), etc.

53 13. The other dimension of the planning fiamework consists of the goals/objectives to be achieved, and the criteria and the indicators to be used to assess the degree to which an option or alternative plan achieves the objectives. This framework is developed in part through a stakeholder consultation process. An example of such of general planning framework is given in the table below. The proposed planning process is outlined in the PIP.

Goals Criteria Possible Indicators

0 Agricultural Benefits Contribution to 0 Hydropower Benefits sustainable economic 0 Flood Damage Economic growth Drought Protection (improved reliability Development Contribution to 0 ofsupply, e.g. decreased frequency of poverty alleviation shortage) and peace 0 Benefits to priority regions and sectors

0 Water supply and 0 Drinking water supply and sanitation sanitation provision coverage.

Social 0 Implications for 0 Additional jobs createdincome increases Development employment expected

0 Minimize 0 Expected resettlement from proposed Resettlement investments

0 Minimize adverse

project impacts 0 Area inundatedimpacted by projects that

Environmental 0 Minimum flow is environmentally sensitive

Sustainability provision 0 Flow at sensitive environmental stretches

0 Biodiversity 0 Benefits to sensitive habitats protection

0 Financial Requirements & Financial Rate Implementability of Return (with filter for Financial Feasibility Economic Rate ofReturn (Econ Anal technical and Economic Feasibility 0 0 outputs) envhocial Public Acceptability Stakeholder views on acceptability feasibility) 0 (rating)

54 Corrponcrrt 1: Sehcdulc

14. It is important to develop objective, quantifiable indicators and the means to determine their value (the models used in the DSS should be designed to do this). The nature of the expected outcomes of each of the above mentioned subcomponents (master plans) and the planning and implementation approach and arrangement are described in the PIP.

15. Proposed Schedule and Milestones: The schedule of activities under Component 3 is outlined in the chart above. The work would be completed in three phases over a four year period: Phase Iwould comprise key Year 1 (PY1) activities including establishing the Water Resources Information and Analysis Centre and the Mundeni Rwer Basin Planning Cell under the ID’SDeputy Director for Water Resources and Project Preparation, and the Mahaweli Water Resources Planning Centre under the MASL’s Director ofProject Planning. First year activities would also include internal staff deployment and recruitment, recruitment of local consultants to complete the staffing of each unit, and modernization and equipping ofthe offices of each ofthe units. Each of the newly established planning units would initiate its respective planning activities including work on development ofeach basin DSS. Training would be implemented for each ofthe new units during Year 1.

16. Year 1 is a year ofconsiderable importance. The table below outlines the key milestones to be achieved. During the launch workshop, a first year work plan would be developed that would be reviewed and adjusted at the end ofsix months.

I Milestones to be Achieved in Year 1 I Activity When Achieved Description

Organization ofPlanning - Three months units Redeployment of internal Six months Internal recruitment involved in some Staff cases Local Consultants Six Months Identification ofneeds and completion ofrecruitment Recruitment ofInternational Twelve months Consultants Staff training Twelve months Phased from three to twelve months

55 Initiate work on NWUP Twelve months Begin with completion of internal staff redeployment. Work should focus on GIs,

I development ofinitial methodology and work on pilot basins including basin schematic, GIS data, compilation of data on water demands and existing and proposed infrastructure Initiate work on Updated Twelve months Begin with completion ofinternal staff MBP deployment. Work should focus on assessment of hydrologic monitoring system and available hydrologic data, establishing calibration and verification data I acquisition in flood risk zones, developing complete basin schematic, GIS data, compilation of data on water demands and existing and proposed

I infrastructure Initiate work on Mundeni Aru I Twelve months Begin with completion ofinternal staff deployment. Work should focus on assessment of hydrologic monitoring system and available hydrologic data, establishing calibration and verification data acquisition in flood risk zones, developing complete basin schematic, GIS data, compilation of data on water demands and existing and proposed infrastructure

17. Phase I1 would focus on completion of the National Water Use Plan and the Updated Mahaweli plan by the middle of Year 3, and the Mundeni basin plan by the end of Year 3. An SEA for the Mahaweli and Mundeni basins would be completed by the middle of Year 3; Phase I11 would focus on completion of pre-feasibility and feasibility studies of selected priority projects by the end of Year 4. Procurement of consultants to carry out these studies as required would be initiated in Year 2.

56 U

U od 3 Component 4: Project Management and Monitoring

1. The objective of this component would be to ensure smooth implementation of project activities as well as monitoring of and learning from project processes and outputs. Activities to be financed include: (i)establishing and supporting the project management unit (PMU), and project units ofeach ofthe implementation agencies (IAs); (ii)project monitoring, evaluation and learning activities; (iii)services ofan external M&E agency to be recruited as consultants for the duration of the project; (iv) providing support for emerging needs and innovations during implementation; and (v) other eligible incremental operating costs.

Master Implementation Schedule: Available in PIP (see Project Files)

58 Annex 5. Project Costs and Financing Plan

SRI LANKA: Dam Safety and Water Resources Planning Project

1. Basis of Costs Estimates: The Project Feasibility Report provided project cost estimates based on the prevailing unit rates of works, goods and equipment, and services at the time of project preparation in 2006. Unit cost estimates for works and equipment have been derived from similar activities procured recently by the MASL and the ID and other agencies, particularly in the context of the implementation of similar civil works (earthworks, concrete and stone works, electrical and mechanical works) and have been updated to reflect price changes. The unit costs of items which were not available locally (like some IT or some hydrometeorology equipment etc.) are based on 2006 prices at the international market adjusted to take account oflocal import duties and taxes. The quantities ofcivil works, mechanical and electrical equipment are based on the drawings ofthe dams and appurtenances taken up by the implementation agencies (Us) at the time of the respective investigation which have been examined by the project preparation consultants, and reviewed by the pre-appraisal mission. The costs of all items are based on mid 2006 prices and include taxes and duties.

2. Incremental staff required for implementation of the program are accounted using four levels of staff, namely very senior level professionals, senior level professionals, mid-level professionals, and skilled staff to be recruited from the local market using Bank’s procurement guidelines for individual consultants. The costs of consultancy services are based on recent contracts for foreign and local consultancy services in Sri Lanka or in the absence of that based on the project preparation consultants’ international experience. Physical contingencies to allow for possible quantity and design variations were applied at 10% for civil works and equipment, 5% for training and incremental operation and recurrent costs, 2% for international consultancy and 0% for national consultancy. Price contingencies, for expected price variations, were based on the inputs of country economic section and applied to the foreign exchange component at 0% until project start, 2.5% in FY 2008 and about 2.65% per year thereafter. For local costs, price contingencies were applied at 7% to 6% in the first 3 years starting 2008 and 5% yearly thereafter. The cost estimates take into account the expected changes in the currency equivalent over the project period. With regard to the project financing, the estimate of Government’s contribution is based on the agreed standard disbursement percentages updated in 2004 and the recent disbursement percentages used for similar countries. Thus the reimbursement percentage proposed for is 85 % and for “Incremental Operation Costs” is 70%, For all other financing such as goods and equipment including vehicles, consulting services, training and salaries of incremental staff of project implementation units (recruited as local consultants), the disbursement percentage proposed is 100%.

3. On this basis, the total project costs (including financial and physical contingencies) are estimated at Rs 8,187 million (US$71.2 million) ofwhich Rs 6,865 million (US$60.7million) are base costs and Rs 1,322 million (US$ 10.5 million) are contingencies. Contingencies would amount to some 18% of the project base cost (respectively 11% and 7% for price and physical contingencies) The estimated costs of the four project components namely, Dam Safety and Operational Efficiency Improvement, Hydro-meteorological Information System, Multi-sectoral Water Resources Planning, and Project Management and Monitoring would be US$ 53.1 million (75%), US$ 8.5 million (12%), US6.5 million (9.0%) and US$ 3.1 million (4%) respectively. The project total costs, by major component and subcomponents, are shown in Table 1 below:

59 Table 1 Democratic Soaalrrt RepuMic of Sn Lanka Dam Safely and Wner RESOUrwS Planning PmiecI Cmponentr Pro]& COS1 SYrnmsly

(SL Rums Mllllon) (US$ Million) % %Total *h +TOW Foreign Bare Fomign Br. Local FDnlgn Total Exchanw Costs Local Fwlgn Tad Exchange cm.1. A DAM SAFETY AND OPERATIONAL EFFICIENCY IMPROVEMENT 1 Remedm Works /a 2709714 722691 3432605 21 50 23980 6397 30377 21 50 2 Basic Sdely Facildlesm 377970 365405 763375 50 11 3345 3411 6756 50 1% 3 lmpiementation Su-n Consunants 123616 296625 420441 71 6 1096 2625 3721 71 e 4 Traininp for Slrengfhening Dam-huning Organlzationa 64600 158200 223wO 71 3 0573 1400 1973 71 3 5 Si-oes 1-6 Smoa rea Eq. me1 ----75707 166336 242043 69 --4 0670 ---- 1472 2142 69 4 EQIWIDAM SAFETY PSID OPERATIONAL EFFlClEhCY IMPROVEMENT 3352007 1729457 5081455 34 74 29664 15305 44969 34 14 B HYDROMETEOROLOGICALINFORMATION SYSTEM 155 138 142556 297693 46 4 1373 1262 2634 46 4 21 933 67600 69733 76 1 0 194 0600 0794 76 1 46621 99342 145964 66 2 0413 0679 1292 66 2 16265 17129 33414 51 - 0144 0152 0296 51 . 67602 66851 136453 50 2 0596 0609 1206 50 2 -----60210 46703 126913 38 2 -0710 ---- 0431 1141 36 2 357769 444361 632 170 53 12 3432 3933 7384 53 12

126613 293235 421648 70 6 1136 2595 3733 70 0 26410 4161 30591 14 - 0234 0037 0271 14 . 4534 3673 8207 45 - 0040 0033 0073 45 . ------90264 101985 192269 53 3 0799 0903 1701 53 I 249841 403073 652914 62 10 2211 3567 5776 62 10

113706 - 113706 - 2 1006 - 1006 . 2 9177 21972 31150 71 - 0061 0194 0276 71 14646 6276 20926 30 - 0130 0056 0185 30 48062 12556 60617 21 10425 0111 0636 21 1 16010 2093 20103 10 - 0159 0019 0178 10 ------40652 10672 51 525 21 1 0362 0094 0456 21 t ------244456 53570 296026 16 4 2163 0474 2637 16 4 4234094 2630461 6864575 36 100 37470 23279 60746 36 IW 261 365 166442 449607 37 7 2490 1491 3961 37 T ------652223 220748 672971 25 13 4947 1481 6426 23 11 5167662 3019671 6167353 37 119 44907 26250 71157 37 117

4. The breakdown of the project total costs by disbursement categories of expenditure is shown in Table 2 below: Table 2 Democratic Socialist Republic of Sri Lanka Dam Safety and Water Resources Planning Project Expenditure Accounts Project Cost Summary

(SL Rupees Million) (US$ Million) % %Total % %Total Forelgn Base Foreign Base Local Foreign Total Exchange Costs Local Foreign Total Exchange Costs I. Investment Costs A. Civil Works 2,771.799 828.297 3,600.096 23 52 24.529 7.330 31.859 23 52 B. Goods and Equipment 274.343 586.286 860.629 68 13 2.428 5.188 7.616 68 13 C. Vehicles 102.537 43.944 146.481 30 2 0.907 0.389 1.296 30 2 D. Consulting Services 834.070 897.105 1,731.174 52 25 7.381 7.939 15.320 52 25 E. Training in Sri Lanka 40.605 7.737 48.342 16 1 0.359 0.068 0.428 16 1 F. Training Abroad 79.851 234.517 314.368 75 5 0.707 2.075 2.782 75 5 G. lncremintal Operation costs 130.890 32.594 163.484 20 2 1.158 0.288 1.447 20 2 Total Investment Costs 4.234.094 2.630.481 6.864.575 38 100 37.470 23.279 60.748 38 100 11. Recurrent Costs Total BASELINE COSTS 4.234.094 2,630.481 6,864.575 38 100 37.470 23.279 60.748 38 1W Physical Contingencies 281.365 168.442 449.807 37 7 2.490 1.491 3.981 37 7 Price Contingencies 652.223 220.748 872.971 25 13 4.947 1.481 6.426 23 11 Total PROJECT COSTS 5,167.682 3.019.671 8,187.353 37 119 44.907 26.250 71.157 37 117

4. The direct and indirect foreign exchange costs are estimated at some US$26.3 million, or about 37% of the project total costs. Foreign costs would mostly consist of international consultancy services, the procurement ofspecialized equipment (dam safety instrumentation, dam control gates, digital water level recorders, telemetric equipment for real- time hydrological and meteorological data monitoring as well as real-time data transmission, commercial software, oversea training and study tours, and vehicles.

60 Annex 6. Project Oversight, Implementation and Coordinating Arrangements

SRI LANKA: Dam Safety and Water Resources Planning Project

1. Overall Project Execution and Management Arrangement: The project would be implemented over a period of four from about April 2008 to June 30, 2012. The project implementation, coordination and oversight setup is presented in Figure at the end ofthis Annex and are elaborated in the Project Implementation Plan (PIP). The overall responsibility for project oversight and implementation would rest with the MADAS. The MADAS would be accountable to the Treasury for utilization of credit funds and compliance with the provisions of the Financing Agreement (FA). The project would be managed through a Project Management Unit (PMU) established at the MADAS. The PMU, on behalf of the MADAS, would be responsible for overall project management. It would be guided and overseen by an inter- ministerial National Project Oversight Committee (NPOC) at national level and by a Project Steering Committee (PSC) at the project level.

2. Project Implementation Responsibility: The MASL and the ID would take the lead responsibility for the design and implementation ofthe agency specific activities of all the three project components and delivery of the expected outputs. The CEB, WRB and NWSDB would involve as implementing partners to a limited extent as the activities as well as the percentage cost of the project investments targeted for each of these three agencies are much lower than those targeted for the MASL and the ID. The implementation would be carried out through the relevant technical divisionshnits ofthe MASL, the ID and the WRB. The PMU would directly oversee and manage all project related activities carried out by the Implementing Agencies (IAs). The heads ofthose implementing divisions/units ofthe MASL, the ID the WRB as well as ofthe CEB and the NWSDB would report directly to the Project Director for all project related matters. The Directors-General ofthe MASL and the ID would assign the existing staff and redeploy the stafffskills to the concerned units to carry out the project activities. Specialized skills and staff that are not currently available within the agencies would be hired as local consultants and international implementation support consultants (ISCs) by the PMU and would be deployed to the units/divisions as necessary.

3. Functions of the Project Management Unit (PMU): The PMU would be headed by a full time Project Director (PD) and would house a multi-disciplinary team of international and local specialists and support staff to assist the PD in the project management. The PMUwould be responsible for: overall project planning, management and coordination; M&E; providing timely and quality resources and technical assistance to support the project implementing agencies; overall procurement administration and contract management; financial management; budget planning and control; planning and management of training; assurance of technical standards and quality ofproject inputs/outputs; environmental and social safeguard compliance; corruption risk mapping and mitigation; grievance and complaints handling; financial, technical, social and environmental auditing of the project proceedings; and liaison with the MOFP, participating agencies, World Bank and other governmental and non-governmental interested groups for all project related matters.

4. The PD would be responsible for the implementation of the project and delivery of project outcomes as indicated in the Results Framework (Annex 3) in accordance with the agreed PIP, FM Manual, Procurement Administration Manual, EAMF, Social Safeguard Process Map,

61 and the provisions of the FA. Guiding principles for various implementation aspects are elaborated in the PIP and summarized in Annexes 3 through 10 ofthis PAD. In addition, the PD would carry out the functions and responsibilities as defined in the Government’s Management Services Circular No: 33 of April 05, 2007. The PD would obtain necessary policy and advice and guidance from the NPOC and operational guidance from the PSC. The PD would be the Secretary to the NPOC and the PSC.

5. The PMU Staffing: The full time PMU core team would include: Procurement Specialist, Project Accountant, Environmental Specialist, Community Development Specialist, Technical Specialist, Communication Specialist and M&E Specialist. In addition, the PMU would hire international firms to serve as Implementation Support Consultants (ISCs) to provide technical guidance and oversight of the activities that would be carried out by the respective units/divisions of the MASL, the ID in the planning, design and implementation of the three project components. In addition, the PMU would be assisted by a Dam Safety Review Panel (DSRP) for the activities ofComponent 1 on dam safety.

