Technical Assistance Consultant’s Report Project Number: 44453 October 2014 India: Supporting the West Bengal Development Finance Program (Volume I) (Financed by the Technical Assistance Special Fund) Prepared by: PricewaterhouseCoopers Private Limited Kolkata, India For: Finance Department Government of West Bengal This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design. www.pwc.com/in Strengthening Reforms Supporting the West Bengal Development Finance – 1 ADB TA 8203-IND Contract No. 104709- S52050 Final Report- Volume-1 October 2014 ADB TA 8203-IND: Supporting the West Bengal Development Finance – I (Contract No. 104709-S52050) Final Report Table of Contents 1 Introduction ...................................................................................................................... 7 1.1 Project Context ................................................................................................................................................ 7 1.1.1 Program Objectives ........................................................................................................................ 8 1.1.2 Deliverables under the Technical Assistance (TA) ....................................................................... 8 2 Progress against Second Tranche Conditions ................................................................... 9 2.1 Expenditure Rationalization Measures ........................................................................................................ 9 2.1.1 Approval of Medium-Term Fiscal Plan ......................................................................................... 9 2.1.2 Actions taken for Subsidy Rationalization .................................................................................... 9 2.1.3 Development/Implementation of four modules of IFMS .......................................................... 22 2.1.4 Preparation of MTEF for three select departments .................................................................... 34 2.1.5 Implementation of Computerization of Salary Account (COSA) ............................................... 38 2.1.6 Operationalization of drug procurement processes through WBMSC ....................................... 41 2.1.7 Rationalization of salary growth for 2013-14 .............................................................................. 43 2.1.8 Database on employees and pensioners ...................................................................................... 43 2.1.9 Increase in annual capital outlay to GSDP ratio in 2013-14 & 2014-15 ..................................... 46 2.2 Revenue Reform Measures .......................................................................................................................... 46 2.2.1 Value Added Tax (VAT) ................................................................................................................ 46 2.2.2 Excise Management System ......................................................................................................... 55 2.2.3 Property Registration Management System ............................................................................... 58 2.2.4 Profession Tax ............................................................................................................................... 62 2.3 Debt Management Measures ...................................................................................................................... 63 2.3.1 Development/Implementation of Debt Database ...................................................................... 63 3 Impact of Program on State Finances ............................................................................. 64 4 Contribution of Technical Assistance ............................................................................. 66 4.1 Support in meeting tranche release policy actions ................................................................................... 66 4.2 Trainings for Government Officials............................................................................................................ 66 4.2.1 Domestic training on ‘Financial Systems, Management and Accountability in Government’ . 66 4.2.2 Domestic training on ‘Management of Indirect Taxes in India: VAT /CST /CENVAT /Services Tax /Customs and GST’ .......................................................................................................................... 66 4.2.3 Foreign training on ‘Principles for International Tax Planning’ ................................................ 67 4.3 Project Appraisal Methodology/ Manual .................................................................................................. 67 4.3.1 Activities pursued by the TA team ............................................................................................... 67 4.3.2 Preparation of Operational Handbook for PPP projects in lieu of Project Appraisal Methodology & Manual ........................................................................................................................... 67 4.4 Submission of a Memorandum before 14th Central Finance Commission. .............................................. 68 Annexure 1: MTEF for Departments of Health & Family Welfare, School Education and Public Works .................................................................................................................. 70 Department of Health and Family Welfare..................................................................................................... 70 PwC Page 2 of 138 ADB TA 8203-IND: Supporting the West Bengal Development Finance – 1 (Contract No. 104709-S52050) Final Report School Education Department .......................................................................................................................... 70 Public Works Department .................................................................................................................................. 71 Annexure 2: PPP Handbook ................................................................................................. 72 List of Tables Table 1: Medium-term Fiscal Plan for FY2014 to FY2017 ................................................................................. 9 Table 2: DDO-wise introduction of OSMS in the State for government-aided schools ................................. 39 Table 3: Details of salary released to employees (including teachers) of govt-aided secondary schools in the state for the month of April 2014 through COSA-compliant OSMS ............................................................... 40 Table 4: List of drugs procured by WBMSC in 2014 till date .......................................................................... 42 Table 5: List of 20 sub-registrar’s offices ........................................................................................................... 61 Table 6: Final MTEF estimates of DoH&FW (in Rs crores) ............................................................................ 70 Table 7: Final MTEF estimates for SED (Rs. crores)...................................................................................... 70 Table 8: Final MTEF estimates for PWD (Rs crores) ........................................................................................ 71 Table 9: Activities and Roles across Project Life Cycle .................................................................................... 78 Table 10: PPP Processes ..................................................................................................................................... 82 Table 11: Different contours of project feasibility analysis-an overview ......................................................... 93 Table 12: Sources of debt and equity ................................................................................................................. 95 Table 13: NPV and IRR: Illustrative example ................................................................................................... 98 Table 14: Nature and Implications of private participation ........................................................................... 112 Table 15: PPP implementation checklist –Key controls to face Challenges ................................................... 114 List of Figures Figure 1: Implicit Subsidy rationalisation measures ......................................................................................... 12 Figure 2: Subsidy rationalization measures ...................................................................................................... 13 Figure 3: Summary of GoWB’s response to its Action Plan on Implicit Subsidy Rationalisation (select examples only for illustration) ........................................................................................................................... 14 Figure 4: Approaches for targeted and prioritised expenditure ....................................................................... 17 Figure 5: e-Payment through the GRIPS portal ............................................................................................... 49 Figure 6: Barcoded e-Transit Declaration .......................................................................................................