Report No. 742a-IN -8 5py

IndiaAppraisal of the Uttar PradeshWater Supply and Sewerage ProjectJuly 29, 1975

Water Supply DivisionSouth Asia Projects

Not for Public Use

Document of the International Bank for Reconstruction and DevelopmentInternational Development Association

This report was prepared tor official use only bv the Bank Group. It may notbe published, quoted or cited without Bank Group authorization. The Bank Group doesnot accept responsibility for the accuracy or completeness of the report.

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CURRENCY EQUIVALENTS(As of July 1, 1975)

Currency Unit = Rupee (Rs)US$1.00 = Rs 8.0Rs 1.00 5 US$0.125Rs 1 lakh (10 > = US$12,500Rs 1 crore (10 ) = US$1.25 million

MEASURES AND EQUIVALENTS

1 millimeter (mm) = 0.04 inches (in)1 meter (m) ' 3.28 feet (ft)1 kilometer (k) = 0.62 miles (mi)1 square meter (m ) 10.8 square feet (sq ft)1 hectare (ha) - 10,000 square meters or

2.47 acres (ac)1 square kilometer (km2) 0.386 square miles (sq mi)1 liter (1) - 0.26 US gallons (gal)1 liter per capita per

day (1/cd) = 0.26 US gallons per capitaper day (gcd)

1 cubic meter (m3) = 35.3 cubic feet (cu ft)1 cubic meter per second (m3/sec) = 31.5 million cubic meters

per year or22.8 million US gallons per

day or (mgd)35.4 cubic feet per second (cusecs)

or86.4 million liters per day

1 million liters per day (mld) = 0.01 cubic meters per second (m3/sec)

ABBREVIATIONS AND ACRONYMS

GOI = Government of IndiaUP = State of Uttar PradeshGUP = State Government of Uttar PradeshLIC = Life Insurance Corporation of IndiaNigam = Jal Nigam, or the Uttar Pradesh State Water Supply

and Sewerage Development CorporationKAVALtowns The five major cities of Uttar Pradesh - Kanpur,

Agra, Varanasi, Allahabad and LucknowJalSansthan - Water Authority

RJS = Regional Jal SansthanLSGED = Local Self Government Engineering Department of

Uttar Pradesh (from June 1975 merged in the Nigam)WHO/PIP = World Health Organization/Preinvestment Planning Unit

of the Division of Environmental HealthOrdinance The Uttar Pradesh Water Supply and Sewerage Ordinance,

1975

FISCAL YEARApril 1 - March 31

INDIA

APPRAISAL OF THEUTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table of Contents

Page No.

SUMMARY AND CONCLUSIONS ..... ..................... i-iii

1. INTRODUCTION ....................... 1

2. THE SECTOR ....................................-----... 2Present Situation .............. ... . ........ **.. * 2Sector Development and Objectives ............. 4Sector Organization ...... ........................ 6

3. THE BORROWER AND THE BENEFICIARIES .................... 7Jal Nigam (UP State Water Supply and Sewerage

Development Corporation) .................... 7The Beneficiaries ...... .......................... 9Regional Jal Sansthans ............ . ............... 10KAVAL Towns Jal Sansthans ..... ................... 10Accounts and Audit ...... ......................... 11Other Local Bodies' Water Supply and Sewerage

Systems .................................... 12

4. THE PROJECT AND SUB-PROJECTS .......................... 12The Project .................................... 12Sub-Projects .................................... 13Sub-Projects Justification ....................... 14Sub-Projects Appraisal ........................... 15Cost Estimates ................ ... ........... 16Amount of IDA Credit ............................. 18Procurement .......... 18Disbursement . . ..... #.... . ......... 19Sub-Projects Design and Construction ...... ....... 20

5. JUSTIFICATION . ...................................... 20Project Risks ........ ............................ 22

6. FINANCES . ............................................ 23Past Performance and Present Position .......... .. 24Financial Operations of the Nigam ......... ....... 25Jal Sansthans' Finances ................ ........... 27Water Supply and Sewerage Taxes and Charges ........ 28The Life Insurance Corporation of India (LIC) ..... 30

7. AGREEMENTS REACHED AND RECOMMENDATION .................. 31

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ANNEXES

1. Reported cases of water-borne diseases in Project Areasand in Uttar Pradesh State for five years 1966-70

2. Description of the Bundelkhand, Kumaon and Garhwal Districts andthe Sub-projects to be constructed therein

3. Description of the KAVAL towns and of the sub-projectsto be constructed therein

4. Uttar Pradesh Jal Nigam (Water Supply and Sewerage DevelopmentCorporation)

5. Regional Jal Sansthans, and Jal Sansthans of the KAVAL towns

6. Forecast of Population and Water Demand, with Design Criteria

7. Outline Technical Report for Nigam Sub-Project Appraisal

8. Supervision Requirements

9. Cost Estimates Summary for Basic Package of Sub-Projects

10. Disbursement Schedule

11. Water Supply and Sewerage Sector in Uttar Pradesh - FinancialPerformance 1969-74 and Forecasts 1974-79

CHARTS

9306 Implementation Schedule (Annex 2)

9307 Uttar Pradesh Jal Nigam (State Water Supply and SewerageDevelopment Corporation) Recommended Organization (Annex 4)

9308 Regional Jal Sansthan - Recommended Organization (Annex 5)

9309 KAVAL town (Lucknow Municipal Corporation) - PresentOrganization of Water Supply and Sewerage Services (Annex 3)

9310 KAVAL town (Lucknow Municipal Corporation) - RecommendedOrganization of Jal Sansthan (Annex 5)

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MAPS

IBRD 11384 Uttar Pradesh with Regional Jal Sanathans andKAVAL towns

11385 Lucknow Water Works - Existing and Proposed

11386 Lucknow Sewerage Works - Existing and Proposed

11387 Typical Rural Water Supply Scheme

INDIA

APPRAISAL OFUTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

SUMMARY AND CONCLUSIONS

i. This report covers the appraisal of a project to (i) assist in thereorganization of the water supply and sewerage sector in the State of UttarPradesh (UP); (ii) construct piped water supply schemes in selected ruralareas suffering from water scarcity and hardship; and (iii) improve thequality of water supply and sewerage systems in the five largest cities ofthe State. The project, to be executed over four years, forms part of theState's Fifth Five Year Plan, and the reorganization proposals are the firstphase of a long-range program of institutional and financial reform. TheState Government (GUP) requires US$75 million equivalent to finance theproject, which includes a US$11 million equivalent foreign exchange compo-nent. The Life Insurance Corporation of India (LIC) will provide US$22.5 mil-lion equivalent, GUP about US$12.5 million equivalent and an IDA Credit ofuS$40 million is proposed to cover the balance.

ii. The project is based on investigations, plans and designs preparedby the GUP Local Self Government Engineering Department, and on recommenda-tions of a 1973 IBRD/WHO Cooperative Program sector survey mission.

iii. The Credit will be made to the Government of India (GOI) and trans-ferred to GUP as part of the GOI financial allocation of the Fifth Five YearPlan. GUP will transfer the sector's allocation under the Plan, includingthe proceeds of the Credit in the form of loans and grants, to the Jal Nigam,a newly established autonomous Corporation charged with developing, monitor-ing and regulating the sector in UP. It is intended to function as the de-velopment finance agency for the sector. It will be responsible also forplanning, design and construction supervision of all projects in the sector,during the next 10-15 years. Local water authorities called Jal Sansthanswill be established, and will be responsible for operation and maintenanceof water supply and sewerage systems. These Jal Sansthans could be forindividual city systems or for a number of conveniently grouped urban andrural systems in a region.

iv. The project has high priority because of the urgent need in UP to(1) develop effective institutional and financial arrangements for thesector to provide adequate and safe services for over 100 million people,(2) transfer to three regional Jal Sansthans the existing water supplyfunctions of about 60 local authorities in three predominantly rural areashaving a total population of about 7.6 million; (3) organize these regionalJal Sansthans, and concurrently construct rural water supply schemes intheir areas, to relieve severe hardship suffered by over one million peopledue to lack of water; and (4) improve on the inadequate service to about5 million people in expanding urban areas and minimize the health hazardsin their present systems. The project, divided into about 300 sub-projects,includes construction of about 1,000 rural water systems in over 2,000 vil-lages, and extension and augmentation of existing urban water supply andsewerage systems in the five largest cities in the State.

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v. The water supply component includes the development of about 900water sources and the provision of about 1,000 piped water supply distribu-tion systems to rural areas, with about 200 treatment works. The urban sys-tems would include further development of existing surface and groundwatersources, extension of transmission, distribution and storage systems andprograms of leakage detection and waste prevention. These facilities shouldbe adequate to meet daily requirements for water supply in the five citiesthrough 1981, but further improvements, particularly to water treatmentplants, will be planned as part of the project. The sew-erage componentis designed to improve existing systems in these cities and extend collec-tion systems in areas of the cities with greatest need. The project pro-vides for training of staff and engineering and management consultingservices to assist the Nigam and Jal Sansthans. For this purpose, inter-nationally and locally recruited consultants would be selected and employedunder terms and conditions satisfactory to the Association. Specializedequipment, such as drilling rigs, will be provided to expedite developmentof projects.

vi. Of the estimated total financing required amounting to Rs 60 crores(US$75 million equivalent), Rs 23.4 crores (US$29.3 million equivalent) isfor rural water supply schemes; Rs 27.4 crores (US$34.2 million equivalent)for urban water supply schemes and Rs 6.8 crores (US$8.5 million equivalent)for urban sewerage systems. Specialised equipment, consulting services andtraining are estimated to cost about Rs 2.4 crores (US$3 million equivalent).The proposed Credit would cover the estimated direct and indirect foreignexchange component (US$11 million) and about 45% of local costs (Rs 23crores (US$29 million equivalent)). The LIC would finance Rs 18 crores(US$22.5 million equivalent) representing 36% of local costs, and GUP willfinance the remaining 19% amounting to Rs 10 crores (US$12.5 million equiv-alent), including interest during construction of about Rs 2.5 crores (US$3million equivalent).

vii. Contracts totalling about US$16 million equivalent for equipmentand materials will be awarded on the basis of international competitivebidding in accordance with IDA guidelines. A margin of preference up to15% or the customs duty, whichever is lower, is proposed to be granted tolocal manufacturers of equipment and materials. Contracts for equipmentand materials, which would not be suitable for international competitivebidding totalling Rs 14 crores (US$18 million equivalent), and about 300civil works contracts, totalling about US$25 million equivalent, which willbe too small to attract international bidders, will be awarded on the basisof competitive bidding advertised locally and in accordance with GUP proce-dures, which are satisfactory to the Association.

viii. Disbursements from the Credit and LIC loans will be made onlyafter technical reports on sub-projects prepared by the Nigam have beenapproved by IDA, prior to commencement of works. The completed sub-projectswill be transferred to Jal Sansthans for operation and maintenance but willbe subject to monitoring and regulation by the Nigam. Investment criteriafor each sub-project, lending terms and methods of charging for the water

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and sewerage services, will be agreed between each Jal Sansthan and theNigam at the time of sub-project preparation and before presentation toIDA. Basic guidelines for the Nigam's investment criteria, includinginitial financial performances and rates of return for Jal Sansthans, havebeen agreed between the Nigam and IDA, and will be further reviewed afterconsultants' recommendations have been received. Reviews by the appraisalmission of the design of some of the sub-projects, and of the design cri-teria used for others included in the project, indicated that these areacceptable. The arrangements made for the future review of sub-projects aresufficient to ensure that technically sound, least cost sub-projects will befinanced from the Credit. The program of works proposed by GUP is realisticand well-conceived.

ix. The project is suitable for an IDA Credit of US$40 million equiv-alent.

INDIA

APPRAISAL OF THEUTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

I. INTRODUCTION

1.01 The Government of India (GOI) has requested an IDA Credit of US$40million to help finance a US$75 million equivalent water supply and sewerageproject in the State of Uttar Pradesh (UP). This would be the second IDACredit for water supply and sewerage projects in India; the first, a Creditof US$55 million, was made in 1973 to help finance the Bombay Water Supplyand Sewerage Project, which is now under construction.

1.02 The Government of India would be the borrower of the proposedCredit, which would be on-lent to the Uttar Pradesh Jal Nigam (Water Supplyand Sewerage Development Corporation) through the State Government of UttarPradesh (GUP). The Life Insurance Corporation of India (LIC) would provideUS$22.5 million equivalent (30%) as a co-lender with IDA, and GUP would ensurethat sufficient funds are made available to the Nigam to complete the proj-ect. The project is part of the US$115 million equivalent water supply andsewerage sector program proposed in the GUP fifth Five-Year Plan 1974-79.The construction components of the project will consist of about 300 sub-projects in rural areas and in the five major cities of UP, Kanpur, Agra,Varanasi, Allahabad and Lucknow, known as the KAVAL towns. These sub-proj-ects, to be constructed from about October 1975 through March 1979, willprovide piped water supply for about 1.2 million people in rural areas andthe extensions, improvements and up-rating of existing water supply andsewerage facilities will serve about 5 million people of the KAVAL towns.

1.03 This project has evolved from a request made by GOI to IDA in 1972to assist GUP in financing extensions and improvements to the KAVAL towns'water supply and sewerage systems. Following an IDA suggestion, a WHO/PIPmission under the IBRD/WHO cooperative program surveyed the sector in 1973.Their report highlighted that urgent attention needs to be paid to:

(i) institutional improvements in the sector; and

(ii) provision of rural water supplies in hardship andscarcity areas.

An IDA pre-appraisal mission in May 1974 recommended major institutionalchanges, and proposed the financing of rural and urban schemes.

1.04 The principal objectives of the project are:

Ci) development of the Nigam, particularly in its role asfinancing agency for the water supply and sewerage sectorin the State;

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(ii) development of water authorities (Jal Sansthans) with re-sponsibility for provision of safe water supply and satis-factory sewerage facilities for the urban and rural popula-tion. As a first stage the project would assist the devel-opment of three large regional Jal Sansthans and five urbanJal Sansthans; and

(iii) to bring urgently needed water supplies to areas of hardshipand scarcity.

1.05 The feasibility studies for the sub-projects have been prepared bythe Local Self Government Engineering Department (LSGED) of Uttar Pradeshwhich has been absorbed into the Nigam. The Nigam is GUP's planning andregulating agency, and most importantly, the development finance agencyfor the sector. It will advise GUP on all policy matters concerning thesector. A special unit of the Nigam would appraise and supervise all schemesto be financed by the Nigam, including the sub-projects proposed in thisproject. This is a new approach to the development and regulation of thissector in India. The successful development of this approach could mean anextension of similar techniques to other States. The traditional project-by-project approach will make little impression on the massive problemsrequiring solution in this sector in India.

1.06 IDA would enter into an agreement with LIC, whereby IDA wouldcarry out the reviews of sub-projects and procurement matters on behalfof the parties, and would advise LIC on the suitability of proposed in-vestments and on disbursements. The agreement would also provide thatproject execution would be the subject of regular review between IDA andLIC.

1.07 Foreign and local consultants will be used during project execu-tion by the Nigam, the regional Jal Sansthans (RJSs) and the Jal Sansthansin the KAVAL towns to improve their technical, management, financial andadministrative procedures. The project appraisal was based on the informa-tion provided by GUP, LSGED and LIC. The appraisal was undertaken inSeptember/October 1974 by Messrs. Mould, Rasmusson, Van Nimmen, LaBahn(IBRD), and Hudson (consultant). Reviews of the GUP final draft legisla-tion were made by Messrs. Mould and Sassoon in Lucknow in February 1975.

2. THE SECTOR

Present Situation

2.01 Uttar Pradesh, with a population of about 95 million, roughly 16%of the population of India, covers an area of 295,000 km2 on India's north-eastern border with Nepal and China, parallel to the Himalayan Mountains.(Map IBRD 11384). Four major rivers, including the Ganga and Yamuna risein the foothills of these mountains and flow southeast through the Indo-Gangetic Plain of UP to Bihar and West Bengal. Over 86% of UP's population

is rural, living in or around 112,000 villages, with the remainder in 293towns with populations ranging from 5,000 in the smallest, to almost 2 mil-lion people in Kanpur, the largest of the five KAVAL towns. The Indo-Gangetic Plain covers about two-thirds of the State and because of readilyavailable supplies of surface and groundwater, it has been the principalpopulated area for centuries. Large population increases (50% - or 31 mil-lions in 25 years) have increased demand for marginal land in unfertile andwater scarcity areas. In the Hill Districts of Kumaon and Garhwal, and inthe Bundelkhand, population growth rate is now about 10% higher than in thePlain. The urban growth rate in UP is lower than the national average, butthe KAVAL towns are now expanding at a rate of about 4% per annum.

2.02 Climatic conditions vary widely from the very hot, almost aridareas of the southern districts, including Bundelkhand, to temperate areaswith ice-capped mountains, in the northern Hill Districts. Temperaturesrange from summer peaks of over 45°C in the Bundelkhand to winter lows ofbelow - 10°C in the inhabited areas of the hills. The annual rainfall inthe south is below 800 mm, while in the hills it can be above 2000 mm.

2.03 In a predominantly agricultural economy - 75% of workers areengaged in agriculture which contributes about 58% of the State's income- an average worker has to support about four persons, including himself,with an annual per capita income of about US$80 equivalent at 1970-71 prices.In urban areas, e.g. a KAVAL town, per capita incomes are over US$120 equiv-alent, compared to under US$60 equivalent in the poorest rural areas.

2.04 Data on health and diseases in UP are limited. The latest avail-able data covering the five years 1966-70 which demonstrate the order ofmagnitude of UP's problem of water-borne diseases are shown in Annex 1.Although the data indicate some 6 million cases of waterborne diseasesoccur annually in UP, they represent only the reported cases by clinicsand health centers. It is common knowledge that a substantially largernumber of cases go unreported. However, the data emphasize the urgentneed to improve safe water supplies. Diseases which are almost eliminatedin many parts of the world are virtually endemic in UP. As an example, inthe same period, 1966-70, the number of cases of typhoid reported annuallyper 100,000 population were 0.2 in North America; 16.0 in South America,compared to UP's 166.6. Pilot water supply projects in UP have success-fully reduced the local incidence of waterborne diseases, reducing diarrhoeain children under 5 years from 24% to 5%, eliminating typhoid, and reducingdeaths from dysentery from 12.2 to 3.1 per 1,000 population. The Nigamintends to operate a rural health surveys program with the GUP Director ofMedical Services for selected sub-projects to ascertain the health of ruralpeople before and after introduction of piped water supplies. The scope ofthe surveys and the sub-projects to be included in the surveys will bemutually agreed upon between IDA and the Nigam.

2.05 In areas outside the Indo-Gangetic Plain, such as rural Bundel-khand, water is scarce and sometimes saline. It is often to be found onlyat depths of 500 feet or more, and these wells usually dry up in summer.

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In the Hill Districts, water supplies have to be hand-carried up or downsteep, rough paths, for long distances - often several miles in summer,when the nearest sources dry up.

Sector Development and Objectives

2.06 The inadequacy of resources, combined with rapid population growth,has contributed to the current situation, whereby less than 30% of thepopulation has access to safe water supplies, and some 65 million have onlypolluted or inadequate sources. Of the 293 towns with water supplies, serv-ing 12.7 million people, 112 do not have safe systems and 86 require majorimprovements to continue safeguarding supplies. Only about 3 million ruralpeople living in 5,000 villages have piped systems, the remainder relyingon surface water, dug wells, irrigation wells or channels which are oftenpolluted 1/. Over 32,000 villages are in drought-prone or rocky zones (e.g.Bundelkhand), or have been classified as hardship areas (e.g. Kumaon andGarhwal), and are listed as priority areas for provision of water supply(Annex 2). Forty towns have limited sewerage systems serving about 6 mil-lion people. The rural areas have no sewerage facilities. Only a fewexperimental rural sanitation systems have been developed. The few exist-ing sewage treatment works use oxidation ponds. Some large towns useuntreated sewage for irrigation with or without dilution by water.

2.07 Urban water supply and sewerage systems in the KAVAL towns (Annex 3)and other important urban areas were first constructed in the late nineteenthcentury. With subsequent extensions, these systems provided adequate highquality water supplies and satisfactpry sewerage facilities to their communi-ties for almost 50 years. The past 30 years have seen a high growth rateof urban population accelerated by immigration from rural areas; and failuresby responsible local bodies to plan for adequate systems, good standards ofmaintenance and financial growth. As a result, most urban systems are in-capable of meeting demand, are in poor operating condition, and are finan-cially dependent on GUP or local government entities' taxation. Substantialinvestments and trained manpower are needed to upgrade these systems, andfinancial performances must be improved to levels where urban water under-takings can generate sufficient funds for their own expansion, and be ableto support poorer and less viable systems in the sector.

2.08 The third Five-Year Plan (1961-66) provided the earliest signifi-cant construction program of rural water supply systems. Annual investmentsthereon - mostly GUP grants-in-aid - have increased from Rs 40 lakhs (US$0.5million equivalent) in 1951/52 to Rs 5.9 crores (US$7.4 million equivalent)by 1973-74. The responsible local bodies - Zilla Parishads - have been unable

1/ A survey in one UP region showed 93% of open wells and 45% of wellsusing hand pumps had high coliforn counts indicating probability offecal contamination.

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to employ the necessary technical and financial expertise to operate andmaintain them, and the systems are often broken down or unreliable, and manyvillagers have never been charged for water supplies. Because of these con-ditions, institutional lenders, such as LIC, have been reluctant to partici-pate in financing of rural water supply schemes (para 6.20).

2.09 The sector development program for the next 15 years aims to pro-vide adequate treated water supplies to about 200 towns and to about 30,000villages in the scarcity and hardship areas, and construction of a few urbansewerage systems. The total development cost for such a program at 1975prices would be about Rs 1,000 crores (US$1.3 billion equivalent). AboutUS$115 million or less than 10% of the estimated needs for the next 15 yearsis provided in the draft Fifth Five-Year Plan 1974/1979. The proposed proj-ect (para 4.01) will form a major part of this Plan, as shown below:

DraftFifth Five-Year Plan Proposed Project

US$ Million US$ millionRs Crores Equivalent Rs Crores Equivalent

Urban water supplies 45.0 56.0 27.4 34.2Urban sewerage systems 10.0 13.0 6.8 8.5Rural water supplies 37.0 46.0 23.4 29.3

92.0 115.0 57.6 72.0

Specialized equipment,advisory services andtraining 2.4 3.0

60.0 75.0

Funds are normally allocated by GOI to States for development of watersupplies and sewerage in the form of 30% grants and 70% loans, which bearinterest at rates between 5% and 6%, for about 18 years with three yearsgrace. In the Fifth Five-Year Plan, all sources of funds such as IDACredits or LIC loans for State projects are included in such allocations,and are not additional to Plan resources transferred by GOI to States.

2.10 In the next 15 years, it is unlikely that Plan allocations willbe large enough to make a significant impact on the sector's development.GUP has therefore decided that the sector development policy should be tomobilize potential resources within the sector as quickly as possible bycommencing a major reorganization of the sector, particularly its institu-tions; introducing fiscal discipline, particularly in urban water under-takings; and improving overall efficiency of operation and maintenance.

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Sector Organization

2.11 State Governments in India have the primary responsibility fordevelopment and organization of the water supply and sewerage sector, withGOI providing national planning and inter-State coordination through Five-Year Plans and special programs. Various UP laws since 1916 have vestedresponsibility for development and operation of water supply and seweragein over 500 local bodies, i.e. town and district councils of elected repre-sentatives, with the GUP Department of Local Self-Government controlling andregulating the sector. Partly because of the non-mandatory nature of manyof the local bodies' powers and duties and certain other legislative diffi-culties, it has not been possible to enforce satisfactory operation andmaintenance of systems. Under the law, GUP could not take over water andsewerage services from a neglectful local body without also taking overresponsibility for all other municipal or district functions.

2.12 In 1927, the State formed a Department of Public Health Engineer-ing, which became LSGED in 1949. Until assimilation in the Nigam in 1975,it was the GUP agency responsible for the development, organization andoperation of the sector (Annex 4). Although LSGED's original role was thatof a quality control agency, GUP became increasingly reluctant to enforceLSGED's recommendations, because to do so would have required unpopularincreases in water taxes and charges by local bodies. From the 1950's LSGEDbecame the project planning, design and construction agency in the sectorbecause of the inability of local bodies to hire and maintain adequatetechnical staff. Since 1971, no local body has designed or constructed itsown facilities; instead they have given the proceeds of loans or grants toLSGED, which executed the work and transferred completed assets to the localbodies. LSGED became a high quality technical organization, and during the1960's successive very capable Chief Engineers convinced GUP to increase thesector's share of GUP's limited resources. To maintain water supplies, LSGEDunofficially took over many rural and small urban systems and met the oper-ating cost from capital budgets. In some cases newly-built systems werenever taken over by a local body, and LSGED developed, with some success,tariffs and charges to cover the cost of operations and maintenance ofthese systems.

2.13 In 1973, GUP promoted the establishment of a State Water Board, butthis was politically unacceptable. Local autonomy would have ceased, andcontrol of systems would have been moved to the center in Lucknow. Further-more, GUP could have been vulnerable to strikes by the Board's staff, asoccurred in 1973 when the State Electricity Board's engineers took indus-trial action. In May 1975, GUP promulgated the UP Water Supply and Sewer-age Ordinance, 1975 as a preliminary to the passage through the LegislativeAssembly during 1975 of new legislation, which provides for the development,maintenance and regulation of the sector, including establishing the Nigam(para 3.02) and Jal Sansthans (para 3.07). This Ordinance has been reviewedand is a satisfactory basis for achieving the project's objectives (para 1.04),but its enactment as permanent legislation by UP Legislative Assembly is acondition of effectiveness of the proposed project. Under the project, thefirst Jal Sansthans to be designated by CUP will be regional water authorities

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for Bundelkhand, Kumaon and Garhwal (RJSs) 1/, and urban water authoritiesin each of the five KAVAL towns. The long-term objective will be for aboutten or twelve RJSs, although during the development period, a larger numberof such bodies may be created. Provisional estimates indicate at least a25-year program of reform and reorganization to be necessary before thesector can provide adequate internal resotirces for long-term development,operations and maintenance.

3. THE BORROIWER ANTD THE BENEFICIARIES

The Jal Nigam (UP State Water Supply and Sewerage Development Corporation)

3.01 The proceeds of the proposed Credit would be transferred by GOTto GUP as part of the Plan resources allocation (para 2.09). LIC wouldlend direct to the Niigam (para 4.19). IDA will have (i) a Credit Agreementwith GOI; (ii) an Agreement with GUP whereby CUP will tn tc l*'>hmthe necessary loans and grants to the Nigam and guarantee the Nigam and JalSansthans' performances; (iii) a Project Agreement with the Nigam; and (iv)an Agreement with LIC on disbursements and supervision procedures. TheNigam will use the loans and grants to forn a Sector Loans Fund (para 6.05)and will enter into agreements to on-lend funds for all sub-projects to JalSansthans on terms and conditions acceptable to IDA for not exceeding 25years (para 6.07).

3.02 The Nigam (Annex 4) has been formed from the LSGED staff, organi-zation and facilities. As an autonomous Corporation, with a Board havingthe Secretary of Local Self Government as its first Chairman, the Nigam'sfunctions include promoting and ensuring the efficient provision of watersupply and sewerage systems in UP, and in particular advising GUP on sectorpolicy and monitoring and advising Jal Sansthans and all local bodies havingwater supply and/or sewerage systems. Should Jal Sansthans fail to performtheir duties, the Nigam would take over and operate their systems, and returnthese to the Jal Sansthans when their satisfactory future operation is assured.

o."'^ 'Aia"'m Tri1! have distinctive short/medium term and long termroles. Jal Sansthans will be established in a phased program over 10-15years, but until they are capable of carrying out their powers and duties,the Nigam will assist in their formation and execute certain functions ontheir behalf. These will include the design and construction of projects,the operation of systems where local capability or capacity is deficient,

ti Throughout this report, the term 'Regional Jal Sansthan (RJS)' is usedto denote that these Jal Sansthans cover a wide area, having a nunmierof urban and rural water supply systems and sub-projects. in contrastto the Jal Sansthans in the KAVAL towns which operate a city's waterstupply and sewerage systems.

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and the provision of various advisory services. When Jal Sansthans can per-form efficiently, the Nigam will revert to its primary role as the sector'smonitoring, financing and regulatory agency. This development period islikely to last about 15 years, because the initial pool of trained staffavailable from LSGED is only adequate to meet the needs of the Nigam, anda few Jal Sansthans. The experience obtained in establishing the first JalSansthans, combined with benefits from a training program for new andexisting staff at all levels should enable the Nigam to plan and imple-ment the establishment of Jal Sansthans in other parts of the State.

3.04 An important innovative feature of the Nigam is its role as sectorfinancing agency. In the absence of planned fiscal or economic policies forthe sector (para 6.02), and faced with an increasing scarcity of resources,GUP will use the Nigam to review and control the sector's resources allocationand utilization. The Nigam will receive all funds from all sources externalto the sector. Jal Sansthans will not be able to obtain funds, other thanof their own generation, from any source other than the Nigam. The Nigamhas powers to borrow from national and international institutions, withrepayments guaranteed by GUP. The Nigam's Loans Fund (Annex 4) will oper-ate as a development bank, using borrowings to finance Jal Sansthans andother local bodies' water supply and sewerage schemes at rates and on termsappropriate to each authority's financial capacity.