6. Implementation of Component 1 (Dam Safety): Deputy Director (Dam Safety) ofthe ID and Director Head Works, Administration, Operation and Maintenance (HAO&M) of the MASL would implement the Subcomponents 1,2, 3 and 4 for the project dams that are under the custodianship of the ID (16 dams) and the MASL (1 1). The ID would use the existing technical capacity of the Regional Directors of the Irrigation (RDIs) and their field offices for the field supervision ofthe Contractor’s works. Similarly, the MASL, the CEB (4 dams) and the NWSDB (1 dam) would use the existing technical capacity of the field based offices and their staff for the field supervision ofcontractor’s work. However, the subcomponent 5 on “Establishment oflong- term sustainable institutional arrangements for OMdams” as well as planning and implementation of training of staff for the dam safety would be directly implemented and facilitated by the PMU in partnership with all the dam stakeholder agencies and the MOFP. The PMU would ensure that the ISCs work closely with the dam custodian agencies and the DMC in carrying out necessary analytical work and studies leading to the establishment of long term and sustainable institutional arrangements for dam inspection and O&M. The PMU would provide assistance from DSRP to guide the MASL, the ID and the CEB for related activities.

7. Implementation of Livelihood Support Assistance (LSA) Plans: It is expected that in about 9-10 dams, reservoir water levels would have to be drawn down and irrigation supplies would have to be interrupted or curtailed temporarily to allow the dam safety repair works. The PMU, thorough the MASL and ID, would implement a special Livelihood Support Assistance (LSA) plan for the people depending on such dams for their livelihoods, to provide livelihood assistance during the temporary interruption. A Process Map depicting the step by step procedure for planning, implementing, monitoring and screening in planning and mitigating negative potential social impacts of temporary livelihood disturbance has been prepared by the PMU. Guiding planning and implementation principles for the LSA are summarized in Annex 10.

8. Role of Farmer Project Management Committees (PMCs): Legally established and functional Farmer Organizations (FOs) and farmer-agency Project Management Committees (PMCs) exist in all the dams, where it would be necessary to implement the LSA subcomponent. In addition, the MASL and the ID have full time field based Resident Project Managers (RPMs) and Project Managers (PM) respectively to facilitate irrigation management for agnculture production at all major dams. The MASL would use the services of the Resident Project Managers (RPM) and the ID would use the services of the Project Managers (PM) with assistance from NGOs to carry out IEC campaigns, social base line surveys and the execution of LSA as explained in the Process Map. In addition, dam-site specific construction committees would be

62 established to monitor the repair work programs. For each dam site, the committee would include the RPM, site engineers/technical officers of the MASL and ID, representatives of the PMC and representative ofthe contractor.

9. Implementation of Component 2 (HMIS): The Subcomponents 1, 2 and 3 of Component 2 would be implemented as a turn key contract for the supply and installation of the network, establishment of a data base in the ID (within the Hydrology unit of the ID), and training of staff. The PMU would hire an international contractor for this turn key contract. The turnkey contractor would work under the supervision of the Director (Specialized Services) ofthe ID assisted by ISC. The JICA is financing two projects in Sri Lanka to develop a central data base in the DMC with real time data to develop the capacity of the DMC on flood control and early warning system, establish disaster communication and monitoring network by developing 38 meteorological stations covering the whole country, and develop an early flood warning system in four river basins. Assurance was obtained during appraisal that the PMU and TWG for component 2 would continue their close collaboration with the JICA funded activities to ensure network and system compatibility. The Subcomponent 4 on the “Establishment of Groundwater Monitoring System” would require an initial survey and design which would be carried out by an ISC hired by the PMU. The WRB would work closely with the ISC in the design and would be responsible for the subsequent establishment ofthe network.

10. Implementation of Component 3 (Water Resources planning): This component would be implemented by the ID and the MASL. A single international consultant team would be recruited to provide technical assistance to each of these units including staff training and capacity building, assist the units to produce the thee outputs. The staffing of each ofthese units would consist of redeployment of existing staff, staff released from other water sector agencies, and local consultants provided by the project. The project would also support the recruitment of interns and junior consultants to be assigned to each of the units from among leading graduate students (current graduate students and recent graduates) in disciplines related to water resources planning and development, especially in the areas of information technology and modeling, economics, environment, hydrogeology and water resources engineering.

11. Subcomponent 3.1: The ID would be responsible for this subcomponent. It would be implemented by Water Resources Information and Analysis Center that would be established under the Director (Planning and Design) and the Deputy Director (Water Planning and Project Preparation). The Center would be staffed by redeploying one Chief Irrigation Engineer (Head of the Center) and three hgation Engineers; four local consultants (GIS/remote sensing, agricultural economics, environment and consultation); and the secondment of specialists in hydrogeology (WRB) and hydropower (CEB). The Center would be responsible for developing a national water resources lmowledge base, continuing maintenance, improvement and dissemination of the knowledge base, development and application of modeling tools, and preparation of the National Water Use Plan including the DSS to support plan preparation.

12. Subcomponent 3.3: The ID would be responsible for this subcomponent. It would be implemented by Mundeni Aru Basin Planning Cell established under the Director (Planning and Design) and the Deputy Director (Water Planning and Project Preparation). The Cell would be staffed by redeploying one Chief hgation Engineer (Head of the Cell), two Irrigation Engineers, and three local consultants (hydrologist/flood management specialist, and two consultation specialists (Sinhalese and Tamil speakmg)). The Cell would be responsible for preparation of a Strategic Environmental Assessment for the Mundeni Aru basin, developing a DSS for the Mundeni basin, and preparation of the Mundeni Aru Basin Development Plan including priority

63 investment recommendations. The Cell would collaborate closely with the Center in developing the Mundeni basin knowledge base and modeling tools.

13. Subcomponent 3.2: The MASL would be responsible for this subcomponent. It would be implemented by Mahaweli Water Resources Planning Center established under the Executive Director (Technical Services) and the Director (Project Planning). The Center would be headed by an Assistant Director selected through an open recruitment within MASL. The MASL Center would be staffed by transferring two engineers, two environmental specialists and one economist from the River Basin Management Unit, redeploying two engineers in the Directorate of Project Planning, one local consultant (consultation specialist), and secondment of specialists in Agriculture (MASL Agriculture Division) and NWSDB. The MASL Center would be responsible for preparation of an SEA for the Mahaweli and adjacent connected basins, developing a DSS for the Mahaweli and adjacent basins in close collaboration with the MASL Water Management Secretariat (WMS) and the ID’SWater Resources Information and Analysis Center, and preparation of the Updated Mahaweli Basin plan including recommendation for the preparation ofpriority investment projects.

14. Implementation of Component 4 (Project Management): This Component covers establishment of PMU; provision of office & IT equipment; provision of vehicles; selection of ISCs, M&E and Quality Assurance Consultants, formation of Dam Safety Review Panel; environmental & social management; and incremental operating costs. Quarterly progress reports would be prepared for each IA collated by the PMU and submitted to the Bank and MOFP for review and comment. Each report would contain a brief description of main events during the reporting period and would cover progress on physical and financial aspects based on approved programs and targets

15. National Project Oversight Committee (NPOC): An Inter-ministerial National Project Oversight Committee (NPOC) would provide overall policy oversight and guidance and resolve inter agency conflicts and issues, The NPOC would be chaired by the Secretary to the Treasury (also Secretary of the MOFP) and would consist of the secretaries of participating ministries, heads of participating agencies, Director-Generals ofthe External Resources Department (ERD), National Planning Department, National Budget Department, and the PD. The participating ministries would be Ministries of: Finance and Planning (MOFP); Agriculture Development and Agrarian Services (MADAS); Irrigation and Water Management (MIWM); Power & Energy (MPE); Water Supply & Drainage (MWSD); and Disaster Management & Human Rights (MDMHR)). The Secretary, MOFP may appoint any professional(s) as member(s) of the NOPC as deemed necessary for its mandate. The PD would be the Secretary to the NPOC. The Committee would meet every four months and review project implementation progress, approve bi-annual work plans, project budgets, resolve inter-ministerial conflicts and issues, if any, and provide policy and strategic guidance to the PMU and the implementing agencies. Particularly, the NPOC would provide policy guidance to the PMU for the implementation of Component 3, establishment of sustainable institutional and O&M arrangements for dam safety and HMIS system O&M , and the efficient use of the HMIS system. The TOR for the NPOC has been agreed with the Government.

16. Project Steering Committee (PSC): day to day project steering, coordination and collaboration would be ensured through a Project Steering Committee (PSC). This committee would be co-chaired by the Secretaries ofMADAS and MWIM. The PSC would be represented by the PD, DGs of MASL and ID, representatives of the ERD, NPD and National Budget Department, and heads of relevant units of the MASL, ID, CEB, NWSDB, WRB, DOM, and DMC responsible for the implementation and supervision of the project activities. The Co-

64 chairpersons may appoint any professional(s) as member(s) of the PSC as deemed necessary for its mandate. The PD would be the Secretary to the NPOC. The PD would be the Secretary to the PSC. The PSC would meet once in two months and be responsible for reviewing monthly progress, coordinating project activities among the partnering agencies, clearing project implementation plans and annual and quarterly project budgets, resolving issues during project implementation, and making recommendations to the NPOC on issues that need the attention of and guidance from the NPOC. In addition, the PD would have hisher own arrangements to plan, coordinate and monitor project activities. The TOR for the PSC has been agreed with the Government.

17. Arrangements for Mitigating Fraud and Corruption Risks during implementation: The PMU has prepared a project specific fraud and corruption risk mapping and mitigation action plan. This is shown as Attachment to this Annex. This should be read in conjunction with Annex 7 on Financial Management Arrangement and Annex 8 on Procurement Arrangements as well as with the FM Manual and Procurement Administration Manual available in Project Files.

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V Attachment to Annex 6: Corruption Risk Mapping and Anti-Corruption Action Plan Sri Lanka: Dam Safety and Water Resources Planning Project

This Annex describes possible project-specific potential avenuedrisks of fraud and corruption and actions that would be taken during the project implementation to prevenumitigate the risks. The main risks of fraud corruption are associated with procurement and financial management of the project. The document also shows (as bullets) measures and actions) against each identified risk that would be taken by the project to mitigate those risks. Most of the actions proposed (shown as bullet points in this document have already been incorporated in to the project implementation design and in relevant sections of the Financial Management Manual and Procurement Administration Manual for the project, cleared by the Task Team.

Procurement related risks.

Procurement of Civil Works and Goods: 1. Surveys, investigations and designs may not be carried out diligently resulting in large quantity variations and additional works during the implementation. Excessive quantities in approved Bill of Quantities (BOQs) provided to contractors may later open up avenues for negotiations between contractors and supervising staff during the preparation ofpayment claims.

The investigations will be carried out by professional staff. Designs will be double checked by Chief Engineers of the Rids, Epics and if necessary of the PMU before approval. All designs will be approved by Implementation Support Consultants before bidding.

2. Bill ofQuantities (BOQs) ofthe works items may be inflated deliberately leaving opportunity for supervisory staff to negotiate with civil works contractors pay for excessive quantities ofwork.

0 PMU senior engineers will carry out spot checks of BOQs on random selection basis. In addition, arithmetic of the BOQ computations will be re-checked by Draftsmen (quantity surveyors) attached to RDI and EIC offices before the designs and cost estimates are approved and before bidding.

3. Pre-bid cost estimates for civil works contracts may be leaked out to interested bidders in exchange of cash benefits.

Pre-bid cost estimates will be publicly disclosed in the tender advertisement.

4. Tender Evaluation Committees (TECs) may consist of members not having strong personal integrity.

0 The Secretaries ofthe Ministry ofAgriculture Development and Agrarian Services (MADAS) and the Ministry of Irrigation and Water Management (MIWM) will appoint competent and appropriate staff as members of the TECs for the works executed by the MASL and the ID. The memberships of the TECs also will be changed from time to time as required at the discretion ofthe two Secretaries.

5. The post-qualification criteria for contractors in the bidding documents or technical specifications for goods may be prepared in a restrictive or biased manner to favor limited and known bidders and the disclosed criteria may not be adhered to during the evaluation to favor some bidders.

67 0 The Procurement Specialist of the PMU will review the post-qualification criteria of all bidding documents prepared by the MASL and the ID. The internationally hired Implementation Management Support Consultants (ISCs) will prepare technical specifications for major good items (except for vehicles). The TECs will pay special attention to ensure that evaluation ofbids adhere to the disclosed post-qualification criteria for bidders.

6. The TECs may not follow the disclosed criteria or deviate from it during the technical and final evaluation ofbids.

0 The TECs will be advised by the Bank procurement staff on the need to adhere to the evaluation criteria. Any bid evaluation report that does not comply with or deviate from the disclosed evaluation criteria will not be cleared by the Bank for contract award.

7. Large works contracts ( particularly remedial work repairs to the 32 dams and provision of safety facilities to the 80 dams) may be split into a number of small contract packages to award such split contracts taking undue advantage of the National Shopping facility available up to US$ 50,000 for each contract. This may reduce competition and selection of competent and experienced contractors.

0 The Procurement Administration Manual specifies restrictions for splitting large contracts to small packages unless there is reasonable justification on economic and efficiency reasons. The bid packaging has been reflected in the initial procurement plan cleared with the Bank and will be reflected in all subsequent revisions for each works item. Any deviation from the approved procurement plan requires prior approval ofthe Bank. The Bank and the PMU will closely monitor the splitting ofbid packages.

8. Irregular contract variation orders and additional work claims may be submitted for payments. Duplicate payments may be paid to contractors for certain sub-items ofworks.

The PMU will make it mandatory that civil works contractors must maintain adequate supplementary and transparent registers and records of daily work carried out by the contractors at dam work sites so that such records can be used by the project supervisory staff and ISCs to reconcile with the variation orders and additional works claims. These records will be authorized by the supervisory staff on day to day basis as well as by the ISCs and senior staff of the ID, MASL and PMU during their field visits. The PMU will ensure that properly maintained contract registers and works measurement books for all works contracts are maintained at regional offices of the ID and the MASL as per the standard practice ofthe ID and the MASL.

9. Restrictive bidding for National Shopping for works may favor known bidders.

0 Wherever possible, the PMU will advise the RDIs of the ID and Engineers in Charge (EICs) ofthe MASL to provide local publicity, encourage submission ofbids by prospective bidders within a shorted bidding period; i.e. say 14 days.

10. The Force Account facility up to US$ 5000 per each works item allowed in the project may be misused with fraudulent labor wage claims.

0 The PMU will approve each force account works requests on the basis of pre-determined criteria. The PMU requires case by case clearance from the bank to execute works on force

68 account. The PMU/Specially appointed sub-committees consisting of designated members of the farmers organizations at dam sites will carry out periodic reconciliation ofthe related wage labor payments with works outputs using standard work output norms per man-day inputs of labor for relevant works activities. Appropriate monthly work measurements books will be maintained as per the standard practice ofthe ID.

General Procurement Monitoring and Contract Management:

11. Collusion among the bidders as well as between the bidders and contractors and project staff may be a serious issue.

Works contracts: e The PMU will have (already on Board) a full time “Procurement Specialist” to oversee and manage the procurement ofworks for the project carried out by the ID and the MASL. e Standard business norms for each step ofthe procurement have been developed and adopted e The PMU will publish on its official website for all works contracts including: (a) all Invitations to Bid; (b) bidding documents and drawings; (c) clarification of bids; (d) bid opening minutes; and (e) information on contract award. e Manual filing and recording system will continue to run in parallel for contractors who wish to use it. e Bidding documents will be available for download on-line. - No charge for electronic documents. 0 Procurement Specialist of the PMU will certify that documents are available on-line prior to the issuance of the Invitation to Bid and ensure that the information and documents remain available up to bid opening. e No pre-qualification is carried out. e List ofbidders remains confidential until bid opening. e No pre-bid meetings will be carried out. The specifications shall be defined clearly in the bidding documents. Clarifications can be sought through written correspondence and replies will be sent to all bidders. Appropriate guidelines providing for this will be prepared. e Procurement Specialist of the PMU and members of the ISCs will be present to observe the bidding process and bids to be under his control during the “Bid Submission Period”. e One sealed copy ofthe bid submitted to the ID and MASL will be kept by the PMU. e The Procurement Specialist of the PMU will immediately check the bids for any signs of collusion and certify the minutes. e Bid Evaluation Report to be complete and submitted within 1 week.

