World Bank Document

Documentof FILECOPY The World Bank FOR OFFICIAI, UISEONLY Public Disclosure Authorized Report No. p-2 51 3-IN REPORT AND RECOMMENDATION OF THE PRESIDENT OF TIIE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE Public Disclosure Authorized EXECUTIVE DIRECTORS ON A PROPOSED CREDlT TO INDIA FOR THE MAIIARASHTRAWATER SUPPLY AND SEWERAGE PROJECT Public Disclosure Authorized April 1]8, 1979 Public Disclosure Authorized This documenthas a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS Rs 1 = Paise 100 US$1 = Rs 8.60 Rs 1 = US$0.1163 Rs I million = US$116,279.07 (Since September 25, 1975, the Rupee has been offi- cially valued relative to a "basket" of currencies. As these currencies are now floating, the U.S. Dollar/ Rupee exchange rate is subject to change. As of April 12, 1979 the exchange rate was Rs 8.21 to US$1.O). FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS GOI - Government of India GOM - Government of Maharashtra MWSSB - Maharashtra Water Supply and Sewerage Board MIDC - Maharashtra Industrial Development Corporation BMC - Bombay Municipal Corporation BMR - Bombay Metropolitan Region BMRDA - Bombay Metropolitan Region Development Authority ENE - Environmental Engineering Organization FOR OFFICIALUSE ONLY INDIA MAHARASHTRA WATER SUPPLY AND SEWERAGE PROJECT CREDIT AND PROJECT SUMMARY Borrower: India, acting by its President. Beneficiaries: The Maharashtra Water Supply and Sewerage Board (MWSSB) and participating local authorities. Amount: US$48 million. Terms: Standard. On-Lending Terms: India to Maharashtra: As part of Central assistance for State development projects on terms and conditions applicable at the time. Maharashtra to MWSSB: 25 years, including four years of grace, at 6-3/4% interest per annum. The foreign exchange risk will be borne by the Government of India. Project Description: Construction of water treatment, transmission and distribution facilities to augment the supply of water to 6 towns and 22 villages, and to provide new piped water supplies to 82 villages; these facilities will enable an additional 200 million liters of water per day to be supplied to 2.4 million people in the 6 towns and 104 villages; provision of sewage collection, treatment and disposal in three of the six project towns and the expansion and completion of the sewerage system in the remaining three towns; provision of public standpipes; improved detection of water distribution system losses, repairs of mains and metering; training and technical assistance. The project would also help to develop MWSSB as an institution capable of planning and imple- menting sectoral development programs in Maharashtra. Because the project involves a substantial amount of civil engineering works, there is a risk that temporary shortages of materials, lateness on the part of manu- facturers in meeting contractual delivery dates, or lack of management skills on the part of contractors, could lead to delays in implementation. However, the Governments of India and Maharashtra, and MWSSB have been alerted and are expected to take all precautions to minimize the impact of these delaying factors. This documenthas a restricteddistribution and may be usedby recipientsonly in the performance of their official duties. Its contentsmay not otherwisebe disclosedwithout World Bankauthorization. - ii - Estimated Cost: (US$ millions) Components Local Foreign Total Water Supply 30.2 6.3 36.5 Sewerage 21.6 - 21.6 Common Services 2.0 - 2.0 Engineering 3.9 - 3.9 Consultant Services 1.5 0.6 2.1 Training 0.1 0.1 0.2 Land Acquisition 2.1 - 2.1 Sub-total 61.4 7.0 68.4 Physical Contingencies 8.3 1.0 9.3 Price Contingencies 16.4 1.7 18.1 Duties and Taxes 4.2 - 4.2 Total Project Cost 90.3 9.7 100.0 Project Cost Net of Duties and Taxes 86.1 9.7 95.8 Financing Plan: IDA Credit 38.3 9.7 48.0 GOM Grant/Loans 37.8 - 37.8 Local Authorities 10.0 - 10.0 Total 86.1 9.7 95.8 Estimated Disbursements: IDA FY FY80 FY81 FY82 FY83 FY84 Annual 0.5 7.2 13.1 15.8 11.4 Cumulative 0.5 7.7 20.8 36.6 48.0 Rate of Return: About 9%. Appraisal Report: Report No. 2377a-IN, dated April 17, 1979. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE GOVERNMENT OF INDIA FOR THE MAHARASHTRAWATER SUPPLY AND SEWERAGE PROJECT 1. I submit the following report and recommendation on a proposed development credit to India in an amount equivalent to US$48 million on standard IDA terms to help finance a water supply and sewerage project in six towns and 104 villages in Maharashtra. The proceeds of the credit would be channeled to the Government of Maharashtra (GOM) in accordance with the Government of India's standard terms and arrangements for the financing of State development projects. GOM will lend the funds to the Maharashtra Water Supply and Sewerage Board for 25 years, including four years of grace, at 6-3/4% interest per annum. The exchange risk will be borne by the Government of India. PART I - THE ECONOMY 2. An economic report, "Economic Situation and Prospects of India" (2431-IN dated April 9, 1979), was distributed to the Executive Directors on April 13, 1979. Country data sheets are attached as Annex I. Background 3. India is a large, low-income country with 640 million people whose average income is US$150 per annum. The agricultural sector dominates the economy, employing over two-thirds of the labor force and contributing over 40% of value added. Although smallholder agriculture provides a fullsome subsistence to many, the land base is inadequate to provide all families in rural areas with an adequate livelihood under current conditions, and many who are landless or nearly landless have only an insecure grasp on the means of existence. Industrialization in India has not been rapid enough to bring about the economic transformation that has led to higher productivity and rapid urbanization in some other countries. The urban population was 18% of the total in 1960, 20% in 1970 and is 21% now. The share of manufacturing has grown slowly and since the late 1960s has remained roughly constant at 16% of GDP. 4. Economic growth has been slow in the past, with GDP growing at a trend rate of 3.6% per annum from 1950 to 1975. Agricultural output grew at 2.4% per annum over the same period. Slow growth in agriculture acted as a drag on overall growth, not only because of its sheer weight in the total, but also because of the need to use of scarce foreign exchange to import food. Growth in industrial output has been higher at 5.2% per annum between 1950 and 1975, but not as high as in many other developing countries nor as high as can be expected. - 2 - 5. This slow growth has persisted despite a quite creditable domestic saving and investment performance. Domestic saving has grown from 9% of GDP in 1951 to the current high level of 22%. Gross domestic investment has risen from 10% to 21% of GDP over the same period. Foreign savings have never financed a large portion of domestic investment and have financed no more than 5% of investment since 1970. Foreign savings have been important in financing imports and foreign exchange has acted as a constraint on the economy for most of the period. External assistance has been low both as a percentage of GDP and in per capita terms. Net external assistance is less than 2% of GDP now, has never risen above 3% and fell to less than 1% in the early 1970s. Exports have grown relatively slowly, 5.4% per annum in US dollar terms and 2.8% per annum in volume terms between 1950/51 and 1975/76. So far during the 1970s, exports have grown much more rapidly, by 18% per annum in US dollar terms and 8% in volume terms over the period 1970/71 to 1976/77. During the same period imports grew by 17% per annum in US dollar terms but only by 2% per annum in volume terms, reflecting a 28% fall in India's terms of trade over the period. 6. India has the capacity to grow and develop at a more rapid pace than has been achieved so far. Although the industrial sector is small compared to the size of the total economy, it nevertheless has a highly diversified struc- ture and is capable of manufacturing a wide variety of consumer and capital goods. Basic infrastructure--irrigation, railways, telecommunications, roads and ports--is extensive compared to many countries, although considerable gaps remain. India is rich in human resources and institutional infrastructure, although there is much scope for improvement. India is reasonably well-supplied with natural resources, not only land and water but minerals, including oil, gas and coal. With good economic policies and sufficient access to foreign savings, India should be able to manage these considerable resources to accelerate the longer-term growth trend. Receit Trends 7. India has managed faster growth during the recent past. Growth of GDP in 1978/79 is estimated to be between 3% and 4%; this is a strong performance coming on top of the previous year's 7.2% growth in GDP and considering agricultural output grew less than 2%. Even this agricultural growth is highly creditable given the previous years' record harvests in most crops. Industrial output grew by 8-10% in 1978/79. Over the four years, 1975/76 to 1978/79, growth in real GDP, agricultural output and industrial output has averaged 5.3%, 4.4% and 6.9% per annum, respectively.

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