-A.nr, The chief executive of the Nigam is the Managing Director, whowas previously the Chief Engineer of LSGED. He is a qualified and capableofficer, with excellent managerial capabilities. He will be assisted bya Finance Director. The Nigam will consist of engineering, accounting,personnel and administrative/secretarial divisions, with a project appraisalunit directly responsible to the Managing Director. The Nigam has agreed togive IDA an opportunity to review and comment on the qualifications and expe-rience required for the posts of Managing Director and Finance Director ofthe Nigam and would inform IDA before future appointments are made to theseposts. The Nigamis management center is in the UP State capital, Lucknow,and there are currently twenty-one regional offices responsible for (i)design and construction; (ii) inspection of water authorities or undertak-ings; and (iii) where necessary, operation and maintenance of local systemswhich have temporarily to be operated by the Nigam. Each of the regionaloffices has one or more engineering design and construction groups (circles)with support services, including accounting, under Superintending Engineers,who have considerable local autonomy. Sector financial management, projectappraisal, and all advisory services will be based in Lucknow, unless anydecentralization is subsequently recommended by consultants. Only limitedadditional technical expertise, particularly specialists in water treatmentwill be needed, but management, accounting, financial and tariff consultants,will be necessary for at least three years to ensure rapid and orderly devel-opment of the new institutions. These consultants will be engaged by theNigam on or before January 1, 1976, on terms and conditions acceptable toIDA, to (i) recommend and install management and organization systems forthe Nigam, the first three RJSs and the KAVAL Jal Sansthans; (ii) reviewand recommend on the financial and resources generation capacity of Jal

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Sansthans, on which on-lending rates and terms of loans would be recommended(para 3.04). The review would include preparation of tariff studies andrevenue collection systems; (iii) assist in the valuation of all assets andinventories as at date of formation of the Nigam and Jal Sansthans, withschedules of condition of the waterworks and sewerage systems in the JalSansthans as at date of formation; and (iv) assist in the planning, designand procurement of water treatment plants.

3.06 During the next few years, the size of the Nigam's staff will varyas personnel are transferred, or seconded, to form or to assist the JalSansthans. The initial Nigam establishment will be about 6,000 personnel.No recruitment problems are expected, but the Nigam will respond to recom-mendations of management consultants (para 3.05) and ensure that its staffingis not excessive. GUP has agreed that (i) it will take all necessary stepsto ensure that the Nigam and Jal Sansthans will hire qualified staff in suf-ficient numbers to carry out the proposed investment program includingappraisal and supervision of sub-projects, and for operations and mainte-nance of their systems; (ii) if GUP requires the Nigam or Jal Sansthans toemploy staff in excess of agreed hiring schedules, GUP will finance theiremployment; and (iii) material modifications will not be made in the agreedstructure and organization of the Nigam and Jal Sansthans (para 3.05) withoutconsultation with IDA. There have been few opportunities for the UP engineersto obtain adequate in-depth training and experience in the sector, becauseLSGED was responsible only for project design and construction supervisionwhile local bodies' staff only operated and maintained water supply andsewerage systems - the staffs could not be interchanged due to differingemployment conditions. The sector's staff will now belong to one cadre,and in-depth training schemes, particularly for management, and for opera-tions and maintenance will be necessary. To advise and assist in imple-menting training schemes for the Nigam and the Jal Sansthans, consultantswill be employed by the Nigam by January 1, 1976, on terms and conditionsacceptable to IDA.

The Beneficiaries

3.07 GUP have selected as the first regional Jal Sansthans, the regionswhich (i) suffer the greatest water scarcities or hardships in the State;(ii) have areas where below average per capita incomes exist; and (iii)have water-borne diseases considerably above the UP average (paras 2.04,2.05). However other areas could be selected provided GUP creates suitableJal Sansthans and the sub-projects have acceptable priorities and justifi-cation (para 4.06). To improve major urban systems and to generate increasedlocal resources, five Jal Sansthans based on the water supply and seweragedepartments in KAVAL towns will be formed to administer the water supply andsewerage services within the areas of the respective municipal boundaries(Annex 5). Before disbursements are made from the Credit or LIC loan inrespect of any sub-project to be financed therefrom, three basic conditionsmust be fulfilled. These are (i) GUP will declare any area of GUP wheresub-projects are to be constructed to be within the area of a Jal Sansthan;(ii) each Jal Sansthan will enter into an agreement to take over all assets

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constructed by the Nigam on behalf of the Jal Sansthan, and will acceptresponsibility for debt service on loans made by the Nigam to meet thecost of sub-project construction; and (iii) the Nigam will have completeda technical report on the sub-project and obtained the approval of IDA andLIC thereto (para 4.09). Assurances were given that the responsible author-ities will complete these steps, and that agreements between the Nigam andJal Sansthans will be in a form acceptable to IDA.

Regional Jal Sansthans

3.08 The RJSs (Annex 5) will be autonomous local bodies whose mandatoryfunctions are, inter alia, to promote and operate efficient systems of watersupply and, where feasible, sewerage, sewage treatment and disposal, andsanitation and to establish or take over, construct, reorganize, operateand maintain those facilities in their areas of jurisdiction. Each RJS willbe controlled by a Board with a GUP-appointed Chairman and General Manager.GUP has promulgated the establishment of Kumaon RJS and Garhwal RJS fromOctober 2, 1975 and it is a condition of effectiveness of the proposedCredit that the Bundelkhand RJS will be promulgated by GUP to be establishednot later than January 1, 1976. Bundelkhand RJS headquarters will be atJhansi and will serve about 4.3 million people in about 4,500 towns andvillages. The Kumaon RJS will be at Nainital and will serve 1.7 millionpeople in about 5,500 towns and villages. The Garhwal RJS will be at Pauri,serving 1.6 million people in about 6,000 towns and villages. RJS organi-zation will be on typical public utility lines, having engineering, financeand accounting, administrative and consumer service divisions, each of whichwill have sub-divisions in the various district centers under district man-agers. RJSs' staffs will be initially formed from existing staff of localbodies' water systems and the Nigam's staff. Numbers will be dependent onthe final organization established by the Nigam and management consultants(para 3.05), but each RJS is expected to have about 1,000 personnel, whichwill increase as additional responsibilities are assumed and taken over fromthe Nigam.

3.09 The first phase of establishment of each RJS will be to take overall existing facilities, which exist mostly in the urban areas; prepareschedules of condition of assets; improve operations and install main-tenance systems. Tariffs, as well as accounting, billing and collectionsystems will have to be designed and implemented (paras 3.05 and 3.06).The Nigam will be constructing new rural systems (the sub-projects) during1975-79 and handing these over on completion to the RJS, which will makearrangements with the Nigam for their operation and maintenance, and pre-paring villagers to receive the new systems through educational programsin water use and hygiene.

KAVAL Towns Jal Sansthans

3.10 The organization of these Jal Sansthans will be based on existingwater supply and sewerage departments, and will be similar to RJSs, althoughon a smaller scale, with the Municipal Corporation as the controlling body.

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An engineer/manager will be responsible for engineering, administrative aneconsumer affairs, and finance divisions. A water works engineer and an addi-tional chief accountant for water supply and sewerage are to be appointed.The Nigam will assist in reorganization and will supply senior staff, orconsultants, primarily to expedite improved operations and maintenance, andto prepare the schedules of condition and of valuations of assets as at dateof formation as a Jal Sansthan (paras 3.05 and 3.06).

3.11 The KAVAL towns have the largest and some of the better operatedwater supply systems in UP. In these towns there has been a bias towardsemploying electrical and mechanical .engineers for the senior water worksengineers' posts. Considerable efforts have been made to maintain pumpingcapacity, often by ingenious methods, but water treatment and distributionsystems have fallen well below acceptable standards. Unaccounted-for wateraverages over 50%, due to high leakage rates, use of about 6,700 standpipes,and wastage. Under 50% of all connections are metered, and only about 40%of the meters are working.

3.12 As a result of these shortcomings the per capita availability isonly about 90 1/cd. This could be improved substantially by improved leakdetection and waste prevention measures, but new investments will be neces-sary to increase the average availability to about 180 1/cd, which wouldstill be a modest quantity for cities of this size and economic activity.Comparable figures for Singapore and Bangkok are 230 1/cd and 300 1/cdrespectively.

3.13 Although the first sewerage systems in these cities are over80 years old, there have been very little extensions in that time. Thecenters of the cities are sewered, but many sewers have been blocked foryears. Systematic clearing of many sewers is now in progress, but extensiveleakage exists and major rehabilitation, with substantial extensions, arerequired. The cities screen all sewage and sell it for irrigation purposeson adjacent sewage farms, which have provided the only significant sourceof revenue for this service for many years. This method of sewage disposalis questionable because of possible dangers to the health of agriculturalworkers and food consumers. Long-term proposals exist for sewage treatmentplants including greater use of oxidation ponds. However, these require-ments, with sewerage system improvements, have a low priority for scarceresources, and water supply improvements in these cities should receivefirst attention.

Accounts and Audit

3.14 Governmental-type accounting will not be used by the Nigam andJal Sansthans. Instead, all authorities will use the accruals basis andJal Sansthans will operate commercial accounting. The KAVAL towns munici-palities will establish water supply and sewerage funds for their JalSansthans. These funds will be separate from other municipal financialactivities and subsidization of water sup py and sewerage from other muni-cipal revenues or vice-versa will no longer be admissible. GUP has agreed

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that Accounts Regulations for Jal Sansthans will be provided to IDA for re-view and comment at drafting stage, and will be brought into force withinthree months of the formation of a Jal Sansthan. Assurances were alsoobtained that audits of the accounts and financial statements of the Nigamand Jal Sansthans, acceptable to IDA, will be carried out, and that copiesof such audited statements will be available to IDA not later than nine monthsafter the close of the fiscal year to which they relate. This is a longerperiod than normal, because of additional time required to review the activ-ities of the many sub-divisions in Jal Sansthans and the Nigam. However,the Nigam would regularly review quarterly unaudited reports of the sector'sfinancial activities to ensure continuous satisfactory performlances. Copiesof such reports will be available for IDA review.

Other Local Bodies' Water Supply and Sewerage Systems

- . 1% 5 Tn tho remainder of UP, existing local bodies would continue forsome years to be responsible for their systems, with the Nigam acting asGUP's financial monitoring and regulatory agency. Many of the currentshortcomings would continue, but where the Nigam executes schemes outsidethe proposed project, it would obtain reforms on the lines proposed forthe eight Jal Sansthans. Until a local body's water supply system isdeclared to be part of a Jal Sansthan by GUP, major improvements will notbe feasible under the new legislation, but it is open to a local body toask GUP to create a Jal Sansthan and bring their systems within the newlaw.

4. THE PROJECT AND SUB-PROJECTS

The Project

4.01 The proposed Rs 60 crores (US$75 million equivalent) project isprimarily designed to promote the first phase (1975-81) reorganization ofthe water supply and sewerage sector in UP, by encouraging the establishmentof the Nigam and eight Jal Sansthans. The sub-projects to be executed bythe Jal Nigam for the Jal Sansthans in the period 1975-79 consist of (i) watersupply scheme improvements costing about Rs 27.4 crores (US$34.2 millionequivalent) to provide adequate water supplies for about 5 million people inthe KAVAL towns; (ii) improvements and extensions to these towns' seweragesystems costing about Rs 6.8 crores (US$8.5 million equivalent); and (iii)rural water supply schemes costing about Rs 23.4 crores (US$29.3 millionequivalent) in selected areas of Bundelkhand, Kumaon and Garhwal Jal Sanathansto meet the needs of about 1.2 million people in 2,050 villages. The totalcost of civil works, equipment, materials, engineering and contingencies forthese water supply and sewerage works is Rs 55.1 crores (US$68.9 millionequivalent) (para 4.11). The Nigam will finance the construction by loansand grants from GUP and loans from LIC. Interest on these loans duringconstruction is estimated at Rs 2.5 crores (US$3.1 million equivalent) andthis interest charge will be added to construction costs by the Nigam whencomputing the total value of assets and loans for purposes of the agreements

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with the Jal Sansthans (para 3.07). The forecast total cost of all sub-projectsis therefore Rs 57.6 crores (US$72 million equivalent). In addition, theproject includes purchase of specialized equipment, such as drilling rigs,advisory services and training at a cost of Rs 2.4 crores (US$3.0 millionequivalent).

Sub-Projects

4.02 To facilitate project management and appraisal, the project willbe divided into sub-projects. Water supply schemes, particularly the 1,000rural schemes will be grouped into about 300 sub-projects. Each scheme isa separate, independent water supply system, designed to supply a group ofvillages having highest priority based on hardship and scarcity factors, orwhere the incidence of water-borne diseases is above average. These schemesare being grouped into appropriate-sized sub-projects on the basis of suchfeatures as commonality of water sources, status of final designs, and pro-curement requirements, particularly grouping of civil works contracts. Thefinal size of each sub-project will be determined by the Nigam and will befully defined in the Nigam's technical reports (para 4.09). Detailed descrip-tion of the water supply and sewerage schemes and probable sub-projects arein Annexes 2 and 3.

4.03 All the rural water supply schemes (Annex 2) will have piped water,many with pumping stations and storage, and a number with treatment works.The capacity of the schemes, which will serve village populations in therange of 250 to 5,000, will vary from one 1/sec to 150 1/sec. The supplywill be provided through standpipes and house connections. One standpipewill serve about 200 persons, and house connections 1/ although limited innumber initially, are expected to increase steadily some two to three yearsafter introduction of supplies, if the experience of similar installationsin UP is repeated. Water consumption could vary from under 50 1/cd to90 1/cd and designs are based on an average of 70 1/cd. Sub-project costscould range from Rs 10 lakhs (US$125,000 equivalent) to Rs 3 crores (US$4million equivalent), but the cost for one village could be as low as Rs onelakh (US$12,500 equivalent). Based on projected populations, the averageper capita cost is Rs 210 (US$26 equivalent), in the range Rs 130 (US$16equivalent) to Rs 370 (US$46 equivalent).

4.04 The sub-projects for the KAVAL towns (Annex 3) will provide forthe extension of existing surface water sources and further development ofgroundwater supplies. Existing water treatment works will be uprated andextended to provide additional capacity. Water distribution systems willbe extended concurrently with major leak detection and waste prevention

1/ The costs of house connections are not included in the project; thesewould be paid for by the consumers concerned.

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programs. The maximum daily domestic water consumption is projected at225 1/cd. The average capital cost per capita is Rs 215 (US$27 equivalent).Existing sewerage systems will be improved, and where feasible, extendedinto areas presently unsewered. These proposals will be based on masterplans and feasibility studies which have been prepared by LSGED for eachof the five KAVAL towns. Some detailed designs are completed, but othersare in various stages of completion. The appraisal mission's review ofthe master plans, feasibility reports and available designs indicates ahigh level of engineering competence in LSGED.

4.05 At the time of IDA appraisal, LSGED had prepared sub-projects -rural schemes for the RJSs areas, and water supply and sewerage schemes forthe KAVAL towns, valued at over Rs 90 crores (US$112 million equivalent)i.e. some rs 32 crores (US$40 million equivalent) additional to the sub-projects included in the proposed project. These additional sub-projectscannot be financed because of insufficient resources, but most would beadequate substitutes for any sub-projects which may be found to be ineli-gible for IDA financing after review of the Nigam's technical reports(para 4.09).

Sub-Projects Justification

4.06 Approval to sub-project financing by IDA from the proposed Creditwould be primarily based on sub-project justification. Nigam technicalreports (para 4.09) -will contain project data and justification of eachsub-project, similar in detail to those contained in IDA water supply proj-ects appraisal reports. Annex 6 demonstrates the overall population andwater demand forecasts for the areas where sub-projects will be constructed,together with the Nigam's design criteria, which are satisfactory. Usingthese as a base, the Nigam will establish related criteria which would bereviewed by IDA when a Jal Sansthan proposes construction of a sub-project.

A. n-7 FP^T- ul -ni-rrojects, the criteria would include (i) waterdemand analysis, and any sewerage systems requirements, with justificationof proposals for meeting these forecasts; (ii) least cost solutions; (iii)satisfactory internal financial rate of return; (iv) satisfactory imple-mentation of any institutional changes by the concerned water authorityrecommended by the Nigam; and (v) satisfactory forecasts of financial per-formance, including pricing policies by the water authority (para 6.17).

4.08 For rural sub-projects, the criteria in para 4.07 would be adoptedto the extent feasible. In addition, evidence would be required that thesub-project is in a scarcity area or a hardship area (Annex 2, paras 2 and3). Potential health benefits would be shown against a background of exist-ing statistics for water-borne diseases in the sub-project area. To supple-ment this data, the Nigam would cooperate with GUP Director of Health Serv-ices to conduct health surveys in selected sub-project areas before, during,and up to three years after construction (para 2.04). A rural sub-projectappraisal would also be required to show the justification for the proposedlevels of charging, taking into consideration annual per capita income of a

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sub-project area, and undertakings by the villagers to meet a Jal Sansthan'srecommended charges. In project areas where annual per capita incomes areless than Rs 300 (US$37.5 equivalent) at 1960/61 prices 1/, only nominalcharges may be levied and operations and maintenance expenditures will besubsidized by other systems, or where necessary by GUP through the Nigam.The Nigam has given assurances that the technical report for a sub-projectwill contain a statement from the Jal Sansthan, showing the proposed taxesand charges which will be levied on the beneficiaries.

Sub-Projects Appraisal

4.09 Because of the large number of sub-projects involved it was notpossible to appraise each and every one in detail, but they were reviewedto ensure their basic concepts were likely to justify their inclusion. TheNigam will be responsible for preparation of detailed technical reports andsupervision of all sub-projects (paras 3.05 and 3.06). Its appraisal unitwill continuously review groups of sub-projects and the Jal Sansthans inwhose area they will be constructed. About fifteen technical reports areexpected from 1975 through 1977. Technical reports for each Jal Sansthan(Annex 7) with supporting applications for allocation of the requisite pro-portion of the proposed Credit or LIC loan will be sent to IDA, who willhave 40 days to review the report and application. The Nigam would proceedwith procurement after this time unless IDA or LIC objected to any sub-proj-ect or to the actual or forecast performance of the Jal Sansthan concerned.Approval of funds allocation for disbursement, following IDA acceptance oftechnical reports, would relate solely to these schemes in the technicalreports and would authorize (i) subsequent IDA disbursements from the pro-posed Credit against approved expenditures thereon less any advance paymentsfor goods and materials (para 4.16); and (ii) LIC loan allocations (para4.19). Review of sub-projects by IDA staff would be limited to approvalof technical reports. Field visits will be undertaken as necessary beforeapproval of complex sub-projects and for supervision of selected sub-projects.These arrangements are satisfactory, and should be adequate to ensure thattechnically sound, least cost sub-projects are financed under the Credit.

4.10 This project is likely to require considerably more IDA supervi-sion than a normal water supply project, particularly in the first two years(Annex 8). IDA will supervise the project on behalf of LIC also, whose staffwill be invited to join in these activities. Current estimates are that 70man/weeks per year may be needed as compared to about 28 man/weeks for otherwater supply projects in the region. Primary emphasis would be on efficientestablishment of the Nigam and the Jal Sansthans, and on the training ofstaffs at all levels in the new bodies. An important objective is to en-courage the Nigam's appraisal team to attain performance standards whichwill minimize or eliminate IDA, LIC, or other lending agencies' review oftheir appraisals of future projects.

1/ 1960-61 is the base year for GUP economic calculations and most localindices.

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Cost Estimates

4.11 At appraisal, GUP asked IDA to consider assisting in the financingof sub-projects for urban and rural water supplies, and urban sewerageschemes, costing Rs 61.2 crores (US$76.4 million equivalent). These areset out in Annex 9 and include civil works, equipment and materials, andengineering components, plus physical and price contingencies. Afterexamining GUP's commitments to the entire sector in the Draft Fifth Plan(para 2.09), it became evident that the project size could not exceedRs 60 crores (US$75 million equivalent). This total included provisionsfor Rs 2.4 crores (US$3 million equivalent) for specialized equipment andconsulting services for the Nigam and Jal Sansthans, and for funding Rs 2.5crores (USS3.1 million equivalent) which the Nigam will require to financeinterest during construction of sub-projects. A summary of the project costestimate follows:

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Cost Estimates

Local Foreign Total Local Foreign Total %Rs Crores ---US$ million equivalent---

Rural SchemesWater SupplyCivil Works 6.0 - 6.0 7.5 - 7.5 11Equipment &Materials 5.3 2.1 7.4 6.7 2.6 9.3 13

11.3 2.1 13.4 14.2 2.6 16.8 24

KAVAL TownsWater SupplyCivil Works 5.4 - 5.4 6.7 - 6.7 9Equipment &Materials 7.4 2.9 10.3 9.3 3.6 12.9 18

12.8 2.9 15.7 16.0 3.6 19.6 27

SewerageCivil Works 2.3 - 2.3 2.9 - 2.9 4Equipment &Materials 1.2 0.4 1.6 1.5 0.5 2.0 3

3.5 0.4 3.9 4.4 0.5 4.9 7

Engineering 5.3 _ 5.3 6.6 _ 6.6 9

Sub-total 32.9 5.4 38.3 41.2 6.7 47.9 67

ContingenciesPhysical 4.9 0.9 5.8 6.2 1.1 7.3 10Price 9.2 1.8 11.0 11.5 2.2 13.7 19

14.1 2.7 16.8 17.7 3.3 21.0 29

Total ofPackage ofSub-projects 47.0 8.1 55.1 58.9 10.0 68.9 96

Specialized equip-ment, ConsultingServices andTraining 1.6 0.8 2.4 2.0 1.0 3.0 4

TOTAL 48.6 8.9 57.5/i 60.9 11.0 71.g/ 100

/a GUP will provide loans of Rs 2.5 crores (US$3.1 million equivalent) toenable the Nigam to finance interest during construction. The totalcost of the project to be incurred by the Nigam, is Rs 60 crores (US$75million equivalent) - see para 4.01.

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4.12 These costs are January 1975 prices, using data from 1974 contracts.About 40% of the estimated costs are based on final designs and 60% on pre-liminary designs. Physical contingencies are 15% average on basic costs ofcivil works, equipment and materials, and engineering. Price contingencies,which average 25% on basic costs and physical contingencies, are explainedin detail in Annex 9, Table 1. Should these contingencies prove inadequateor excessive, the contents of the basic package can be adjusted by exclusionor inclusion of approved sub-projects from the larger package (para 4.11) tocomplete the project.

4.13 The preliminary and final designs are of good quality, and littlerevision is anticipated except for specialized features such as water treat-ment works for which recommendations for improvements have been made by IDA(para 3.05). The costs of engineering and the Nigam administration havebeen estimated at the LSGED charging rate of 16% of the cost of schemes,but these fees will be reviewed as the Nigam develops accounting and cost-ing systems. The latter will be essential to enable the Nigam to maintaineffective control and regular reporting to IDA on its construction opera-tions. Assurances have been obtained that the Nigam will (i) constructand maintain costing systems to the satisfaction of IDA; (ii) review itscharges and recoveries annually for engineering and advisory services toJal Sansthans; (iii) provide IDA with a summary of these cost accounts notlater than three months after the close of a fiscal year commencing withthe year 1975/76; and (iv) provide IDA with forecasts of charges to JalSansthans and recoveries for each fiscal year, commencing 1977/78, notlater than four months before the commencement of such year.

Amount of IDA Credit

4.14 The credit of US$40 million will finance about 56% of theUS$71.9 million equivalent package of works and services shown in para4.11. This package, with interest during construction of about US$3.1million equivalent, forms the total project of US$75 million equivalent.About US$11 million equivalent, or 28% of the Credit will be used to fi-nance direct and indirect foreign exchange expenditures. The balance ofUS$29 million, or 72% of the Credit, will finance local currency expendi-tures on civil works, equipment and materials, consultant services andtraining, but not interest during construction.

Procurement

4.15 Contracts for about US$16 million equivalent of equipment andmaterials will be awarded on the basis of international competitive biddingin accordance with IDA guidelines. A 15% margin of preference, or customsduty, whichever is lower, is proposed to be granted to local manufacturersof equipment and materials when evaluating bids. After grouping of civilworks, there will be about 300 contracts totalling about Rs 20 crores(US$25 million equivalent). This large number is because of the widelydispersed sites in the three RJSs, whose combined areas total about 80,000km2, and letting of contracts over three construction seasons. It is not

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practical to group the civil works contracts in the five KAVAL towns' sub-projects. The largest of these contracts is unlikely to exceed US$3 mil-lion equivalent and would not interest foreign contractors. Civil worksmay include works by force account labor, but assurances were obtained atnegotiations that the Nigam will not employ force account for the civilworks component exceeding Rs 10 lakhs (US$125,000 equivalent) of any sub-project, without obtaining prior agreement of IDA. Contracts totallingRs 14 crores (US$18 million equivalent) for equipment and materials wouldbe either of small sizes and unattractive to foreign suppliers, or unsuita-ble for international competitive bidding by reasons of high transportationcosts, and/or high damage risk e.g., asbestos cement pipes. These equipmentand material contracts, with the civil works contracts, would be awarded onthe basis of GUP procedures for local competitive bidding which are accepta-ble to IDA.

4.16 The Nigam aims to achieve economies by bulk purchasing of equip-ment and materials for groups of sub-projects. The first technical reportsare under preparation but it is unlikely that sufficient sub-projects willbe approved by October-November, 1975 to permit the Nigam to make large-scale purchases of equipment and materials, particularly of foreign originfor use in the 1975/76 construction program. To overcome this difficultyand to encourage the Nigam to achieve its objective, it is proposed thatnotwithstanding the requirements of para 4.09, after the first sub-projecthas been approved by IDA, disbursements may be made in respect of foreignexpenditures until June 30, 1976, in aggregate not exceeding US$2 millionequivalent, for sub-projects which may not have received IDA approval.However, disbursements will not be made for such equipment and materialpurchases until the Nigam has provided IDA with a list of such goods andthe sub-projects in which they will be incorporated. Subsequently theNigam will provide IDA with proof of such incorporation. If any sub-proj-ects in which these goods are used, should not be approved by IDA, theequivalent expenditures would be excluded from subsequent IDA disburse-ments. During negotiations, assurances were received from the Nigam thatadequate records will be kept, and IDA will be provided with adequate proofof use of these advance purchases of goods.

4.17 Consulting and training services totaling about 300 man/monthswould be provided by international and locally recruited consultants whowould be employed on terms and conditions acceptable to IDA (paras 3.05and 3.06). Engineering services provided by the Nigam's staff, will notbe financed from the Credit. In order that the Nigam can commence essen-tial studies it is recommended that retroactive financing from June 18,1975, not exceeding US$0.5 million for consulting services should be author-ized from the Credit.

Disbursement

4.18 A quarterly disbursement forecast is shown in Annex 10. It isproposed to finance from the proposed Credit (i) 100% of the approved CIFcosts of imported equipment and materials, and of consulting services andtraining based outside India; and (ii) 60% of approved costs of civil works,

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and approved ex-factory costs of all other equipment and materials, con-sulting services and training.

4.19 LIC will finance a proportion of the local costs of (i) civilworks; (ii) the ex-factory cost of equipment and materials; (iii) consult-ing services; and (iv) training expenditures. This proportion will probablybe about 36% of these costs, after LIC has made an initial advance of Rs 1.8crores (US$2.0 million equivalent) to provide the Nigam with working capital.At negotiations LIC agreed to make available to the Nigam a loan of Rs 18crores (US$22.5 million equivalent) for 25 years with three years' grace onterms and conditions acceptable to IDA. Interest during the disbursementperiod of the LIC loan would be 7-3/4% per annum, or such other rate as maybe prevailing for LIC loans at the time of withdrawal of each instalment;and an average rate of interest would be charged on the total loan afterdisbursement of the final instalment.

Sub-Projects Design and Construction

4.20 The engineering division of the Nigam (Annex 4) will be responsiblefor planning, design, procurement, bid evaluation, and supervision of con-struction of sub-projects. Adequate high-calibre staff are available forthis work, but will be supplemented by technical consultants for specializedfeatures such as water treatment works (para 3.05). The program covers adesign and construction period from October 1975 through March 1979 (endof the Fifth Five-Year Plan period), although individual sub-projects havedesign and construction periods ranging from a few months to about threeyears. An outline schedule of the program is given in Annex 2, Chart 9306.Based on the past performance of LSGED, the potential capacities of theNigam's engineering staff and the local contracting industry, the programappears realistic.

5. JUSTIFICATION

5.01 A major objective of the project is to develop the institutionalcapability and the financial policies and procedures needed to deal with theproblems of providing basic water supply and sewerage services to millionsof people. Compared with the Bank's borrowers, UP State in India, with about95 million people, is third largest in population size (excluding India),Brazil and Indonesia being the other two. About 140 million people willneed water supply, sanitation and other basic services in UP by 1991. Onlyabout a third of UP's present population has access to safe water supplies.The present rate of investment in the sector is not even sufficient to keeppace with the annual growth in population. Therefore, there are dangers oflarge scale outbreaks of waterborne diseases and increasing hardship due tolack of drinking water for large masses of people. Rapid coverage of theentire population is not feasible but even modest increases in percentageof population covered are unlikely until basic changes are made in thefinancing of projects in this sector. The continuation of tariffs which

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do not even cover operation and maintenance costs means that the State'sfinancial burden on account of this sector will increase every year, aslong as it continues the financing of water and sewerage works through itsbudget allocations without any serious attempt at even partial recovery ofcapital. In a drive to place the sector on a self-supporting basis theState Government has taken the first significant step in establishing theNigam (para 3.02) and the Jal Sansthans (para 3.07). A major and specificgoal of the proposed credit is to assist in the development of these institu-tions.

5.02 As a new institution, the Nigam will have to organize its staff,train them and develop policies and procedures to fulfill its role as thedevelopment finance agency for this sector. The Association has alreadyassisted through its preappraisal and appraisal missions, in developingthe concepts behind the establishment of these institutions and the lawestablishing them. The Association can play a crucial role in the futuredevelopment of these institutions, their policies and procedures.

5.03 The project will help to impose financial discipline and improvefinancial management of the sector. Although the funds allocated for thesector in the five year plans (para 6.03) are small in relation to theneeds, the amounts involved are large. The multiple channels throughwhich these funds are provided and the accounting systems used, make itdifficult to assess the efficiency of overall sector investments. The pro-posed project will help to address this issue, because it approaches thesector as a whole. In addition, the accounting systems will be changed toenable determination of full costs. Existing pricing policies will bereviewed and adjusted to increase the revenues of the water supply andsewerage operations and to distribute the burden on the consumers moreequitably.