12. Due to poor and/or lack of public disclosure, project procurement related information may be used as avenues for corruption.

e The PMU will disclose all non-confidential project information widely among public. This will include: Final Annual Procurement Plans and schedules and all updated will be published in the official project website within 1 month ofthe end ofthe fiscal year;

Bidding documents and requests for proposal issued in accordance with the procurement provisions ofthe loan agreement, shortlist of consultants upon request by any member ofthe public.

69 0 Allow any representative ofthe civil society to attend the public bid openings and other key procurement steps on request. Representatives of civil society will be included as witnesses/members ofthe Procurement/Selection committees.

In line with the Procurement Guidelines, within two weeks of contract award (Bank's no objection) publish in UNDB online, dgMarket, on MPW website, and send to those who submitted bids, contract award information identifying the bid and lot numbers and the following information (a) name ofeach bidder who submitted a bid (b) bid prices as read out at the bid opening, (c) name and evaluated prices ofeach bid that was evaluated; (d) name of bidders whose bids were rejected and the reason for their rejection; and (e) name of the winning bidders, and the price it offered, as well as the duration and summary scope of the contract awarded.

0 upon request by any person or company, the PMU will make available promptly, a list of all contracts awarded in the three months preceding the date of such request in respect of a project, including the name ofthe contractor / supplier / consultant, the contract amount, the number of bidders / proposes, the procurement method followed and the purpose of the contract.

0 The work contract information, including contract value, name of the contractor etc, will be publicly displayed at work sites with contact details for making any complaints to the executing agency, the PMU and the World Bank.

13. Lack of efficient complaint handling mechanism may encourage corruption in project transactions.

0 The PMU will establish and adopt a transparent complaint handling mechanism as indicated in the projects Procurement Administration Manual and Financial Management Manual. . Complaints handling mechanism with contact details and addressed will be disclosed in the project website. The salient corruption mitigation measures included in the Manuals are: (i) maintenance of a project complaint log and filing register to monitor status of follow up of each received complaints; and (ii)all complaints will be investigated by appropriate staffkommittees appointed by the PMU including internal Auditors, or third party audit to ensure independency and reliability and impartiality of the investigations; (iii)all complaints received, with respect to procurements carried out by the ID and the MASL, would be responded to by the ID and the MASL with copy to the Project Management Unit (PMU) within 7 days of receipt, with copy to the World Bank Task Team Leader. Similarly all complaints received on procurements carried out by the PMU would be responded to by the Project Director with copy to the Bank. The PD will table a list ofcomplains and actions taken on these complains at the Project Steering Committee (PSC) meetings. The Bank would review the actions at periodic review missions.

0 For the complaint mechanism to function, it is essential that information concerning the alternative conduits for complaint (telephone hotline', dedicated email ad+ and PO Box) is widely disseminated.

Strict procedures to ensure anonymity of informants will be enforced.

70 0 Tracking ofthe status ofinvestigations and measures taken will be reported in monthly reports to management and the Bank. Complaints deemed possible serious infringements may be further investigated by the Bank.

14. Weak contract management may open up avenues for corruption.

0 Robust MIS system will be established to generate information required for contract monitoring. Any delay in the major procurement steps may indicate a possible corruption attempt. 0 The ID, MASL and the PMU will establish procedures to maintain proper project and procurement filing including filing of advertisements, bidding documents, evaluation reports, contract award and final contract documents. These will be audited by the Bank during its post-audits. Standard business time norms for processing major steps of works, goods procurement and consultant hiring have been developed. The procurement plan will be prepared and updated using these norms and the MIS will use these norms to track bottleneckshndications of corruption.

15. Vehicle hiring procedures and claiming of mileage based traveVfue1 charges may open up avenues for fraudulent practices.

0 Transparent procurement process for hiring vehicles will be adopted. 0 Assigning ceilings ofmileage for each vehicle based on the planned usage will be specified by the PMU. 0 Adequate information and approvals on actual vehicle usage for processing payments will be adopted.

Livelihood Support Assistance

16. The implementation of the Livelihood support payments to people whose livelihood would be temporarily affected in about 10 dams may lead to corrupt practices if the Beneficiaries are not selected properly and in transparent manner and payments are not administered diligently.

A socio-economic survey supported by an information, education and consultation will be carried out campaign prior to the start up ofthe remedial repair works to identify and establish the affected people. This will be dons following transparent procedureshiteria. Independent NGO will carry out h this survey with the assistance from the representatives of established farmer organizations to ensure accuracy and transparency. Adequate supporting documents will be maintained to establish eligibility ofthe beneficiaries. Public disclosure of selected beneficiaries. Clear mechanism will be established to handle complaints including bottom up communication channels direct to the PMU and systems to track the progress on complaints processing etc. Simplified payment procedures i.e. direct transfer of funds from PMU to individual beneficiary bank accounts. Payments to be carried out with adequate authority, internal checks and duties segregated. Obtain confirmation from banks on the transfer of funds to beneficiary bank accounts.

71 Financial Management Related Risks

17. Livelihood support payments: Risks are: (i)payments to non-registered andor non-existing beneficiaries, (ii)inaccurate payment amounts, and (iii)rent seeking in the payment process.

. Clear and transparent payment procedures to beneficiaries will be developed. . Payments will be carried out as per the procedures with adequate authority, internal checks and duties segregated. Internal checks include checking each payment with the information maintained in consolidated data base ofeligible beneficiaries (by the PMU accountant). . Adequate payment supporting documents will be maintained to establish eligibility of the beneficiary. Confirmation from banks on the transfer of funds to beneficiary bank accounts will be obtained. . A robust review of processes and documents by independent parties will be carried out to ensure compliance with procedures. - Random checks by the internal auditors on the timeliness and accuracy ofpayments to beneficiaries. . Public disclosure of payment history to selected beneficiaries (at the appropriate level e.g. at the divisional level). . Clear mechanism to handle beneficiary payment complaints will be established: bottom up communication channels direct to the PMU; systems to track the progress on complaints processing etc. . Simplified payment procedures i.e. direct transfer of funds from PMU to beneficiary bank accounts.

18. Payments to contractors for civil works: Risks are: (I)when the quality of works is poor, the contractors may negotiate with supervisory staff to authorize payments for such works; (ii)payments made without adequate/proper authorizatiordrecommendation; (iii)undue and deliberate payment delays (may be an indication of rent seeking from suppliers); and (iv) inaccurate payment amounts, double payments etc.

. The completion ofworks in sufficient quality as verified by the standard quality tests will be a requirement for the payments. The Implementation Support Consultant will pay special attention to quality assurance of the works. These payment recommendatiordapproval procedures will be clearly laid out in the FM Manual. FM Manual to be widely circulated to all parties (including RDI offices) who are responsible for carrying out payments. FM manual will be translated to SinhalaEnglish if required and a luck off workshop will be organized to orient all accountants on the manual. . Proper documentation to be kept of the payment recommendations/approvals and a contract register to be maintained ofall payments, recovery ofadvances and retention money. . Independent verification will be carried out (by internal auditors and PMU FM specialist on the payments made by RDIs) to ensure accurate payments as per agreed procedures. . Set up and implement business standards/response times (specified in the FM manual) and test compliance. Response times will be tacked in the MIS. . The communities of relevant dam sites will be provided awareness on the basic quality requirements and they will be involved in the construction supervision through the proposed construction management committees at the 32 dam sites where remedial repairs will be carried out.

19. Payments for Goods: Risks are; (i)payments for inferior quality goods; and (ii)payments for goods that have not been supplied.

72 . Procedures/controls will be developed to ensure that the following are checked before processing payments on goods . Aclmowledgement from the relevant party that goods have been received. Adequate certification that goods have arrived in good condition and in line with the required specifications. . The FM manual will specify who can accept goods and who can certify the quality of goods (depending on the type ofgoods). . Invite feedback on the quality ofthe goods fiom the end users. = Inspection ofthe quality ofassets while in use e.g. by internal auditors.

20. Project Management Controls: Misuse ofworking capital advances by RDI offices.

Controls to be exercised by the PMU . Detailed upfiont working capital budgets will be prepared by the implementing agencies (RDI offices) and agreed with the PMU. . Periodic reporting against the agreed budgets and submission of all documentation to the PMU. . Review ofpayment documentation by the PMU and internal auditors. Independent cost comparability studies - Periodic review by PMU and internal auditors ofthe reasonableness ofexpenditures incurred by comparing across locations. Controls to be exercised by the implementing agencies 0 Enforcing strict cost controls such as setting more detailed controls in each cost category e.g. expenditure ceilings for individual mobile phones, telephone lines, pooled vehicles etc.

21. Misuse ofpetty cash imprests (by PMU and RDI offices)

. Daily cash reconciliations will be carried out and approved. . Proper payment support documentation will be maintained. . Robust imprest replenishment procedures will be adopted. . Safe keeping ofcash and receipt books with restricted access.

22. Fixed Assets purchased using project funds; Risks are: (i)missing assets; (ii)misuse of assets such as project vehicles for non-project purposes; (iii)idle assets due to breakdown, inadequate consumables provided by the project for optimum use of usage ofthe asset leading to personal use or theft.

. Procedures for assets transfers will be developed and adequate documentation of asset transfers (GRNs etc.) will be maintained. . Comprehensive fixed asset registers will be maintained at the PMU with details on the quantities, values, location of the asset, file locations of warranty details, serial numbers, supplier names, reference nos. for the purpose ofphysical labeling ofassets etc. . Physical labeling ofassets with donor name and reference numbers as per the registers (with a permanent marker). . Annual physical verification of all assets purchased using project funds, by an independent team. . PMU accountant to ensure there is adequate budget to maintain, repair and purchase consumables for fixed assets at the implementing agencies.

73 Annex 7. Financial Management and Disbursement Arrangements

SFU LANKA: Dam Safety and Water Resources Planning Project

Executive Summary 1. The primary responsibility for financial management would rest with the Ministry of Agricultural Development and Agrarian Services (MADAS). A Project Management Unit (PMU) mapped to the MADAS, has been set up to implement the proposed project. The PMU already manages a PPF and managed and closed a PHRD grant for project preparation. The existing finance unit ofthe PMU would be strengthened with additional staff to carry out the Financial Management of the project. The PMU headed by the Project Director (PD) on behalf of the Secretary, the MADAS would ensure that the financial management arrangements for their respective components are implemented to the satisfaction of the Ministry and IDA. The overall Financial Management arrangement of the project is satisfactory and actions agreed during the post-appraisal mission have been completed to bring the FM arrangements to a satisfactory status. A computerized accounting system would be used by the project. The project accounting procedures would be governed by Government regulations and the project FM manual. The project would be subjected to continuous internal audit by an internal audit unit created within the PMU directly reporting to the Secretary Ministry of Agricultural Development and Agrarian Services (MADAS). Year-end external audit would be carried out by the Auditor General’s Department.

2. One Designated Account would be set up and maintained in US dollars at the Central Bank of Sri Lanka. Replenishment of the Designated Account would be based on the interim Financial Statements (IFS) prepared and submitted by the PMU.

Strengths and Weaknesses: 3. There are three main strengths in the proposed FM arrangements: - A senior staff member with relevant and good experience in government financial regulations and procedures is already appointed as Project Accountant of the PMU. He has also been exposed to IDA procedures by handling the PPF and the PHRD grant; - Accounting officers in the offices ofthe Regional Directors ofImgation ofthe ID, who would be responsible for the planning and implementation of the dam safety remedial works of the ID, already manage a large government budget, follow government financial regulations and have experience in facing government external and internal audit; and - Government FM procedures and regulations would be followed by the project. These procedures are comprehensive and time tested.

4. Wealmesses are as follows;

Weaknesses Mitigating Measures Responsible Completion Date 1. Existing support finance The organization MADAS On-going. The department ofthe PMU structure for the PMU appointment of carrying out work under the has a full time Project support staff takes PPF and the PHRD grant is Accountant, Accountant, place by credit inadequate in numbers to and adequate effectiveness. This carry out the assigned FM experienced clerical staff will be supported by related work in the project. to manage the work load. a legal covenant in PD/PMU would ensure Financing that all positions will Agreement.

74 remain occupied by staff with required skills and Experience, right through out the life ofthe project. Approval from Management Services for these cadre positions has been obtained. 2. Systemic weaknesses of the Government Financial Management arrangements that apply to the project.

2.1 Weak Fixed Asset A well structured fixed PMU Included in FM management Systems asset management Manual. Ongoing strategy (including during the warranty management implementation and asset maintenance) phase would be followed by the project.

2.2 Weak Government Internal Audit unit ofthe PMU Supported by a Internal Audit PMUwill carry out dated covenant in internal audit ofthe Financing project. Agreement and thereafter On-going. I TOR included in the FM manual

2.3 Input-focused systems An integrated PMU Selection ofa that cannot establish direct computerized system software system and linkages between expenses would be developed. the basic fi-amework and physical progress. ofthe system have been finalized. Supported by a dated covenant in Financing I Agreement 3. Livelihood support A detailed system taking PMU. Included in FM assistance: Implementing into account Manual. agencies have no prior transparency, experience in handling accountability and payments ofthis nature and internal control aspects to no established systems of be designed. paying livelihood support assistance for economic disruptions are in place.

75 Country Issues.

5. The Country Financial Accountability Assessment (CFAA) for Sri Lanka published in June 2003, highlighted gaps and weaknesses in the institutional framework for the financial management of public resources. The assessment covered a wide range of processes including financial management and reporting practices at the three levels of government, public audit, and parliamentary control ofpublic funds.

6. One key weakness identified in the CFAA was that the Public Financial Management framework was not designed to encourage a performance-oriented culture. The framework lacked mechanisms to monitor outputs and outcomes of government expenditure. The budget process was input-focused and relied upon rigid economic classifications of expenditure. The Financial Regulations did not focus on controls that promote accountability for performance. The current government accounting system ‘CIGAS’ relies on the economic classification ofexpenditure used for budgeting but does not include lower levels of classification and does not facilitate direct linkages with output/physical progress and contract management data.

7. To instill a performance-based culture in the project, project management is encouraged to monitor financial progress against physical progress, to help ensure that the funds are spent for the intended purpose in an economic and efficient manner. Due to the weakness identified in the government accounting system ‘CIGAS’, the PMU would use a computerized accounting system with a chart of accounts designed to accommodate multiple categorization of data that would generate information required for project management and establish direct linkages between financial and physical progress.

8. The government internal audit departments attached to Ministries are in need of building capacity. The departments are under-staffed and lack the required resources to carry out comprehensive, structured internal audit programs with frequent reporting arrangements. The MADAS internal audit unit faces similar constraints. Hence the project internal audit would be carried out by an internal audit unit set up under the PMU. Its TOR has been agreed.

9. Overall, fixed asset management within the public sector is inadequate. Some of the key weaknesses are in the areas of warranty management, timely preventive maintenance of assets, inadequate funds for maintenance, timely disposal of fixed assets, physical labeling, and timely physical verification of assets. The project would have a structured fixed asset management program, and the PMU would ensure that the MADAS would have adequate operating budgets to maintain the capital assets purchased using project funds throughout their useful lives.

10. Public audit lacks financial and administrative independence. In many cases, audits focus on large numbers of immaterial transactions issues and lose on major internal control Weaknesses and materiality. At the country level efforts are being made to modernize the Auditor General’s office by strengthening four keys areas: Human Resources, Audit Methodology, IT, and Communications. Legal reforms are also under way with plans to introduce a new Audit Act.

12. At the project level, other tools to supervise the project such as internal audit reports, quality audits, project progress reports, and interim financial reports would be reviewed in conjunction with the external audit report to help manage FM risks and to strengthen FM execution ofthe project.

76 -Ri i Ratin Risk Mitigating Measures

INHERENT RISK Country Level Quality of FM Profession Whilst the public sector does have an accounting institute it does not offer a public sector accountancy qualification by conducting structured professional examinations and continuous professional development. The project should recruit staff that have extensive public sector related relevant work experience in accounting, and adequate experience worlung in a computerized environment and other required slulls. Standard of Financial reDorting Standard of Auditing Government internal audit capacity is inadequate to carry out continuous internal audit to international standards. An internal audit unit will be created within the PMU to carry out internal audit ofthe project. An internal audit TOR has been agreed with Government and included in the FM Manual.

CFAA points out weaknesses in Public Audit. The staff of the Auditor General’s office has been provided with training under the IDA- financed Economic Refoms Technical Assistance (ERTA) project and further funds under a proposed new project would be allocated to modernize the Auditor General’s DeDartment. Entity level (existing PCU) Independence of the entity’s mgt. Appropriateness of the organization structure Project Level

77 CONTROL RISK Budget Accounting Internal controls FM manual is comprehensive to capture the project specific internal controls especially in high risk areas such as livelihood support assistance for economic disruptions. In addition the Project together with IDA has developed a corruption risk mapping and mitigation action plans and would be operationalized during the implementation. Funds Flow Certification measures would be in place to verify that adequate physical progress is made before releasing payment. Quality control specialist attached to the PMU would carry out an independent verification ofthe larger value contracts. Financial reporting Internal and External auditing Overall FM Risk of the Project

Implementation arrangements

13. The PMU would oversee project implementation. The project would be implemented by multiple agencies including: several departments in the ID, the MASL, the Ceylon Electricity Board (CEB), and the Water Resources Board (WRB). These implementing units have adequate technical staff for smooth operations of project FM activities. The PMU would recruit a full-time ISC to independently review the quality ofcivil and electro-mechanical works carried out under Component 1 by the above implementing agencies. International Consultants would assist the PMU in the planning and implementation as well as in quality assurance ofthe outputs ofall the three components.

Project Staffing

14. At present the PMU is staffed with Project Accountant seconded to the project from MASL and an Assistant to manage the PPF and the PHRD grant. The Project Accountant has substantial experience in government financial regulations and procedures and he has also been exposed to IDA procedures by handing the FM activities of the PPF and the PHRD grant. He has undergone short- training on Bank procurement procedures in India during the preparation phase. The MADAS has assured that he would continue to work in the PMU. However the present staffing levels would be inadequate to carry out the FM activities of the project assigned to the PMU. The proposed organization structure has one Project Accountant, and three Accountants to oversee the three project components, and adequate clerical level staff engaged on a full-time basis. All staff has relevant experience in public sector accounting and be adequately slulled to work in a computerized

78 environment. Approvals for cadre positions have been obtained and the recruitment of support staff is underway and is a condition of disbursements.

15. The FM activities related to the remedial works of the dams under the ID will be handled by the existing accountants in the RDI offices. All RDI offices are adequately staffed to manage the government budget assigned to these offices and the project related work will be carried out by the existing staff. FM activities ofother implementing agencies will be limited to an imprest (small value) given to the officers in charge to meet daily expenditures.

Accounting Policies and Procedures

16. The project would follow the cash basis of accounting. The project would adopt the accounting policies laid out in the Financial and Administrative Regulations ofthe Government of Sri Lanka and project-specific procedures laid out in the Financial Management Manual. In addition, the project would be guided by the Circulars issued by the MOFP and the MADAS.

Accounting System

17. The Government’s manual accounting system would be used by the implementing units to record and report the financial transactions to be carried out by these units. However due to weaknesses in the government’s computerized system and the inherent weaknesses in manual systems, the project would implement a computerized system at the PMU and the RDI offices. The database would maintain all financial transaction of the project and generate project management and monitoring data. All reports to stakeholders would be generated via this system.

18. In addition to the computerized system, the PMU would maintain a manual accounting system since the audit examiners ofthe Auditor General’s office do not have adequate slulls or experience to carry out computer-based auditing. Also the manual system would be used to ensure uninterrupted financial reporting until the computerized system is implemented and tested. The manual system would be capable ofgenerating reports to meet the requirements ofall stakeholders.

Budgeting and Flow of Funds

19. One Designated Account would be set up and maintained in US dollars at the Central Bank of Sri Lanka. IDA funds would be advanced to the Designated Account. Treasury would provide budgetary allocations for the project under the overall budget of the MADAS although several ministries would be involved in implementing the project. The proposed project would receive budget allocations under counterpart funds, reimbursable foreign aid, and direct foreign aid. Internally, a detailed project budget would be prepared to clearly specify the funding available for each implementing unit and for each component. A bottom up approach will be practiced by the PMU to prepare the budgets where the implementing agencies will provide necessary information on agreed formats for the preparation of annual budgets. The Budget formats form part of the FM manual. Annual budgets would be ratified by the Project Steering Committee (PSC) and cleared with the Bank.

20. Reimbursable foreign aid enables the PMU to obtain a direct advance from the Treasury using the Government’s own funds and to incur eligible expenditures. Treasury would be reimbursed periodically from the proceeds in the Designated Account up to the IDA-funded amount. Withdrawal applications would be submitted by the PMU to the Central Bank on a monthly basis to request reimbursement ofGovernment for the IDA share of eligible expenditure incurred up to that date, from funds available in the Designated Account.

79 2 1. For large payments, PMU has the option ofrequesting a direct payment to the supplier by: (a) Central Bank using the proceeds in the Designated Account; (b) IDA against the Credit. The allocations under direct foreign aid would be utilized for this mode ofpayment.

22. Whilst the program would have a number ofimplementing agencies, payments to third parties would be largely made by the PMU and the Regional Directors of Irrigation. For day-to-day operations a fixed imprest (equivalent to one month requirement) would be given to each key implementing unit. However before the initial imprest is given, as a practice the PMU Accountant would ensure that an MOU is signed with the respective agency and that adequate accounting capacity and internal controls exist to execute, record, and report on financial transactions accurately. Also it was agreed between the IDA team and the PMU that all fund transfers would be between bank accounts and that no cash transfers would take place. At present all key implementing units have fully fledged accounting units that manage Government budgets, follow government procedures, and operate bank accounts. In addition, the existing finance staff of the implementing units has indicated their willingness to handle project financial activities in addition to their normal work load. The detailed project payment procedures that clearly state the responsibilities of each of the staff are laid down in the FM Manual. The Government requested and the Bank agreed to a retroactive financing amount not to exceed US$l,OOO,OOO equivalent for eligible expenses incurred after March 3 1,2008.

23. Interim Financial Statements (IFS) would be sent to IDA quarterly by the PMU for the replenishment of the respective Designated Bank accounts. Formats of the IFSs have been agreed with the PMU and included in the FM Manual. A separate project-specific local bank account would be opened by the PMU to more easily track the inflow and outflow of funds. Separate project specific bank accounts will be opened by the Regional Directors of hgation, who are responsible for the implementation ofworks under Component 1.

Financial Reporting

24. Quarterly Interim Financial Statements would be submitted by the PMU to IDA within 45 days from the end of each quarter. These would form part of the project progress reports. The implementing units would report to the PMU on a monthly basis on the imprest given and PMU would strictly monitor the reporting practices to ensure timely reporting by the implementing units. Formats for monthly reports have been developed and incorporated into the FM Manual.

25. The Secretary, MADAS would be responsible for the appropriate and diligent use of project finances. The PMU under the leadership ofthe PD would report regarding the use of project funds to the Secretary, MADAS as well as to Secretary, MIWM who would co-chair the PSC. Following the financial regulations of the Government, the Secretary, MADAS, would issue a written financial delegation of authority to the PMU but continue to supervise the project by reviewing the monthly expenditure statements that the PMU submits internal and external audit reports and via discussions.

Internal Controls

26. Internal Controls: The Project will follow the central government Financial Regulations (FRs). Whilst the Government FRs are input focused, they are quite comprehensive and address all aspects of procedures and controls necessary for authorizing, approving, executing, recording, and reporting expenditure. The project FM Manual would cover any additional internal control procedures required to bridge any gaps, address project specific issues and to promote outcome/output focused accountability.

80 27. Internal Audit: In addition to the regular financial statement audit, ongoing quarterly internal audits of the project would be conducted by the internal audit unit of the PMU headed by a qualified Auditor recruited from the market and assisted with experienced audit staff within Governments internal audit. The overall scope of internal audit services would assess whether funds: have been disbursed on a timely basis, reached the intended recipients, were used effectively and efficiently and for the intended purposes, and if the relevant procedures were followed. Internal audit would also cover the livelihood support assistance payments for economic disruption of activities. This approach would result in periodic: (i) identification of findings and recommendations for enhanced accountability and transparency; and (ii)corrective actions based upon recommendations made. Internal audit reports would be shared with IDA upon request. The project internal audit arrangements and the Terms of Reference ofinternal auditors would form part ofthe project FM manual.

External Audit

28. The external audit of the project would be carried out annually by the Auditor General of Sri Lanka (AG) or another audit company nominated by the AG. The AG is the supreme audit institution of Sri Lanka and has been accepted by IDA. If any other audit company is nominated by the AG it should be acceptable to IDA. An audit opinion would be submitted to IDA on the Annual Financial Statements of the project within 6 months from the end ofeach financial year.

29. The following audit reports would be monitored in Audit Reports Compliance System (ARCS).

I Financial Statements I

Disbursement and Financing Plan

30. The proposed IDA Credit (US$ 65.33 million) would finance about 91 percent of the project total cost (US$7 1.66 million) including some taxes and duties. The Total Cost ofUS$71.66 includes the cost required to complete the four project components (US$71.16 million) plus the Project Preparation facility Advance (US$0.50 million). The Credit would finance 100% of the direct and indirect foreign costs and 86 percent ofthe local costs (including some taxes). The Government would finance the remaining project costs (US$6.33 million), which would mostly consist of taxes, duties and staff salaries as recurrent costs. The Table below sets forth the suggested Category of items to be financed out ofthe proceeds of the Credit, the percentages of expenditures for items to be financed in such Category, and proposed allocation of the Amount of the Credit and corresponding Government financing amounts to such Category and unallocated amount of the Credit. The final Category allocations have been finalized during Credit negotiations.

31. The proposed project has a modest Financial Management risk rating. A Project Launch workshop would be conducted to advise FM staff fiom all of the implementing entities on the provisions of the FM Manual, records retention procedures, and reporting requirements. Consistent with the risk-based approach to supervision, a substantial portion of the supervision activities would consist of desk reviews of internal and external audit reports, quarterly financial reports, and fixed asset physical verification reports supplemented by dialogue with the project staff as needed, especially in the initial years. As and when required, other Financial Management supervision tools and resources such as SOE reviews, site visits, and joint missions with procurement would be used in an effort to periodically monitor the adequacy ofFinancial Management systems.

81 Next Steps

Agreed Actions By Whom Target Date I.Implementation of the PMU Director, Senior Dated Covenant and to be Computerized system Accountant and the RDI completed and operational by offices August 1,2008.

2. Establishment ofan Internal PMU Director Dated Covenant and to be Audit Unit within the PMU for completed by August 1,2008. the project.

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? nn * CbP F + ww Annex 8. Procurement Arrangements

SRI LANKA: Dam Safety and Water Resources Planning Project

A. General 1. Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004; and the provisions stipulated in the Financing Agreement. The Bank’s Standard Bidding Documents, Request for Proposals and Forms of Consultant Contract will be used. In case of conflictkontradiction between the Bank’s procurement procedures and any national rules and regulations, the Bank’s procurement procedures would take precedence. The general descriptions ofvarious items under different expenditure categories are described below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time fi-ames are agreed between the Borrower and the Bank project team and included in the initial Procurement Plan. The PMU has prepared a detailed, project-specific, Procurement Administration Manual (cleared with the Bank) that further elaborates the project procurement methods, procedures, arrangements, including arrangements for disclosure, complaint handling and procurement audits. Additionally, the PMU completed a detailed matrix for procurement (and financial management) related corruption mapping and mitigating actions that would be used as an anti-conuption guiding document during project implementation. These documents are found in Project Files.

2. Procurement of Works: Works procured under this project, would include the remediation works of thirty two (32) high-risk dams and basic safety facility for 80 dams managed by the ID, the MASL, the NWSDB and the CEB.

3. Remediation works and safety facilities would include, but not be restricted to, rehabilitation of downstream and upstream dam faces, dam crests, repairs to spillways and sluices, renovation of monitoring facilities etc, together with associated safety facilities and services primarily consisting of access roads. The civil works of a given dam site will be packaged together to the extent possible. The ancillary electro-mechanical works for the thirty two dams shall be divided into four/ five packages takmg into consideration the complexity, type ofwork and geographic locations ofthe sites. Procurement will be done using the Bank’s Standard Bidding Documents (SBDs) for all ICB and National SBDs agreed with (or satisfactory to) the Bank for all NCB and Shopping. A limited number of small works may be procured following Force Account and Community Based Procurement with clearance from World Bank. Procurement of such works shall be guided by the provisions applicable to them as laid down in the corresponding paragraphs of Procurement Guidelines as well as in the Procurement Administration Manual of the project. Very small value procurements may be done following Direct Contracting.

4. Procurement for works under the purview of the MASL and the ID for values up to US$1 (one) million or equivalent will be handled by the respective implementing agencies using their own contract management units. Procurement of all works under the purview of the CEB and the NWSDB and all works above US$ 1 (one) million shall be the responsibility ofthe PMU.

5. Procurement of Goods: A variety of hydro-meteorological and dam safety equipment are to be procured for 50 hydrometric stations, the telemetry stations, dams and for the water resources planning component. These will include; supply and installation of hardware and software related to hydro- meteorological system and data base, hydrological and hydraulic modeling, telecommunication equipment, groundwater monitoring station equipment, earthquake monitoring and early warning systems, generators etc. The Hydro Meteorological Information System (HMIS) modernization involves

84 supply and installation ofequipment including both hardware and software which will be procured on the basis of a major turn key contract and will be required to be compatible with the equipment supplied under JICA financing. Other goods and equipment to be procured include cranes, heavy machinery, boats and trucks etc.

6. Additionally, goods for operational work such as office equipment and supplies, photocopiers, computers, printers, UPS, communication equipment and computer software; office furniture; vehicles and motorcycles would also be procured. The procurement would be done using Bank’s SBDs for all ICB and National SBDs agreed with (or satisfactory to) the Bank for all NCB and Shopping. Very small value procurements (up to US$500 or equivalent) may be done following Direct Contracting.

7. All procurement of goods and equipment would be carried out by the Project Management Unit. Procurement of goods of value less than US$ 500 would be carried out by the respective implementing agencies.

8. Selection of Consultants: The Borrower has already completed the consultancy assignment during the project preparation phase that led to the preparation of the Project Feasibility Report and Project Implementation Plan for project appraisal. Other major consultancy services to be procured would include: Implementation Support Consultants for the three components viz. dam safety and operational efficiency, hydro-meteorological information system; and multi-sector water resource planning, training management consultants, M&E consultants and Dam Safety Review Panel of Experts depending on specific requirements. In addition, individual consultants would be hired to fill in staff gaps ofthe PMU and the implementing agencies as described in the incremental staffing plan cleared with the Bank. Procurement of consultancy services shall follow the World Bank guidelines for selection of consultants and standard documents ofthe Bank shall be used. The PMU would be responsible for hiring all Consultants.

9. Incremental Operating Costs: Incremental operating costs will include any reasonable costs incurred in the management and supervision of respective project components including costs of office utilities and supplies, communication, printing services, bank charges, advertising expenses, vehicle rental, operation and maintenance of vehicles, office equipment and facilities, travel, lodging and per- diem expenses, but excluding salaries and allowances of the Recipient’s civil servants or other regular government staff. The Incremental Operating Costs would be incurred solely to support the project implementation.

10. Notification of Business Opportunities: A General Procurement Notice (GPN) has been published in UNDB/dgMarket. Specific procurement notices for all ICB contracts and Expressions of Interest (EOIs) for contracts for consultancy services above US$ 200,000 would be published in UNDB/dgMarket and in a major national newspaper. Other contracts to be procured competitively would be advertised nationally.

11. Procurement Methods: The procurement‘ selection methods to be used are: (i)for Goods -- International Competitive Bidding (ICB); National Competitive Bidding (NCB); Shopping; and Direct Contracting (DC); (ii)for Works - - (ICB), NCB, Shopping, DC, Force Account and Community Based Procurement for works; and (iii)for Selection of Consultants - - Quality and Cost Based Selection (QCBS), Selection on Consultant Qualifications (CQS), Fixed Budget Selection (FBS), Least Cost Selection (LCS), Quality Based Selection (QBS) and Single Source Selection (SSS). Each contract shall be procured as agreed with the World Bank and included in the Procurement Plan.