5.04 The long range objective of the government is to place all watersupply and sewerage systems on a self-supporting basis. As shown in Annex 11,the mission has calculated that in the period of the Fourth Plan (1969-1974),the total subsidy to the water supply and sewerage sector in UP has totaledRs 23.4 crores (US$29.2 million equivalent), of which Rs 13.9 crores (US$17.4million equivalent) was on capital account and Rs 8.5 crores (US$10.6 millionequivalent) on current account. Given the investment program presently en-visaged, the amount of annual subsidy in the next five years would rise by140%, and reach Rs 12.8 crores (US$16.0 million equivalent) in 1978/79.Implementation of the project would aim at eliminating subsidies in theRJSs (although still allowing for a possible cross-subsidization betweenlow-income rural areas and higher-income towns), and at gradually gener-ating funds for investment in the KAVAL towns. Improved financial andeconomic management will also make it possible to lay down criteria to beused in subsidizing the low-income areas, possibly on the basis of the con-sumer's ability to pay for water service. For many years to come a numberof systems especially in the rural and economically backward areas of theState will not be in a position to meet the objective. To assist suchsystems, a number of urban and rural water supplies in contiguous areas

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are to be grouped together to form regional Jal Sansthans such as the onesincluded in the project. Steps will be taken to ensure the financial sub-sidy from the richer (urban) to the poorer (rural) areas. This is animportant feature which the project is designed to promote.

5.05 Limited financial resources spread over a number of projects andslow and uncertain release of funds have in the past tended to lead to un-economic construction. The proposed project would help to provide the Nigamwith assured sources and amounts of funding over a period of years for theagreed development program. This should encourage more efficient planningand construction of the projects.

5.06 The sub-projects have been selected with two objectives. The firstis to construct facilities to meet the water demand in the KAVAL towns andexpand their sewerage systems to cover selected unserved areas. Since theKAVAL towns are the major industrial centers of the State, the implicationof not improving the facilities to meet demand could be to adversely affectthe industrial development in these areas. The second objective is to alle-viate the drinking water problem for large masses of people living in thedifficult and scarcity areas of the state. Care will be taken to ensurethat the sub-projects themselves are least-cost solutions using appropriatediscount rates. For example, the emphasis in the KAVAL towns' sub-projects hasbeen to modify and use existing water treatment facilities to produce addi-tional quantities rather than construction of entirely new facilities.Similar approaches to treatment plant design, which would emphasize theuse of local materials and resources will be adopted in all sub-projects.Certain components, the urgency of which was not self-evident, have beeneither eliminated from the sub-projects, or postponed to later stages inthe program.

5.07 The paucity of data, especially in the rural areas, makes anyquantification of the economic benefits of this project impossible. Yet,to the extent that improved sanitation and increased water supply contri-bute to better health and upgrading of social well-being, the project willcontribute to overall economic welfare. Given this assumption, which isbased on evidence recorded in other countries, the question of economicjustification is essentially one of project cost, composition and geographicdistribution. The considerations which led to the choice of the projectareas and the steps taken to ensure that project cost is brought down to aminimum are indicated in para 5.06. The health survey to be conducted byGUP, under the aegis of the project (para 2.04), will permit measurementof the impact of the project on health improvement and, possibly help toestablish guidelines for further water supply development policy in theState.

Project Risks

5.08 Although the establishment of the Nigam, with the eight JalSansthans, is an enterprising and constructive step in trying to resolvethe complex and extensive problems of this sector, there are a number ofuntested features. These include:

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Mi) the ability of as yet unrecruited financial, administrativeand managerial staff;

(ii) the capacity of regional Jal Sansthans to operate andmaintain systems in large territories, particularly incurrent circumstances of lack of consumers' education andof their unwillingness to protect their systems; and thepotential backlog of repairs and rehabilitation of existingsystems; and

(iii) the ability of urban Jal Sansthans to effectively charge andcollect from all consumers having water supply and sewerageconnections, and to obtain satisfactory property valuationsas bases for water tax on unmetered connections (para 6.16).

5.09 Nevertheless, the Association's investment in the project isjustified because of the impact it would have on the future developmentof the sector which will affect more than 100 million people. The UPState in India was selected for this approach because of the availabilityof a large and competent engineering staff which could serve as the nucleusfor developing an adequate organization for handling the sector administra-tion, project study and design, economic evaluation, procurement, construc-tion supervision, operations and maintenance. The alternative to thisapproach would have been the Association's consideration of individualprojects. Such a traditional approach in the context of UP, with its vastpopulation and large number of projects, would not have made any signifi-cant impact on sector development. In dealing with a problem of such alarge magnitude as in UP, the Association can play only a catalytic rolesince it cannot provide all the financing required for implementing theneeded program. Under the circumstances the approach selected in thisproject makes for the maximum impact on the sector and the most effectiveutilization of IDA staff in making our contribution to the sector.

6. FINANCES

6.01 This chapter reviews the past financing policies and proceduresadopted with regard to the development and operation of water supply andsewerage projects in UP and the new approaches that will be made as partof the proposed project. The role of LIC as co-lender for the proposedproject is discussed. The pattern of assistance for water supply and sew-erage schemes in the state, plan allocations, annual recurrent expenditures.relating to water supply and sewerage in the KAVAL towns, existing waterrates and charges in these towns, financial performance from 1969-74 andforecasts up to 1979 are all shown in Annex 11.

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Past Performance and Present Position

6.02 While a broad policy framework for financing of water supply andsewerage projects has existed in the State for many years, its applicationin practice has been uneven. Under this policy, water supply projects inurban areas were to be financed through loans and those in rural areasthrough grants. Grant financing was also used in respect of some sewerageschemes. The loans and grants, although advanced to local bodies, werechannelled through LSGED. In addition, the 500 local bodies in the Statealso occasionally incurred some expenditures from their own sources on minorextensions and improvements. There are no accurate data to indicate thetotal financing provided for this sector but the five year plan allocationsgive a broad indication of the capital financing proposed for water supplyand sewerage projects in the State.

6.03 The information available indicates that between 1969 and 1974approximately Rs 35 crores (US$43.7 million equivalent) were spent oncapital construction. Of this amount roughly Rs 15 (US$18.7 millionequivalent) crores were spent on rural water supply schemes. The annualrecurrent expenditures incurred by local bodies during this period in-creased from Rs 6 crores (US$7.5 million equivalent) in 1969-70 to Rs 9crores (US$11.2 million equivalent) in 1973-74. Present indications arethat during the Fifth Plan 1974-79 capital expenditures would rise to Rs 92crores (US$115 million equivalent) and annual recurrent expenditures to aboutRs 20 crores (US$25 million equivalent) by 1978-79. Increases of this orderwould tend to impose considerable additional burden on the financial manage-ment of this sector which is largely lacking at present. While technicalsoundness of the projects financed by grants and loans has been ensuredinvariably, only cursory attention has been paid to determination of finan-cial viability of projects. Often the repayment of loans has been irregularand indebtedness of the local authorities has increased considerably. Thepotential for levying adequate user charges has seldom been fully explored.As a result, the water and sewerage works have failed to be revenue earningentities. In several cases the KAVAL towns and local bodies have used muni-cipal resources, or subventions (ways and means advances) obtained from theState Government, as regular sources of funds to meet deficits in theiroperating budgets. Subventions are normally intended as short term financingto bridge cash flow problems, but these advances are rarely repaid. Underthe existing methods of allocation, releases of funds and maintenance ofaccounts, it is virtually impossible to determine the magnitude of financialsubsidies involved in this sector. The absence of adequate financial poli-cies and management is largely responsible for the slow rate of developmentso far. One of the objectives of the proposed project is to rectify thisdeficiency. For the first time all funds for the sector will be channelledthrough a single state agency, i.e. the Nigam.

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Financial Operations of the Nigam

6.04 The Nigam, as the sector development and finance agency, will re-ceive all funds for the sector from GUP in the form of grants, subventionsand loans. The Nigam is authorized to borrow from sources other than CUP,and it proposes to take loans from the LIC and other institutional lenders.The Nigam will use loans and grants to finance the construction of projectson behalf of Jal Sansthans and local bodies. Subventions from the Nigamwill assist any Jal Sansthans or local body which the Nigam considers to bein financial difficulties, but it intends to develop a policy of encouragingsuch bodies to repay these subventions. The Nigam will budget to recover itscosts of project construction and loans administration from the local bodieswhich use the Nigam's services. For its work in regulating and monitoringthe sector, and acting as the operator of water systems in default by theresponsible local bodies, the Nigam will be financed from GUP annual budgetpayments, which have been treated in this report as grants to the sector.To account for these funds and demonstrate their use the Nigam will operatethree accounts or funds: (i) a Sector Development Account; (ii) a SectorLoans Fund; and (iii) an Operations Account.

6.05 The Sector Development Account (Annex 4 Table 2) is designed toshow the net cost of the sector to GUP, excluding loans, by recording themanner in which all CUP grants or subventions to the sector through theNigam are utilized by the various authorities in the sector, and the netcost of operating the Nigam. This Account will also record transfersbetween authorities in the sector, including cross-subsidization, shouldthis occur in the future. GUP grants, which are earmarked in the Plan forcapital expenditures will be channelled through the Development Accountto the Sector Loans Fund. In this Fund, grants and loans raised by the Nigam,will be combined to form a pool of loans to finance capital expenditures inthe sector. Direct grant assistance for capital works is expected to cease.When the Nigam has completed construction and funding of an asset on behalfof a Jal Sansthan or local body, the assets will be transferred to the JalSansthan, and the cost of the assets will be treated as a loan from thesector Loans Fund repayable on terms and conditions agreed between the Nigamand the Jal Sansthans (para 3.07).

6.06 The Nigam will take over responsibility for all loans, includingGUP and LIC loans, made to local bodies for sector services before theformation of the Jal Sansthans. Initially, this will consist of the watersupply and sewerage loans totaling about Rs 21 crores (US$26.2 millionequivalent). This debt, together with all subsequent loans made to allauthorities in the sector, will be repayable to lenders by the Nigam andwill be guaranteed by GUP. As at March 1975, LIC loans to the KAVAL townsand local bodies which will be taken over by the Nigam were about Rs 1.5crores (US$2.0 million equivalent) compared to CUP's Rs 19.5 crores (US$24.7million equivalent). The Nigam will have the responsibility of collectingthe debt service from the RJSs and KAVAL towns, and can obtain from GUP thepower to take over water supply and sewerage services of any authority whichdefaults in such payments (para 3.02).

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6.07 The principles of Sector Loans Fund Operation including on-lendingrates and terms will be established after detailed examination of the re-sources of the RJSs, the KAVAL towns and other local bodies by the Nigam(para 3.05), including reviewing recommendations of tariff studies; but GUPintends that the Nigam should use the Fund's resources and operating poli-cies to (i) maximize generation of new funds for sector investment; and (ii)subsidize authorities which need assistance e.g. by low interest rates. Atnegotiations, assurances were obtained that IDA will be invited to commenton tariff studies and recommendations for Sector Loans Fund operation. Inaddition, it was agreed that until recommendations for the Sector LoansFund Operations (para 3.05) are adopted by the Nigam, the lending rates forNigam's loans will be ti) not exceeding 11% and not less than 8% to theKAVAL towns Jal Sansthans; (ii) not less than 3% to regional Jal Sansthans;and (iii) not exceeding 9% and not less than 7% to all other local bodies.All loans would be for periods not exceeding 25 years. These proposalsare intended to establish two principles: (i) that the more wealthy author-ities, particularly in urban areas should be charged interest at rates closerto the opportunity cost of capital and in doing so, generate additional re-sources to subsidize poor authorities; and (ii) grants from GUP should beused as loans funds, albeit on easy terms, to encourage consumers to makecontributions to construction costs of systems.

6.08 To complete the project, GUP gave assurances at negotiations that(i) it will make available to the Nigam grants of Rs 18 crores (US$22.5 mil-lion equivalent) and loans of Rs 24 crores (US$30 million equivalent) atinterest not exceeding that charged by GOI for development projects (cur-rently about 5-3/4% per annum); (ii) the loans will be for at least 18 yearsincluding 3 years grace; and (iii) these funds will be made available to theNigam in the loans/grants ratio of 4:3 as expenditures are incurred on IDA-approved sub-projects. On the above basis, by using the on-lending termsin para 6.07, the Nigam would be able to generate about Rs 42 crores (US$52million equ.valent) over 25 years, in the Sector Loans Fund, for new lendingpurposes. This amount would be additional to the loans and grants madeavailable from 1975 through 1979.

6.09 The Nigam will use an Operations Account (Annex 4 Table 1) torecord (i) costs recovered from authorities to which it provides projectdesign and construction supervision services, and other advisory services;(ii) GUP financial support through grants via the Development Account tomeet the net cost of the Nigam's operations, and unrecovered costs ofoperating and maintaining systems of defaulting authorities; (iii) ex-penditures on the Nigam's staff and services; and (iv) deficits incurredor surpluses earned as a result of the interaction of (i), (ii) and (iii)above. GUP would budget for an annual grant for Nigam's operations, butthe Nigam would be encouraged to maximize costs recoveries from the author-ities in the sector. The extent of any deficits or surpluses on the Devel-opment Account would indicate the success of such a policy by GUP and theNigam.

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6.10 The Nigam's financing plan for 1975/76 through 1978/79 is asfollows:

US$ US$Rs Million Rs Million

Sources Crores Equivalent % Applications Crores Equivalent %

GUP provi- Sub-projects'sion of expenditures 84.5 105.6 93initial work-ing capital 1.6 2.0 2

GUP budget pro-visions (grantsor subventions) 5.3 6.6 6 Advanced planning

and design work 3.9 4.8 4CUP grants 18.0 22.5 19GUP loans 47.9 59.9 53 Operations (net

loss) 3.4 4.2 3LIC loans 18.0 22.5 19 Increase in

Working capital 0.1 0.2 -Loans Fund

(net profit) 1.1 1.3 1

91.9 114.8 100 91.9 114.8 100

The Nigam will commence operations with a GUP contribution of about Rs 7crores (US$8.75 million equivalent) consisting of essential assets, equip-ment and work-in-progress of LSGED, and including about Rs 1.6 crores (US$2million equivalent) as working capital. It is a condition of Credit effec-tiveness that GUP will have completed the transfer of Rs 1.6 crores (US$2million equivalent) of initial working capital in cash to the Nigam. Assur-ances were also obtained that GUP will ensure the Nigam is provided withadequate funds to fulfill its statutory powers and duties.

Jal Sansthans' Finances

6.11 Every Jal Sansthan is required by the Ordinance (para 2.13) toestablish a Water Supply and Sewerage Fund, to which all revenues derivedfrom these services must be credited, and out of which only expendituresrelated to these services can be paid. GUP has given assurances that JalSansthans' Water Supply and Sewerage Funds will be established with adequateworking capital, including cash, to finance their operations. The Ordinancealso stipulates that a Jal Sansthan shall so regulate its rates of taxes andcharges and use the Fund in such manner as to enable it to meet the cost ofoperations and maintenance, and debt service, and achieve a rate of returnon its fixed assets.

6.12 Until RJSs are established and the Nigam and management consult-ants have advised on the most appropriate form of administration and staff-ing, and on schedules of water supply and sewerage systems' condition (para3.05), an accurate financial forecast will not be possible. However, fore-casts of a typical RJS have been prepared (Annex 5) using unit costs and per

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capita costs bases of known systems in these areas. Each RJS will be pro-vided through the Nigam with Rs 30 to 50 lakhs (US$0.4 to 0.6 million equiv-alent) of working capital. The first three RJSs will not be financiallyviable for some years because they are taking over ill-run urban and ruralsystems, including many where no serious attempt has been made so far torecover service costs from consumers. The forecasts demonstrate BundelkhandRJS may need subsidies totalling Rs 1.6 crores (US$2.0 million equivalent)through 1978/79. Nevertheless, their targets will be to attain financialindependence from Nigam subsidies. To ensure that the existing waterworkstaken over by RJSs in 1975/76 are financially viable by 1977/78, and to givetime for the new sub-projects built in 1975-79 to attain a revenue-earningcapacity, the Nigam has given assurances that each RJS will be required totake all measures based on the recommendations of the tariff studies (para3.05) or otherwise required (including, but not limited to the adjustmentof each RJSs taxes, fees and charges) to provide such RJS: (i) in each ofthe five fiscal years between April 1977 and March 1982, revenues sufficientto cover the annual cost of the operation and maintenance, and the debt serv-ice related to the assets transferred to the RJS on its establishment in1975/76; and (ii) in the fiscal year commencing April 1, 1982 and in eachsubsequent fiscal year, revenues sufficient to cover the annual cost of theoperation and maintenance, and the debt service related to all assets of theRJS.

6.13 Detailed examination of the water supply and sewerage finances ofthe KAVAL towns have been made from 1971/72 through 1973/74, and forecastsprepared from 1974/75 through 1980/81. Until the sub-projects for thesetowns are defined in detail (para 4.04) in Nigam technical reports, it willnot be possible to define accurately the extent of their financial problems.At the end of March 1975, four of the five towns were forecast to have acombined cash deficit on these services of Rs 5.7 crores (US$7.1 millionequivalent) ranging from Rs 92 lakhs (US$1.2 million equivalent) in Varanasito Rs 2.3 crores (US$2.9 million equivalent) in Lucknow. These deficits havebeen temporarily financed by other municipal funds, overdrafts, or GUP sub-ventions. These deficits are unlikely to be recovered, but the KAVAL townsJal Sansthans will not be required to meet any cash deficits incurred up tothe date of separation of these services from other municipal services.

Water Supply and Sewerage Taxes and Charges

6.14 Although the data are not firm, evidence suggests that in 1970/71urban consumers were spending not more than 0.05% - or RS 3.0 (US$0.40 equiv-alent) of their total yearly per capita expenditures of Rs 526 (US$66 equiv-alent) on water supply. Rural consumers' per capita expenditures were aboutRs 420 (US$52 equivalent) (Annex 11, Table 9). Assuming a low annual growthrate for such expenditures based on the 1966/70 rate of 8.5% per annum, thecorresponding urban and rural per capita expenditures for 1978/79 would beRs 1,010 and Rs 807 (US$126 and US$100 equivalent), respectively. Annex 5,Table 1 indicates that the 1978/79 maximum per capita revenue requirementsof the Bundelkhand RJS would be Rs 11.76 (US$1.47 equivalent) - or 1%-2% ofann-ual per capita expenditures. If a similar percentage requirement were

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applied to the projected 15 million urban consumers in 1978/79, this wouldyield about Rs 15 crores (US$17.9 million equivalent) which would meet theprojected operations, maintenance and debt service costs of urban watersupplies in that year (Annex 11, Table 8).

6.15 The urban population, being only 14% of the whole, cannot beexpected in the long term to finance a disproportionate amount of thesector's requirements. Consistent and meaningful increases in taxes andrates should be possible in rural areas and could yield sufficient revenuesin the medium and long terms to meet the requirements of their part of thesector. The estimated 1974/75 revenue yield in the UP water supply sectoris Rs 13 crores (US$16.2 million equivalent), which should be viewed againstGUP's taxation revenue yield from alcoholic drinks and liquor in 1974/75,which is anticipated to be not less than Rs 50 crores (US$62.5 millionequivalent). The purchase price to consumers of alcoholic beverages isprobably 50% in excess of this sum i.e. about Rs 75 crores will be paidout by consumers, and of this, about Rs 52 crores (US$65 million equiv-alent) will probably be obtained from liquor sales in rural areas of UP.This would indicate the potential capacity to pay for water supplies, evenin the rural areas.

6.16 The KAVAL towns derive over 70% of their revenue for water supplyfrom a water tax based on annual rental value of property. This tax hasbeen collected with other municipal property taxes, and the combined taxeshave been subject to a statutory local taxation limit of 25% of propertyrental values. However, under the Ordinance, water taxes and seweragetaxes have prescribed limits independent of other property taxes, whichshould provide additonal revenue. Property values have been kept artifi-cially low by rent controls since 1945, and water supply has had to competefor revenues from a restricted tax source which had a low-rated base. GUPis considering establishing a central valuation authority and has givenassurances that it will use its best endeavors to ensure equitable valua-tion of property for tax purposes in the areas of the Jal Sansthans. How-ever, Jal Sansthans have power under the Ordinance to establish propertyvaluation for purposes of water supply and sewerage taxation should thelocally ascribed values be unsatisfactory.

6.17 To meet their statutory obligations (para 6.11), forecasts showthat the KAVAL towns Jal Sanathans require immediate increases in water andsewerage taxes and charges ranging between 60% and 120% (Annex 11, para 20and Table 3). Thereafter, increases of not less than 15% per annum wouldbe necessary to continue to meet operations and maintenance expenditures,but to meet increases in debt service and provide funds for new investments,the taxes and charges would have to increase by about an additional 100% by1981. Such increases may be unpopular, but if these towns are to be finan-cially viable and to be the basis for cross-subsidization in the sector(para 5.04) they must now be encouraged to generate steadily increasingrevenues. Assurances have been given by GUP and the Nigam that they willcause each KAVAL Jal Sansthan to achieve the following minimum financialrates of return on net fixed assets in operation (para 3.05), (i) 2% in

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1977/78; (ii) 4% in 1979/80; and (iii) 6% in 1982/83. These returns arereasonable, since the tariff increases needed to attain them can be affordedby consumers in these towns. These targets will ensure financial viabilityof the undertakings, and surpluses for future investment.

6.18 Billing and collection performances by local bodies including KAVALtowns have long been poor. These latter towns collected 51% of recoverablesonly in 1971/72 and 1972/73, and improved to 53% in 1973/74. Kanpur andLucknow are currently significantly improving collections by reorganizingcollection teams -- in the former town, collections have risen from 38% to60%, proving the feasibility of taking action against consumers and indif-ferent staffs -- but considerable and consistent improvements are necessary.It is intended that the Nigam through its monitoring and regulatory role,will have a direct influence on billing and collection performance by JalSansthans, because the success of the sector's new fiscal policies will bealmost entirely dependent on the efficacy of these systems. Assuranceswere obtained at negotiations that the Nigam will require the Jal Sansthansto reduce their receivables to the equivalent of not exceeding two months'billings by March 31, 1977.

6.19 Billing and collection systems in rural areas have yet to befinally evolved. LSGED and pilot rural projects have been successful inmaking regular collections from villagers with house connections, either onthe basis of metered consumptions or fixed charges. GUP also intends that aproportion of the rural development levy on all villagers will be allocatedto RJSs to represent standpipe users' contributions, but until the Nigam'sand their consultant's reports (para 3.05) on tariffs and collection sys-tems are available, suitable collections systems cannot be introduced. Inpractice, it may take a number of years, because experimenting with special-ized local practices may be necessary before deciding which systems wouldbe the most effective to achieve the goal.

The Life Insurance Corporation of India (LIC)

6.20 The LIC, with its headquarters in Bombay, has been one of theprincipal institutional lenders in India for over 17 years. Its total as-surance business in force exceeds Rs 11,500 crores (US$14 billion equiva-lent) with an annual income exceeding Rs 600 crores (US$750 million equiva-lent). Loans constitute a major avenue of investment of LIC funds. As atMarch 1974, It had lent Rs 750 crores (US$937 million equivalent), in thepublic sector for power, housing and urban water supply schemes, of whichRs 103 crores (US$129 million equivalent) has been loaned for water supplyschemes. In recent years LIC has endeavoured to place loans in each Statein amounts approximating to its income therefrom, but GUP has not beensuccessful in obtaining its proportion of loans, due in part to delays incompleting agreements between GUP and local bodies. The debt serviceperformance of UP local bodies has also been disappointing and, in 1974,LIC warned that it may cease lending for urban water supply and sewerageschemes (para 2.08), even though it had only commenced lending three yearsearlier. LIC had recommended GUP to (i) act against defaulting local bodies;

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(ii) reduce the number of borrowers (by sector reorganization); and (iii)encourage higher water rates and charges to meet recurrent costs and debtservice. LIC therefore welcomes the current GUP initiative, and wishesto be a co-lender with IDA in this proposed project, in order that it canactively participate in the appraisal and supervision processes of a majorlending operation to this sector. In this way, LIC hopes to gain experienceto enable it to work with GOI in encouraging other States to adopt similarreorganization and techniques for development of safe water supply andsewerage systems -- thereby increasing population longevity -- and itsown investments.

7. AGREEMENTS REACHED AND RECOMMENDATION

7.01 During negotiations for the proposed Credit, agreement was reachedon the following points:

(a) with GOI to make the proceeds of the Credit available to GUPin accordance with GOI's standard arrangements for developmentprojects (para 3.01);

(b) with GUP:

(i) structure, organization and staffing of theNigam and Jal Sansthans (para 3.06);

(ii) conditions relating to sub-projects whichshould be fulfilled before IDA and LIC dis-bursements are made (para 3.07);

(iii) introduction of accounting regulations forJal Sansthans (para 3.14);

(iv) audits of the Nigam and Jal Sansthans (para 3.14);

(v) providing grants of Rs 18 crores (US$22.5 millionequivalent) and loans of Rs 24 crores (US$30 mil-lion equivalent) to the Nigam (para 6.08);

(vi) providing the Nigam with adequate funds to fulfillits statutory powers and duties (para 6.10);

(vii) providing the Jal Sansthans with working capital(para 6.11); and

(viii) property valuation for taxation purposes (para 6.15).

(c) with the Nigam:

(i) reviews of qualifications and experience requiredfor the posts of Managing Director and Finance

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Director of the Nigam, and informing IDA beforeappointments are made thereto (para 3.05);

(ii) employment of consultants (paras 3.05 and 3.06);

(iii) form of agreements between the Nigam and JalSansthans (para 3.07);

(iv) contents of technical reports prepared by theNigam (paras 3.07 and 4.08);

(v) introduction and maintenance of costing systemsin the Nigam and provision of data to IDA (para 4.13);

(vi) force account labor for civil works (para 4.15);

(vii) review by IDA of studies on tariffs and Loans Fundoperations, and establishment of on-lending ratesfor loans by the Nigam (para 6.07);

(viii) financial performance targets of Jal Sansthans(paras 6.12 and 6.17);

(ix) reduction of receivables in Jal Sansthans (para 6.18).

(d) with LIC, to provide the Nigam with a loan of Rs 18 crores(US$22.5 million equivalent) on terms and conditions accepta-ble to IDA.

7.02 The following are conditions of effectiveness of the proposedCredit:

(a) the enactment of legislation to give effect to the UPWater Supply and Sewerage Ordinance 1975 by the UPLegislative Assembly (para 2.13);

(b) the promulgation by GUP of the establishment of theBundelkhand RJS not later than January 1, 1976 (para3.08);

(c) signing of the LIC/Nigam Agreement (para 4.19); and

(d) the transfer by GUP of Rs 1.6 crores (US$2.0 millionequivalent) of cash as working capital to the Nigam(para 6.10).

7.03 With the indicated assurances, the project constitutes a suitablebasis for an IDA Credit of US$40 million.

July 29, 1975

ANNEX I

UTSTAR PRADESH WATER SUPPLY AID SEWERAGE PEtOJECT

REPORTED CASES OF WATER-BORE DISEASES IN PR<iJECT AREAS AIR UTTAR

PRADESH STATE FOR FIVE YEARS 1966-1970 /

Infectious Other Cases per PercentagePopulation Typhoid Cholera Dysentery Hepatitis Trachoma Enteric TOTAL 100,000 of State

Diseases Population AverageMillions ---------------------------- _'000 Cases a s es--- ------

PROJECT AREAS

Bundelkbsand 1966 3.9 5.7 0.8 88.8 1.5 15.5 164.2 276.5-4 Districts 1967 4.0 4.5 0.2 111.6 0.9 9.1 160.6 286.9

1968 4 o 4.2 o.6 123.5 2.0 8.6 184.8 323.71969 4.0 o/ 11.4 4.0 98.9 1.4 9.7 140.0 265.41970 4.1 ]/ 14.0 6.o 63.8 1.1 8.0 162.4 255.3

Adjusted Annual Average 5 Years 4.o 7.9 2.3 97.2 1.4 10.1 162.7 281.6 7,040 105

Kumaon and Garhwa6i 1966 3.5 13.6 0.1 104.3 4.6 19.3 195.8 337.7-8 Districts 1967 3.5 10.5 - 99.5 7.8 21.8 266.9 406.5

1968 3.6 8.6 - 194.2 3.6 24.6 264.3 495.31969 3.7 8.2 - 129.8 3.9 20.8 360.7 523.41970 3.7 9.1 0.2 107.8 6.1 22.7 254.3 400.2

Annual Average Five Years 3.6 10.0 0.1 127.1 5.2 21.8 268.4 432.6 12,017 179

Five KAVAL Towns with 1966 11.6 49.3 6.7 326.5 14.5 86.9 581.6 1,065.5Surrounding Districts 1967 11.9 44.6 2.6 47.5 18.9 79.9 676.1 1,239.7

1968 12.1-/ 51.5 1.7 399.7 33.4 34.6 1,104.50 1,625.41969 12.5 41.4 0.5 330.6 28.8 33.7 1,031.8 1,466.81970 12.8 / 56.1 0.4 524.8 34.0 49.4 1,164.6 1,829.3

Adjusted Annual Awrage Five Years 12.2 48.6 2.4 399.8 25.9 56.9 911.7 1,445.3 11,847 176

Uttar Pradesh State (55 Districts)1966 82.4 145.4 10.5 1,870.9 70.3 299.4 2,978.0 5,374.51967 77.7 9/ 131.2 5.4 1,761.6 71.4 274.8 3,209.8 5,454.21968 75.5 /i 198.5 4.4 1,794.4 65.9 212.4 3,357.6 5,633.21969 79.1 135.6 5.3 1,294.3 58.3 242.4 3,361.5 5,097.41970 67.3 2 132.1 7.9 1,328.0 69.4 196.5 2,463.8 4,197.7

Adjusted Annual Average Five Years 85.3 166.6 7.5 1,791.3 75.3 271.8 3,429.3 5,741.8 6,731 100

AVERAGE AINUAL C SES PSR 100,000 POPULATION 1966-1970Iniectious Other

Typhoid Cholera Dysentery Hepatitis Trachoma Enteric TOTALDiseases

PROJECT AREAS

Bundelkhand 197.5 57.5 2,430.0 35.0 252.0 4,067.5 7,040.0

Xumson and Garhwal 277.8 2.8 3,530.5 144.4 605.5 7,455.5 12,016.5

Five KAVAL Towns with surrounding districts 398.4 19.7 3,277.0 212.3 466.4 7,472.9 l1,846.7

UTTAR PRADESH STATE 195.3 8.8 2,100.0 88.3 38.6 4,020.3 6,731.3

/ Complete reports for all 55 Districts of the State are not available and certain data in this Table have been adjusted to enablereasonable comparisons to be made. The adjusted data are referenced below

i 3 out of 4 Districts only reported3/ 2 out of 4 Districts only reported

Allahabad District did not report5/ Allahabad and Agra Districts did not reporti/50 Districts only7/ 49 Districts only

44 Districts only

Source: Director of Medical Services, Uttar Pradesh

July 18, 1975

ANNEX 2Page 1

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

General Description of the Bundelkhand, Garhwal and Kumaon Regionsand the Rural Water Supply Sub-Projects

Basic Data

1. All sub-projects will be the subject of separate and detailedtechnical reports by the Nigam Appraisal Unit and submitted for IDA andLIC approval prior to financing from the proposed credit and the LIC loan(Annex 7). Tables 1 and 2 give statistical information on the Bundelkhand,Garhwal and Kumaon Regions and on the sub-projects, and Map 11387 shows atypical rural water supply scheme. These areas will be administered forwater supply and sewerage services by the Regional Jal Sansthans (RJSs)which bear their title (Annex 5). The locations of the Jal Santhans areshown in Map 11384 with Bundelkhand in the southwest of UP and Garhwal andKumaon in the northwest bordering Nepal and Tibet (China).