B. Assessment of the Agency’s Capacity to Procure

85 12. DSWRPP would be mainly implemented by the MASL and the ID under the supervision ofa full time PMU staffed with a team of multi-disciplinary staff and is located within the MADAS. For Component 1, Director (Planning and Design) of the ID and Executive Director (Technical Services) of the MASL would be responsible for all dam safety remedial works. They would engage the relevant Regional Directors of Irrigation of the ID and the relevant Engineers-in-charge of the MASL for the planning and implementation. Bulk of the major works procurement responsibility lies with the PMU, ID, and the MASL. The procurement responsibility for major works of the CEB (4 dams) and of the NWSDB (1 dam) is not heavy. As indicated above, all works pertaining to the CEB and the NWSDB dams, all works above US$ 1 million, and all goods and consultant services would be procured by the PMU. Detailed arrangements and responsibilities of the implementing agencies are elaborated in the Procurement Administration Manual.

13. The PMU is staffed with an experienced Procurement Specialist and procurement support staff. The ID has a stand alone procurement unit with experienced staff overseen by a Deputy Director (Contract Administration). All the implementing agencies are staffed with experienced and competent officers with experience in public procurement and have the shlls and capacity to undertake the procurement of works envisaged under the project. These agencies would be provided with incremental procurement staff to expedite the procurement of works of the project. The requirement shall be identified prior to negotiations to avoid procurement delays at the outset.

14. An assessment of the capacity ofthe Implementing Agencies for undertaking procurement actions for the project was carried out by Bank’s Procurement Specialist for the project. This assessment also included the organizational structure for implementing the project and interaction between the project staff responsible for procurement and other agencies involved.

15. Most of the issues/ risks concerning the procurement of the project during the implementation have been identified to be ‘High’. The number ofdifferent agencies entrusted with procurement emerged as a primary concern due to difficulties that may be encountered in co-coordinating and monitoring procurement under each unit. Procurement Specialist of the PMU would play a central role in trouble shooting, coordinating and monitoring the procurements carried out by the implementing agencies and provide overall oversight on a day to day basis. He/she would be responsible to the PD for all procurements to be undertaken by the Project. As the procurement responsibility of the PMU is very heavy and is critical to speedy and timely implementation of the project, it would be indispensable to ensure adequate and satisfactory procurement capacity in the PMU throughout the project. .

16. Additionally, the key procurement staff of the PMU and the implementing agencies would be trained on procurement procedures pertaining to Bank Financed projects in general and specific to the project in particular. The present procurement specialist (and Project Accountant) of the PMU received short-term training on Bank procurement procedures in India during July 2007. A workshop would be conducted for Procurement Staff and other key staff of the PMU and all the implementing agencies to align them with the Bank’s procurement procedures as well as to introduce methods for identifying and mitigating risks, including corruption mapping and risk mitigation actions. The PMU would disseminate and conduct training on Procurement Administration Manual. In addition, the Bank would facilitate training sessions on Government’s procurement policy and procedures as applicable to Bank financed projects as a measure to avoid potential confusion between the government procurement procedures vis-a- vis Bank procurement procedures. Both short-term local and overseas training would be provided to select key staff in line with the actual requirements ofthe project. Several measures are being introduced as indicated in the Corruption Risk Mapping and Mitigation Action Plan for improving governance in procurement and to minimize procurement related corruption risks under the Project. Action would be taken to establish a system of handling complaints; and a procurement website as indicated in the Corruption Risk Mapping and Mitigation Action Plan. With these risk mitigation measures, procurement

86 risk rating is likely to be improved and would be reviewed and reassessed during the supervision missions for adjustments.

C. Procurement Plan

17. The Borrower has, at appraisal, developed an initial Procurement Plan for project implementation which provides the basis for the contracts to be procured and the procurement methods to be adopted. The Procurement Plan would be updated bi-annually or earlier if required, to reflect the actual project implementation needs and shall be reviewed and cleared by the Bank. The Procurement Plan and its updates would be available on the Project’s database and on the Bank’s external website. Initial procurement plan for 18 months and total procurement plan for the entire project period have been prepared and are annexed. Procurement of goods and works and selection ofconsultant services would be undertaken in accordance with plans approved by the World Bank.

D. Frequency of Procurement Supervision

18. The procurement risk rating for the project is considered ‘High’ and accordingly it is proposed to have regular supervision missions. In addition to the prior review of contracts by the Bank, at least 20% of the contracts that have not been prior reviewed would be post reviewed in terms of the Bank Guidelines.

E. Monetary Thresholds for Procurement Methods and Review

19. Review by IDA: Review thresholds and requirements for different methods ofprocurement ofworks and goods and selection ofConsultants by the Bank, based on the current procurement risk rating, and are listed in the following table. These thresholds and review requirements may be modified on the basis of reassessed risk ratings during implementation. However, any deviations from the initial or modified adjusted review thresholds and requirements would require prior clearance ofthe World Bank.

Description Procurement Method Threshold Review Requirements (US$) 1. Goods (a> I ICB I >250,000 I All Contracts I < 250y000 > 100,000 and first contract irrespective ofthe value (c) Shopping < 50,000 Post Review (d) I Direct Contracting I <500 1 Post Review 2. Works (a) I ICB I > 4,000,000 I All Contracts (b> NCB -< 4, 000,000 > 2,000,000 and first contract for each implementing unit irrespective ofvalue (c) Shopping < 50,000 Post Review (4 Direct Contracting < 500 Post Review (e> Force Account* < 5000 Post Review (0 Community Based < 20,000 First two contracts Procurement * irrespective ofvalue

87 QCBS > 100,000** Prior Review [selection method can be other than QCBS also, if agreed in the PP1 CQS, FBS, LCS, QBS -< 100,000 Prior review only if (as per applicable selection is non guidelines and as agreed competitive in the PP sss of firms 5 50,000 Prior Review. Single source selection of firms shall be limited to US$ 50.000. Individual consultants All Prior review - sss

- Competitive Selection > 50,000 Prior Review

50,000 Post Review, TOR prior Review.

* To be procured only after clearance from the World Bank for the specific works to be procured following these procedures. ** Shortlists of consultants for services estimated to cost less than US$ 300,000 per contract may be composed entirely ofnational consultants.

20. Post Review: Contracts below the prior review threshold for goods, works and consultancy services shall be subject to post review as per procedure set forth in paragraph 4 of Appendix 1 of the Bank’s Procurement and Consultancy Guidelines. The Borrower shall retain complete documentation for each contract and make it available to the Bank or its nominated findconsultant for carrying out the post review.

F. Implementing Agency Capacity Building Activities with Time Schedule 21. Following activities have been identified for Capacity Building

No. Expected Outcome I Estimated Estimated Start Comments Activity Description cost Duration Date us $ 1 Procurement staff fully appraised 2,000 03 days TBD Resident ofthe procedures and practices of Workshop by a both WB and Government to local trainer. maintain consistency in implementation 2 Well trained procurement staff in 18,000 03 weeks TBD Training in a SA all implementing agencies Regional institute for 06 persons 3 Refresher course for updated 36,000 01 week Years 021 In country knowledge 031 04 of training I or short impleme courses overseas ntation in South Asia Region 88 G. Special Considerations

22. NCB: Following provisions shall apply to procurement ofgoods, works and non-consultant services procured under the National Competitive Bidding (NCB) method.

Only the Sri Lanka specific model bidding documents as agreed with IDA (and as amended from time to time and agreed with IDA) will be used for NCB and shopping. Invitations to bid will be advertised in at least one widely circulated national daily newspaper. Bidding documents will be made available at least twenty one (21) days prior to the deadline for the submission ofthe bids. Bidding documents will be issued by mail or in person to all who are willing to pay the required fee. Qualification criteria will be stated in the bidding document (in both pre- and post- qualification cases), and if a registration process is required, a foreign firm declared as the lowest evaluated responsive bidder shall be given a reasonable time for registering, without let or hindrance. There will not be any restrictions on the means ofdelivery ofthe bids, which shall be either through post or hand delivered. Electronic submissions will not be permitted. Foreign bidders shall not be precluded from bidding and no preference ofany kind shall be given to national bidders (including state-owned enterprises or small-scale enterprises) in the bidding process. Nospecial preferences will be accorded to any enterprises or bodies. Bids will be opened in public in one location, immediately after the deadline for the submission ofbids, as stipulated in the bidding documents [the bidding documents will indicate the date, time and place ofbid opening]. Evaluation ofbids will be made in strict adherence to the criteria disclosed in the bidding document, in a format and within the specified period agreed with IDA and within the bid validity period specified in the bidding documents. Contracts will be awarded to the lowest evaluated responsive bidder. Bids will not be rejected merely on the basis ofa comparison with an official estimate without the prior concurrence ofIDA. Except with the prior concurrence of IDA, there will be no negotiation ofprice with bidders, not even with the lowest evaluated bidder. Re-invitation of bids will not be carried out without the prior concurrence of IDA. Except in cases offorce majeure and/or exceptional situations beyond the control ofthe implementing agency, extension ofbid validity will not be allowed without the prior concurrence ofIDA: (a) for the first request for extension if it is beyond eight weeks; and (b) for all subsequent requests for extension irrespective of the period. All bidders/ contractors shall provide bid/performance security as required in the bidding/ contract documents. A bidder's bid security will apply only to the specific bid, and a contractor's performance security will apply only to the specific contract under which it was furnished. Bids will not be invited on the basis ofpercentage premium or discount over the estimated cost, unless agreed with IDA. Two or three envelop systems in which bidders simultaneously submit technical and price bids that are opened at different times shall not be used.

Consultant Services: Following provisions shall apply to selection ofconsultants.

Procurement ofconsultants will generally follow the QCBS method.

89 The QBS method will be followed for highly specialized assignments. The SSS method will be allowed only if it presents a clear advantage over competition: (a) for tasks that represent a natural continuation ofprevious work carried out by the firm (see next paragraph), (b) in emergency cases, such as in response to disasters and for consulting services required during the period oftime immediately following the emergency, (c) for very small assignments, or (d) when only one firm is qualified or has experience of exceptional worth for the assignment. The CQS method may be followed for services estimated to cost less than US$ 100,000 equivalent per contract. 0 Section 5 ofthe Bank’s Guidelines will be followed for hiring individual consultants, including the contracting ofkey staff for the project monitoring cells. Each implementing agency will be required to document its process ofselecting individuals to ensure they are hired on the basis oftheir qualifications and competency for the assignment. The Bank will review the selection process for all key personnel appointed to staff the project monitoring cells.

90 Annex 9: Economic and Financial Analysis

SRI LANKA: Dam Safety and Water Resources Planning Project

1. Economic and financial analysis has been undertaken of the benefits generated from project investments in improving dam safety & operational efficiency, modernizing hydro-meteorological system, and developing institutional capacity, accounting for 84% of the project costs. The expected project benefits would flow from several sources which can be broadly grouped in to; avoided damage costs and avoided potential losses of income following the implementation ofproject. The benefits from the 32 high risk dams prioritized for project investment are quantified. The benefits foregone, due to the proposed project activities are netted out while quantifying the incremental benefits due to the project. Other benefits associated with dam safety related impacts, not quantifiable in monetary values is identified and to this extent, the methodology adopted understates the projected returns from the proposed dam safety and operational system improvements.

2. The analysis is based on data available for 32 dams from Jacobs Gibb study (2004) carried out under the Bank-financed MRRP and Project Feasibility Report (2007). Project Feasibility Report study indicates sub-optimal utilization of the storage capacity of these dams mainly due to weakened dam capacity and inadequate flow forecasting information resulting in improper sequencing of spillway gate operations leading to artificial floods. Water level is either kept below full supply level due to weakened dam capacity, which results in loss of crop production downstream as well as power generation losses or kept at full supply level due to the pressure from cultivators. The proposed project interventions, while improving the dam safety, optimize the use of storage capacity and enhance down stream flood control. If the dam operators can lower the reservoir level by a certain magnitude in advance in anticipation of a flood wave, a certain amount of flood volume can be absorbed in order to reduce the flood damage in the down stream valley.

3. During the Feasibility study for the project design, four sample dams, namely Inginimitiya, Tabbowa, Usgala Siyabalagamuwa and Lunugamvehera dams, for which 1: 10,000 maps are available, were selected to simulate flood inundation mapping and quantify the physical impacts of flood events with 1%, 2%, 4%, 10% and 20% AEP levels. Based on this, flood damage costs for different AEP levels are quantified. Secondary data from a sample of 650 paddy farmers covering four agro-ecological zones under different water regimes, compiled by the socio-economics and planning centre in the Department of Agriculture, Sri Lanka (2006), was used to quantify the potential losses of income from paddy in maha and yala seasons, which is predominantly grown in the project area. Detailed historical impact data available for the major failure ofKantale tank in 1986 was used to quantify the loss of property and cost ofrehabilitation and reconstruction activities.

Project Benefits

4. Avoided Damage Costs: The major sources of economic benefits of improved dam safety, operational efficiency and hydro-meteorological system are reduced probability of dam failure and reduced flood related damages. The benefit stream measures the cost of direct flood damage, which the project would avoid. This corresponds to the difference between damage costs under ‘with’ and ‘without’ project scenarios. The associated damage costs would vary with the intensity/duration of the flood, extension of flooded areas and return period. Under the future-without-the project scenario, flood damage costs would grow due to expanding economic activities and increased population density, increasing risk ofdam failure and flood related damages as compared with the present (base case) situation.

91 5. The estimated avoided damage costs would cover (i)residential sector, (ii)commercial and public buildings, (iii)public infrastructure (water roads, telecommunications, power & railways), (iii)agriculture (crops, livestock and fisheries), and (iv) emergency relief. For the 38-prioritized high risk dams, potential damages would come from 8,550 residential houses, 56 km length of railways, 947 km of national and rural roads, which are exposed to risks following the dam failure. Population at flood risk is assessed at 389640 out ofwhich potential loss of life could be 36,600 in case of failure of dams. Dam replacement cost is estimated at Rs 94 billion for 3 1 dams. The estimated probability ofdam failure comes down by 50 to 100% with improved dam safety and operational policies as projected in the Jacobs Gibb study (2004). The primary source of information for estimating the avoided damage costs is available historical data from recent past flood histories (Box. 1) and other relevant literature including Project Feasibility Report (2007) and statistical reports and socioeconomic survey results published by Central Bank of Sri Lanka, National Planning Department, and Department ofAgriculture, ofthe Government ofSri Lanka.

6. Based on theses sources, mean flood related damage costs are estimated at 2007 prices as follows:

Box.1 Kuntule tank breach: The Kantale tank bund breach in 1986 illustrates the far-reaching consequences of a recent massive dam disaster; lulling 127 people, affecting 10864 residents, destroying 1200 houses and substantially damaging agnculture, commercial and public infrastructure sector. The cost to the Government of rebuilding the breached section (Rs186 M) was about three times the cost of all the Government’s relief, rehabilitation, and re-housing expenditures for the affected downstream residents. Including the cost of rebuilding public properties and infiastructure like schools, roads, railway lines, hospitals, and government offices, the total expenditure spent is equivalent to Rs 3.5 billion in 2007 prices, which is about 50% ofthe DSWRP project costs (Report of the Findings of the Commission of Inquiry into the breach of the Kantale tank bund, Sessional Paper No. VII-1987, Government of Sri Lanka, Sep.1987).

I Rs 0.34 million for damaged residential house; Rs 0.08 million per house for the value of houst iold goods lost; Rs 145 mllion per km ofrailway line; Rs 26 million pir km ofnational roads; Rs 0.7 million per ha ofprawn farms; Rs 10,000 per head for cattlehuffalo; and Rs 4,350 per head for small ruminants. The immediate relief and rehabilitation costs following the dam failure was estimated at Rs 0.91 million per affected house. Cost of repairing and restoring the water supply and drainage systems, telecommunications and power supply to the affected areas was valued at Rs 0.3 million per affected house.