2. The sub-projects will be piped water supply schemes and will in-clude mainly scarcity and hardship villages, with only a few non-scarcityvillages. The latter have been included only where they easily can beconnected to groups of scarcity villages. The villages selected for thesesub-projects have been assessed by the Nigam as those where the need forwater supply is most urgent. The sub-project will be executed as shown onimplementation schedule, chart 9306 (Annex 2).

3. Scarcity villages are defined as (a) where sources of drinkingwater dry up during summers, (b) where water is available at a depth ofmore than 16 meters, and (c) where water is unpalatably hard and saline.Hardship villages have the additional definition of drinking water avail-able only (i) at a distance of 800 m or more in hilly areas or 1600 m inthe plains; and (ii) at a height or depth of 150 m or more.

4. The proposed grouping of the villages have been determined asleast cost solutions. Alternative water sources have been investigatedas to their locations and reliable yields. Where a river will serve aswater source for several groups of villages, alternatives as to numbersof intakes and treatment works have been evaluated. In order to facilitatethe operation of the water works simplicity in design has been a primerequirement.

5. The water sources for the sub-projects are rivers, streams, im-poundments, springs and groundwater. Sub-projects using rivers and streamsas sources will include treatment facilities for chemical dosing, settlingand rapid sand filtration. Springs and groundwater sources would requireonly chlorination. In the Garhwal and Kumaon some sub-projects will benefit

AgNEX 2

Page 2

from a gravity supply, while others with big differences in altitudes willrequire substantial pumping. In Bundelkhand all sub-projects will requirepumping. Both standposts and service connections will be provided in thevillages. The initial number of service connections is expected to besmall, but would increase gradually during the years.

6. In Garhwal and Kumaon the number of villages is larger, but theirpopulations are generally smaller than in Bundelkhand. The number of sub-projects is also much larger in Garhwal and Kumaon than in Bundelkhandbecause it is possible to group the villages in Bundelkhand into largerwater supply schemes due to geographical conditions.

Bundelkhand Regional Jal Sansthan

Description

7. The Bundelkhand Jal Sansthan comprises five administrative dis-tricts - Jhansi, Lalitpur, Banda, Hamirpur and Jalaun - with a total areaof about 30,000 km2. The northern part of the region consists mainly of afringe area of the fertile Indo-Gangetic plain, while the southern part islow hills and rocky outcrops.

8. The average annual rainfall is about 880 mm occurring mostlyduring the monsoon (July-September). About 61% of the total area iscultivable. There are two harvesting seasons and the main crops are gram,wheat, bajra, cotton and rice.

9. Geologically the Jal Sansthan can be broadly divided into areasunderlain by granites, vindhyan rocks and alluvium. Some mineral depositssuch as iron ore, copper and quartz have been located.

10. The total population is about 4.5 million, of which 55% are culti-vators, and 25% agricultural laborers. Only about 23% of the population isliterate. The Jal Sansthan is a backward area without any major industries.The land holdings are small, and decreasing in size, and only 52% of totalagricultural land is irrigated.

11. A recent assessment of the rural areas has revealed that about58% of the rural population is living in areas with scarce water supply.About 51% of the total number of villages have been classified as scarcity.

12. Table 1 shows for each district number of villages and populationserved and unserved. Villages unserved have been subdivided into scarcityand non-scarcity. Adequate and safe water supply facilities are lacking inthe scarcity villages, which have 58% of the rural population, indicating theextent of the present need.

13. In the Jal Sansthan 20 schemes have been commissioned or are underexecution at a total cost of 5.7 crores (US$7.1 million equivalent). The

ANENE 2Page 3

schemes have been financed as 100% grant-in-aid. The rate of charges varyfrom Rs 3.00 to Rs 5.00 per house connection per month and from Rs 175.00to Rs 200.00 per standpost per year. The charges, when collected, aregenerally sufficient to meet operation and maintenance costs.

14. The schemes have been implemented by the LSGED, which has assumedresponsibility for their operation and maintenance in cases where localbodies have not taken over their responsibilities.

Sub-Projects

15. Thirteen sub-projects (Table 2) for rural water supplies have beenproposed, divided between the districts as follows: 3 in Jhansi/Lalitpur,4 in Banda, 3 in Hamirpur and 3 in Jalaun. The number of villages andprojected populations (2001) to be served by each sub-project vary between 7and 174 and between about 10,000 and 190,000 respectively. The water sourcesfor the sub-projects are rivers (4 sub-projects), impoundment (1) and ground-water (8). The design capacity for the water works in the sub-projectswill vary between about 10 I/s to 150 l/s. The total capital costs areestimated to be Rs 12.4 crores (US$15.5 million equivalent). The averagecapital cost per capita is Rs 190 (US$24 equivalent) and it varies betweenRs 130 (US$17 equivalent) and Rs 224 (US$28) computed on 2001 projectedpopulation.

16. The sub-projects will cover about 530 villages with a presentpopulation (1974) of about 0.5 million. The number of scarcity villagescurrently unserved is assessed at 2,284 with a population of about 2.2million. The sub-projects will extend adequate water supply facilitiesto about 23% of the scarcity villages which corresponds to about 23% of thepopulation of such villages.

17. Rural population presently served with water supply is about 13%,which will increase to 24% after project implementation. Correspondingfigures for rural population living in scarcity villages are about 18%and 35%.

Garhwal Regional Jal Sansthan

Description

18. The Jal Sansthan comprises four districts, Dehra Dun, Tehri Garwhal,Garhwal and Uttar Karshi. It covers an area of 20,300 km2. The Jal Sansthanhas a population of about 1.7 million (1971), which corresponds to about1.9% of the State's entire population.

19. Uttar Karshi is the only district to have no sub-projects in theproposed Project. The districts of Dehra Dun, Tehri and Garhwal cover anarea of about 60% of the total area in the Jal Sansthan and their populationis about 90% of the Jal Sansthan. Tehri and Garhwal districts are entirelyin the hills with a chain of high ridges and deep valleys on altitudes vary-ing from 300 to 4,000 m above mean sea level. Dehra Dun district comprises

ANNEX 2Page 4

both hilly terrain and the terrai, which is the foothills area sloping downto the plains.

20. The average annual rainfall is about 1,670 mm and it occurs mostlyduring the monsoon season (June to September). Sixty percent of the area iscovered by forests and the most common trees are pine, oak, deodor and fir.Horticulture is dominating with principal fruits such as apples, plums andpeaches. About one-third of the area is cultivated. There are two cropgrowing seasons for wheat, paddy, millet, sugar cane, maize and gram.

21. Scenic beauty and cooler climates draw thousands each year from thePlains to these districts, and in the tourist seasons people come from allover India and abroad for recreation. Some mineral deposits such as iron-ore, copper, magnesium and quartz have been located in the area.

22. The Jal Sansthan is classed as a backward area, and has no majorindustries. People depend on horticulture and agriculture and the landholdings are small. Less than 15% of the total agricultural land is irri-gated. In the absence of adequate road communications, many areas, especiallyin Tehri and Garhwal, are not easily accessible. Tourism and the summerhouses of the wealthy have created rich areas in the towns of Dehra Dun andMussoorie, where per capita incomes are among the highest in U.P., contrastingwith neighboring rural areas, which are among the poorest in U.P.

23. A recent assessment of the rural areas has revealed that about 29%of the population is living in areas where water is scarce. About 30% of thetotal number of villages have been classified as hardship or scarcity.

24. Table 1 shows for each district the present number of villages andpopulation served and unserved. Villages unserved have been divided intoscarcity and non-scarcity. Adequate and safe water supply facilities arelacking in the scarcity villages having 29% of the population, indicatingthe extent of the present need.

25. In the districts of Dehra Dun, Tehri and Garhwal about 1600 watersupply schemes have been commissioned or are under execution. The capitalcosts for the completed water supply schemes, which are serving about 500,000people, have amounted to 3.7 crores (US$4.7 million equivalent). The averageper capita capital cost was about 76 rupees (US$9.4 equivalent).

26. These schemes have been implemented by the LSGED which has assumedresponsibility for their operations and maintenance in cases where localbodies have not accepted responsibility.

Sub-Projects

27. Four hundred and sixty-two rural water supply schemes have beenproposed (Table 2), which will be grouped into a convenient number of sub-projects. The schemes are divided between three districts as: 63 in DehraDun,171 in Tehri and 228 in Garhwal. The number of villages and theirprojected populations (2001) to be served by each sub-project vary between

.ANE X 2Page 5

5 and 60 and from about 1,000 to about 30,000, respectively. The watersources are rivers and streams, (128 schemes), springs (330) and groundwater(4). The design capacity for the water works in the sub-projects will varybetween 1 l/s and 20 l/s. The total capital costs are estimated to be Rs 5.7crores (US$7.1 million equivalent). The average capital cost per capita isRs 290 (US$36 equivalent) and it varies between Rs 230 (US$29 equivalent) toRs 370 (US$46 equivalent), computed on 2001 projected population.

28. The sub-projects will cover about 660 villages with a presentpopulation (1974) of about 0.14 million. The number of scarcity villagescurrently unserved in the districts of Dehra Dun, Tehri and Garhwal isassessed to 1,585 with a population of about 0.14 million. The sub-projectswill extend adequate water supply facilities to about 42% of the scarcityvillages, which corresponds to about 36% of the population inhabiting suchvillages.

29. Rural population in the districts of Dehra Dun, Tehri and Garhwalpresently served with water supply is about 40%, which will increase to about51% after project implementation. Corresponding figures for rural popula-tion living in scarcity villages are about 58% and 73%.

Kumaon Regional Jal Sansthan

Description

30. The Jal Sansthan comprises four districts - Almora, Nainital,Pithoragarh, and Chamoli - and it covers an area of 30,000 km2. The JalSansthan has a population of 2.1 million (1971), which corresponds to 2.4%of the State' s entire population.

31. - Of the four districts only Almora and Nainital will have sub-projects in the proposed Project. These two districts cover an area ofabout 45% of the total area in the Jal Sansthan and their population isabout 73% of the Jal Sansthan. The Almora district is entirely in the hillswith a chain of high ridges and deep valleys on altitudes varying from 300to 4,000 m above mean sea level. Nainital district comprises both hillyterrain and the terrai, which is the foothills area sloping down to the plains.

32. The rainfall, forestry and vegetation characteristics are similarto Garhwal, with the predominant activities as horticulture and tourism.The Jal Sansthan area is classed as a backward area, and has no majorindustries. Horticulture and agriculture are based on very small landholdings, but less than 15% of the total agricultural land is irrigated.Inadequate road communications leave many areas inaccessible.

33. A recent assessment of the rural areas has revealed that about57% of the population is living in areas, where water is scarce. About52% of the total number of villages have been classified as hardship orscarcity.

ANNEX 2Page 6

34. Table 1 shows for each district the present number of villagesand population served and unserved. Villages unserved have been dividedinto scarcity and non-scarcity. Adequate and safe water supply facilitiesare lacking in the scarcity villages having 57% of the population, indicatingthe extent of the present need.

35. In the districts of Almora and Nainital about 2,000 water supplyschemes have been commissioned or are under execution. The capital costsfor the completed water supply schemes, which are serving about 400,000people, have amounted to 3.5 crores (US$4.3 million equivalent). Theaverage per capita capital cost was about 88 rupees (US$11.0 equivalent).

36. As in Garhwal, schemes have been implemented by the LSGED, whichhas assumed responsibility for their operations and maintenance in caseswhere local bodies have not accepted responsibility.

Sub-Projects

37. Four hundred and eighty six rural water supply schemes have beenproposed (Table 2), which will be grouped into a convenient number of sub-projects. The schemes are divided between 299 in Almora District and 187in Nainital District. The number of villages and their projected populations(2001) to be served by each sub-project vary between 5 and 100 and from about1,000 to about 45,000, respectively. The water sources are rivers and streams(65 schemes), springs (348) and groundwater (73). The design capacity forthe water works in the sub-projects will vary between 1 l/s and 30 l/s. Thetotal capital costs are estimated to be Rs 6.8 cores (US$8.5 million equiv-alent). The average capital cost per capita is Rs 210 (US$26) and it variesbetween Rs 130 (US$17) to Rs 310 (US$38), computed on 2001 projected population.

38. The sub-projects will cover about 860 villages with a presentpopulation (1974) of about 0.23 million. The number of scarcity villagescurrently unserved in Almora and Nainital is assessed at 2,874 with apopulation of about 0.8 million. The sub-projects will extend adequatewater supply facilities to about 30% of the scarcity villages, whichcorresponds to about 28% of the population inhabiting such villages.

39. Rural population in the districts of Almora and Nainital presentlyserved with water supply is about 28%, which will increase to about 44%after project implementation. Corresponding figures for rural populationliving in scarcity villages are about 33% and 52%.

July 17, 1975

a0m P12111 I17 Ml A10mIDDODG 021

0DODI,O0IOi & DIIDADO ID VIUDnDD~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~i 3

11 76 53 D O6D3 DID 'DD D7 4'DOD11 Do 'ID DI 130 DO 10 DO,4 DODD 11 DOD PDODD I 5361- 0063DI 11t 0001 OnOOD D

1 --A 316, 60 ;5 7,1 W ,2 69~ 4 1 03 125-4di D5 1 1 10 19 AD-1 44 21 00 20 2 2,5 P5 255 A,, 3 6, ~ G35

OMODIAOInID MDOOD4 10,000 AdO .0~31~ 61,30 OD D,79 1, 706,A 01 3? 0, hO 4I I DID A3D 20 37 571 ADO DAD A5 300 893 350 559 ODD 509 05

DODOD 4Ii 67190 093 1 D.,0 10 D,30 i,A6 246 I 1, 503 ADo AID 13 AA8 09 57 74 6.1 6A 72 5b 530 A;o 70 314 057 733 39

DADoI. 00001Z 000 31.25 6,599 403 ,~.5 ,3 05175 ,903 MO 2,100 2.303 0,300 18» 763 419 OD 150 i,6i 7,0D 1.05 oh O,'7 1.095 O,45 D,7 0 9 1.00 DD o

6.36, 11, 746 719 616 i0 63 1,200 ,397 0Th 630 39o 13 lOg OhS 96 30 139 030- 109 12 3 019 D12 5'20 00 20I37

01,10, 000 05 0645 -- 33 001, 0 1 !15 1,90 415 11 '1135 03 111 , 130 145 139 837 20 406 Hil01 000 '.oO 012 iA6DS015

7o.O -' 0737 0i'7 0,390 Dt 30S 0,0~13 n3on S,"I0 5,730 330 2,974 700 B6* -00 056 ool 03 020 6,000 DSW 4 2,118 ADO 030 005 025 D97 33 *

172 55D68 1.1137 0.434 7.701 .,707 9,307 1 1,042 5,243 4ho4n '303 6,749 3.361 4,259 1,760 2,51 00 90 1,170 6,200 *505 0.179 34l4 6109 0,777 030- 11,59 1,930 A5D1 29 00

DANNEX 2

INDIA2

00000 P0013 W0630ESUPPLY ACND SEWERAGE PROIJECT

RaDio1 2: D= SAC 23 050 7 011N NEOOAI- CAL L9NDJWI2

Prgtoooi OSoOrSox 7lonoo2 0-Sltoooo2oooorR Woer Ro-r DRStailot RADAR DSRE EL A N 3-Pr-jo Sub-Projet Cost

001 OoAor,o or Woo~~31- :polu 2 D oR y Rto ooo1 CI Crn oa Cohta 1974 J-n o l p.t'

93 3 5 0 A -o mo 00 13 9) AU C 17 1 33~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 I3 11 1 1

3n,AouC jboonSj A.-.ipo DI--- 71 3 (',7C I54ooA 1 P30 33 o7j h4 o41

La1.Stooo C. OoooatoU 0.74 023,400 187,726~~~~~m O n(I 010 260 00 3U013 loao 92 0-,400I JR, ................. 6. Ol R 00_

.OotooooO 1F 97939730347 736 7 R3,5)0 70 ,91 77 33 73 3,0 9 3677 99 9Ror.8o 0, lIon ot 33,1CC 47,9 3 20 436 33 9oo~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Tq9 ,~o T,9 0,

2. On-C CSoi '7 CR_70C 0 3210I3 :.33 20 473 2': 639~3. Au 2 3 30,300 L

3 9goo '(Wp3 07 637 30 65L

4. Aa 3 25,300 3_6. .1 23 544 30 710-bAttno 3 590I 6,000.3 O 3 ,4 3 3,70 p 375)3 ORE 30.35 595 937

Inro . OW 00 R,RO 9,3t: 3. ', (sO 8 2 0 039C. rAndab 24 ,c,6co h644t 3 127 63 6 s5. oOoh 3 7 6 .-2. 00 17oO oIh 331

Jaoao L. Jn 100 1 1-9,200 27_03 -.303 07 4602 2 2

U. Th-e 17 3.700 16,000 I .w.0) 8 -89 DO 063. otooh C29,062350.W13 7 4,2052

Gnoh-1 LeArod- S. 0;ooaLr 00 7,200 00,500 16 R()lt( 7A590.( 1662. ACh-po- OR2C,70 30,07~1 ~ (~t 7 ,E(6 ,3.8.C2 iR 126 63.CO,on. 09 3,0R 3,23 09 5o2(,333 0 0

lai 1 A"- .. 7 2 4 __ -- 54. totS OR 3.,000 EoO5 S3 A.)) 3 30 o,4 7i10) 9775o T7, 679 23 23.2

ono)-.o,-0

07 0,600 3,7,0 ' o3 o ho 2. lolOr 07 3.500 5,050 09 0t(93,0(00) 3 7) 4 933. Unop-apa 1D 3,000o 4.3500 9 2t(L3,034) 2 47 3 74. Uttjaar 2 5,2OA0 7,0 1`0(9 7 003 6 1h2

o.Prtap Soor 0-, 4,4oo 6,4 3 ,o3sS 4 120. 13hlooor 3,000O -04o0 9 0))437,9 3 70 4 937. (1-nba 5 900 40 (5,,o3o) 6 039 I 3. Uinreodmaoa.. D-R2 4,o0DU 0,8t00 0to3003),R(005 JIBt 0 SliD9. BhiASoA.n.a -5 9,000 13,000 30 )t0315(,0(153 4 009 1

10. JoOAoO CA T,ROU 3,400 13 tg, 9 ~9) 133-.03 7 ___6_SoRotnO~ "38 0,900 73,00 171 oY3R33,373 TO =53 76 3 2 3 1,161 T7695 236 99

lotonl 1. lot 5 hoo 605 3 0(3) 0 o6-C. 5R0jikhol DO 2,500 3,600 04 0C 0 O(),(C 2 4)~3.OP-o 00 0400 3,300 0 -3; 7 2 474. RJOo. 0 4,300 6,200 00 0l463 4 95 11

6 .1Thn i,ni 13 2,900o 4,00 - ho 3 .7. D-nokoi 60 3,330 13,50 4 R()Ir03),R337) 9 00 10 PLC3. DogatRo OR 0,400 2,000 12 (1A32 C 4h 2 47

19. L= -Aooo 35 4,020 7,0080 A 33032,30 100 6 14000. Eknoho- 45 5,930 8,000 3 R2 Rt32 ,3 26) 5 LAO 7 16631 .kPo-n 03 3,020o 4,403 -2.2 P1 r±33t l ,oe:1o3 0 75 4 35

0. -Rro.lA, 07 3,500 5.000 12 0(103 71 4 951C. Rioooa 202 3,000 4,0- 14o3ooo 70 4 9314. N85ii:d-n ho 5.20 7 2 03 )03): 6 ohs_2_

TOTS). 636 3983 196.62o 462 12335;3) ~ 2,38a :6- 3,335 960 o,8 o 9 36.2

Almooc 0. Do-ltogi, 20 3,320 4,700 0)- R(3) ,02Xo3) 9i9o

3. 0A 30 C 0,0210 12,750 20 0(3-t3,7)7,0014) '7 50 9 210h.SnkoRo 38 a ,80 2,000 95 0(0),t(h>,S(1:) 0 083 10 2301

7.Aocr R 5,40 7,090 o6 o(6 o 013 6 1426. Fapkote 30 8,620 02,500 2 00 2 37 166 SR 2307. Boaa-h-o 30 4,020 6,R800 0 R(') 7t(20:436 9 5 6 062

8. err5.0 ,00 , I R32 RJJ2' 0 '03 4 95 0003. AoSAo 30 0000 90,) 24 6 4~1 0 0 109

01. 00a:k0too C ,1 , 20 06 i o(: 0 7 ~6000 'bROkc-oo C 0,01 0,500 8 033,72(3 a) 2 47

03.Coohot 20 4,120o 6,ooo .5S( 953 1ph4 Oa-,t 30 5,910 3,50030( 0 7la066

A B. kaaota 30 6,020 3,090 20 0(3) 0(33' "'4) 3 08616. L. pa U 6:2 .0 3 0( 1 6617. Cheso-t 39 9, 500 8,oo0 25 ( 2) 181

sobtotal1 3 95 '<.39,02o ' jfl:o3 < 3 0000 1- 37 7 033 36 9775 _ 797 97F3

II--5,19o 0. 0a mr A 3,71 OO 0,o 1 (~ 3 713. 7PIlnda C ,20 00 110 9 sIC

3 . .iOt.aloa 45 7,600 2.0,000 30 3) 7 06621t.BSotnl 50 o,poo :0,50 0 F30oRt33,('' o 6 062 2

OPomo-gor 302 3200 00,9-:O 2 , 7 166 7. KooO,lp: 4o 13,9,00 25,-~ 1 (14) 16 -3",8 1 40. 1orpr 30L74C0 220,41 (so) 1 330 la 429C3. onpr W 0: 000 45 00 9~.W203 07 039 3 5

2.0. Thatton 60 07 360 4o00o J-5 0.w. 15) 09 331 33 780 __SoSb-tel Z2 130506014,0 05 - 0_737003, 0o-1 07 -.0W. 7 3 32 10 -1 -T6 I733 3,2 2f51 3,.3 _ 20.0 739 E767

ThW0L R9~6 oo66: 3R8.60o 4R6 RU32)Dt(33A.s(348) .. w. 73033 022 4,778 266 6,296 679 ,0 239 30.4 oo6 25.6

AnearO P-nlooa JaR Sao,tAn- 0,01 010,300 2364,900- 961 7(1,()oOs,oQR,..0300 17,029 954, 22,510 3Ž7 31,039 3o6 58 all 26.4

spring 3o) -- odaat-r (o).

S555CR, LEUGS.

Solo 18, 100'

INDIAUTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

IMPLEMENTATION SCHEDULE

CALENDAR YEAR 1975 1976 | 1977 1978 1979

IDA FISCAL YEAR 1975 1976 1977 1978 1979

INDIA FISCAL YEAR 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80

QUARTERS r2 3 4 1 2 3 4 1 2 3 1 2 2 3 4 1 2 3 4

FIFTH Pl ANI PERIOD `.;, . 7y-- -- -w

DETAILED DESIGNI1.V~ .SUB-PROJECT APPRAISAL

LAND AQUISI RFON - -. - - -

PROCUREMENT _

CIVIL WORKS - - m _ - - - - - -

INSTALLATION OFEQUIPMENT & MATERIAL

COMMISSIONING_____._._ __ _ _ _ _ _

World Bank-9306 (R)

ANTNEX 3Page 1

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Description of the KAVAL Towns and their Water Supply, Sewerage

and Sewage Disposal Systems and Proposed Sub-Projects

1. The five biggest towns in Uttar Pradesh are Kanpur, Agra, Varanasi,Allahabad and Lucknow, and are known as the KAVAL towns and their locationsare shown on Map 11384. The combined popularlon of the five towns was about3.8 million in 1971, corresponding to about 31% of the total Uttar Pradeshurban population. The existing water supply and sewerage systems are inade-quate in these towns, which are likely to be designated Jal Sansthans beforesub-projects are commenced in their areas. The investments in water andsewerage have not kept pace with the large scale urbanization and industri-alization that has taken place during the latest decade. Maps 11385 and11386 show the water supply and sewerage systems of Lucknow, as a typicalKAVAL town.

2. The general topography is similar in each of the KAVAL towns. Thetowns are located in the alluvial Gangetic Plain and are underlaid withsediments deposited in successive stages. Groundwater-bearing strata isgenerally available at depths of 75 to 200 meters. The temperature in theKAVAL towns varies from 2°C in winter to 470C in summer. The annual rainfallvaries from 680 mm to 1,025 mm with a large proportion occurring during themonsoon season, July to September.

3. Regulated by the Uttar Pradesh Municipal Corporations Act 1959, eachKAVAL town has a Municipal Corporation, which is an autonomous local bodyresponsible to the Minister of Local Self Government through the GUP LocalSelf Government Department. A Chief Executive Officer appointed by GUP isthe senior officer of the Corporation. Each Corporation has been organizedinto a number of departments and the "Water Works Department" has beenresponsible for operation and maintenance of the water supply and of sewagepumping stations, while sewerage and sewage disposal services usually havebeen administered through Health, Drainage and Farm Departments. The CityEngineer is usually the head of the department. Chart 9309 (Annex 3) showsas an example the organization of the Water Works Section in Lucknow. TheUttar Pradesh Water Supply and Sewerage Ordinance now sets out the functionsand powers of a Jal Sansthan, and takes precedence over the 1959 Act. Whenthese towns are declared to be Jal Sansthans, these services will be separatedfrom other municipal activities. Probable changes in a Jal Sansthan organi-zation to meet IDA requirements for sub-projects investment are shown onChart 9310 (Annex 5).

ANNEX 3Page 2

Kanpur

4. Kanpur is the biggest industrial town of the state, with a popula-tion of 1,273,000 (1971). It is located in south central Uttar Pradesh, onthe southern bank of the River Ganga, and is famous for its textile, rayonand leather industries and also for its technical, medical and agriculturalinstitutions.

5. Kanpur Water Works was established in 1892. Water is currentlydrawn from two intakes with pumping stations on the River Ganga and the LowerGanga Canal. The Ganga River has shifted course towards the opposite bankfrom the intake. This has necessitated the construction of a 0.7 km canalbetween the river stream and the intake site. The canal has to be dredgedfrequently. Exploratory drilling of tubewells has indicated occurrence ofpotable ground water, but the reliability and quantity have yet to beestablished. The raw water is treated at Benajhaber treatment works. Thetreatment comprises plain sedimentation, alum dosing, settling and rapidor slow sand filtration. The treated water is collected in a clearwell forpumping to 19 distribution zones.

6. The water works serve a population of about 1,300*000 and thedistribution system covers an area of 57 km2. The average daily supply isabout 216 mld (2.5 m3/sec) subdivided into 80% domestic use and 20% non-domestic use. Only about 23% of the residential connections are metered.The domestic average per capita consumption is about 133 l/d, taking intoaccount service connections, standposts and including wastage and leakage.

7. The sewerage system dates back to the end of the last century. Thepresent system covers an area of 40 km2 or 70% of the area covered by thewater distribution network. The average flow is 157 mld and through twointermediary and one main pumping station it is conveyed to a sewage farmfor irrigation of about 3,100 hectares. No treatment of the sewage isprovided. About 56% of the houses have dry service latrines.

Agra

8. Agra has a historical past, and was during the Moghul Period, themain political, economical and cultural center of India. A large number oftourists visit the town for its historical monuments including the famousTaj Mahal. The town is located in western Uttar Pradesh, on the westernbank of the River Yamuna, which is the raw water source. The ground waterin the area is hard, saline and unsuitable for consumption. The feasibilityof extracting water from radial collector wells to be located in the riverbed has:been investiga-ted and the results are promising.

9. In 1888 piped water supply was constructed for a population of160,000-. From the intake with pumping station the raw water is pumped tothe treatment works for pre-sedimentation, chemical dosing-, settling andrapid or slow dand filtration. The treated water is pumped to 14 distributionzones. Within the zones the water is distributed by booster pumping stations,with or without elevated storage tanks.

AXNEX 3Page 3

10. The existing water works serve a population of about 580,000. Theaverage daily supply is about 104 mld (1.2 m3/sec), and the consumption is75% domestic use and 25% non-domestic use. The number of service connectionsis about 15,000 of which about 10,500 are unmetered. The domestic averageper capita consumption is about 135 l/d taking into account service connectionsand standposts and including wastage and leakage.

11. The first comprehensive sewerage scheme was commissioned in 1920.The total flow of sewage is collected in Tanjganj main pumping station fordischarge without any treatment to a sewage farm for irrigation. About 11%of all houses have flush latrines and the remainder dry service latrines.