7. Avoided damage costs is estimated as follows: First, flood damage loss-probability curve is plotted for both ‘with project’ and base case scenarios. Then, by integrating the area under the curve, incremental benefits, which are equivalent to the annual average damage costs avoided due to the project investments, are quantified for three sample dams. Total number of dams to be taken up for remedial works is known with certainty at appraisal, but this number may change at the Mid Term Review ofthe project based on the actual achievements and associated costs incurred for remedial works at the time. Hence, the ratio of incremental project costs is used to up-scale the estimated annual average damage costs from three sample dam analysis to cover all the 32-high risk prioritized dams proposed for dam safety and operational efficiency improvements under the project.

8. Avoided Potential losses of income: The benefit stream captures the loss of current and future farm income due to floods but avoided following the project interventions through reduced flood damage risks. Specifically, the benefits are expected fiom irrigated paddy production and productivity saved in the maha season and irrigated paddy land area saved in yala season. For quantifying the saved farm income, crop budgets for paddy, which is the major crop cultivated in both the maha and yala seasons, were formulated for different water regimes namely rainfed and irrigated conditions.

92 9. A total of 111,300 ha of irrigated paddy in maha season are exposed to production and productivity losses in the event of dam failure. In addition to this, 55,650 ha of irrigated paddy in yala season would also be lost in the absence of alternative sources of irrigation. While damages due to floods at less than PMF levels would limit the agriculture damage costs both in extent and time, dam failure would result in the potential loss of farm income to occur for many years till the dam is reconstructed and productivity is restored in the affected land areas. Paddy is the dominant crop in the project areas, occupying more than 85% of the crop area in maha and yala seasons. Irrigated area accounts for about 70% in maha and 90% in yala seasons. Analysis of average paddy productivity data based on 650 farmers done by the Department of Apculture, Sri Lanka (2006) reveals that paddy productivity loss due to missing irrigation in maha season is 2.1 t/ha (difference between rainfed and irrigated paddy yield) and in yala season is 5.2 t/ha, in the absence of alternative irrigation sources.

10. The crop value to be taken as a crop loss during the flood year is the gross economic farm-gate value of paddy in maha season, which is estimated to be Rs 67,875 per ha during the flood year and during post-flood years is the opportunity value of irrigated paddy crop valued at Rs 16,740 per ha. The loss in the yala season would be the opportunity value of the paddy crop that could not be planted because of lack of irrigation. The net economic value of paddy crop in yala season is estimated at Rs 17,670 per ha. The cropping pattern is 100% paddy in maha and 50% in yala season. The total crop loss comes to Rs 76,710 per ha per year during the flood year and Rs 25,575 per ha during post-flood years depending on the intensity and duration of floods. Loss of other income earning opportunities due to flood induced displacements is also estimated based on the consumer finances and socioeconomic survey in Sri Lanka (2004), which has estimated that average family size in Sri Lanka is 4.3 out of which about 37% are income receivers earning about Rs 11,000 per month. Avoided potential losses of income are estimated based on the families displaced due to floods for different AEP levels and included in the benefit stream.

11. Avoided Potential losses of hydro power: Dam failure would result in the potential loss of income from power generation to occur for many years, till the dam and hydro power infrastructure is reconstructed and power generation is restored to its base level. The cost ofplanned and unplanned power supply interruptions, estimated as the average loss to the economy due to electricity not supplied, varies ffom Rs 60hhto Rs 72hhas against Rs 15Kwh being the production cost of the power. There are five dams among the 31-high risk dams, with a total installed hydro power generation capacity of 486 MW. If these dams fail, a total of 2.1 billion Kwh of hydro power generation per year would be lost, valued at Rs 30 to 150 billion. The high opportunity cost of power, estimated for Sri Lanka would further go up, since demand for power is growing at 10% per annum and diesel is used for generating 65% ofthe power. The benefit stream captures the loss of hydro power generation due to floods, avoided following the project interventions.

12. Other Benefits: Several other important project benefits include reduced risks to human life, avoidance of water borne diseases, saving of scarce resources diverted for clean-up and recovery activities, and reduced disruption in social and economic services with their impacts extending beyond the affected areas/communities. For instance, population at potential risk due to failure of 31 dams is estimated at 389,640 out of which potential loss of life is assessed at about 8% of the population at risk, which can be brought down to less than 2% with project interventions (Jacobs Gibb, 2004 and Project Feasibility Report, 2007). Some of these benefits, identified in physical terms, are not incorporated in the analysis since they cannot be quantified in monetary terms with the limited available data and to this extent, the estimated incremental benefits due to the project interventions are under estimated.

Project Costs

93 13. Project costs and benefits are estimated at 2007 prices over a period of 25 years with 12% as the opportunity cost of capital. Total project costs, including contingencies, is estimated at Rs. 8,187.4 million. However, for economic analysis, price contingencies and taxes, accounting for 25% of the total project costs, have been netted out. While estimating the rate of return, incremental investment and recurrent costs are included for the project implementation period while need-based O&M costs (0.3% of the capital costs) are included for the post-project years. All project costs are considered for the analysis. Appropriate conversion factors based on the parity prices for the internationally traded inputs (urea, TSP and MOP) and outputs (paddy) and a range of standard conversion factors (0.75 to 0.9) for other non- traded agricultural inputs is used.

Economic Analysis

14. Sample Dams: The simulated flood damages for varying AEP flood l8 -0- Flood Damage, Base Case levels for the base case and with project 15 h situation are estimated for four sample . ..m-. Flood Damage, WP dams; Inginimitiya, Tabbowa, Usgala Siyabalagamuwa and Lunugamvehera selected for detailed study (Table 1 and Table 2 below), which was then scaled - ...... , up for all the prioritized dams identified 0 for the project investments (Fig.1 and 0.00 0.05 0.10 0.15 0.20 2). These four sample dams account for Probability about 27% of the dam safety and operational efficiency related project Fig.1 Simulated flood damage costs, four sample dams investments. Avoided flood damage costs covered residential sector, commercial and public buildings, *0° h &Flood Damage, Base Case emergency relief and public infrastructure. Avoided potential income losses covered paddy farming, prawn farming, livestock and employment. Dam replacement cost was included for the extreme flood event resulting in dam break. 0.00 0.05 0.10 0.15 0.20 Probability 15. In the event of dam break, a total of 9,412 ha of paddy lands would be Fig.2 Simulated flood damage costs, all dams damaged, 500 ha of prawn farm area would be lost, 5,764 people living in 1,3 13 houses would be at risk, 122 km length ofnational and other roads, and 2 km ofrailway line would be damaged in case of four sample dams involving a total flood damage cost ofRs 16 billion. The flood damage costs for four sample dams varied from Rs 0.4 to Rs 5.2 billion for the base case for various return periods.

94

16. As compared to the base case scenario, improved dam safety and operational efficiency backed by a modernized hydro-meteorological system would help in avoiding flood damage costs and income losses which varied from Rs 278 million to Rs 1,486 million for different AEP flood events. Annual avoided flood damage costs as estimated from the area below the flood damage curve for base case scenario is Rs 503 million. With the proposed project interventions in Inginimitiya, Tabbowa, Usgala Siyabalagamuwa and Lunugamvehera dams, estimated to cost Rs 807 million, the annual avoided flood damage costs is expected to come down by 21% to Rs 398 million. The estimated annual flood damage cost, would further go up due to growth in population and economic activities and increasing probability of dam failure. To capture this, long term annual compound growth rate in real Gross Domestic Product (GDP) (4.5% during 1980-2005) has been used to project the future damage costs.

17. Economic analysis of the Table 3: Summar of Pro., t Econ nic An: ysis (R; million) proposed investments and expected Dams PVB PVC NPV ERR benefits for the four sample dams Sampledams indicated that the estimated ERR Inginimitiya 319 211 108 20.3% varied from 16.2% to 26.2% with a Tabbowa 303 154 149 26.2% NPv Of Rs 29 to 149 UsgalaSiyambalangamuwa 137 107 29 16.2% million (Table 3) for the project life Lunugmvehera 136 76 61 23.8% of 25 years. For the four sample All 4-sample dams 895 548 346 2 1.6% dams, combined ERR is estimated Overall Project 7,515 5,144 2,371 18.8% at 21.6%.

18. Overall Project Analysis: Avoided damage cost expected from 31 dams prioritized for dam safety and operational efficiency improvements is projected from the damage costs estimated for sample dams, based on the ratio of incremental project costs. Total flood damage costs from all dams varied from Rs 1.5 to 83 billion for different return periods for the base case, while the dam break would incur a total flood damage cost of Rs 187 billion. As compared to the base case scenario, improved dam safety and operational efficiency backed by a modernized hydro-meteorological system would help in avoiding flood damage costs and income losses which varied from Rs 1 billion to Rs 18.2 billion for different AEP flood events. Annual avoided flood damage costs as estimated from the area below the flood damage curve for base case scenario is Rs 3.9 billion. With the proposed project interventions, estimated to cost Rs 6.1 billion, the annual avoided flood damage costs is expected to come down by 21% to Rs 3.1 billion.

is performed to test the robustness of the Scenarios for the project ERR NPV-25 project investments. Sensitivity tests indicate yrS Base Level 18.8% 2,371 that the project is able to absorb substantial Costs at 120% of the base level 15.3% 1,342 negative impacts yet still generate robust Benefits at 80% ofthe base level 14.6% 868 ERRS. For example, the project can sustain Costs at 120% &benefits at 80% 11.6% (161) significant decreases in benefits andor ofbase level increases in costs. Various scenarios like Benefit lagged by one year 15.7% 1,443 benefits, or delayed realization of benefits by one year, do lower the ERR but still remains above 14.6%. In the unlikely event of 20% increase in costs and 20% decrease in benefits occurring together, the ERR 96 falls marginally below 12%. Delayed implementation, captured through delayed realization of benefits by one year has brought down the ERR from 18.8 to 15.7% and reduced the NPV over 25-year period by about 40%. Switching value analysis indicated that costs would have to go up by 46% or benefits would have to come down by 32% for the estimated ERR to come down to 12% (Table 4). estimate the effects of uncertainty on the projected NF’V (Rs outcomes of the proposed project investments and Million) ERR determine the confidence limit for realizing the Expected 1,160 15.1% expected economic returns. Sensitivity analysis Standard deviation 289 0.8% indicated varying sensitivity levels for the project’s Minimum 252 12.7% rate of return to cost escalation and fall in avoided Maximum 2,069 17.9% flood damage costs. Besides, database for the cv 0.249 0.053 analyses is compiled from multiple sources and no Probability of negative outcome 0.0% 0.0%

100%

20% -

0% 12.0% 13.0% 14.0% 15.0% 16.0% 17.0% 18.0%

Fig.3 Sri Lanka DSWRPP: Cumulative Distribution of ERR

15.1% can be considered reasonably stable. The simulation also suggests that the project’s ERR is not likely to fall below 12.7% as the probability of negative outcomes is predicted to be zero by the risk model (Table 5 and Fig.3).

97 Annex 10. Social and Environmental Safeguards Management

SRI LANKA: Dam Safety and Water Resources Planning Project

1. The Project’s primary thrust would be to ensure public safety against potential failure ofhigh risk dams and resultant flooding. In addition the project would assist the Government to plan its water resources for socio-economic development. Therefore, the project’s overall impacts would be positive. The implementation of the project would not have significant irreversible adverse environmental and social impacts as evident from the Environmental and Social Assessments conducted during project preparation by independent consultants. Therefore, the project has been classified as a Category B project for safeguard purposes. Overall, the project would have the potential to offer significant opportunities to further environmental and social development objectives.

Key Stakeholders and Consultations

2. Social Assessment: Key stakeholders would be (i)Users of reservoir water such as farmers and farmer organizations and federations, laborers earning wage from agricultural operations, fishers catching fish in the reservoir, and households using water for domestic purposes; (ii)Water managers or the service providers at the operational level - chiefly, officers of the ID, MASL, CEB, NWSDB, Agrarian Development Department; (iii)Administrators and regulators such as the offices ofDivisional Secretary, Government Agents,; (iv) Water resources decision makers, at the strategic level - MADAS, Ministries of Irrigation and Water Management, Agriculture, Power and Energy, Finance and Planning, Disaster Management Centre, DOM and Wildlife Conservation, who formulate draft policies and programs and allocate resources; and (v) policy makers, political functionaries, scientific and extension agencies who play a major role in promoting public safety and water resources development and planning. Systematic and extensive consultations with all the key stakeholders have been conducted as part of the social assessments and a framework for continuing consultations during implementation has also been proposed in the project.

Key Social Development Issues

3. Key social development issues relating to project implementation would be: (i)participation by the local communities; (ii)inclusion - particularly ofthe poor and vulnerable sections including landless laborers, women, women headed households; (iii)human and institutional development support involving the community based organizations as well as joint management committees (comprising both government and people representatives); (iv) Information, Education and Communication (IEC) campaigning to ensure informed decision making; and (v) transparency and accountability in transactions.

Environmental Safeguards

4. Environmental Assessment (OP 4.01) - The environmental impacts of the proposed dam rehabilitation work are not expected to be of a serious nature as the dams are already in existence. The adverse environmental impacts are expected to be largely off site impacts of borrow areas. The project prepared an Environmental Assessment and Management Framework (EAMF) in lieu ofproject specific Environmental Assessments (EA) as details of specific dam sites and required interventions were not available initially as the required studies were on-going. The EAMF would serve as a template to guide the level ofenvironmental analysis and the preparation of Environmental Management Plans (EMP) once the specific dams and the interventions are identified. The EAMF primarily includes an assessment of generic issues that are typically associated with dam rehabilitation & associated structures, measures for environmental risk mitigation and institutional arrangements for conducting environmental assessment, 98 EMP implementation and monitoring. Limited consultations have been carried out in the preparation of the EMF. It was publicly disclosed for review and comments but no comments were received. However, closer consultations with the key stakeholders, especially at the local level, would be conducted on environmental aspects concerned when site-specific environmental assessment (EA) and EMP preparation commences.

5. Being a Category B project, all physical activities financed under Component 1 of the project would be subjected to a subproject specific EA and the subsequent preparation of an EMP for each intervention. From a dam safety point ofview, two categories of dams are relevant for the application of environmental safeguards. The first category includes dams that require urgent physical rehabilitation and is mostly comprised of earth dams operated and maintained by the ID. The second category includes dams that would have a very high impact ifbreached but do not have any need for physical intervention at present. Remedial works proposed for the dams falling under the first category would include one or more of the following; (i)strengthening of the existing dams; (ii)repair or replacement of sluices; and (iii) repair and improvements to existing spillways; (iv) replacement of electro-mechanical equipment. Activity (i)would warrant an EA and an EMP as it would be associated with a number of potential environmental impacts, both on site and off site. The scope of the EA for such dams would vary, depending on the type of intervention planned, the site characteristics and characteristics of the borrow areas. However, for activities (ii)- (iv), an EMP focusing on best practices would most likely suffice. Interventions in category 2 dams would be primarily on intensive vigilance and monitoring with limited maintenance work. These dams would not require extensive environmental analysis and hence could be limited to the preparation ofan EMP for any physical maintenance work planned to be carried out.

6. The type of remedial work undertaken at category 1 dams may cause serious environmental issues off-site where resource extraction would take place. Some of the work involved in strengthening the dam slopes would require large amounts of sand, soil and rock to be extracted from one or more places and brought to the construction site. The borrow areas, if not properly identified and managed (subsequent to extraction) could have serious environmental repercussions. Selection ofsites for resource extraction should be made after careful evaluation of resource availability within the areas concerned and in conformity with the Government regulations for designation of such sites. The Soil Division ofthe ID, which carries out surveys on borrow areas, should be involved in such exercises. It has been agreed with Government that the project would not support the use of any borrow material taken from sites within protected areas.

7. Solid waste/debris disposal Dam reconstruction would result in removal of large quantities of topsoil, rip rap etc and in the generation of concrete debris and other construction wastes. In addition, wastes would be generated from worker camps. The project should explore options for re-using material such as soil and for the careful disposal of other waste material. Specific disposal sites would be identified in the respective EMPs.

8. Any air and water pollution at the sites would be temporary and localized, provided that adequate precautions are taken to manage such issues. If dam rehabilitation work requires the emptying of a reservoir, there might be impacts on its aquatic life depending on the extent of drying up. However, seasonal fluctuations in the water levels of tanks in the dry zone are a natural phenomenon to which aquatic life is adapted. Since there would be no instances where the reservoirs will be emptied below its dead storage capacity, aquatic flora and fauna should be well preserved. The project would not increase the storage capacity of the tankdreservoirs. Hence, environmental issues associated with additional inundation would not apply.