Varanasi

12. Varanasi (Benares) may be the oldest city in the World. It islocated in eastern Uttar Pradesh on the northwest bank of River Ganga. Thetown has great religious importance for both Hindus and Buddhists and it isan educational and tourist center. The larger industries are weaving, brass-ware, and diesel locomotive works.

13. The water sources are the River Ganga and groundwater. Twenty-twotubewells are in operation and their present yields indicate a safe andeconomical ground water supply. The first piped water supply scheme wasinstalled by 1892 with the Ganga as the water source. This surface watersupply has gradually been extended and supplemented with ground water. Theraw water is treated by pre-sedimentation, chemical dosing, settling andrapid or slow sand filtration. The treated water is pumped to various zonesin the distribution system. Each zone, covering a population of about50,000 people, is provided with booster pumping facilities and ground orelevated storage tanks.

14. The existing system is sufficient to meet the requirements of630,000 people, The average daily supply is about 146 mld (1.7 m3/sec). Thewater consumption is divided into 90% domestic use, and 10% non-domesticuse. The number of service connections is about 31,000 of which8,000 are metered. The domestic average per capita consumption is about215 l/d when including service connections and standposts with wastageand leakage.

15. The first part of the sewerage system in Varanasi was built duringthe period 1898 to 1917. The present sewerage system consists of 320 kmlength of sewers, a sewage pumping station at Village Konia and a sewagefarm covering about 220 hectares. Trunk sewers and pumping stations arecurrently under construction along the River Ganga to prevent river pollutionat the bathing ghats. The number of domestic sewage connections is about25,000 serving 35% of the present population.

ANNEX 3Page 4

Allahabad

16. Allahabad is located in southwestern Uttar Pradesh at the confluenceof the Rivers Ganga and Yamuna and it is an important religious center forthe Hindus and a previous provincial capital. In recent years the town hasalso attracted some heavy industries, including pumps and compressors manu-facturing. It is also a major agricultural, education and law center.

17. The River Yamuna is the main raw water source, but some tubewellshave recently been drilled to supplement the river water supply, theiryields confirming that ground water is abundant. The waterworks was es-tablished in 1891 and has subsequently been reorganized and enlarged withthe growing demand. The raw water is pumped from the intake works to thetreatment site for pre-sedimentation, chemical dosing, settling and rapidor slow sand filtration. The treated water is pumped directly into thedistribution system. One of the zones in the distribution system is suppliedby groundwater from 3 tubewells.

18. The population covered by the present water supply system is about520,000. The distribution system covers an area of 30 km . The averagedaily water supply is about 120 mld (1.4 m3/sec). The water consumption isdivided into 85% domestic use and 15% non-domestic use. The number ofservice connections is about 35,000 of which about 25% are metered. Meteredwater consumption is about 30% and unmetered about 70%. The domesticaverage per capita consumption is about 200 l/d, when considering bothservice connections and standposts and including wastage and leakage.

19. The sewerage system in Allahabad was first introduced in 1910.The present system covers an area of about 27 km2 and serves a populationof about 200,000 or 40% of total. An average flow of about 60 mld is con-veyed to the main pumping station via two intermediary pumping stations.The sewage is ultimately discharged untreated (although diluted by ground-water) to two sewage farms with a combined area of 1,350 hectares. Popula-tion served by septic tank is about 70,000 or 14%. The remaining part of thepopulation is served by the conservancy system.

Lucknow

20. Lucknow is the capital and the administrative and commercial centerof Uttar Pradesh. The town is developing manufacturing industries, but ithas an important railway center and has educational, technical and medicalinstitutions.

21. The major raw water source is the River Gomti. Exploratory tube-well drilling has been carried out within city limits, but with only limitedsuccess. A geological survey has indicated the existence of groundwater-bearing strata about 4 km outside the city. Lucknow waterworks was estab-lished in 1894. The raw water is pumped to the treatment works at Aish

ANNEX 3Page 5

Bagh for pre-sedimentation, chemical dosing, settling, slow or rapid sandfiltration. The treated water is pumped to a number of zonal overhead tanksfor further distribution into the network system. Map 11385 shows thepresent water supply works.

22. The population served by the present system is about 840,000, andthe distribution system covers an area of 82 km2. The average daily watersupply is about 180 mld (2.1 m3/sec). The domestic consumption is about 90%and non-domestic 10%. Water drawn from standposts represents 5% of thedomestic consumption. Only 10% of the service connections are metered. Thedomestic average per capita consumption is about 195 l/d when consideringboth service connections and standposts and including wastage and leakage.

23. The sewerage system was first introduced in 1920. The presentsystem serves a population of about 700,000. The sewage is conveyed to twomain pumping stations for discharge without treatment to a sewage farm forirrigation. The irrigated area is about 500 hectares. Map 11386 showspresent sewerage works.

Sub-Projects

General

24. All sub-projects will be the subject of separate and detailedappraisal reports by the Nigam appraisal unit, and submitted for IDA and LICappraisal prior to financing from the proposed credit and the LIC loan.Present and projected population and water demand through 2001, the masterplan period, have been shown with design criteria in Annex 6 and in Table 1.(Annex 3). Maps 11385 and 11386 show proposed water and sewerage works forLucknow, as an example. A short description of the present proposal forwater supply and sewerage sub-projects for each of the towns follows below.The sub-projects will improve the water supply service and through 1981increase the population served from about 3.9 to 5.1 million (+ 30%) byaugmenting the water production capacity with about 5.0 m3/sec. The seweragesub-projects will mainly achieve rehabilitation and upgrading of existingsystems and limited extensions of the service areas.

Kanpur

25. Alternative proposals for meeting the additional requirements ofwater supply from River Ganga or groundwater have been studied but finaldecisions have yet to be made. Groundwater development as a supplement toexisting river water supply may be the least cost solution. The town isdivided into 4 service districts, which are further subdivided into zones.The service district covering the city center will continue to be servedfrom the existing treatment works. The other service districts may be fedfrom tubewells to be drilled within respective service area. The waterwould be pumped from the tubewells into ground or elevated zonal reservoirsfor further distribution by pumping or by gravity. Chlorination is the only

ANNEX 3Page 6

treatment required for the groundwater. The sub-project would then comprise:replacement of material and equipment in existing pumping stations and treat-ment works; modifications of the treatment works; tubewells with pumps andelectrical equipment; booster pumping stations; chlorination equipment:ground and elevated storage tanks; transmission mains; and extension of thedistribution system. The sub-project will improve the water supply serviceand through 1981 increase the population served from 1.3 to 1.7 million byaugmenting the water production capacity by about 2.3 m3/sec.

26. There is a proposal to construct a barrage in order to divert RiverGanga to an earlier course. The justification for the barrage as set forthby various concerned authorities is deemed to be land reclamation andland access for town development; improved communication across the riverby using the barrage as a causeway; improved intake conditions for the waterworks by eliminating the recurrent dredging costs; and improved intake con-ditions for cooling water to a steam power station (which is likely to beabandoned). The project would be very costly and part of the costs is pro-posed to be borne by the water works. This part has, however, still to bejustified, and it will be subject to further considerations,

27. Parts of the existing sewerage system are choked and have to becleansed. Some sewers will be relaid or duplicated and the sewerage systemwill be extended to cover new areas. Two sewage pumping stations with pump-sumps, to be provided with screening facilities, are proposed to be built.Two raw water pumping stations with rising mains are proposed for dilutingthe sewage before its use for irrigation.

Agra

28. The raw water supply from Yamuna river is currently used to itsultimate capacity and has to be supplemented from another water source.Alternative water sources have been studied, and collector wells to be builtin the river bed could be most feasible. The distribution system will bereorganized and subdivided into 14 zones to be fed from the existing treat-ment works and the proposed wells. For well water, chlorination only wouldbe required. In the distribution system six zones will be served fromoverhead tanks and eight by direct boosting. The sub-project would thencomprise: two radical collector wells with pumping plants; booster pumpingstations; ground and elevated storage tanks; modification of existingtreatment works with replacement of some equipment; transmission mains;and extension of the distribution system. The sub-project will improve thewater supply service, and through 1981, increase the population served fromabout 0.6 to 0.7 million by augmenting the water production capacity byabout 0.8 m /sec.

29. The sewerage sub-projects would include: replacement or cleaningof existing sewers; extension of the sewerage system; and replacement ofa pumping plant for augmenting the pumping station capacity.

ANNEX 3Page 7

Varanasi

30. For extension of the Varanasi water supply ground water developmenthas been found technically and economically feasible. The town area isproposed to be divided into two main service districts to be served by riverwater and by ground water, respectively. The service districts will befurther subdivided into zones. Existing intake and treatment works will bemodified and some mechanical and electrical equipment will be replaced.Tubewells will be drilled, as needed, and so located to achieve lowestpossible distribution costs. The ground water will require chlorination onlybefore being pumped to zonal ground or elevated storage tanks for furtherboosting or gravitating to the distribution system. The sub-project wouldcomprise: modification of intake and treatment works with some replacementof equipment; tubewells with pumping plants; ground and elevated storagetanks, transmission mains; and strengthening and extension of the distribu-tion system. The sub-project will improve the water supply service andthrough 1981 increase the population served from about 0.6 to 0.9 millionby augmenting the water production capacity with about 0.5 m3 /sec.

31. Varanasi is divided into three sewerage districts. Parts ofexisting sewerage system will have to be cleansed or relaid and new sewerswill be extended to areas not yet covered. In order to cope with increasedsewage flow three sewage pumping stations, two main and one intermediary,with rising mains will be built. The sewage will continue to be dischargeduntreated to sewage farms for irrigation.

Allahabad

32. For the Allahabad water supply the further development of theground water source has been found to be technically and economicallyfeasible. Existing intake and treatment works require modification and somereplacement of equipment. The distribution system is proposed to be re-organized and divided into 12 zones. The zones to be fed by groundwaterwill be provided with tubewells as needed. The groundwater will be pumpedto overhead storage tanks for gravitating to the distribution system. Thesub-project would comprise: modification of intake and treatment works withsome replacement of equipment; tubewells with pumping plants; elevatedstorage tanks; transmission mains; and strengthening and extension of thedistribution system. The sub-project will improve the water supply serviceand through 1981 increase the population served from about 0.5 to 0.8 millionby augmenting the water production capacity with about 1.0 m3/sec.

33. The Allahabad town area is divided into 4 sewerage zones. Part ofexisting sewers are choked and have to be cleansed or relaid and new sewerswill be extended to areas not yet covered. An intermediary sewage pumpingstation with pumpsump and screening equipment and related rising main willbe built. A number of dry latrines will be converted into flush latrines.

ANNEX 3Page 8

Lucknow

34. For extension of the Lucknow water supply groundwater developmenthas been found technically and economically more feasible than expansion ofthe existing river source supply. The distribution system is proposed to bedivided into 4 service districts, which will be further subdivided into zones,each for a population of around 50,000 people. Two districts will be servedfrom existing treatment works and two from a groundwater source proposed tobe developed about 5 km outside the town area. Existing intake and treatmentworks will be modified and some equipment will be replaced. The ground waterwill be pumped to zonal overhead storage tanks and gravitate to the distribu-tion areas. The sub-project would comprise: modification of intake andtreatment works with replacement of some equipment; tubewells with pumpingand electrical plants; booster pumping stations; ground and overhead storagetanks; transmission mains; and extension of the distribution system. Thesub-project will improve the water supply service and through 1981 increasethe population served from about 0.8 to 1.0 million by augmenting the waterproduction capacity with about 0.4 m3/sec.

35. The Lucknow sewerage system is proposed to be divided into 4sewerage districts. The sub-project will include cleaning and replacingof existing sewers, where needed, and extension of new sewers to areas notyet covered.

July 18, 1975

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 1: Kaval Towns Jal Sansthans

Forecast of Population and Water Demand 1974-2001

KAVAL TOWNS YEAR POPULATION WATER DEMANDAVERAGE MAXIMUM

Domestic Non-Domestic Total Domestic Non-Domestic Totalx 1,000 m

3/s m

3/year m

3/s m

3/year m

3/s m

3/year m

3/s m

3/year m

3/s m

3/year m3/s m

3/year

_ _ _ __ _ x 1,000,000 x 1,000,000 x 1,000,000 x 1,000,000 x 1,000,000 x 1,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1. Kanpur 1974 1,337 2.07 65.2 0.45 14.4 2.52 79.6 2.59 81.5 0.56 18.0 3.15 99.51981 1,704 3.55 112.0 0.78 24.8 4.33 136.8 4.44 140.0 o.98 31.0 5.42 171.01991 2,250 4.69 147.8 0.78 24.8 5.47 172.6 5.86 184.8 0.98 31.0 6.84 215.82001 2,840 7.12 224.5 1.31 41.3 8.43 265.8 8.90 280.6 1.64 51.6 10.54 332.2

2. Agra 1974 583 0.90 28.4 0.30 9.4 1.20 37.8 1.13 35.6 0.38 11.8 1.51 47.41981 670 1.39 43.8 o.46 14.6 1.85 58.4 1.74 54.8 0.58 18.3 2.32 73.11991 890 1.85 58.4 0.46 14.6 2.31 73.0 2.31 73.0 0.58 18.3 2.89 91.32001 1,280 2.69 84.7 0.55 17.5 3.24 102.2 3.36 105.9 o.69 21.9 4.05 127.8

3. Varanasi 1974 630 1.57 49.5 0.12 3.8 1.69 53.3 1.76 64.2 0.15 4.7 1.91 60.21981 870 1.81 56.9 0.14 4.4 1.95 61.3 2.26 71.2 0.17 5.5 2.43 76.71991 1,225 2.50 78.8 0.19 5.8 2.69 84.6 3.13 98.6 0.23 7.3 3.36 105.92001 1,600 3.24 102.2 0.32 10.2 3.56 112.4 4.05 127.8 0.41 12.8 4.45 140.6

4. Allahabad 1974 520 1.19 35.9 0.18 7.2 1.37 43.1 1.49 44.9 0.23 9.0 1.72 53.91981 826 1.72 50.5 o.42 17.0 2.14 67.5 2.15 67.8 0.53 21.3 2.68 84.51991 1,292 2.69 84.7 0.98 31.0 3.67 115.7 3.36 106.0 1.23 38.7 4.59 144.82001 1,671 3.48 109.6 1.19 37.7 4.67 147.3 4.35 137.2 1.49 47.1 5.84 184.2

5. Lucknow 1974 841 1.89 59.7 0.23 7.3 2.12 67.0 2.25 71.0 0.29 9.1 2.54 80.11981 990 2.07 65.2 0.26 8.3 2.33 73.5 2.58 81.4 0.33 10.4 2.91 91.81991 1,335 2.78 87.8 o.48 15.0 3.26 102.8 3.48 109,7 o.60 18.8 4.08 128.72001 1,931 4.83 152.2 0.74 23.5 5.57 175.7 6.03 190.2 0.93 29.4 6.96 2i9.5

6. Summary 1974 3,911 7.62 238.7 1.28 42.1 8.90 280.8 9.22 297.2 1.61 52.6 10.83 341.1

1981 5.060 10.54 328.4 2.06 69.1 12.60 397.5 13.17 415.2 2.59 86.5 15.76 497.11991 6,102 14.51 457.5 2.89 91.2 17.40 548.7 18.14 572.1 3.62 114.1 21.76 686.52001 9,322 21.36 673.2 4.11 130.2 25.47 803.4 26.69 841.7 5.16 162.8 31.85 1004.3

Source: LSGED

July 18, 1975

INDIAUTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

LUCKNOW MUNICIPAL CORPORATION WATER SUPPLY AND SEWERAGE WORKSPRESENT ORGANIZATION (1974)

MunicipalCorporation

Administrator -(Mukhya NagarAdhikari) Municipal Accountant

r ~~~~~SecretarVWater Works WLegal and Admihis-

Engineer tration

Asi ltE Assistant Engineer g ssistant EngineerAAssatEgineer Treatment Works Head Clerk . Raw Water Assistant Engineer

Distribution ~Pumping Station .Pumping Station

i IZnseco r oremen _ uperintendent

Superi ntendent_ I nspector _ Superi ntendent _ Tube WellIs

Pumping Stations

World Bank-9309(R)Number of Staff 623

ANNEX 4Page 1

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

The Jal Nigam

(State Water Supply and Sewerage Development Corporation)

1. The Jal Nigam was established in 1975 following promulgation ofthe Uttar Pradesh Water Supply and Sewerage Ordinance in May 1975.

2. The Nigam's basic organization and assets, staff and expertise,locations and premises were derived from the Local Self Government Engi-neering Department, which was merged into the Nigam in June 1975.

Local Self Government Engineering Department (LSGED)

3. The Local Self Government Engineering Department (LSGED) wasoriginally formed as the GUP Public Health Engineering Department and priorto 1927, was part of the GUP Public Works Department. The name was changedto LSGED in 1952, when it was attached to Ministry of Local Self Government.

The principal duties and functions of LSGED which are nowassumed by the Nigam are:

(i) Preparation and execution of water supply, drainage, sewagedisposal, and other health works for local bodies; and ofrural water supplies and drainage projects for districtauthorities;

(ii) Preparation and execution of health schemes for otherGovernment departments;

(iii) Inspection and general supervision of all waterworks, sewagepumping stations, sewage utilization schemes, municipalowned electric undertakings and other electrical andmechanical plants installed in Vaccine Depots, etc.;

(iv) Scrutiny of water supply budget of local bodies havingwaterworks;

(v) General supervision and advice to local bodies in respectof recruitment and work of the technical staff;

ANNEX 4Page 2

(vi) Advising State Effluent Board on all public healthengineering matters;

(vii) Preparation of designs for public health engineeringworks;

(viii) General technical advice on matters relating to publichealth engineering work of local bodies and all GovernmentDepartments;

(ix) Supply of forecasts of project costs to local bodies;

(x) Arranging purchase of spare parts, chemicals and otherelectrical and mechanical equipments for water worksand local bodies;

(xi) Repairing waterworks plants at request of local bodies;

(xii) Testing and developing of tubewells for the local bodies.

4. Although local bodies were required to take over commissionedprojects from LSGED and assume responsibility for operations and maintenance,a number failed to do so, and LSGED was left to continue these responsibili-ties using GUP capital funds (allocated for other project development) tofinance the works. The Nigam has now assumed these responsibilities, usingprojects construction supervision engineers to do the work, in addition totheir normal duties.

5. LSGED had its head office in Lucknow and 21 regional organizationscalled circles, in various towns in the State. The staff establishment ofLSGED before reorganization was 1 chief engineer; 2 additional chiefengineers; 20 superintending engineers; 125 executive engineers; 464assistant engineers; 1,820 engineering overseers; 380 draftsmen; and 115computers. The total number of staff members amounted to 4,239 of which612 were professionals. The head office was mainly executing staff func-tions such as project selection, overall planning and project supervision,training of personnel, research, budgeting and accounting. Each circlewas headed by a superintending engineer and consisted of a varying numberof design and construction divisions. Each circle was given independencefor projects execution, subject to overriding control and authorization ofHead Office for annual budgets and programs. These circles had completeddesign work for projects valued at about Rs 40 crores (US$50 million equiv-alent) awaiting resources allocation by mid-1974.

The Nigam - UP Water Supply and Sewerage Development Corporation

6. The Nigam is a planning, regulatory and development finance agencyfor the water supply and sewerage sector, and its functions are prescribedin the Uttar Pradesh Water Supply and Sewerage Ordinance of May 1975.

ANNEX 4Page 3

7. The Managing Director is responsible to the Board, whose membersare: Secretary of Local Self Government (Chairman); Vice-Chairman to beappointed by the Government; Managing Director and Finance Director of theCorporation; Secretaries to the State Government in the Finance and LocalSelf Government Departments; Commissioner of Local Bodies; Director Medicaland Health Service; and three elected representatives nominated by GUP.

8. Chart 9307 (Annex 4) shows a proposed organization chart of the Nigam.Under the Managing Director, there would be four departments - engineering;finance; personnel and training; and secretary. For projects appraisal aseparate unit is attached to the Managing Director.

9. The Nigam's auditors would be appointed from commercial firms,although the GUP Accountant-General would still regularly examine certainaccounting functions.

10. The Nigam's main functions, which are a major expansion of theLSGED functions (para 3) can be summarized as:

(i) to promote and ensure the provision of water supply andsewerage and sewage disposal throughout UP;

(ii) to guide water authorities in the performance of theirfunctions;

(iii) to perform the functions of the water authorities incases where such authorities cannot be appointed orfor any reasons do not function;

(iv) to evolve and implement a technical and financial programin the water supply and sewerage sector;

(v) to advise the Government regarding establishment, modi-fication or abolition of any water authority;

(vi) to review and advise on the tariff, taxes and chargesfor water supply and sewerage in the areas under waterauthorities; and

(vii) to establish standards of supply and service for watersupply and sewerage.

The Nigam will aim to divest itself of certain functions, which can beexecuted in the long term by water authorities, e.g. project design andconstruction supervision. It will always retain the powers to executethese in the event of failure by a responsible authority.

11. The powers of the Nigam are:

(i) to inspect all water supply and sewerage facilities inthe state, by whomsoever they are operated;

ANNEX 4Page 4

(ii) to obtain such periodic or specific information from anylocal water authority as may be deemed necessary;

(iii) to oversee and direct all activities of every localwater authority as may be laid under the regulations;

(iv) to call for and sanction the projects for water supplyand sewerage from every local water authority and obtainon their behalf finance for the same;

(v) to prescribe the schedule of fees for all services to berendered between water authorities and the Nigam;

(vi) to enter into contract or arrangement with any person,firm or institution as the Board may deem necessary;

(vii) to approve tariffs for water supply and services;

(viii) to adopt its own budget annually;

(ix) to borrow money, issue debentures and manage its ownfunds; and

(x) to incur expenditure and to grant loans and advances tosuch persons or authorities as may be deemed necessary.

12. The Nigam's staff will be similar to LSGED (para 5), but expandedto meet requirements for (i) improved management techniques; (ii) accountingand financial control; (iii) personnel and training functions; and (iv) Boardadministration. The principal engineering staff are public health engi-neers, supported by electrical and mechanical engineers. Some engineerswill be seconded or transferred to RJSs or KAVAL Jal Sansthans as theseare formed, and this will deplete the original numbers to what will probablybe the long-term size of the Nigam's establishment. Management consultantswill be used by the Nigam to advise on its own and other water authorities'organizations and managements and until their reports are adopted, thefinal staffing will not be known.

13. In addition to its various planning and design offices, the Nigamhas major workshops where equipment is overhauled and repaired. Limitedresearch and development activities are undertaken, but these will be ex-panded to provide facilities for all UP water authorities, as the demandincreases. Certain plant, such as drilling rigs, in limited supply inIndia, have been constructed by LSGED, but the Nigam now intends to import,where necessary, the larger and heavier-duty equipment necessary for de-velopment and operations.

ANNEX 4Page 5

Consultant Services

14. For implementation of the project, the Nigam will need consultantassistance within the fields of engineering, finance, management and training.

15. The Nigam's engineering staff is well experienced in planning,design and construction supervision of various water and sewerage works.However, for water treatment works the practice has been to ask for tendersboth for water treatment plant equipment and for related civil works design.Such a procedure has not developed an adequate design capability for, norcritical approach to, water treatment works among the Nigam's staff.

16. The appraisal mission was joined by Mr. H.E. Hudson, a specialistin water treatment, to study the existing water treatment works in the KAVALtowns. His main observations are summarized below:

(i) the pre-treatment is deficient; there is no control overthe alum dosing; and the mixing and flocculation arrangementsare inadequate.

(ii) the settling tanks are subject to short-circuit currents;the turbidity for the settled water is exceedingly high; thefilter-run periods are correspondingly short; and the filtereffluent turbidity is unsatisfactorily high.

(iii) the operational staff is generally more proficient in themechanical and electrical field than in water treatment;pumping plants are normally well maintained; and there isan apparent lack of understanding of the treatment process.

There is a clear need to uprate the knowledge in the design of treatmentworks and to train people in their operation.

17. Consultants will also be engaged to execute part or all of thefollowing tasks:

(i) recommend and implement management, organization andstaffing proposals for the Nigam, the RJSs and theKAVAL Jal Sansthans;

(ii) review and recommend on the financial and resourcesgeneration capacity of Jal Sansthans;

(iii) prepare tariff studies for Jal Sansthans and any otherareas specified by the Nigam;

(iv) recommend on the principles of the Nigam's loans fundoperation, including loan terms and conditions to thevarious water authorities to which the Nigam may lend,having regard to the findings in (iii) above;

ANNEX 4Page 6

(v) valuation of all assets and inventories of the Nigamand Jal Sansthans as at date of formation; and

(vi) preparation of schedules of condition of the watersupply and sewerage systems of Jal Sansthans as atdate of formation.

Training

18. The Nigam has the responsibility of training all staffs in thesector, and to do so, will have to develop central and localized trainingfacilities for all levels of staff. Extensive training is needed forplant operators and maintenance personnel, together with the introductionof work programs and planned maintenance. Administrative and accountingpersonnel have to be recruited and trained, with consumer services per-sonnel - meter readers and meter repairers. The Nigam intends to engageconsultants to advise on the entire sector's training requirements andpossible programs, which will be sent to IDA for review and comment. There-after they will recruit, or transfer existing suitable staff as trainees,but if necessary, for a short time may hire specialists in certain fields.

Finance and Accounts

19. The Nigam, to fulfill its role of planning, regulatory anddevelopment finance agency, has initial assets of about Rs 7 crores,(US$8.75 million equivalent) including Rs 1.6 crores (US$2.0 millionequivalent) working capital which will be made available by GUP.This would be supplemented by an initial advance of Rs 1.8 crores (US$2.25million equivalent) from LIC (see para 4.19 of Appraisal Report).

20. The Nigam will operate an Operational account, a Sector Develop-ment Account and a Sector Loans Fund. Examples of these are shown asTables 1, 2 and 3 to this Annex and are supported by Table 4, ProjectsConstruction, Deferred Charges and Income Accounts; Table 5, Sources andApplication of Funds Statement; and Table 6, Balance Sheets as at March 31,1976 through 1979. Only four years' transactions are shown in each Tablebecause 1978-79 will be the end of the current Five-Year Plan period. TheNigam will be significantly affected by Five-Year Plans (particularly re-sources allocations), and it will not be meaningful to forecast the nextPlan period - particularly when the current Plan remains only at draft stage.

21. The Operations Account records all expenses of staff, managementand organization of the Nigam, divided between (i) projects and sectorwork; and (ii) operation of water supply systems of defaulting water authori-ties or local bodies. This fund will receive fees income from sums rechargedto (i) Construction and Deferred Charges Accounts for projects planning,design and construction supervision work; (ii) local bodies or water authori-ties for other direct services rendered, such as provision of managementconsulting services; (iii) the Sector Loans Fund for staff time and servicesincurred in operation of that fund; and (iv) the Sector Development Account

ANNEX 4Page 7

in respect of operations and maintenance costs of water supply systems, andfor costs of administering the sector as whole, e.g. costs of inspectionof facilities - or sector-wide tariff studies. Other income could includerents received, or hire charges for plant and vehicles.

22. The Sector Loans Fund, which represents a development bankingoperation for the sector, is designed to take over all existing externaldebt of Jal Sansthans and local bodies which enter into agreements with theNigam, and to replace this with Loans from the Nigam to these authorities.The Nigam would then become the borrower for the sector, and its borrowingswould be guaranteed by GUP. The Nigam will thus be responsible for raisingall new borrowings and to repay these and the existing debt. The localbodies and Jal Sansthans will repay the Nigam on an annuity basis. TheNigam has the right to (i) determine the terms and conditions of any advancesit may make; (ii) review and approve local tariffs on behalf of GUP; and (iii)review the activities and performance of water authorities and take over thosein default. With these powers, and after detailed tariff studies in areaswhere loans will be made, the Nigam will determine the onlending rates,periods and terms of loans with the objective of providing a banking facilitywhich can steadily expand its provision of new resources to the sector. Asan example, the onlending of Rs 35 crores of the proposed project loans andgrants to the KAVAL Jal Sansthans at 8% or higher could provide the necessaryresources for the rural schemes in the proposed project. Surpluses on thecapital or revenue sections of the fund can be used for reinvestment, orrevenue surpluses only used for Sector Development Account purposes.

23. The Sector Development Account is designed to show the financingof the sector by GUP and cross-transfers between constituent authorities.The transactions shown in Table 3 are limited to the first three RJSs, theKAVAL Jal Sansthans and Nigam operations, but it will be possible by use ofthis fund, providing the regulations 1/ are observed, to annually measurethe financial support to, and within, the sector.

24. The Projects' Construction and Deferred Charges Accounts show theannual inputs for construction, planning, design and construction supervisionexpenditures, interest during construction, and work-in-progress. Thebalances on the Deferred Charges Account are the costs of planning anddesign work chargeable to projects construction not yet authorized orcompleted. Charges are 1% for projects investigation and 4% for planningand design on the final construction costs. Construction supervision whichis transferred direct to project construction costs from Operations Accountis at 11% of construction costs.

25. The Sources and Application of Funds Statements and the BalanceSheets reflect all operations of the Nigam, which is being encouraged toregard itself as one multi-purpose entity and not as separate engineering,financing or administrative units.

1/ Regulations will require that no local body or GUP department, agencyor statutory corporation except the Nigam can transfer any funds forfinancing water supply and sewerage services except through the SectorDevelopment Fund of the Nigam.