9. Investment in upgrading and/or rehabilitating selected dams under this project would not yield the anticipated long term benefits unless there is proper management of the watersheds in the catchment areas. Increased pressure on upland areas above the dam is a common phenomenon caused by the 99 resettlement of people from the inundated areas and by uncontrolled influx of people to the watershed. On site environmental deterioration as well as a decrease in water quality and an increase in sedimentation rates in the reservoir result from clearing forest land for agriculture, grazing pressures, use of agricultural chemicals and illegal timber felling for commercial purposes. It would therefore be of utmost importance that the dam owners work in coordination with the agencies responsible for management of the watersheds to identify such issues and arrest them with appropriate measures. Sustainability of the project interventions would be dependent on better management of the surrounding watersheds.

10. Impacts arising from construction of buildings under the different components of the project, if any, are expected to be minimal. If the construction work is to be located on sites where the implementing agency has existing buildings, it is not anticipated that any real environmental concerns may arise and could be dealt with environmental codes, building codes and best practices. The main impacts of building construction for such sites would be off-site impacts due to resource extraction for construction. Hence, resources should be extracted from authorized locations and sources that are licensed by relevant Government authorities. Obtaining all necessary Government approvals for construction of buildings are a pre-requisite for the civil works to be eligible for funding under the project. If buildings are to be constructed on new land, an environmental checklist would be applied with an EA conducted only if necessary.

11. Safety of Dams (OP/BP 4.37): The dams that would be financed by this project are those where the risk involved in case ofa malfunction or a structural breach is high and hence provisions made under the dam safety policy would be incorporated into the project design and implementation. The Government would use professionally qualified and experienced civil engineers of the IAs and hire such staff for designing ofdam upgrading and for supervision ofcivil works and adhere to certain stipulated dam safety measures for the design, bidding, construction, operation and maintenance of the dam and associated works.

12. For dams that would be supported under the project, the policy on safety of dams requires the establishment of an independent panel of experts on dam safety. The Government would appoint a Dam Safety Review Panel, whose primary purpose would be to review and advise the IA on dam safety and other critical aspects ofthe dam, its appurtenant structures, the catchment areas, the area surrounding the reservoir and downstream areas. The Panel would also review and evaluate the IA’s O&M procedures and recommend improvements, ifnecessary.

Social Safeguards - Impacts and Risks

13. Involuntary Resettlement (OP 4.12): No land acquisition is envisaged, nor would there be any displacement of people. However, in a few cases, it is likely that water flows into the reservoir and consequently, irrigation flows might have to be stopped for prolonged periods to conduct detailed technical investigations and rehabilitation works. This could impact livelihoods of some downstream users adversely.

14. Selection of Dams. Selection of dams for remedial works is based on an assessment of the nature and extent ofthe risk to public safety. Portfolio risk assessment for 38 dams has been carried out to prioritize dams according to their hazard and risk levels. This risk analysis considered the population at risk in the event ofdam failure as one ofthe risk profiling criteria. The risk profiles ofthe analyzed dams are ranked according to the safety deficiencies using the Risk Based Profile System developed by United States Bureau of Reclamation. Subsequently, 32 dams that pose the highest threat to public safety have been listed for remedial measures under component 1. These 32 have been classified into four broad categories depending on the nature and extent ofsocial impacts:

100 Category I(1 1 dams): The remediation measures are such that there would be no obstruction of water flows to the downstream users. Remedies could either be undertaken without obstructing water flows or alternatives could be worked out to ensure water flows.

Category I1 (13 dams): There is direct agnculture under its command but the remedial measures are such that suspension of water releases to its users for prolonged period is not required.

Category I11 (6): There is direct agriculture under its command and the nature of remedial measures does require suspension of water releases to its users for prolonged periods.

Category IV (2): Those dams which serve multiple commands and users and whose radius of influence extend beyond the immediate agriculture command area to a number of other distant hydraulically inter-connected agncultural command areas and villages/ towns.

Categories I11 and IV are significant from the perspective of adverse social impacts. 15. Interruption of water flows and impacts: The suspension of water could prevent farmers from growing paddy. Although the farmers would have to forego paddy cultivation, they could grow other field crops, such as maize, cowpea, green gram and ground nuts, using residual moisture and limited rainfall during the Yala season and under rain-fed condition in Maha (wet) season. However, rainfed farming of non-paddy crops would be an entirely a new practice to some farmers, because it requires different crop husbandry practices and probably higher wage labor inputs. Thus, despite this potential alternative cropping possibility, it is felt that that the livelihoods for the following users could be affected adversely: (i)farmers who draw water from the reservoir for cultivating paddy; (ii)landless laborers earning wages from agricultural operations in the command area; and (iii)fishers involved in fishing from the reservoir. In addition, in a few cases, water supplies for domestic purposes (dnnlung, bathing, washing, and cooking) could also be affected.

Social Safeguards Management 16. Voluntary Participation. Category I11 dams would cause temporary partial economic displacement of some water users. However, OP 4.12, Involuntary Resettlement, would not be triggered because the resettlement would not be attributable to the eminent domain or other forms of land acquisition backed by powers of the state. The operative principles would be Informed Consent and Power of Choice. In respect of the former, the project would ensure that local affected communities would be fully knowledgeable about the project and its implications and consequences and free agree to participate or not in the project2'. Efforts would be made to build full awareness ofthe potential social and economic disruptions ofthe contemplated dam safety remedial measures and to reach consensus with the water users on the implementation schedule and arrangements for the repair work. Local communities who are likely to be affected would be identified through a comprehensive baseline survey for each of such dams and informed decision-making would be accomplished through an intensive Information, Education and Consultation (IEC) campaign.

17. Public Consultation, Information, Education and Communication (IEC) Campaign. The project well recognizes that the stakeholders need to be prepared adequately and appropriately to enable informed decision making. For this, the project would deploy Livelihood Support Facilitators (LSF) and launch an extensive IEC campaign mainly in respect of Category (111) dams. This would comprise

*' Stakeholder discussions have distinctly revealed that local Communities express willingness to participate only when they perceive (apart from the public safety) a commercial benefit. The project did encounter a couple of cases (Category IV) wherein the local communities have refused to participate in the project as they could not perceive a direct commercial benefit for them. And, such cases were dropped from the project's purview though Risk Assessments do list them in the priority list. Further, project will not include such dams wherein it is not feasible to ascertain 'voluntariness'. 101 intensive consultations with Farmers Organizations, Women, Fishers, Laborers and other interest groups. These would include, in addition to livelihood impacts, discussions on dam safety designs, technical investigation and construction work schedules, quality control requirements, and arrangements for the monitoring ofthe construction program. A Memorandum of Understanding (MOU) would be signed by the project (represented by Resident Project Manager/ Project Manager) and the local communities (represented by Farmers Organizations and Fisher Associations). Once a voluntary decision has been made by the stakeholders to carry out the remedial works, a site level construction monitoring committee would be formed to ensure that the remedial measures are carried out in accordance with the agreed implementation plan and norms and the consequent livelihood disruption is minimal. This committee would be built on the existing farmer organization, federations and project management committees that exist for irrigation management ofthose dams.

18. However voluntary may be the decision making, the project would provide some coping assistance to the communities affected by water flow interruptions. Towards this, the project has designed a Livelihood Support Assistance (LSA) subcomponent. This would comprise three broad category ofplans: (i)Coping Assistance Plan, to help cultivator households cope with the likely crop loss; (ii))Alternative Crop Plan would assist cultivators to raise alternative crops without irrigation; (iii)Wage Assistance would provide wage employment for fishers and landless laborers; and (iv) Gender Action Plan would address the requirements ofwomen. 19. Coping Assistance Plan. During the Social Assessment enquiry, extensive discussions were held with the elected representatives of farmers’ organizations and federations at selected critical dams to gauge their perceptions and reactions to the potential public safety threat and dealing with the likely economic disruptions. In cases, where farmers perceive the dam safety threat, and feel that the project interventions are timely and essential, the implementation planning and execution would be easier. In such cases, farmers said that they would not mind foregoing one season of cultivation provided they are adequately consulted and informed of the nature of remedial works and the implementation schedule sufficiently in advance (at least 4 to 6 months) of the start of the works to enable them to prepare themselves.

20. Sri Lanka has two crop seasons - Maha, from October to February; and Yala, April to July and paddy is the major crop. Of these Maha is the major season, which coincides with the main rainy season and full area coverage. Full area coverage during Yala is not possible for want of water. Given this, farmers would be willing to forego cultivation during Yala, but not Maha. This means, the project has a window of opportunity- from March to September - for undertalung remedial measures. If remedial measures cannot be completed between March and September, it would be advisable to postpone completion till the next March to September. Otherwise a large number ofcultivator households would be affected adversely. Thus, scheduling holds the key for developing the coping strategy.

21. Wage Assistance. Unlike the farmers, landless laborers and fishers are totally un-organized and hence no information exists on them. Consequently, it is difficult to clearly identify the potentially affected people. There are not many households that do not own land and earn their livelihood exclusively from daily wage labor in farms. Wage laborers are not always locally based and often migrate to other villages or towns in search of livelihoods. It is estimated that, on average, 10 to 15% of the farmers are landless laborers. Each reservoir could have some 50 to 100 fishers depending exclusively on the reservoir for their livelihoods. To ensure that their livelihoods are not adversely affected, the project would place funds at the disposal ofthe RPM / PM who (with the Livelihood Support Facilitators) would prepare a Wage Assistance action plan to use landless labor and fishers for some asset generation/ maintenance work. Efforts would be made to encourage the remedial measures contractor to engage local people as laborers.

102 22. Gender Action Plan would be prepared as a part of the overall LSA activity which would: (i) recognize women as a distinctly separate group with a different set of requirements; (ii)seek their participation in decision making and (iii)feed their requirements into the LSA plan.

23. Domestic water supplies are unlikely to be affected because there are many open wells and no reservoir is expected to be completely emptied. If there is a necessity to ensure unintempted water supplies for drinlung, the project would enlist the help of the local administration and make available water at certain key locations.

24. Physical Cultural Resources (OP 4.11). Certain structures in ancient dams, such as sluices, could be of high archaeological significance. If they are replaced, old structures may need to be preserved as ‘cultural property’. This would trigger OP 4.11. The project would, where necessary, seek technical assistance from the Department of Archaeology (DOA) and undertake an Archaeological Impact Assessment. Subsequently, the DOA would make an implementation action plan, as deemed appropriate. Chance finds would also be subject to enquiry and technical assistance from the DOA.

25. Details ofthe role and responsibilities ofthe project as well as the DOA would be as outlined in Government’s notification on ‘The Antiquities Ordinance’ and as per Projects Procedure Regulations No 01 of 2000. Procedures for dealing with the cultural property would be incorporated in the civil works contract documents with a provision for an orientation program for the project authorities as well as contractors.

Institutional and Implementation Arrangements

26. Environmental. The policy and regulatory framework in Sri Lanka provides an adequate basis for the mitigation of potential impacts mentioned above. Under the National Environmental Act, administered by the Central Environmental Authority (CEA), activities that fall into a prescribed category are required to go through a comprehensive environmental screening and planning process (EIA). Accordingly, all river basin development and irrigation projects, excluding minor irrigation works, require an EA. However, the guidelines are ambiguous about the requirement for upgrading and rehabilitation of existing dams. An agreement has been reached with the CEA and IAs that all dam upgrading and rehabilitation and related activities financed under this project as well as any other activities that may lead to potential adverse environmental impacts would be required to undertake an EA, commensurate with the potential for environmental impacts, and prepare detailed EMPs that would be included for implementation as part ofthe civil works contract documents.

27. For dams that fall within the North-Westem province, it would be required to adhere to provisions of the Provincial Environmental Act administered by the North-westem Environmental Authority. Although the Provincial Environmental Act is similar to the National Environmental Act, the North-Westem Environmental authority has the discretion to decide on the need for EWIEE for a given project under its jurisdiction. Therefore, for dams located in the North-Westem province, approval will be required from the North-Westem Environmental Authority prior to commencement of project activities under Component 1.

28. In view of resource extraction for construction work, the Geological Surveys and Mines Bureau (GSMB) which is the regulatory authority for all mining and quarrying activities in the country is important. Approval of the GSMB is required prior to commencement of commercial mining (for example, sand). Licenses by the GSMB are issued for identified sites for a stipulated quantity based on technical evaluations. However, monitoring of such sites and activities to ensure conformity with stipulated conditions are rather weak. Therefore, in addition to the supervisory consultants being

103 responsible for ensuring that civil works contractors adhere to the GSMB licensing conditions, the PMU Environmental Specialist would ensure compliance with environmental standards.

29. Conducting site-specific environmental assessments - The primary responsibility for coordinating work related to EAs would rest with the PMU. For this purpose an environmental specialist would be appointed to the PMU staff whose main task would be to ensure that EAs/EMPs are prepared for all the dams selected for rehabilitation and for works financed by other components ofthe project and that suitable mechanisms are mobilized to ensure the implementation of the EMPs. IDA clearance ofthe EMis a prerequisite for disbursement of funds for the civil works. The prescriptions detailed in the EMP are mandatory and would be contractually binding as it would form a part ofthe contract.

30. Livelihood Support Assistance. - A detailed activity break down chart for LSA has been prepared. A Community Development Specialist (CDS) would be deployed in the PMU to steer the LSA under the guidance and leadership ofthe Project Director. At the dam level, key responsibility would rest with the RPM (in MASL) and PM (in ID). Farmers Organizations and other JMCs would endorse the program and extend technical support as appropriate. RPM / PMs would deploy LS Facilitators and undertake lEC campaigning as well as community consultations. Mechanism for redressing gnevances has been worked out. Overall responsibility rests with the PMU. A process map, depicting sequentially activities that would ensure that participation was voluntary and further measures along with the role and responsibilities ofthe different actors as well as the review/ approval mechanisms, has been prepared.

31. Monitoring and Evaluation: A systematic program has been designed to monitor various environmental and social parameters. The environmental and social issues would be monitored as a part of the overall subproject progress monitoring. The PMU would monitor the compliance with EMPs by the IAs and with environment related technical specifications by the civil works contractors. The PMU would appoint environmental committee for each site for this purpose. The committee would receive input from an environmental specialist on the consultants’ team overseeing the design and implementation, environmental specialist in the PMU, Environmental Officers ofthe CEA and interested members ofthe projected affected community. PMU would share the quarterly progress reports regularly with the CEA and IDA.

32. Regular IDA missions would include specialists to monitor the project’s compliance with the World Bank’s safeguard policies. Information related to all subproject proposals and the project, as a whole, would be made publicly available at different places, including locally at the reservoir level and at the national level.

33. All key project staff is being made aware of the provisions in the environmental and social assessments and these have been budgeted and included into the project budgets. Summary of the assessments have been translated into Sinhala and Tamil languages and disseminated widely across the stakeholders. Several workshops have been organized to enable effective dissemination. The EAMF and Social Assessments, together with the ISDS, have also been made available in the Bank Infoshop.

104 Annex 11. Project Preparation and Supervision

SRI LANKA: Dam Safety and Water Resources Planning Project

Project Process Schedule 1 Key Processes 1 Key dates PCN Review June 3,2005 Preparation Mission October 26,2006 Pre-Appraisal February 7,2007 Quality Enhancement Review March 29,2007 Appraisal April 20,2007 Post Appraisal October 2-12, 2007 Negotiations February 58,2008 Board Approval March 27,2008 Loan Effectiveness May 1,2008 Planned date of mid-tern review April 30,2010 Planned project completion date June 30,2012 Planned Credit closing date June 30,2013

Key institutions responsible for preparation of the project:

Ministry of Agnculture Development and Agrarian Services: Ministry of Irrigation and Water Management; Ceylon Electricity Board; Department of Meteorology; Water Resources Board and Disaster Management Center.