July 18, 1975

ANNEX 4

IPDIA

UTTAR PRADESH WATER SUPPLY AID SEWERAGE PROJECT

Table 1: Jal Rigam (Uttar Pradesh State Water Supply and Sewerage Levelopeent Corporation)

Operations Account Forecast 1975-76 Through 1978-79

1975-76 1976-77 1977-78 1978-79 Total- ----------------------------------- Rs Lakhs ---------------------------------------

INCOMERevenues

Fees Receivable:Investigations of Projects 22.0 25.3 27.8 30.6 105.7Planning, Design and Estimating 90.0 103.5 113.5 124.8 431.8Procurement and Construction 93.0 219.6 281.7 176.1 770.4

Sub Total 205.0 r 423.0 331.5 1,307.9Advisory Services 10.0 25.0 40.0 15.0 90.0

Charges to local bodies forOper4tions and Maintenanceof Water Supply Systems 17.3 25.6 31.4 38.0 11'.3

Other Income - 4.8 5.2 5.7 6.5 22.2Total Revenues 237.1 404.2 500.1 391.0 1,532.4

Additional IncomeSector Development Account for Sector

and Project Operations 50.0 50.0 50.0 50.0 200.0sector Development Accourt for WaterSupplv Systems Operations 60.0 80.0 90.0 100.0 330.0

Sector Loans Fond for Fund Administration,Projects Appraisal and Supervision 23.6 32.2 57.4 67.6 180.8

Sub-total 162.2 197.4 217.6 710.8

TOTAL INCOcME 370.7 566.4 o752.24

EXPENDITURESfleas' s Sector end Projects Development

Staff and Labor (including consultants) 290.5 342.1 364.1 400.5 1,397.2Travel and Transportation 40.0 46.o 50.6 59.7 196.3Maintenance of Premises 10.0 11.5 12.7 15.0 49.2Drawing Offices 5.0 5.8 6.4 8.0 25.2General Offices 15.0 17.3 19.0 22.9 74.2Field Surveys 7.0 8.1 8.9 14.0 38.0Tools and Plant 4.0 4.6 5.1 9.6 23.3Allowances to Board Members 1.0 1.2 1.3 1.5 5.0Research and Training 2.0 20.0 40.0 45.0 107.0Miscellaneous 12.0 13.8 15.2 18.7 59.7

Sub-total 470.4 523.3 594.9 1975.l

Nigan Operation of Water Supply SystemsRepairs and Maintenance 12.5 18.4 20.2 23.4 74.5Power 17.5 25.1 27.6 32.3 102.5Chemicals 7.0 10.6 11.7 12.8 42.1Transportation 5.0 5.8 6.4 9.0 26.2Miscellaneous 6.o 6.9 7.6 9.9 30.4

Sub-total --. o 66.8 73.5 7 275.7Total Operational Expenditures 434.T 537.2 25.685

Depreciation of Nigam Assets 1.5 2.0 2.5 3.0 9.0TOTAL EXPENDITURES 436.0 539.2 599.3 685.3 2,259,8

Operational Surplus (Deficit) Before Interest (65-3) 27.2 98.2 (76.7) (16.6)Interest 1.9 6.6 12.8 19.8 41.1

Operational Surplus (Deficit) (67.2) 20.6 85.4 (96.5) (57.7)

Surplus (Deficit) at Beginning of Year - (67.2) (46.6) 38.8

Surplus (Deficit) at End of Year (67.2) (46.6) 38.8 (57.7)

1/ Salaries and labor costs of operations and maintenance included under Sector and Projects Developmentno separate staff maintained for this service.

Source: LSGEDJuLy 18, 1975

ANNEx 4INDIA

UTTAR PRADESH WATER SUPPLY AND SEERAGE PROJECT

Table 2: Jal Nigam (Uttar Pradesh State Water Supply and Sewerage Development Corporation)

Water Supply and Sewerage Sector Development Account

Forecast - 1975-76 Through 1978-79

1975-76 1976-77 1977-78 1978-79 Total------------------------ Rs Lakhs ------- ________________

INCOMEUhGovernment

Grants 330.0 650.o 780.0 570.0 2,330.0Subventions 38.9 39.5 67.0 112.6 258.o

Sub-total 368.9 689.5 847.0 682.6 2,588.0

Other Sources - _ _ _ _

Jal Sansthans and Local Bodies

Subventions Repaid _ _Other Payments to Fund _ _ _

Sub-total

Surpluses Transferred from

Loans Fund Revenue Account _ _ _ _ -

Nigam Operations Account _ _ _ _

Sub-total _ _ _

Transfers from Sector Equalization Fund

TOTAL INCOME 368.9 689.5 847.0 682.6 29588.0

EXPENDITURESGrants to Sector Loans Fund 220.0 520.0 640.o 420.0 1 ,800.

Jal Sansthans _- - -

Local Bodies - - -

Sub-total 220.0 520.0 64000 .0W

Subventions - to RJSs - Bundelkhand 24.3 24.7 41.9 70.4 161.3Kumaon and Garhwal 3/ 14.6 14.8 25.1 42.2 96.7

KAVAL Jal Sansthans - - - - -Local Bodies - _- - -

Sub-total 38.9 39.5 67.0 112.6 250.0

Deficits or Defaulting Payments Transferred from:

Loans Fund - Principal Payments - _ - Interest Payments - - _- Fund Deficit - - - _

Operations - Sector and ProjectsAccount Development 50.0 50.0 50.0 50o0 200.0

- Water Supply SystemsOperations 60.0 80.0 90.0 100.0 330.0

Sub-total 110.0 130.0 140.0 150.0 530.0

TOTAL EXPENDITURES 368.9 689.5 847.0 682.6 2,5W.0

This table shows only the operations in respect of three RJS's, the KAVAL Jal Sansthans and investments innew schemes in other areas of the State. It excludes any other transaction- relating to local bodies inareas of the State outside RJS's and KAVAL Jal Sansthans

Subventions or Ways and Means Advances.

Kumaon and Garhwal RJS's support payment assumed at 601o of Bundelkhand RJS payments.

July 18, 19(5 Source: Appraisal Mission

ANNIEx 4

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 3I Jal Niam (Uttar Prad.a State Water SUPD3Y end Sewerage Devalomnt Corporation)

Water Supply and Sewerage Sector Loans Fundyl

Forecast 1975-76 Through 1978-79

1975-76 1976-77 1977-78 1978-79 Total- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -- Rs L3khs - -- -- - - - - - - -- - - - -_-----------------------___

CAPITAL TRANSACTIONS

EXPENDITURESLoans to Water Supply and Sewerage Aulthoritans

RJS's - 630.0 810.0 810.0 2,250.0LiVAL Jel Sanethans - 360.0 1080.0 1710.0 3,150.0Loca. Bodies 1132.0 553.6 893.7 770.1 3,349.4JaT Niga 30.0 70.0 90.0 90.0 300.0

Sob-total 1182.0 1613.6 2873.7 3380.1 9,049.4

Repaymneto to Lenders:cov-rnment 49.0 53.2 58.6 88.4 249.2LIC 2.1 2.6 3.0 7.7 15.4BanksOther

Sub-total 51.1 35.8 61.6 96.1 2564

Advances (net reduction) for work in Progress (153.0) 764.0 209.0 (1420.0) (600.0)

Coah Surplus (deficit)ZI 1.0 20.3 (8.9_ 10.2 22.6Total Capatal Expenditures 1081.1 2453.7 3135.4 2066.4 8,736.6

INCOMELoans Received fros:

Government 590.0 1340.0 1750.0 1060.0 4,740o0LIC.2/ 220.0 520.0 640.0 420.0 1,800.0RanksOther

Sob-total 810.0 1860.0 2390 0 1480.0 6,540.0

Greats Received from:S.ector Developsent Account (eu-GUP) 220.0 520.0 640.0 420.0 1,8oo.oOther Sources

Sub-total 1030.0 2380.0 3030.0 1900.0 P,340.0

Loans Fepid by:RJS's 13.1 13.8 31.9 55.5 114.3KAVAL Jal Sanstbans 38.0 42.0 46.9 70.1 197.0Local Bodies - 17.9 26.6 40.8 85.3,7al Nigen

Sub-total 31.1 73.7 105.4 166.4 39TSector Develop-ent Fond (far

Local Bodies in default) - -Total Capital Incone 1081.1 2453.7 3135.4 2066.4

REVENUE TRANSACTIONS

SXPENDITURESInterest doe to Lenders:

-overnaent 130.5 182.2 268.7 348.3 929.7LIC 19.2 47.9 92.8 133.7 293.6BanksOther

Sab-total 149.7 230.1 361.5 482.0 1,223.3

Financing Charges Incurred (0.1% of brrowangs) 0.8 1.9 2.4 1.6 6.7Nign Operational Fund Charges (2% of Advances) 23.6 32.2 57.4 67.6 180.8

Total Expenditures 174.1 264.2 421.3 551.2 1,410.5

INCOMEInterest paynents receaved fron:

RJS's 22.3 21.4 39.5 62.5 145.7KRVAL Jal Sansthans 102.0 99.0 124.8 208.8 534.6Local Bodies - 79.2 118.0 180.5 377.7Jal Nigan 1.9 6.6 12.8 19.8 4i.1

Sub-total 126.2 206.2 295.1 471.6 1,099.1Sector Develop=ent Account

(for Local Bodiea iL default)

Interest Charged to Construction 47.0 62.0 112.0 103.0 324.0

Interest fron Teaporary lnv-ot-ents

Total Income 173.2 268.2 407.1 574.6 - 1,423.1

Surplus (Deficit) for Year Transferred to Sector Development Fund - -Surpusa (Deficit) for Year (0.9) 4.0 (14.2) 23.4 12.3Surplus (Deficit) at Beginaing of Year - (0.9) 3.1 (11.1)Surplus (Deficit) Carried Forward at End of Year (0.9' 3.1 (11.1) 12.3

1/ This Table Bhows only the operations in respect of thb three RJS's, the RAVAL Jal Sasnthans and sew schoens in other areas of ths State.It excludes any transactions relating to existing debt in areas of the State outside h.7S's and the 7AVAL Jal Sansthans.

2/ Cash surpluses or defioits are included in cash balances in Statenent of Eouroes and Applications of Funds.

3/ Includes RS 180 Lakhs initial advance in 1975/76 to be elimisated by 1977/78.

Julv 18, 1975 Souroec Appraisal Misaion

INDIiA - UTTAR PRAD)E3H WATER SUPPLY AND SEWEPAGE PROJECT

Table 4: Jal Nigam (Uttar Pradesh Water Supply and Sewerage Development Corporation)

Forecast of Projects Implementation EKpenitures Deferred Charges and Inpome 1975-76 Through 1978-79

1975-76 1976-77 1977-78 1978-79

---------------------------------------------------------- R. Lskh ------------ -- - _

A. E3NDITURES. WORK IN PHOOGRES, WORKS CONMISSIONED

Construction Expenditures - ID&/LIC sub-projects 573.3 1346.4 1744.2 1080.9Other Schemes 273.7 649.6 816.8 520.1

Interest during construction 47.0 62.0 112.0 103.0

From Deferred Charges:Investigation 8.4 20.0 25.6 16.0

Planning, Design and Estimating 33.6 80.0 102.4 64.oProcurement and construction supervision 93.0 219.6 281.7 176.1

Sub-Total Projects expenditures in year 1029.0 2377.6 3082.7 1960.1

Add Work-in-Progress at beginning of year 600.0 447.0 1211.0 1420.0

Sub-Total 1629.0 2824.6 4293.7 3380.1

Deduct Work-in-Progress at end of year 447.0 1211.0 1420.0

WORMS COMMISSIONED IN ElAR AND TRiNSFERRECTo Jal Sansthans; local bodies 1182.0 1613.6 2873.7 3380.1

B. WORKS COOUSSIONED IN YEAR FINANCED BY:

Advances from Sector Loans Fund 1182.0 1613.6 2873.7 3380.1Capital Pay ents by Jal Sansthans; local bodies _ _ _ _

Grants from Sector Development FuPndOther Services

TOTAL FINANCING 1182.0 1613.6 2873.7 3380.1

C. DIFDM CHARGES

IN7E2TIGATIONS PLANNING, DESIGN INVESTIGATIONS PLAllNRG]. DESIGN INVESTIGATIONS PLANNIR, DESIGN INVESTIGATIOIS PlIANING. D8IGN

Expenditures

Charges from Nigam Operations Accoo:t 22.0 90.0 25.3 103.5 27.8 113.5 30.6 124.8

Income

Recoveries from Projects(Section A above) 8.4 33.6 20.0 80.0 25.6 102.4 16.o 64.0

Under (over) Recovery for year 13.6 56.4 5.3 23.5 2.2 11.1 14.6 60.8

Add (Deduct) Amounts under (over) recovered from previous years 40.0 160.0 53.6 216.4 58.9 239.9 61.1 251.0

Total Under (Over) Recovery atend of Year 53.6 216.4 56.9 239.9 61.1 251.0 75.7 311.8

Deduct transfers of surplus to Sector Development ooun. - -

Net Balance carried forward 53.6 216.4 58.9 239.9 61.1 251.0 75.7 311.8

Jc1.g 18, 1975 Scores: Appraisal Missios

AMWvX 4

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

.Table 5: Jai Nigam (Uttar Pradesh State Water Sapply and Sewerage Developmert Cbrporation)

Sources and Application of Funds Statement

1975-76 1976-77 1977-78 1978-79 Total

--------------------------Rs Lakhs-----------------------____

SOURCES OF FUNDS

Onerotions Account Revenues 32.1 55.8 77.1 59.5 224.5OTJP Contributions for Working Capital 265.0 -- - 265.0

Grants 330.0 650.o 780.0 570.0 2,330.0

Subventions from Government 38.9 39.5 67.0 112.6 258.0Subventions Repaid by Jal Sansthans, Local Bodies _Loans Received 810.0 1860.0 2390.0 1480.0 6,540.0Loans Repaid by Jal Sansthans, Local Bodies 51.1 73.7 105.4 166.4 396.6

Interest Repaid by Jal %ansthans, Local Bodies 124.3 199.6 282.3 451.8 1,058.0Increase (Decrease) in Payables 146.5 160.2 92.2 (95.0) 303.9

TOTAL SOURCES 1797.9 3038.8 3794.0 2745.3 11,376.0

APPLICATION OF FUNDS

Operations Account Expenditures 434.5 537.2 596.8 682.3 2,250.8

Jal Sansthans Working Capital 100.0 - - 100.0Construction Expenditures 847.0 1996.0 2561.0 1601.0 7,005.0

Subventions to Jal Sansthans 38.9 39.5 67.0 112.6 258.0

Debt ServiceInterest - Loans taken over 124.3 120.4 116.6 113.8 475.1

- New Loans 25.4 109.7 244.9 368.2 o48.2

Principal - Loans taken over 51.1 55.8 61.6 67.0 235.5- New Loans - - - 29.1 29.1

Increases (Decreases) in - Inventories 20.0 22.0 24.0 27.0 93.0

- Receivables 44.3 25.7 31.0 56.2 1.72Financing Charges - Loans Fund 0.8 1.9 2.4 1.6

TOTAL APPLICATIONS 1686.3 2908.2 3705.3 3058.8 11358.6

Cash Surplus (Deficit) for Year 111.6 130.6 88.7 (313.5) 1'7.4

Balance at Beginning of Year - 111.6 242.2 330.9

Balance at End of Year 111.6 242.2 330.9 17,4

.. ~l.v 18, 1975 Source: Appraisal Missionjuly i8, 1975

ANNEX 4

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE FRCJECT

Table 6: Jal Nigam (Uttar Pradesh State Water Supply and Sewerage Development Corporation)

Balance Sheets as at March 3t 1975 through 1979

Year ended March 31 1976 1977 1978 1979---------------------------- Rs Lakhs --------- ___________

ASSETS AND OUTLAYCurrent Assets

Cash Surplus (deficit) 111.6 242.2 33C.9 17 Short Term LoansShort Term InvestmentsReceivables 44.3 70.0 101.0 157.2Inventories 220.0 242.0 266.0 293.0

Sub Total - Current Assets 375.9 554.2 697.9

Deferred Charges to Jal SansthansFees Receivable on Completion of Projects 270.0 298.8 312.1 387.5Consultants Fees for Reorganization Studies 25.0 75.0 125.0 170.0Projects Work in Progress 447.0 1211.0 1420.0

Sub Total 742.0 1584.8 1857.1 557.5Outstanding Loans

RJS's 358.6 974.8 1752.9 2507.4KAVAL Jal Sansthans 1691.0 2009.0 3042.1 4682.0Local. Bodies 1132.0 1667.7 2534.8 3264.1

Sub Total - Outstanding Advances 3181.6 4651.5 7329.8 10453.5Advances to RJN's for Working Capital 100.0 100.0 100.0 100.0Fixed Assets

Buildings, Plant and Machinery 60.0 80.0 120.0 165.0Less Accumulated Depreciation 1.5 3.5 6.0 9.0

Net Assets 58.5 76.5 114.0 156.0

TOTAL ASSETS AND OUTLAY 4458.0 6967.0 10Oi39 117<4.6

LIABILITIES. EQUITY AND SURPLUSESCurrent Liabilities

Short Term LoansPayables 146.5 306.7 398.9 303.9

Sub Total - Current Liabilities 146.5 306.7 398.9 303.9

Long Term DebtGovernment - Loans taken over 1897.2 1844.0 1785.4 1721.6

- New Loana 1190.0 2530.0 4980.0 5315.4LIC - Loans taken over 152.4 149.8 146.8 143.6

- New Loans 220.0 740.0 1380.0 1795.5BanksOther

Sub Total - Long Term Debt 3459.6 5263.8 7592.2 0c76.

Equity. Grants and SurplusesGovernment Contribution 700.0 700.0 700.0 700.0Government Grants 220.0 740.0 1380.0 1800.0Surpluses (Deficits) on: Sector Development Account - - - _

Operations Account (67.2) (46.6) 38.8 (57.7)Sector Loans Fund (0.9) 3.1 11,1 12.3

TOTAL LIABILITTES AND SURPLUSES 4458.o 6967.o 10098.8 11734.6

.Jul- 18, 1975 Source: Appraisal Mission

;tCI~~~~~~~~~~~~~~~~~~~~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~ 1 -bIWO.Ag

[ _ _ z T | E [ _ _-T -- J t r j c r ~~~~~~~~~~~~~~~~~~~~~---- ---

............................ ...... .. ..............

W~~~~~~~~

I ~ ~ - I

ANNEX 5Page 1

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Description of Regional Jal Sansthans and KAVAL Towns Jal Sansthans

1. The sub-projects, which form the proposed project, will beconstructed in the areas of the Bundelkhand, Kumaon and Garhwal RegionalJal Sansthans and in the five KAVAL towns. These eight Jal Sansthans willhave the responsibility of operating and maintaining the works commissionedfrom the sub-projects to be designed and constructed by the Nigam, togetherwith all existing water supply and sewerage systems within their administra-tive boundaries. Detailed reviews of these authorities will be provided toIDA and LIC in Nigam technical reports, when IDA will be able to comment onthe organizations and performances - actual and forecast - before sub-projects are financed.

Regional Jal Sansthans

2. Under the Uttar Pradesh Water Supply and Sewerage Ordinance ofMay 1975, GUP will establish three Regional Water Authorities (RJSs) inthe Bundelkhand, Kumaon and Garhwal Districts. The Nigam has the respon-sibility of forming, organizing and staffing the RJSs.

Organization and Staffing

3. Chart 9308 (Annex 5) shows an outline proposal for organizationof a Regional Jal Sansthan. Until consultants have made recommendationsto the Nigam, the final form will not be known. Under a General Managerthere could be three departments for engineering, finance and administra-tion. The General Manager would be responsible to the Board, whose memberswould be: a chairman to be appointed by the Government; the General Man-ager; a District Collector; a representative from the Nigam; and threeelected representatives from local bodies within the area of jurisdictionof the RJS.

4. RJSs will initially be staffed by transfer of staff members fromlocal bodies' water works within the regions. The local bodies will thencease to have responsibility for these services. Additional staff will beprovided from the Nigam, or will be recruited and trained. It is envisagedthat before the RJSs obtain sufficient numbers of staff with adequate ex-perience, the Nigam will have to carry out some of their duties and respon-sibilities.

ANNEX 5Page 2

Functions

5. A Jal Sansthan's functions are as follows:

(i) to promote and operate efficient systems of water supply,sewerage, sewage treatment and disposal, sanitation anddrainage;

(ii) to establish, take over, construct, reorganize, operateand maintain water supply and sewerage facilities in thewater district(s) within its jurisdiction;

(iii) to regulate the drilling of tubewells and control thewithdrawal of groundwater;

(iv) to protect water bodies from pollution; and

(v) to manage all affairs so as to provide the people withinthe jurisdiction with wholesome water and efficientsewerage services.

Powers

6. A Jal Sansthan's powers are as follows:

(i) to take over all the existing responsibilities, power,controls, facilities, services and administration fromrespective local body or authority and to manage watersupply, sewerage and sewage disposal so as to providethe people with wholesome water and efficient sewerageservices;

(ii) to acquire, possess and hold lands and property forpurposes of water and sewage works;

(iii) to abstract water from any natural source and disposeof waste water;

(iv) to enter into contract or arrangement with any person;

(v) to adopt its own budget annually subject to theconcurrence of the Nigam;

(vi) to introduce or amend tariff for water supply andsewerage services, subject to approval by the Nigamand collect all taxes and charges for their services,as may be prescribed;

ANNEX 5Page 3

(vii) to incur expenditure and manage their own funds; and

(viii) to obtain loans, advances and subventions from the Nigam.

Operations and Maintenance

7. The primary objective is to construct for each RJS a completeoperations and maintenance organization under a Chief Operations Engineer,probably based on district centers, with a consumer service organizationfor meter reading and repairs, billing and collection arrangements. Ini-tially, the Nigam circle offices and sub-offices will be used where suitable,until the Nigam and the consultants can decide on the most suitable locationsto maximize the benefits for consumer services. It is possible that Nigamstaff may service Nigam and RJS's until the first phase of reorganization iscomplete. This will be about mid-1977. Some operation, maintenance andconsumer arrangements in rural areas are expected to be experimental, becausethere is no experience in maintaining water supply systems in rural areason the proposed scale.

Capital Works

8. It is expected that after 5-7 years the better developed RJSswill commence designing and constructing minor capital works, leaving theNigam to execute their larger projects. Subsequently, if the Nigam issatisfied with the RJSs' capability and capacity, they may execute allcapital works. However, the loan finance for such works will be channelledthrough the Nigam.

Accounts and Audit

9. The accounts of the RJSs will be maintained on a commercial(accruals) basis by a Chief Accounts Officer and will be subject to periodicsupervision by Nigam inspection staff. Commercial auditors will be engagedto audit the financial statements and balance sheets, and the GUP Accountant-General will also audit the accounts. The RJSs will annually present typicalpublic-utility-type Income Statements and Sources and Application of FundsStatements (Tables 1 and 2) with Balance Sheets. The tables shown are formaldemonstration tables only. Until Nigam appraisals are prepared and sub-sequently the consultants' reports implemented (para 3.05 of AppraisalReport) it will not be possible to provide an accurate picture of RJSs'finances.

Assessment of RJSs' Financial Capacities

10. All Jal Sansthans are required by law to review and adjust theirrates of taxes and charges to cover the cost of operations and maintenance,and debt service. When the RJSs take over all water supply and seweragesystems in their areas (para 1) schedules of condition and valuations ofassets will be prepared. Until the former are available, it will not be

ANNEX 5Page 4

possible to fully assess the financial commitments of an RJS, because manysystems in small towns are known to be in very poor condition and some equip-ment inoperable. Concurrently with the preparation of the above schedules,tariff studies will be carried out and the combined data used to determinethe impact on rates and taxes of the IDA requirement that the costs of oper-ations and maintenance and debt service of existing systems should be metby RJSs consumers in 1977/78, and the future obligation for each RJS tofinance all such costs for all systems by 1982/83. Until these targetsare achieved RJSs will receive support subsidies from the Nigam SectorDevelopment Account (Annex 4).

Debt Service and Interest Rates

11. Existing rural schemes of RJSs are debt free, having been financedby GUP grants; only urban systems have debt service obligations. The IDAproposal in para. 6.09 of the appraisal report, is that RJSs should berequired to meet a debt service of 3% per annum over 25 years for the pro-posed rural sub-projects, until the results of tariff studies determine thelocal potential of consumers to pay for water. This will almost certainlymean that Nigam support subsidies will be required for RJS debt service pay-ments prior to 1982/83. However, it is proposed that when the recommenda-tions of the tariff studies are agreed between IDA, LIC and the Nigam, theinterest rate and terms of advances by the Nigam to RJSs will be amended toreflect the latters' potential financing capacity.

KAVAL Towns Jal Sansthans

Legislation and Powers of Municipal Corporations

12. The UP Municipal Corporations Act 1959, which authorizes thesecorporations to provide water supply and sewerage services within theirmunicipal boundaries, has been amended by the UP Water Supply and SewerageOrdinance 1975 which will require, inter alia, that (i) the Municipal Corpora-tions set up separate water supply and sewerage departments and funds, towhich all revenues for these services must be paid, and from which allexpenses of these services must be met; and (ii) water and sewerage taxeswill be excluded from existing limits on municipal taxation (currently allmunicipal taxes taken together shall not be less than 10%, nor more than25%, of the total rental value of properties in the municipality). Theamendments tighten up the financial operations of KAVAL towns' water supplyand sewerage services, but IDA and LIC will require that before sub-proj-ects can be financed in any area of the state, such area shall be desig-nated a Jal Sansthan by GUP under the UP Water Supply and Sewerage Ordinanceof May 1975. This will also have the effect of bringing the KAVAL towns'water supply and sewerage services under the requirements, rules and regu-lations, including the Nigam's monitoring and regulatory functions.

ANNEX 5Page 5

Water Supply and Sewerage Departments

13. The mayor and elected members of KAVAL towns, with the UP appointedchief executive officer, will retain overall control of their water supplyand sewerage services, but their water supply and sewerage departments, asJal Sansthans, will be effectively separated from other municipal activities,and will be under control of an engineer/manager, with the additional chiefaccountant to assist. As in RJSs, their primary responsibility will beefficient operation and maintenance with all the functions and powers of aJal Sansthan (paras 5 and 6 above). Departmental organization will beadvised on by the Nigam, and is expected to follow a similar design asfor RJSs with the exception of elimination of district centers. Charts9309 (Annex 3) and 9310 (Annex 5) show for Lucknow as an example existingand an outline proposal for an organization. KAVAL towns are expected torequire some decentralization of consumer service functions. The Nigam isexpected to transfer or second certain key engineering staff to the KAVALJal Sansthans to provide support to the present lower calibre staffs inthese towns.

Accounts and Audit

14. Regulations under the UP Water Supply and Sewerage Ordinance ofMay 1975 will prescribe the form of accounts and require each Jal Sansthan,including the KAVAL town to establish a Water Supply and Sewerage Fund. IDAwill be invited to review and comment on new regulations to be introduced,which should include requirements for commercial and accruals accounting.The audit arrangements will be as for RJSs (para 9).

Assets Valuations and Tariff Studies

15. The preparation of schedules of condition, valuation of assetsand tariff studies will be undertaken as for RJSs (para 10).

Financial Forecasts, Rates of Return on Net FixedAssets in Operation and Working Capital

16. Detailed studies of past and projected performance of each KAVALtown by the appraisal mission show that all have considerable cash deficits,collection at only 50% of receivables in three cases; and inadequate ratesof taxes and consumer charges. The Nigam's appraisal reports will revieweach Jal Sansthan's finances in detail, but to ensure that the KAVAL townsare encouraged to take early action to remedy these deficiencies, IDA wouldrequire (i) the KAVAL town should achieve specified targets of financialperformance in 1977/78, 1979/80 and 1982/83 (para 6.17 of appraisal report);and (ii) GUP would ensure that each water supply and sewerage fund was pro-vided on the date of its establishment with adequate working capital, includ-ing cash (para 6.12 of appraisal report).

July 18, 1975

Note: This is a demorstration table only.Accurate and refined data will not beavailable until presented in Jal Nigam

INDIA appraisal reports.

UTTAR PRADESH WATER SUPPLY AND SWERAGE PROJECT

Table 1: Bundelkhand Jal Sansthan

Forecast of Incorm statements 1975-76 Through 1982-83

1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-62 1982-83

Persons served 432.000 479,000 619,000 800,000 980,000 990,000 1,000,000 1,000,000---- I---------------------Rs Lakhs --------------------------

Revenues 10.0 15.0 30.0 60.0 100.0 120.0 160.0 200.0

Operating ExpendituresStaff and Labor 8.9 10.6 12.3 18.2 28.2 31.0 34.1 37.5Repairs and Maintenance 2.1 2.5 7.0 17.8 37.2 40.9 45.0 49.5Power arx Fuel 5.1 6.9 11.2 21.5 37.7 41.5 45.6 50.2Chemicals 1.4 1.8 2.8 4.9 8.4 9.2 10.2 11.2Vehicles and Equipment 1.2 1.9 1.9 2.6 3.8 4.2 4.6 5.1Office Admdnistration 1.4 1.7 1.9 2.4 3.1 3.4 3.7 4.1Miscellaneous 0.8 1.0 1.3 1.5 1.8 2.0 2.2 2.4Purchase of Bl3k Water Supplies 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.6

Total Operating Expenditures 21.7 27.3 39.4 70.0 121.4 133.5 146.8 161.6

Depreciation 34.2 12.9 2.1 35.4 35.4 35.4 35.425.2 31.5 5~~~2 . 3 94.1 1-68.9 182.219.

Net Income (Loss) before Interest (15.2) (16.5) (22.3) (34.1) (56.8) (48.9) (22.2) 3.0

Interest 7.4 7.1 17.4 30.4 43.0 41.7 40.4 39.1

Net Income (Loss) (22.6) (23.6) (39.7) (64.5) (99.8) (90.6) (62.6) (36.1)- ----------- ----------------------- Rs ------ _____________-_____-_________________________

Per Capita Operating Costs 5.02 5.70 6.36 8.75 12.38 13.48 14.68 16.16Per Capita Operating Costs including Depreciation 5.83 6.57 8.45 11.76 16.00 17.06 18.22 19.70

Per Capita Revenues 2.31 3.13 4.85 7.50 10.20 12.12 16.00 20.00

Per Capita Incomes for Region at Current PricesAssuming 8.5% growth rate, (which can be consideredconservative) 917.00 995.00 1,081.00 1,172.00 1,271.00 1,380.00 1,497.00 1,624.00

Percentage of per Capita Operating Costs, includingDepreciation,to per Capita incomes o.64,% o.66% 0.78% 1.00% 1.25% 1.24% 1.22% 1.31%

Percentage of per capita reverues to per capita incomes 0.25% 0.31% 0.45% 0.64% o.80% 0.88% 1.07% 1.33%

July 18, 1975 Source: LSGED

Note: This is a demontration table only,Accurate and refined data will not be

INDIA av-ilable until presented in Jl Nigaz

UTTAR PRADESH WATER SUPPLY AlD SEWERAGE PROJECT apprisal -p-t

Table 2: Bondelkhand Jal Scnsthan

Stst-nt of Sourrs and Applicatiun of Funds 1975-76throngh 1982-83_/

1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83

Net Income (Loss) before Interest (15.2) (16.5) (22.3) (34.1) (56.8) (48.9) (22.2) 3.0Add Depreciation 3.5 4.2 12.9 24.1 35.4 35.4 35.4 35.4Interval Cash Ceneration (Dofiuit) (11.7) (12.3) (9.4) (10.0) (21.4) (13.5) (13.2) (32.4)Equity Contributio (W-orking Capital) by Jalllx_ 50.0 - - - - - - -

Debt Service - Interest 7.4 7.1 17.4 30.4 43.0 41.7 40.4 39.1- Repsymeats of Principal 5.2 5.3 15.1 30.0 41.1 42.4 43.7 45.0

Sub-total Debt Service 12.6 12.4 32.5 60.4 84.1 84.1 84.1 84.1

Working Capital - Increases in Inventories 5.0 5.0 1.0 1.0 2.0 1.0 0.5 0.5Rl...ivablea 2.0 1.1 3.0 6 8.0 4.0 8.0 8.0

7.5 6.8 4.0 7.0 10.0 5.0 8.5 8.3

Increases (Decreases) in Payable. 2,0 (1.0) 1.0 2.0 2.0 0.5 0.5 0.5Net Increase (Decrease) in Working Capital 5.5 7.8 3.0 5.0 8.0 4.5 8.0 8.0

Net Cash S-epls (Deficit) to be A-utilized or B-finansed by: 20.2 (32.5) (44.9) (75.4) (113,5) (102.1) (78.9) (59.7)

A. Cash Utilization(i) Capital Exeenditore Contribstiaa (transfer to \

Jal Nigam)(ii) Sector Eqsalization FPnd(iii)Other

Total UtIlization

B. Deficit FinancingSupport Payments by Jal Niigam 24.3 24.7 41.9 70.4 105.5 97.6 70.9 51.7

Cash Sarplus (Deficit) for Year 44.5 (7.8) (3.0) (5.0) (8.0) (4.5) (8.0) (8.0)

Cash at Beginning of Year - 44.5 36.7 33.7 28.7 20.7 16.2 8.2

Cash at End of Year 44.5 36.7 33.7 28.7 20.7 16.2 8.2 0.2

1/ Note: Project expenditures and Loans will apear in Jal Nigam Statements.No cash transactions for capital eapssditurea wlll occur in RJS's.

SJurce LSGED

Jul~- 16. 17.,

INDIAUTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

REGIONAL JAL SANSTHANRECOMMENDED ORGANIZATION

I BOARD

EXTERNAL AUDIT

RAL

MANAGER

... N AL...... I

SECRETARY

CHIEF ' C HI E- F-IEFFINACHEF | ENGIN EERING ADMINISTRATION j

| FPLANCIAL ] L ACCOUNTING CASHIER DEVELOPMENT OPERATION ADMINISTRATION CUSEOMER TRAINING

TA IFFS COLLECTION ~~~~~~~~~~~~~~OPERATION OFFORECASTS WATER SU.P_,ILN COLLECTION

C EU PLANNING W SPL SENRVICE PERSONNEL_____________ I ~~~~~~~~~~~SCHEMES J

BUDGETARY COSTING PAYMENTS DESIGNLABORATORY CLERICAL AND '4

EXTERNALI _~~~~~~~~~~~~~~~~~~EGNESUTILITY SERVICES~]

LOANSl WATER AND [- 7 E~ALTH~ACCOUNSTINL CONSTRUCTION SEWAGE PROCUREMENT U EDUCATION

j FINAL l 1 PUMPING PLANTS CACONTRACTSACCOUNTSI

|TRANSMI SSION

AND DISTRISUTION| MAINS

-|SEWERAGE SYSTEMS|

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1 .e flevPlop ! ~ ~ ~ ~ ~ ~ ~ t METERING

Wora. -I Rz, 930812

INDIAUTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

LUCKNOW MUNICIPAL CORPORATION JAL SANSTHANRECOMMENDED ORGANIZATION (FROM 1976)

| Ahh fla MA

I-.

Cg~~~~~~~~~~~~~~~~~~~~~~~~~~~~_ 1 t-L, .

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ANNEX 6Page I

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Population and Water Demand Projections, and Design Criteria

Population

1. Enumeration of the population in India occurs every ten yearswith the latest census in 1971. Data on present and past population havebeen extracted from "Census of India 1971 - Uttar Pradesh - A Portrait ofPopulation." The relative position of Uttar Pradesh (UP) might best bedemonstrated by comparing it with the population in India and in the world:World - 3,632 million; India - 548 million; and Uttar Pradesh - 88 million.Uttar Pradesh is the most populated state in India with 16% of India'spopulation.

2. The area of Uttar Pradesh is 294,413 km2. In India, UttarPradesh stands fourth in terms of area and ninth in terms of populationdensity. The density (people/km2) in the State varies and it is in theplains between 365 and 600, and lower than 100 in the Hill Region.

3. The population of India, in the decade 1961-71, increased from439 to 548 million. This gives a percentage decadal variation of 24.8%and an annual arithmetic growth rate of 2.48%. Corresponding growth ratefor Uttar Pradesh is 1.98%. If an annual geometric growth rate is applied,the population increases for India and Uttar Pradesh are 2.23% and 1.82%respectively.

4. The population in Uttar Pradesh is about 86% rural and 14% urban.An urban area is defined as (i) all places with a Municipality, Corporation,Cantonment or Notified Area, or (ii) all other places satisfying the fol-lowing criteria (a) a minimum population of 5,000, (b) a density of popu-lation of at least 400 per km2.

5. The villages, based on the size of their populations can bebroadly divided into four categories - 1. small (population less than500), 2. medium (500-1,999), 3. large (2,000-4,999), and 4. very large(5,000 and above). The total number of villages in UP amounts to 112,561and the largest number are in category 1, followed by those in category 2.The average population of a village is 675 for UP, with 806 for Bundelk-hand, 236 for Kumaon and 180 for Garhwal.

6. The towns have been classified in seven classes on the basis ofpopulation. Almost 60% of the urban population is living in towns (22 in

ANNEX 6Page 2

number) with a population exceeding 100,000 (Class 1). The average decadalgrowth rate (1961-1971) in urban areas was 30.68%; while correspondinggrowth rate for Class 1 towns, including KAVAL towns, was higher at 37.00%.

7. Present and projected population in Bundelkhand is shown inAnnex 2, table 1. Of the total population 85% is rural and 15% urban.The decadal growth rate (1961-1971) was 22.65% for urban and rural, combined,and 21.05% for rural only. The latter being slightly higher than the Stateaverage, 18.25%. Considering the trend of population growth during the lastseven decades the growth of rural population during 1971-2001 has beenassumed at 50% or 16.6% per decade. The population density would subse-quently increase from 143 to 214. The present rural population resides in4,517 villages, of which 1,085 villages have a population of more than 1,000.

8. Present and projected population in Kumaon and Garhwal is shownin Annex 2, Table 1. Of the total population 80.5% is rural and 19.5% isurban. The decadal growth rate (1961-71) was 24.4%, which is somewhathigher than for Bundelkhand. Considering the massive urbanization due tomigration from rural areas the growth rate of the rural population during1971-2001 has been assumed at 50% or 16.6% per decade. The populationdensity would subsequently increase from 117 to 175. The present ruralpopulation resides in 11,458 villages.

9. Present and projected population for the KAVAL towns is shown inAnnex 3, Table 1. Past and projected percentage decadal growth rates aresummarized below:

Decadal Growth Rate

1961-71 1971-81 1981-91 1991-2001

Kanpur 31 34 32 26Agra 25 26 31 37Varanasi 24 28 36 30Allahabad 19 45 56 29Lucknow 24 22 35 45Average 26 35 37 33

The Nigam has studied the projected increase in population for each of theKAVAL towns. Various methods have been applied such as, arithmetical,geometrical, comparison with other cities, graphical interpolation, andbirth, death and immigration rate. Conclusions have been reached in col-laboration with town planning authorities after consideration of forecastincreases in industrial activities and employment opportunities.

ALNNEX 6Page 3

Water Demand

10. Projected water demand for Bundelkhand, Garhwal and Kumaon isshown in Annex 2, Table 2. Present and projected water demand for the KAVALtowns is shown on Annex 3, Table 1.

11. The per capita water consumptions through the design year 2001 forthe Bundelkhand, Kumaon and Garhwal have been assumed as follows: 70 l/c.d.for villages with a design population of less than 4,000, where serviceconnections are expected; 50 1/c.d. for small villages where none or onlya few service connections are expected; and 90 l/c.d. for villages with adesign population exceeding 4,000. In Annex 2, Table 2 a water consumptionof 70 1/cd has been assumed as an average for the villages included in theproject. The water supply should meet the needs for bathing, washing,cooking and cleaning, but would not provide for industries or fire reserves.The ultimate number of service connections is estimated to cover about 20%of the population. For computation of the operating costs the averageconsumption is assumed to be 75% of above maximum consumptions.

12. The present water consumption in the KAVAL towns varies between160 to 230 1/cd. The figures have been derived by dividing total waterproduction by population served. There are no bulk measurement devicesand most service connections are unmetered - or have unserviceable meters -therefore, the past and present water production and consumption cannotbe accurately ascertained. For future demand, the maximum day rate fordomestic consumption has been assumed at 225 and 270 1/cd respectivelyfor population less than, and exceeding 1,000,000. For industrial supplya water consumption per hectare will be assumed, varying with type ofindustry. The average water consumption will be computed by applying thefactors 0.80 or 0.75 depending on the consumption pattern in each town.

Design Criteria

13. Generally civil works, which cannot readily be extended, aredesigned for 30 years, and civil works, which can readily be extended,are designed for 10 to 15 years. Electrical and mechanical equipmentis designed for 10 to 15 years. For rural projects extendable units suchas filter and settling tanks and storage tanks are designed for 30 yearswhere a 10 year's design period would give uneconomically small units.Transmission mains to be laid in areas with difficult laying conditions(Kumaon and Garhwal) are likewise designed for a 30 year period. Inplaces where ground water exploration is feasible the development oftubewells is proposed to be phased in periods of 5 years. For each sub-project the phasing of the various civil works components and equipmentand material supply has been, or will be studied for achieving least -cost solutions.

ANNEX 6Page 4

14. The Nigam has established various water and sewerage works designcriteria such as settling and filtration rates, storage capacities, deten-tion times, velocities in water pipes and sewers, and pressure in distribu-tion systems. The design criteria comply with normal practice but will bereviewed again, particularly by consultants engaged for water treatmentdesigns (Annex 4).

July 18, 1975

ANNEX 7Page 1

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Outline of Typical Technical (Appraisal) Report by the Jal Nigam

1. Description of area of Jal Sansthan.

2. Description of any existing water supply and sewerage systems,including capacities and significant data.

3. Description of Jal Sansthan

e.g. Regional; orNagar Mahapalika;including Organization Chart referring particularly to theDivisions or Sections having responsibility for sub-projectoperation and maintenance.

4. Description of Nigam's design and construction circles to beresponsible for execution of the sub-project.

5. Brief description of Master Plan for water district includingpopulation and demand project, design criteria, and review ofalternative solutions and reasons for selection of sub-project solution.

6. The Sub-Project

(i) Description (a) General(b) Technical

(ii) Cost Estimates, including

Basic cost, giving year of base;Engineering costs;Physical contingencies; andPrice contingencies giving annual provisions.

(iii) Bar chart of activities, showing critical activities.

(iv) Foreign and local cost estimates including importduties etc.

ANNEX 7Page 2

(v) Commentary on proposed procurement method andprocedures, including schedules of goods andequipment acquired by advance procurement forwhich IDA/LIC disbursements have been made.

(vi) Estimated schedule of disbursements, loans or grants:

(a) by Nigam to contractors;(b) by IDA to GOI;(c) by LIC to Nigam; and(d) by UP Government to the Nigam.

7. Justification of the Sub-projects

Population and demand projections;Explain how the sub-project fits into the Jal

Sansthan's entire program;Why were these sub-projects chosen over the other

ones in the same district?Least cost solution; andDesign periods for various categories of works andreturn on investment.

8. Financing of the Sub-Project and Operations and Maintenance.

(i) For the Jal Sansthan showing existing and future commitments(including additional projects likely to be proposed) in first5 year period from year of commencement of construction:

(a) Income statements;(b) Sources and applications of funds statement; and(c) Balance sheets;

(For Regional Jal Sansthans, projections should commencefrom April 1, 1975; for Nagar Mahapalikas Jal Sansthans,projections should cover a 10 year period including threefiscal years prior to the year of commencement of sub-project construction);

(ii) Financing plan of Jal Sansthan;

(iii) Copies of resolutions of the Jal Sansthan accepting thefinancial implications of the sub-project, includingacceptance of Nigam's proposals for construction costsand the Jal Sansthan's proposed method(s) of financingits services including the sub-project, e.g. charginglevels for tariffs;

ANNEX 7Page 3

(iv) For rural water supply schemes, a copy of undertakingby villagers of schemes to meet the Jal Sansthan'scharges, and where applicable, to contribute to the cost;

(v) Copy of Nigam's Board approval to sub-project costsand Jal Sansthan's proposed methods of financing allits services, including this sub-project, togetherwith any commentary considered necessary by theNigam on financing plans, tariffs or pertinentsubjects;

(vi) Brief review of Jal Sansthan's accounting, billingand collection systems;

(vii) Review of past and current financial performance ofJal Sansthan and proposed performance indicators forfuture supervision purposes.

July 18, 1975

ANNEX 7Page 4

STATISTICAL DATA

(Estimates acceptable, but indicate by 'E' where applicable.Analyse the data, where applicable between urban and rural)

For the ......... Before After commis-........... .Jal Sansthan commissioning Propoaed sioning of

of project in proiect project

1. Population - Total

- supplied with water- supplied by standposts- supplied by connections

- metered- unmetered

2. Connections - Total

- metered- unmetered

3. Water Supplies -

- water produced- water sales- metered- unmetered- unaccounted for- average availabilityper capita (L/c.d)

4. Sewerage -

- No. of connections- Population served byconnections

- Population not servedby connections

5. Tariffs and charges Current, including connection fee-following introduction of service fromsub-project.

ANNEX 7Page 5

6. Financial For each year of projections:Rate of return on net fixed assetsin operation;

Rate base (assets value);Operating ratio;Debt/equity ratio; andCash available for investment insub-project development.

7. Sub-Projects Per capita cost of construction;Per capita cost of operation andmaintenance as at final commissioningdate;

Per capita cost of depreciation as atfinal commissioning date; and

Per capita grant to be made available bythe Nigam - for capital construction

- for operation and maintenance.

8. Population, Prices, andIncomes Per capita income by districts and/or for(in all cases, where area of water authority;appropriate, give UP Daily earnings of wage earners byState comparable data) appropriate groups;

Index of consumer prices by districtheadquarter towns.

July 18, 1975

ANNEX 8Page 1

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Supervision Requirements

1. Supervision of this project will not follow traditional lines.There are no precedents and therefore the following must be regarded astentative. IDA will not be lending direct to the beneficiaries - the RJSsand the KAVAL Jal Sansthans - and it will be the responsibility of theNigam to supervise these authorities. IDA will concentrate on the Nigam'sactivities and the supervision will be directed to ensure high-qualityperformance by this Corporation with its special responsibilities.

2. Traditional public utility indicators cannot apply to the Nigam,instead, supervision would concentrate on the following:

(i) assimilation of LSGED into the Nigam and the subsequentreorganization to effect an integrated DevelopmentCorporation having engineering, procurement, financial,legal and administrative services capable of fulfillingthe Nigam's powers and duties;

(ii) formation of teams and programs, and performance ofappraisal unit for sub-projects' appraisal and supervision;

(iii) formation of programs and performance of advisory servicesincluding management, organization, engineering, financeand administration;

(iv) development of fiscal and economic policies for thesector including introduction and review of tariffsand use of the Loans Fund as a Development Bank;

(v) sub-projects planning and control programs to ensureadherence to design and construction targets; and

(vi) development and implementation of training programs.

3. Additional to the (i) through (vi) above will be supervision ofsub-projects primarily through review of the Nigam's technical and super-vision reports at headquarters, but some field missions, particularly toreview the Nigam's early technical reports will be necessary.

ANNEX 8Page 2

4. The Nigam's technical reports (Annex 7) will follow traditionalpublic utility project appraisals. A series of performance indicators willbe developed for each water authority by the Nigam as appraisals are com-pleted for use in their statutory monitoring and regulation of Jal Sansthansand will be presented in the Nigam's quarterly reports to IDA and LIC.

5. The complexity of this project and the need to concentrate onqualitative rather than quantitative controls implies a need for substan-tially more supervision than for a normal public utility project, particu-larly during the first two years. The following is a summary of headquartersand field supervision man/weeks tentatively planned during the projectexecution period.

Headquarters_Y Manweeks Field Total

Sub-projects /1 Missions Man-Weeks Man-WeeksAppraisals Other

76 44 18 2 12 7477 40 18 2 12 7078 24 16 2 12 5279 - 16 2 12 28

/1 Sub-project appraisals are estimated to require 4 man/weeks each ofengineer and financial analysts time. At least fourteen technicalreports can be expected as follows:

KAVAL towns - Kanpur 2- Lucknow 2- Allahabad 1- Varanasi 1- Agra 1

RJSs - Bundelkhand 3- Kumaon 2- Garhwal 2

J4

July 18, 1975

ANNEX 9

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 1: BUNDELEHAND, GARHWAL, KUMAON AND TAVAL TOWNS JAL SANSTHANS

Summary of Estimates of Sub-Project Costs

Water Supply sod Sew7erage

Year Ending March 31 Perce-tage of1976 1977 1978 1979 Total 1976 1977 1978 1979 Total Grand Total

------------------- s Lakhs--------------------- -------------- 1us$ 1,000 Equioaleat----------------

Breakdows of Gand Total by Regional J.l Sansthan- asSd aal Towos Jal Sonstbans

Bundelkband Water Supply 187 348 430 272 1,237 2,342 4,336 5,379 3,400 15,457 20Sarah,l Wat-e Supply 82 158 201 124 565 1,026 1,968 2,521 1,551 7,o66 10Crus.o Water Supply 98 193 242 148 681 1,226 2,4o6 3,032 1,852 8,516 11taKal Towas,

Wqater Supply 405 812 1,046 632 2,895 5,073 10,150 13,079 7,876 36,178 47Se-erage 117 09 244 166 736 1,465 2,609 3,050 2,074 9,198 12

GR0ID TOTAL 889 1,720 2,163 1,342 6,li4 11,132 21,469 27,061 16,753 76,415 155

Breakdown of Grand Total By Category of Cost

A. Ba-ia Coats CW 304 457 453 302 1,516 3,809 5,712 5,660 3,774 18,955 25at 1975 Prices INS 216 647 862 431 2,156 2,695 %J 10,775 5,33 26,936 35

TOTAL 520 1,104 1,315 733 3,672 6,5o4 13,790 16,435 9,162 45,891 60

B. Physical Contingency i' OW 45 68 69 47 229 572 857 848 566 2,843 4M&E 32 96 129 64 321 401 1,213 1,616 8C8 4,036 5_

TOTAL 77 164 198 111 550 973 2,070 2,464 1,374 6,881 9

Sob-Totals CW 349 525 522 349 1,745 4,381 6,569 6,501 4,34C 21,798 29A+3- M&E 248 743 991 495 2,477 3096 9,291 12,391 6,196 30,974 40

TOTrL 597 1,268 1,513 844 4,222 7,477 15,860 18,899 1C,536 52,772 69

C. 3agioeeriag 35esign 069 44 - - 213 2,111 528 - - 2,639 3Cosstr-oti-o Supervisio- 65 140 166 93 464 823 1,745 2,077 1,15(' 5,795 d

TCTAL 234 184 166 93 677 2,934 2,273 2,077 ;,15C 8,434

D. Price Co-tingenoy CW 27 117 190 193 527 329 1,45- 2,376 2,4C5 6,56oMAE 13 111 235 164 523 17- 1,392 2,949 2,051 6,563 9Eag. 18 40 59 48 165 221 493 760 611 2,C86

TOTAL 58 268 484 405 1,215 721 3,336 6,085 5,06'7 15,203 21

GH55D TOTALA+B+C+D 889 1,720 2,163 1,342 6,1i4 11,132 21,469 27,061 16,757 ?6,415

CW = Civil WockhMAE Material and Eguipment

Source- LSGED

1/ Basic -osts are January 1975 prices.

2 For Physical Contiag-cay, 15% ia applied on basic coats. The percentage haa beeo calculated having regard to the status of detailed desigo sad kiad of projeotoumposen.ta.

F/ Par Engi-eeriog, 4% ia applied for design including 1% fTr preliminary investigations and 11% for -onstructioa supervsoho, including advisory services fCroperation sad maiatenance of water sod sewerage works.

4/ FPr Price Contiageacy, the fllowiag percentages have been applied, which are io accord-nce with "Revised Interim Gtidelines on Treatment of Project Cost- ncreases tf March 29, 1974. Civil Wo-ks and Engineering: 15s% far 1975 and 12% for 1976-79- Equipmeat: l1% fCr 1975 asd 7.5% fTr 1976-79. However, io the

vnat of overprovisioa or underprovision, the Nigas can add or deduct subprojects is order to fulfill the project cost of Rs 60 orares (us$ 75 nillio-eqalvaleat .

daly 18, 1975

INDIA

UTTAR PRADESH WATER SUPPLY AID SEWERAGE PROJECT

Table 2: BUTIDELKHAND JAL SANSTHTAM

Sub-Project Cost Estimates

Water Supply

BASIC COSTS Fiscal Year Ending March 31 Percentage1975 Prices ofz Grand

Rs Lakhs 1976 1977 1978 1979 Total 19i76 1977 1978 1979 Total Total

DISTRICT SUB-PROJECT CW M&E TOTAL ----------------- Rs Lakhs------------------ ------- us$ 1ooo---------------------------------_

Jhansi Hipra Bansa 37 37 74 A. Basic Costs CW 73 109 109 73 364 910 1365 1365 910 4550 29Gursarai 102 105 207 @ 1975 Prices M&E 38 113 150 75 376 470 1410 188O 94o 4700 31Chirgaom 70 70 140 Total 1i1 222 2 59 1 740 1-30 2775 3245 1650 9250 T6Subtotal 209 212 421

B. Physical CW 11 17 16 11 55 137 205 204 137 683 4Banda Bira 42 40 82 Contingency M&E 5 17 23 11 56 70 212 282 141 705 5

Sanda Sani 11 14 25 Total T1 70 22 1i1 207 4B1 2-7 7181 79Gureh 16 15 31Oran 15 15 30 Sub-Totals CW 84 126 125 84 419 1047 1570 1569 1047 5233 33Sabtotal I 7 16 A + B M&E 43 130 173 86 432 540 1622 2162 1081 5405 36

Total 127 325 296 170 651 1567 3192 3731 2126 10638 9

Hamirpur Beri 3 3 6Khandeh 36 41 77 C. EngineeringGohand 6 7 13 Design 34 9 -- -- 43 426 106 __ 532 3Subtotal 75 51 -9; Constr. Super, 14 28 33 19 94 175 351 410 234 1170 8

Total 71 37 3 3 19 137 601 45 871- -23 027 T1Jalaun Jagmanpur 10 12 22

Tihar 6 6 12 D. Price CW 6 28 46 44 124 79 344 573 554 1550 10Kuthond 10 11 21 Con ency M&E 2 19 41 29 91 30 243 515 358 1146 7Subtotal o7 29 Eng. 4 8 12 10 34 45 100 150 126 421 3

Total 12 55 99 1 2 315 T17 1238 1036 3117 20

Total, All Districts 364 376 740Grand TotalA+B+C+D 187 348 430 272 1237 2342 4336 5379 3400 15457 100

CW = Civil WorksMSE = Material & Equipment

Source: LSGED

July 18, 1975

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 3: GARHWAT. JAL SANSTHAN

Sub-Project Cost Estimates

Water Supply

Jal BASIC COSTS 1975 PRICES GarhwalSansthan Rs Lakhs Fiscal Year Ending March 31

District Sub-Project CW E&E TDtal Percentage1976 1977 1978 19'19 Total 1976 1977 1978 1979 Total of Grand

Garhwal Dehradun Doiwala 6 8 14 ---- Rs Lakhs------------- ------ OUS '000 Equivalent ------- TotalSahaspur 16 23 39 A. Basic Costs CM. 27 60 41 27 135 338 500 513 33C. 1,9 24Chakrata 5 8 13 1975 prices M&E 21 62 83 41 207 263 775 1,038 513 2 589 36Kalsi 5 7 12 Total Th 102 Th X _E 32 601 1,275 1,551 851 4

Subtotal 32 XE 77B. Physical C.W. 4 6 6 4 20 50 75 '75 50 250 4

Tehri Jaunpur 3 4 7 Contingency M&E 3 9 12 6 30 38 113 150 75 376 5Tholdhar 4 3 7 Total 7 15 -17 1E 350 3 E 2325 125 9Chamba 7 7 14Pratap Nagar 4 5 9 Sub-Total C.W. 31 46 )i7 31 155 388 575 588 388 1,939 27Jakhainidhar 5 5 10 A+B M&E 24 71 95 47 237 301 888 1,188 588 2 965 42Bhilangana 9 10 19 Total 55 117 132 X7 392P 689 1,463 1178 976 Deoprayag. 3 3 6Narendra Nagar 5 4 9 C. EngineeringKirtinagar 5 6 11 Design 16 4 - - 20 200 50 - - 250 4Jakholi 6 6 12 Construction

Subtotal 51 53 102 Supervision 6 13 15 9 63 75 163 188 113 539 7Total 22 17 15 39 T275 213 loo 113 3 79 11

Garhwal Kot 1 4 5Kaljikhal 2 5 7 D. PricePauri 2 5 7 Contingency C.W. 2 10 17 16 45 24 121 213 200 558 8Khirsu 4 7 1 MRE 1 10 22 16 49 13 121 281 200 615 9Pabau 3 5 8 Eng. 2 4 5 5 16 25 50 63 62 200 3Thalisain 3 7 10 Total 5 X 37 110 62 292 557 462 1,373 20Dwarikhal 8 17 25Dogadda 4 7 11 Grand Total 82 158 201 124 565 1,026 1,968 2,521 1,551 7L066 100Lansdowne 5 8 13 A+B+C+DEkeshwar 6 13 19Pokhra 3 7 10Bironkhal 3 7 10Rikhnikhal 3 6 9Sainidanda 5 10 15

Subtotal 52 10

Total 135 207 342

July 18, 1975

C.W.= Civil WorksM&E = Material and Equipment

Source: LSGED

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 4: KUMAON JAL SANSTHAN

Sub-Project Cost Estimates

Water Supply

Jal BASIC COSTS 1975 PRICESSansthan Rs Lakhs Kumaon

District Suib-Project CW M&E Total Fiscal Year Ending March 31 Percentage1976 1977 1978 1979 Total 1976 1977 1978 1979 Total of Grand

Kmaon Almora Hawalbagh 7 10 17 ------------ Rs Lakhs------------- ------- hus$ '000 Equivalent------ TotalBhasiachara 4 6 10 A. Basic Costs C.W. 33 50 50 33 166 413 625 625 413 2,076 214Takula 7 10 17 1975 prices M&E 24 73 97 49 243 300 913 1 213 613 3,039 36Dhaula Devi 15 25 Total 5 3 7 1 2 v 713 1,538 7 1, 1026 5,115 0Lamgara 5 a 13Kapkote 7 11 18 B. Physical C.W. 5 8 7 5 25 63 100 88 63 314 4Bageshwar 4 8 12 Contingency M&E 4 11 15 7 37 50 138 188 88 464 5Garur 5 8 13 Total 9 19 22 12 68 113 T7 276 151 7 9Syaldey 6 11 17Salt 6 10 16 Sub-Total C.W. 38 58 57 38 191 476 725 713 476 2,390 28Chaukhutia 5 8 13 A+B MgE 28 84 112 56 280 350 1 051 1 401 701 3 503 41Bhilkia Sain 3 5 8 Total 6 T71 E2 T 1,177 5 7Twarshat 5 8 13Tarakhet 8 12 20 C. EngineeringBarakote 6 10 i6 Design 19 5 - - 24 238 63 - _ 301 4Lohaghat 6 9 15 ConstructionChampawat 5 9 14 Supervision 7 16 19 10 52 88 200 238 125 651 7

Subtotal 99 156 257 Total 6 21 9 10 7 3 263 238 125 952 11

Nainithal Ramgarh 3 4 7 D. Price C.W. 2 13 21 20 56 24 159 263 250 696 8Gkhal Kanda 3 4 7 Contingency M&E 2 12 26 19 59 25 145 329 237 736 9Baitalghat 7 9 16 Eng. 2 5 7 5 19 25 63 88 63 239 3Bhimtal 5 5 10 Total T 30 3 4 T1 77 7 W 0 550 1,671 -Haldwani 5 5 10Ramnagar 4 6 10 Grand Total 98 193 242 148 681 1 226 2 406 3,032 1,852 8,516 100Kashipur 8 11 19 A+B+C+DRudrapur 6 7 13Bazpur 14 18 32Khatima 12 15 27

Subtotal 177 __7 151

Total 166 242 406

C.W. Civil WorksM&E = Material and Equipment

Source: LSGED

JulY 18, 1975

ANNCEX 9

INDTA

UTTAR PEADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 5: KAVAL TOWNS JAL SANSTHANS