Name Area of specialty Nihal Fernando TTL, Water Resources and Rural Development Xiaokai Li CO-TTL, Water Resources Ohn Myint Dam Engineering and Costing (Consultant) Seeniathamby Manaoharan Implementation Arrangements and Coordination Suryanarayan Satish Social Development Walter A Garvey Water ResourcesRiver Basin Planning (Consultant) Nagaraja Harshadeep Rao Hydrological Models and DSS Tools Sumith Pilapitiya Environment Ashis Mondal Monitoring and Evaluation (Consultant) Nadeera Rajapakse Environment (Consultant) Jiwanka Wickramasinhe Financial Management Samantha Wij esunadara Procurement Shivendra Kumar Procurement Specialist (Consultant) Suzanne F Morris Disbursement Minneh Kane Legal Counsel Robert Paterson Civil Engineering (Consultant) Richard Paulson Hydrologist (Consultant) R.K. Malhotra DesigdConstruction Quality Control (Consultant) S . Selevarajan Project Economist (Consultant) 105 Kishani Fernando I Team Assistant Anita Lakshmi Fernando I Team Assistant I Brenda Lee Scott I Program Analyst 1

Key Processes Resources Requirements Concept review 30,000 Amraisal 160.000 Negotiation 40,000 Board Approval 20,000 Effectiveness 10,000 TOTAL 260,000

Bank funds expended to date on project preparation: Bank resources (PPF Advance: US$500,000 Trust funds (PHRD Grant): US$550,000 (Recipient executed) Total: US$1,050,000

Estimated Approval and Supervision costs: Remaining costs to approval: US$20,000 Estimated annual supervision cost: US$lOO,OOO

106 Annex 12: Documents in the Project File

SRT LANKA: Dam Safety and Water Resources Planning Project

1. Updated Project Information Document - Also filed in Infoshop. 2. Project Implementation Plan ofthe Government (cleared with the Bank). 3. Detailed technical and risk assessments of38 major dams (38 individual reports available in hard copy form in the Bank office in Colombo considered partly as baseline status reports). 4. Project Feasibility Report submitted by the Government ofSri Lanka (that provides the detailed project component designs) with the following Appendices: Appendix A: Portfolio of Dams Appendix Al: Technical Date Sheets ofMajor Dams Reviewed Appendix A2: Draft Cost Estimates for Remediation Works Appendix A3 : Dam Inspection and Assessment Reports Appendix B: Hydro meteorological Information System (HMIS) specifications Appendix B 1: HMIS data and information management Appendix B2: Institutional and staff capacity building for HMIS Appendix C: Water Resources Planning Supporting Material Appendix D: Training and Capacity Building Appendix E: Environmental Safeguards Appendix F: Social Assessments and Safeguards Appendix G: Groundwater Monitoring Appendix H: Economic Analysis 5. Environmental Assessment and Management Framework (submitted by the Government and cleared with the Bank). 6. Integrated Safeguard Data Sheet (ISDS) - Also filed in Infoshop. 7. Social Assessments with Sinhalese and Tamil translations ofthe Public Information brochure submitted by the Government - Also filed in Infoshop. 8. Detailed Environmental Assessments and Environmental Management Plans for Inginimitiya, Ridiyagama, Tabbowa and Victoria Dams submitted by the Government. 9. Detailed Cost Estimates (Cost Tables). 10. Draft Financial Management Manual (Submitted by the Government and cleared with the Bank). 11. Draft Procurement Administration Manual (Submitted by the Government and cleared with the Bank). 12. Concept Paper for a Dam-related Hazard Warning System in Sri Lanka: A Participatory Study on Actions Required to Avoid and Mitigate Dam Disasters, LIRNEasia, January 23,2006. 13. Detailed TORSfor Implementation Support Consultants for the 3 project components. 14. Draft Initial Procurement Plan (Submitted by the Government and cleared with the Bank). 15. Corruption Risk Mapping and Mitigation Action Plan (Cleared with the Bank). 16. Implementation Schedules for the Remedial Repairs to the 32 Dams.

107 Annex 13: Statement of Loans and Credits SRI LANKA: Dam Safety and Water Resources Planning Project Difference between expected and actual Original Amount in US$ Millions disbursements

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d P100390 2007 Sri Lanka: Puttalam Housing Project 0.00 32.00 0.00 0.00 0.00 31.19 -0.67 0.00 PO86411 2006 Sri Lanka -Road Sector Assistance 0.00 100.00 0.00 0.00 0.00 42.69 -14.36 0.00 PO84580 2006 Education Sector Development Project 0.00 60.00 0.00 0.00 0.00 44.38 5.29 0.00 PO83932 2005 North East Housing Reconstruction Progra 0.00 75.00 0.00 0.00 0.00 23.90 6.01 0.00 PO81771 2005 E-Sri Lanka Development 0.00 53.00 0.00 0.00 0.00 36.32 27.45 0.00 PO94205 2005 Sri Lanka Tsunami ERL 0.00 75.00 0.00 0.00 0.14 4.56 5.80 0.00 PO86747 2004 Community Livelihoods in Conflict Areas 0.00 64.70 0.00 0.00 0.00 55.35 18.86 4.93 PO74872 2004 Community Development & Livelihood 0.00 5 1.OO 0.00 0.00 0.00 23.42 6.77 0.00 “Gemi PO50740 2004 HEALTH SECTOR DEVELOPMENT 0.00 60.00 0.00 0.00 0.00 18.07 1.17 0.00 PO74730 2003 National HIVIAIDS Prevention 0.00 12.60 0.00 0.00 0.00 7.06 4.98 0.00 PO58067 2003 Second Community Water 0.00 39.80 0.00 0.00 0.00 17.15 8.13 1.45 PO50741 2003 Relevance and Quality of Undergrad. Educ 0.00 40.30 0.00 0.00 0.00 17.25 9.09 0.00 PO76702 2002 Renewable Energy for Rural Economic 0.00 115.00 0.00 0.00 0.00 45.91 -10.18 4.60 Dev. Total: 0.00 778.40 0.00 0.00 0.14 367.25 68.33 10.93

SRI LANKA STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 1998 Apollo Lanka 3.88 0.00 0.00 0.00 3.88 0.00 0.00 0.00 1996 Asia Power 0.00 2.27 0.00 0.00 0.00 2.27 0.00 0.00 2003 CBC 0.00 9.96 0.00 0.00 0.00 9.96 0.00 0.00 2004 CBC 0.00 2.89 0.00 0.00 0.00 2.89 0.00 0.00 2003 Dialog 48.75 0.00 0.00 0.00 13.75 0.00 0.00 0.00 1999 Fitch Srilanka 0.00 0.07 0.00 0.00 0.00 0.07 0.00 0.00 1997 Packages Lanka 0.00 0.17 0.00 0.00 0.00 0.17 0.00 0.00 1999 SAGT 12.65 3.62 0.00 0.00 12.65 3.62 0.00 0.00 2000 Suntel 1.18 4.20 0.00 0.00 1.18 4.20 0.00 0.00

~ ~ ~~ Total portfolio 66 46 23 18 0 00 000 3146 2318 0 00 0 00

Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic.

Total pending commitment: 0.00 0.00 0.00 0.00

108 Annex 14: Country at a Glance SRI LANKA: Dam Safety and Water Resources Planning Project

Lower- POVERTY and SOCIAL Srl South middle- Development diamond. Lanka Asia income I 2006 Population,mid-year (millions) 8.6 1493 2276 GNIpercapita (Atlasmethod, US$) 1320 766 2,037 Life expectancy GNI (Atlas method, US$ billions) 26.0 t143 4,635 T Average annual growth, 2000.06 Population (Yd 0.4 17 0.9 Laborforce(%) 0.6 2.1 14 GNI Gross per primary Most recent estlmate (latest year avallable, 2000-06) capita nrollment Poverty (%of population belownationalpovertyline) Urban population (%of totalpopulation) 6 29 47 Life expectancyat birth (wrs) 75 64 71 Infant mortality(per 1OOOkebirths) P 62 31 Child malnutrition(%ofchildren under5) 29 0 Access to improved water source Access to an improved watersource (%ofpopulation) 79 84 61 Literacy(%ofpopulationage 59 93 58 89 Gross primaryenrollment (%of school-agepopulation) 98 10 It3 -Sri Lanka Male m 17 Lo wr-middleincome group Female 05 111

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1986 1996 2005 2006 Economic ratios. GDP (US$ billions) 6.4 0.9 23.5 27.0 Gross capital forrnation/GDP 23.7 24.2 26.5 26.7 Exports of goods andsewices/GDP 23.7 35.0 33.5 316 Trade Gross domestic savings/GDP P.0 15.3 77.3 ff.l Gross national savings/GDP 8.1 8.4 24.5 24.6 T Current account balance/ODP 5.4 4.9 -2.6 4.9 Domestic Capital Interest paynents/GDP 2.5 13 0.6 16 savings formation Total debt/GDP 63.7 59.7 711 66.3 Total debt sewice/exports 20.6 8.0 4.9 0.1 Present valueof debt/GDP 416 Present valueof debt/exports 96.9 Indebtedness 1986-96 1996.06 2005 2006 2006-M (average annualgroMh) GDP 4.7 4.4 8.0 7.4 -Sri Lanka GDP percapita 3.4 3.7 5.1 6.6 - - Lo wr-middleincome group Exports of goods andservices 7.5 5.5 5.6 4.6 r -

STRUCTURE of the ECONOMY

109 1986 1996 2005 2006 /Growth of capltal and GDP (%) (%of GDPj Agnculture 271 224 I73 6.5 Industry 266 264 27 1 27.1 Manufacturing 152 62 ?48 0.9 Services 463 511 55 6 56.5 Household final consumption expenditure 777 74 1 74 5 73.8 General gov't final consumption expenditure 03 05 62 9.0 Imports of goods and services 353 439 42 6 43.2

ise.6-s~ m96.06 2005 2006 Growth of exports and Imports (%) (averageannualgrowth) Agnculture 19 15 19 4.7 20

Industry 6.4 4.4 a3 7.2 10 Manufactunng 7.9 4.1 60 5.3 Services 5.0 5.5 62 8.3 0 Household final consumption expenditure 4.6 5.2 25 6.0 -10 General gov't final consumption exqenditure 272 2.3 61 7.3 Gross capital formation 3.2 6.0 0.4 110 --Exports -Imports Imports of goods and services 6.2 7.0 30 6.3 r1 I

Note:2006 data are preliminaryestimates 'Thediamonds showfour keyindicators in the country(in bold) compared with its income-group average. tf data are missing, thediamond will be incomplete.

PRICES andGOVERNMENT FINANCE 1986 1996 2005 2006 Inflation (%) Domestic prices (%change) c Consumer prices 6.0 15.9 116 0.7 Implicit GDP deflator 5.9 0.6 9.9 0.3 Government Finance (%of GDP, includes cun'ent grants) 1 I Current revenue 20.7 8.0 7.4 8.1 01 02 03 04 05 Current budget balance 18 -3.6 -13 -14 Overall surplusldeficit -0.1 -9.4 -7.3 -7.3 -GOPddlator -CPI

TRADE 1986 1996 2005 2006 Export and Import levels (US$ mill.) (US$ millions) Totalexports (fob) 126 4,095 6,347 6,683 Tea 330 615 811 882 Other agricultural goods 94 378 344 461 10.000 Manufactures 223 1902 2,896 3,086 Total imports (cif) 1764 5,439 8,663 m253 Food 80 1 611 757 5,000 Fuel and energy 479 1655 2,070 Capital goods 12M 1669 2246 0 00 01 02 03 W 05 08 Exqort pnce index(2000=DO) 73 129 126 Import price index (20OO=WO) 76 03 04 Exports 0 Imports Terms of trade (2000-DO) 97 97 96 I I

110 BALANCE of PAYMENTS 1986 1996 2005 2006 'Current account balance to GDP (%) (US$ milirons) I Exports of goods and services 1,521 4,661 7,867 8,508 Imports of goods and services 2,264 6.099 0,065 11621 Resource balance -743 ,1238 -2,V6 -3.10

Net income -06 -204 -300 -389 Net current transfers 471 759 1.829 2,169

Current account balance -41) -883 -649 -1333

Financing items (net) 296 615 1,076 1267 Changes in net reserves It2 66 -429 66 !-a A Memo: Reserves including gold (US$ millions) 363 2967 2,737 2.947 Conversion rate (DEC,locaI/US$) 26 0 55.3 1)O 5 03.9

EXTERNAL DEBT and RESOURCE FLOWS 1986 1996 2005 2006 IComposition of 2006 debt (US$ mill.) (US$ millions) Total debt outstanding and disbursed 4.063 8,296 16,730 23,275 IBRD 72 40 0 0 FR5n G:B77 B:2,245 IDA 498 15 16 2,095 2,245 1 Total debt service 399 467 480 1,PI IBRD P 11 1 IDA 5 20 57 60 Compositionof net resourceflows Official grants I74 M2 659 0 Official creditors 349 318 6,007 6,630 Private creditors 0 67 11 -83 Foreign direct investment (net inflows) 30 QO 272 0 Portfolio equity(net inflows) 0 0 -2 16 0 World Bank program Commitments 07 256 t20 29 A - IBRD E- Bilatsai

Disbursements 88 a4 1x3 1)O ~ B - IDA D -Other mitilateral F- Private

Pnncipal repayments 6 16 41 43 ~ C-IMF G - Short-term Net flows 82 88 73 57 Interest payments 11 25 n n Net transfen 72 73 56 40

Development Economics 0/V07

111

MAP SECTION

IBRD 35864 80°E81°E INDIA SRI LANKA PROJECT DAMS DAM SAFETY AND WATER RESOURCES PROJECT GAUGING STATIONS

10°N PLANNING PROJECT 10°N RAIN GAUGING STATIONS PROJECT DAMS AND HYDROMETRIC NETWORK PROJECT RIVER BASINS

Point Pedro MAIN CITIES AND TOWNS JAFFNA Jaffna PROVINCE CAPITALS

NATIONAL CAPITAL Delft Elephant Pass Island Palk Strait MAIN ROADS KILLINOCHCHI Killinochchi RAILROADS

Iranamadu Mullaittivu DISTRICT BOUNDARIES Tank Ferry MULLAITTIVU Adam’s Talaimannar Manakulam 0 20 40 60 KILOMETERS Bridge 9°N Mannar 9°N 0 10 20 30 40 MILES Island Mannar VAVUNIYA Pulmoddai MANNAR This map was produced by the Map Design Unit of The World Bank. Vavuniya The boundaries, colors, denominations and any other information shown on Nuwarawewa TRINCOMALEE this map do not imply, on the part of Trincomalee The World Bank Group, any judgment Tissawewa Vendrasan Gulf of on the legal status of any territory, or Karaitivu Nachchaduwa Huruluwewa any endorsement or acceptance of Island such boundaries. Mannar ANURADHAPURA Rambewa Kantale Mutur Anuradhapura Oya

Galkulama an Kaudulla 82°E Y Kalpitiya Rajangana Kala Tabbowa Oya Usgala- Kaudul Oya Siyambalangamuwa la Bay of Bengal PUTTALAN Minneriya Puttalan Inginimitiya Kalawewa Giritale 8°N Habarane 8°N Kandalama POLONNARUWA Dambulu Oya BATTICALOA Parakrama Maho Bowatenna Samudrya Oya MAHAWALI Oya Batticaloa Deduru Madura MUNDENI Kattankudi MATALE Nalanda KURUNEGALA ARU

Ganga Chilaw BASIN Madura Oya Reservoir Ulhitiya Kurunegala Rathkinda BASIN Kalmunai Pollgolla Oya KANDY Mahaweli Maha Rantembe Ampara Kandy Randenigala Gai Oya Negombo GAMPAHA Kegalla Victoria Victoria Falls Reservoir AMPARA NUWARA Senanayake Kotmale BADULLA Samudra 7°N 7°N Kelani Ganga Laxpana Badulla COLOMBO ELIYAPidurutalagala Canyon Norton (2,524 m) Sri Jayewardenepura COLOMBO Kotte Moneragala Pottuvil Castlereigh Moratuwa MONERAGALA INDIAN Ganga Wellawaya Kalu Ratnapura Kir Samanalawewa indi OCEAN Kalutara KALUTARA

Laccadive RATNAPURA Oya

Wal Chandrikawewa Kumana Sea Gangaawe Kataragama

HAMBANTOTA GALLE Ridiyagama MATARA Hambantota

Tangalla SRI 6°N Galle LANKA

Matara Dondra Head

80°E81°E82°E FEBRUARY 2008