Sub-Project Cost Estimates

Water Supply

Fiscal Year Ending March JL PERCENTAGEKAVAL TOWNS r ITM OF COSTS 1976 1977 1978 1979 TOTAL | 1976 1977 1978 1979 TOTAL OF

ITEM I 02220~~~~~~~~~~ 1GRN TOTAL----------------- R. LakhsS------------------0 ------------ US$1,000 Equivalent-------------

SUMIAARY, A. Basic Costs CW 1i9 180 180 120 599 1,498 2,247 2,250 1,500 7,495 21@ 1975 Prices MAE 115 344 459 229 1,147 1,436 4,301 5,739 2,871 14,347 39

Kaval TommsTOTAL 234 524 639 349 1,746 2,934 6,548 7,989 4,371 21,842 60

B. Physical CW 18 26 29 20 93 226 336 337 226 1,125 3Contingencies M&E 17 51 68 35 171 214 647 860 430 2,151 6

TOTAL 35 77 97 55 264 440 983 1,197 656 3,276 9

Sub-totals, CW 137 206 209 140 692 1,724 2,583 2,587 1,726 8,620 24A + B M&E 132 395 527 264 1,318 1,649 4,948 6,599 3,301 16,497 45

TOTAL 269 6ol 736 404 2,010 3,373 7,531 9,186 5,027 25,117 69

C. EngineeringDesign 81 21 - - 102 1,005 251 - - 1,256 3Co.nstr. Super. 29 66 81 45 221 371 829 1,009 552 2,761 8

TOTAL 110 87 81 45 323 1,376 1,080 1,009 552 4,017 l

D. Price CW 11 46 76 '3 206 129 566 944 911 2,550 7Cuntingency M&E 7 59 125 87 278 91 741 1,570 1,093 3,495 10

Eng. 8 19 28 23 78 104 232 370 293 999 3

TOTAL 26 124 229 183 662 324 1,539 2,884 2,297 7,044 20

GEAND TOTALA + B + C + D 405 812 1,046 632 2,895 5,073 10,150 13,079 7,876 36,178 l00

CW = Civil WorksM&E = Material & Eq.ipvseot

So.rce: LSGED

July 18, 1975

AKNE! 9

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 6: KAVAL TOWNS JAL SANSTEANS

Sub-Project Cost Estimates

Sewerage and Sewage Disposal

Fiscal Year Ending March 311976 1,976 PERCENTAGE

KAVAL TOWNS ITEM OF COSTS 1976 1977 1978 1979 TOTAL 1976 1977 1978 1979 TOTAL OF

GRAND TOTAL----------------- Rs Lakbs ------------------- i----- USfl,OOO Equivalent_--___-_______

SIMiSARY - A. Basic Costs CW 52 78 73 49 252 648 972 916 611 3,146 34KAVAL TOWNS @ 1975 Prices M&E 18 55 73 36 i82 228 683 911 455 2,277 25

TOTAL 70 133 146 85 434 876 1,655 1,827 i,o66 5,423 59

B. Physical CW 8 12 11 7 38 97 146 137 92 472 5Contingency M&E 3 8 11 5 27 34 102 137 68 341 4

TOTAL 11 20 22 13 65 131 248 274 16o 813 9

Sub-Totals CW 60 89 84 56 289 745 1,118 1,053 702 3,618 39A + N ME 21 63 84 42 10 262 785 1,047 524 2,618 29

TOTAL 81 152 168 98 499 1,007 1,903 2,100 1,226 6,236 68

C. EngineeringDesign 20 5 -- -- 25 249 63 __ __ 312 4Constr, Super. 9 17 18 10 54 11 209 231 126 677 7

TOTAL 29 22 18 10 79 360 272 231 126 989 11

D. Price CW 5 20 30 39 94 56 257 385 482 1,179 13Contingency M&E 1 10 20 14 45 15 118 249 173 555 6

Eng. 2 5 7 5 19 27 59 84 67 238 2

TOTAL 8 35 57 58 158 98 434 718 722 1,972 21

GRAND TOTALA + B + C + D 117 209 244 166 736 i,465 2,609 3,050 2,974 9,198 100

CW = Civil WMrksM&E = Material & Ecaipmest

Saurce: LSCED

July i18, 1975

ANNEX 10

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Estimated Schedule of Disbursements

IDA Fiscal Year Quarterly Disburse- Cumulative Disbursements at % ofand Quarter Ending ments US$ Mlillions end of Quarter - US$ Millions Total

1976December 31, 1975 0.5 0.5 1March 31, 1976 0.8 1.3 3June 30, 1976 2.0 3.3 8

1977September 30, 1976 2.4 5.7 14December 31, 1976 2.1 7.8 20March 31, 1977 3.2 11.0 28June 30, 1977 4.9 15.9 40

1978September 30, 1977 3.7 19.6 49December 31, 1977 2.7 22.3 56March 31, 1978 3.7 26.0 65June 30, 1978 4.0 30.0 75

1979September 30, 1978 2.1 32.1 80December 31, 1978 1.3 33.4 84March 31, 1979 2.4 35.8 90June 30, 1979 2.4 38.2 96

1980September 30, 1979 1.8 40.0 100

July 18, 1975

ANQNx 11Page 1

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

THE WATER SUPPLY AND SEWERAGE SECTOR IN THE STATE OF UTTAR PRADESH

FINANCIAL PERFORMANCE 1969-74 AND FORECASTS 1974-79

List of Tables

Table 1 Yearly Outlay on Water Supply and Sewerage in Fourth Five YearPlan

Table 2 Pattern of Assistance for Water Supply and Sewerage Schemes

Table 3 Water Rates and Charges in KAVAL Towns

Table 4 KAVAL Towns - Income and Expenditure on Water Supply andSewerage including per capita and per kiloliter

Table 5 Other Waterworks - Income and Expenditure including percapita and per kiloliter

Table 6 Yearly Recurrent Subsidy on Water Supply (Rs per capita)

Table 7 Total Yearly Expenditures and Subsidy on Water Supply andSewerage

Table 8 Total Projected Yearly Expenditures on Water Supply andSewerage and Yearly Subsidy on Water Supply and Sewerage

Table 9 Per Capita Monthly Consumption Pattern in 1970/71

Definitions - The following terms which are used in the AppraisalReport and in this Annex have the definitions ascribed to them below:

capital expenditures expenditures incurred in formation of capitalassets;

recurrent expenditures expenditures incurred on operations,maintenance, debt service, or for whichthere is an annual revenue budget provi-sion to meet government service expenditures;

ANNEX 1 1Page 2

subsidy a payment, or a reduced charge made by apublic authority, usually government, toassist in meeting capital or recurrentexpenditures; not normally repayable;

subvention - or Ways and Means Advance - an interestfree, repayable loan by government to assista local body to meet a deficit caused byan excess of recurrent expenditures overrevenues; such deficics are usually cal-culated on a cash basis, as opposed to anaccruals accounting; rarely repaid inpractice;

Plan expenditures expenditures, usually capital, forecastor actual, which will be financed from aprovision in a government Five Year Planbudget;

Non-Plan expenditures expenditures which did not figure in aFive Year Plan budget, usually appearingin a government's annual budget, but maybe unbudgetted;

Ways and Means Advance see subvention;

Grant a payment by government to finance expenditures.Government does not normally expect repaymentat any time. Usually free of interest terms,or conditions, except in the manner in whichit is to be applied by the recipient; and

Consumption personal expenditures or outlays, as used ineconomics.

1. Water Supply and Sewerage services in UP have been provided by avariety of institutions and autonomous bodies. Until 1975, preparation,design and execution of works has been carried out by LSGED, now to bemerged in the Nigam. Maintenance and operation of the works is mostly theresponsibility of the local bodies (i.e.) municipal boards, town areacommittees, and zilla parishads, in the areas under their jurisdiction; butoften in rural areas, where financial resources are limited and technicalskills scarce, the latter activities have also been unofficially undertakenand financed by LSGED on an ad hoc basis from GUP funds allocated forcapital expenditures. No consolidated financial picture of the sector hasever been drawn up because (i) there has been no financial policy for thesector; (ii) so many entities are involved in the sector; and (iii) finan-cial resources flow through many different channels. No GUP department oragency can say how much is being spent every year on water supply and

ANNEX 11Page 3

sewerage in the State; what part of these outlays is being supported bythe ultimate beneficiaries of the services; and what part is being sub-sidized by the GUP general budget. This is the first attempt to assemblesuch a picture from data available in different places. It must neces-sarily be defective, because it has had to be based on data which aremostly incomplete, often deficient and almost always prepared for purposesentirely different from the one to which they have now been used. Yet,the order of magnitude of the main features which emerge from the pictureshould be indicative of the real situation and any conclusions basedthereon could be considered valid.

2. This Annex is divided into two parts. Part A deals with thefinancial situation of the water supply and sewerage sector in the last3 to 5 years. It deals with capital expenditure and with outlays on opera-tion and maintenance (recurrent expenditure) and with the sources of incomederived from provision of water supply and sewerage services. It assessesthe extent to which the sector has been subsidized in the past, either inovert or in hidden ways. Part B projects the sector's outlays and receiptsthrough March 31, 1979 ascertains the potential of subsidy which may benecessary, if the proposed investment program would be executed on time.It assumes that a number of policy changes with regard to financial chargesand recovery rates will be taken by the Nigam, the three regional JalSansthans and the KAVAL Jal Sansthans, but also assumes little significantchange in the remainder of the sector, pending further reorganization after1979.

A. Fourth Five-Year Plan Period 1969/70 - 1973/74

a. Capital Subsidies

3. Total plan expenditures 1/ on water supply and sewerage in thecourse of this period amounted to Rs 34.5 crores. These expenditures werefinanced by Rs 24.9 crores from the State Plan, Rs. 5.8 crores from theLife Insurance Corporation of India (LIC) and Rs. 3.8 crores through adecrease in the cash balances held by the LSGED 2/ (Table 1).

4. Funds provided by the GUP State Plan and from LSGED cash balanceswere passed on by LSGED to local bodies under a variety of financial terms(Table 2) ranging from 100% loans, in the case of water supply schemes inurban areas, to 100% grants, in the case of water supply schemes located

1/ Plan outlays consist largely of investment expenditures. They includehowever, those recurrent expenditures which are related to physicalassets constructed, but not yet completed, in the current plan period.

2/ LSGED had been able to build up some cash balances because of earlyreleases of State plan funds in previous years.

ANNEX 1 1Page 4

in scarcity or hardship areas. Funds provided by the LIC were lent tolocal bodies at the prevailing LIC terms, i.e. with interest of 6.5-7.5% 1/and principal repayable in 25 years, including 3 years of grace.

5. Apart from a small element of interest rate subsidy involved inthe loans passed on by LSGED or by the LIC, 2/ the principal element ofcapital subsidy in the sector lay in the grants extended for the construc-tion of water supply and sewerage schemes. The total of such grants givenin the period of the Fourth Plan amounted to Rs 13.5 crores (Table 1).Almost all grants were for construction of rural schemes, with only Rs. 0.2crores being channeled into rural 3/ and urban towns. These grants covered39% of total capital outlay in the sector in the five years ending 1973/74,and 88% of the outlay on rural schemes. The percentage of urban schemesfinanced by grants was extremely small. Rural and urban grants wereprovided from the GUP budget.

b. Recurrent subsidies

6. Recurrent subsidies occur whenever the recurrent expendituresrelated to the operation of water supply or sewerage schemes are notentirely covered by the income derived, directly or indirectly, fromcharges on water supply and sewerage. Broadly, recurrent expendituresinclude the outlays on maintenance and operation, and debt service. Incomeis mainly derived from a water tax on the annual rental value of property,metered water charges, ferrule charges, 4/ and from the sale of seweragewater for farming purposes.

7. For the KAVAL towns information on recurrent expenditures andincome is readily available: Recurrent expenditures on water supply(Table 4) in these towns have risen from Rs 1.93 crores in 1969/70 toRs 3.07 crores in 1973/74. On a per capita basis this amounts to an in-crease from Rs 5.3 to Rs 7.7 per head per annum. The income from waterrates and charges in the same towns has risen from Rs 1.93 crores in1969/70 to Rs 2.75 crores in 1973/74. The corresponding per capita pay-ments by consumers have increased from Rs 5.3 to Rs 7.3 per annum. Cur-rent income was therefore sufficient to cover recurrent charges in 1969/70;

1/ LIC interest rates have been raised a number of times in the lastfive years. The present rate is 7.75%.

2/ Rates charged by the State Government and by the LIC in the recentpast were slightly below those charged by other financial institutionsfor their normal operations (9X).

3/ Rural towns are township areas which are not considered as "urban"under the Indian census definition.

4/ The principal water tax rates and charges for the Kaval towns aregiven in Table 3.

iNXEX I1Page 5

but income growth since then has fallen short of the expansion in recurrertoutlays, and a gap of Rs 45 lakhs had developed by 1972/73. In thefollowing year this gap was slightly reduced, primarily due to a sharpincrease in the revenue collection in Kanpur due to property revaluationyielding increased tax revenue. But even in 1973/74 the revenue shortfallon water supply in the KAVAL towns still amounted to Rs 32 lakhs. Thisgap had to be made up largely through revenue from other sources, and tosome extent by defaulting on debt service payments.

8. With regard to sewerage in the KAVAL towns, information on incomeand expenditures is available for the last three years only (Table 4).This information shows that income from sewerage services, primarily inthe form of sewerage sales, has more than doubled in that period, fromRs 13 lakhs in 1971/72 to Rs 28 lakhs in 1973/74. Nevertheless thisincome continues to represent a relatively small portion of total recur-rent expenditures (26% in the latter year), and there is a substantialsubsidy from other sources of municipal income, which in most cases meansindirect support by GUP through subventions. In 1973/74 this annualsewerage subsidy amounted to Rs. 77 lakhs.

9. The yearly recurrent subsidy in the five KAVAL towns has in-creased from about Rs 0.31 lakhs in 1969/70 to Rs 1.1 crores in 1973/74(+250%). Main factors responsible for this deterioration are the in-elasticity of the water tax revenue, which is levied on a heavily under-estimated and often artificially pegged rental property value, a marginallydeteriorating performance in the collection of income actually billed, anda very slow sporadic adjustment in the rate of water charges to an in-creasingly rapid rate of inflation.

10. Apart from the water supply facilities in the five KAVAL towns,the water supply sector excluding rural schemes, covers another 288waterworks, 224 of which are located in urban town areas and 64 inrural towns. Statistical information on the current expenditures incurredand on the income collected by these waterworks was assembled by LSGED,but the data, especially for later years, do not cover all waterworks.The limited information was gathered and expressed on a per capita basis,using the number of people benefitting from the water supplied by thewaterworks included in each year's sample. The absolute data for thesewaterworks and their per capita equivalents are shown in Table 5. Thesedata show that, although recurrent costs have steadily risen from Rs 3.00per head per annum in 1967/68 to about Rs 4.20 in 1973/74, income collectedfrom the beneficiaries has remained fairly constant during the same periodat about Rs 3.40 per head per annum. The recurrent per capita subsidy hasthus constantly gone up and was probably around Rs 0.80 per capita per annumin 1973/74.

11. The per capita information collected on the basis of yearly sampledata, combined with more precise information on the total number of peoplebenefitting from water supplied by the rural and urban waterworks, permits

ANNEX 1 1Page 6

an approximation of the cost of the annual recurrent subsidy to theconsumers in all towns taken together. These data are summarized inTables 6 and 7. They show that the yearly recurrent subsidy on accountof water supply in urban areas other than the KAVAL towns has increasedfrom Rs 16 lakhs in 1969/70 to Rs 70 lakhs in 1973/74. As far as ruraltowns are concerned their number is relatively small and their averagesize not very significant (less than 6,000 inhabitants). Consequentlytheir total popu'lation benefitting from water supply amounts to only 0.5million and the recurrent subsidy on that account is negligible. In 1973/74 it amounted to approximately Rs 4 lakhs.

12. Much more important in terms of financial subsidy is theoperational cost incurred on rural village schemes. These schemes,designed to provide water to villages or groups of villages, began about1961, and have been increasing rapidly in recent years. From 1.1 millionin 1969/70, the number of beneficiaries from such schemes has increasedto about 3.0 million in 1973/74. No detailed information is availableon the recurrent expenditures actually incurred for the operation andmaintenance 1/ of these schemes, but sample studies indicate that opera-tion and maintenance costs stood at about Rs 2.00 per capita per annumin 1969/70. Due to recent sharp price increases these costs may beestimated to have risen to approximately Rs 2.50 per head in 1973/74.Given the number of beneficiaries of the schemes, the total recurrentcost may have been around Rs 23 lakhs in 1969/70 and Rs 50 lakhs in1973/74. Very little revenue has been collected from these beneficiaries,and actual expenditures have been defrayed either by zilla parishads outof their general revenue, or have been met by the LSGED budget. 2/ Insome cases proper maintenance has been neglected, because of lack of funds,and for all practical purposes, the subsidy on these schemes amounts to thefull recurrent cost thereof.

13. Very little is known about the financial burden imposed by thesewerage systems in urban areas other than the KAVAL towns. Income directlyderived from the sector, either through specific contributions from thebeneficiaries or through the sale of sewerage water is very small, and therecurrent costs of these sewerage schemes is virtually entirely subsidizedby the general municipal revenue of these towns or by the State Governmentthrough subventions. To get an approximate idea of the total recurrent

1/ These schemes being financed out of grants have no debt service tocover. But no provision has been made for depreciation by theresponsible authorities.

2/ LSGED has to maintain and operate these schemes until their commission-ing date, but in many instances repair works have been performed byLSGED out of its own budget after sehemes had been commissioned.

Page 7

costs of sewerage schemes, some broad assumptions were made. 1/ On thebasis of these assumptions, total yearly expenditures on sewerage in theurban areas other than the KAVAL towns has probably risen from about Rs 31lakhs in 1969/70 to about Rs 42 lakhs in 1973/74, and the correspondingsubsidy has gone up from about Rs 25 lakhs to about Rs 34 lakhs.

14. Finally, there may be an additional element of hidden subsidygiven by LSGED, and therefore by GUP. LSGED had been charging a commis-sion of 16% of capital cost to cover its estimated expenditures on plan-ning, design and construction supervision. Considerable time elapsesbetween the incurrence of these expenses by LSGED and the moment whenthey are charged to the project (i.e. the commissioning date), and notenough attention has been paid to verification of whether the presentcommission rate does in fact fully cover the corresponding LSGED overheadcosts. There are, however, indications that, whereas the commission chargefor supervision activities (13%) is sufficient to cover the relevant ex-penses, the commission on design activities (3%) is lower than actualdesign costs (presently estimated at roughly 4%). To account for sucha possible element of subsidy, it has been assumed that a notional addi-tional subsidy of 1% of LSGED project costs would be forthcoming. 2/

15. It therefore appears that the total annual subsidy to the waterand sewerage sector in UP has amounted to about Rs 5 crores in the lastthree years, with a 15% increase from Rs 4.6 crores in 1971/72 to Rs 5.3crores in 1973/74. Over the five-year period of the Fourth Plan thissubsidy has totalled about Rs 23.4 crores, of which Rs 13.9 crores weregiven as capital subsidy 3/ and Rs 9.5 crores as recurrent subsidy. Totalexpenditures on the water supply and sewerage sector in the same periodamounted to Rs 71.3 crores. One-third of these total expenditures werethus being subsidized, in one way or the other, by paying for the sectorwith resources from the general budget revenue.

1/ It has been assumed that, as in the KAVAL towns, recurrent seweragecosts in those urban areas are one-third of the recurrent expendi-tures incurred on water supply. However, because only one-third ofthese urban areas provide sewerage services, the sewerage cost hasbeen put at one-ninth of the water supply costs. It was furtherassumed that, again as in the KAVAL towns, the sewerage subsidy wouldamount to 80% of total sewerage costs. Given that the other urbanareas probably do not have as much opportunity to sell their sewagefor farming, this may be an underestimation of the subsidy in theseurban areas.

2/ There is also some evidence that LSGED may be overstaffed and hasincurred excessive costs in planning and design activities.

3/ Including the hidden subsidy granted by LSGED.

ANNEX I1Page 8

16. The bulk of the subsidy over the five-year period (Rs 15.4crores) has gone to rural areas. Nevertheless, the subsidy on accountof urban water supply and sewerage has been rising steadily: from Rs 75lakhs in 1969/70 it increased to Rs 218 lakhs in 1973/74 (+190%). Thisincrease is partly due to the increase in the number of urban peoplebenefitting from water supply and sewerage services but to a much largerextent it is due to an increase in the per capita cost of the subsidy. Ifthe per capita rate of subsidization had remained at its 1969/70 level, thetotal urban subsidy would have risen from Rs 75 lakhs in 1969/70 to onlyRs 81 lakhs in 1973/74, or an increase of 8%. For this to happen, however,the rate of increase of income from the sector would have had to be fasterthan the rate of increase of expenditures. Even if the income from watersupply and sewerage would have kept pace with the rate of expansion ofexpenditures on the sector, the total subsidy would only have risen toRs 109 lakhs, instead of to Rs 218 lakhs. In other words, 4% of thetotal increase in subsidy is due to the expansion in the number of ben-eficiaries, 20% is caused by the inflation of costs, but 76% of the in-crease, is caused by revenue growth lagging considerably behind increasesin expenditures.

B. Fifth Five-Year Plan Period 1974-79

17. It is not possible to accurately forecast the subsidy on watersupply and sewerage in the next five years, because the size of that sub-sidy will depend on a number of factors, including (a) the size of theinvestment program for the sector; (b) the on-lending terms by the Nigamto the local bodies concerned and the share of any grants in the total;(c) the rate of inflation and its effect on both expenditure and revenuelevels; (d) future increases in water charges and tax rates. Some ofthese factors can be predicted with a reasonable degree of accuracy, otherswill entirely depend on policy decisions and cannot be forecast with anylevel of certainty. Therefore, the total outcome remains largely anunknown.

18. This section is an assessment of the size of the subsidy undercertain assumptions relating to both economic factors and policy decisions.The aim is to indicate what size the subsidy might take, even if certainsteps are taken to increase water charges, particularly in the urban areas,and given a reasonable size program and a reasonable pattern of on-lending.Any failure to increase the water charges to the levels assumed in the ex-ercise would only raise the amount of subsidy required even further. Thefollowing assumptions have been made, but changes in any one could inter-act on others and affect the projected result:

(i) Five years' capital investment 1974-79 will be aboutRs 92 crores;

(ii) The rural schemes investment would be about Rs 43crores of (i);

ANDM 11Page 9

(iii) Annual inflation rate of 152 for the first two of thefive years dropping to 10%;

(iv) Urban systems recurrent expenses will increase by 5%per annum excluding inflation;

(v) Recurrent urban sewerage expenditures will remain atabout one-third of water supply in KAVAL towns and one-ninth in other towns; and

(vi) Recurrent expenditures on rural schemes will increaseat about 10% per annum excluding inflation.

19. Total expenditures on the water supply and sewerage sector can bereasonably expected to rise from Rs 18.0 crores in 1973/74 to Rs 48.4 crores(+169%) in 1978/79 (Table 8). In the same period the total annual subsidyon the sector would rise from Rs 5.3 crores in 1973/74 to Rs 13.8 crores(+160%) in 1978/79. The subsidy as a percentage of total outlay would thusremain static. Yet, it should be noted that this is only due to a sharprise in water rates assumed in the KAVAL towns and the other urban areas.This causes a fall in the overall subsidy rate as between 1974/75 and 1976/77; but thereafter, because of the high subsidization of the rural villageschemes, the share of the subsidy in total expenditures again begins to riseover time.

20. It should also be noted that the implications of the gradual elimi-nation of subsidy on water supply in the urban areas are fairly severe. Itwould mean that income in the KAVAL towns would have to rise by 85% by 1976/77 on current levels and by about 15% a year thereafter, for these towns tobe able to meet only their recurrent expenditures on water. 1/ As for theother urban towns, they would have to more than double their rates between1974/75 and 1976/77, and keep on increasing them by 15% a year thereafter.Disregarding some marginal increase in the number of beneficiaries in towns,it would mean that water charges would have to be raised in the same propor-tions 2/ and that yield from water taxes may have to be increased.

21. A further reduction in the overall subsidy could only be madepossible through (a) the generation of a financial surplus on water supplyin the towns, (b) a reduction in the sewerage subsidy, and (c) the gradualintroduction of some water charges in the rural village schemes. The firstof these alternatives has possibilities, in that the urban areas have among

1/ This is without allowing for the generation of investible surpluses.

2/ At the time of the appraisal mission two of the five KAVAL townswere considering raising their water rates by 25-100%, dependingon the consumer category.

ANNEX 1Page 10

the highest per capita income in the State. It should be possible - atleast after a while - to generate a surplus in these areas and to syphonit off to other subsidized areas by using the Nigam's fiscal operations.The second alternative, a reduction in the sewerage subsidy, will be moredifficult to bring about. Sewerage is considered even more widely thanwater supply, to be a free public service, which has to be paid for bythe community at large. Except where individual house connections exist,it will be difficult to introduce a specific charge fot sewerage servicesexcept through taxation. The sale of sewage for farfing purpose, may pro-vide some additional revenue, but this part of the sector will probablyhave to remain subsidized for some time. The third avenue for reducingthe sector subsidy is the introduction of some kind of water charge in therural areas where water supplies have been, or will be made available. Manyof these villages belong to the poorer areas of the State, and it may bedifficult, if not impossible, to levy water charges at rates comparable tothose in urban areas. However, either where individual house connectionshave been installed or where a standpost has been set up within a certaindistance from a dwelling, it has been possible to make the ultimate bene-ficiaries contribute something to the defrayment of water supply costs.The question then arises as to how much these people can contribute. Littlelocal thought has been given to the subject, and relatively few socio-eco-nomic data on a regional or district-basis are available. Furthermore, thedetermination of water charges in the poorer sections of the State cannotbe decided on purely scientific or economic grounds; the matter is linkedwith the problem of income redistribution. It will ultimately remain oneof political judgment, but tariff studies which are now proposed shouldinclude in their terms of reference the need to ascertain as accuratelyas possible, and then review all available data to facilitate decisionmaking.

22. There are some limited data available on consumption patternin urban and rural areas (Table 9). These data suggest that in 1970/71,people in the urban areas of UP were spending approximately one-half ofone percent (Rs 3) 1/ of their total yearly consumption (Rs 526) on watersupply. Total yearly consumption in the rural areas was about 20% belowthe level attained in urban centers. Even if the inhabitants of theseareas were required to contribute only half as much of their income asurban inhabitants to the cost of water supply (i.e. slightly over 0.25%),this would still represent Rs 1.19 in 1970/71 prices. In 1974/75 pricesthis would probably amount to about Rs 1.70 per capita, per annum. Sucha level of water charges would have reduced the level of recurrent subsidyon village schemes by 60% in 1974/75 from Rs 60 lakhs to Rs 24 lakhs.

23. Finally, GUP might consider the introduction of differential watercharges as between different parts of the State. The distribution of percapita income as between different districts is quite uneven and varies

1/ See Table 5.

ANNEX 11Page 11

from 30% or more below the State average (Rae Bareli, Gonda, Bahraich,Pratapgarh, Basti, Azamgarh, Jaunpur and Ballia) to 60% or more above theaverage (Meerut and Dehra Dun). From the district with the lowest to theone with the highest income, this represents a more than four-fold increasein per capita income levels. This is not to argue that it would be advis-able or even practical to recommend water rates which are four times ashigh in the Dehra Dun district as in the Basti district. In fact it maywell be impossible to introduce differential water charges as betweendistricts. It may, however, be feasible to recommend that a regionalwater authority in a more prosperous part of the State charge more forits rural village water than a water authority in a poorer region. Evenas between divisions the per capita income distribution ranges from 25below average (Faizabad) to 50% above average (Meerut). This seems to in-dicate that there is some scope for differential water pricing to be in-troduced in the future.

July 18, 1975

AIE 11

INDIA

UTTAR PRADE SH WATER SUPPLY AND SA(EAGE PROJECT

Table 1: Yearly Outlay on Water Supply and Sewerage in Fourth Plan(in Rs crores)

% of1969/70 1970/71 1971/72 1972/73 1973/74 Total Total

Outlay 4.77 4.30 6.87 9.52 9.02 34.48 100

Of which:

- for urban schemes 0.29 2.75 4.21 6.62 5.61 19.48 56

- for rural schemes 4.48 1.55 2.66 2.90 3.41 15.00 44

financed by:1/

- State plan 5.98 4.82 5.31 4.00 4.75 24.86 72

- LIC - 1.66 0.50 2.07 1.53 5.76 17

- LSGED cash resources -1.21 -2.18 1.06 3.45 2.74 3.86(- increase)

- grants 4.22 1.79 2.53 2.46 2.53 13.53 39

t,, Includes resources made available by OI National Plans.

Source: Appraisal Mission

July 18, 1975

INDIA

UTTAR PRADESH WATER SUPPIY AND SBNERLGE PROJECT

Table 2: Pattern of State Assistance for Water Supply and Sewerage Schemesin Uttar Pradesh -7/7 1

Pattern Rate of Periodof interest of loan

aseistance for loan repamgent

I. URBAN SCHENE

a. Water supply

t. in local bodies having populationof more than 20,000 according to1971 census. 100 % loan 6 % 30 years

2. in local bodies having populationof upto 20,000 according to 1971census. 75 % grant 6¼ % 15 years

25 % loan

b. Sewerage 75 % grant25 % loan 6 % 30 years

II. RUR*L SCHE

1. ordinary schemes 75 % grant25 % loan 6¼ % 15 years

2. schemes in scarcity areas orhill region. 100 % grant

2/ This pattern has been in force for about 10 years, although the interest rates have risen over time.

Source: LSGED-July 18, 1975

INDIA

UTTAR PRADESH WATER SUPPIY AND SDJERAGE PROJECT

Table 3: Water Rates and Charges in Kaval Townsin force October 1974

Kanpur Agra Varanasi Allahabad Lucknow

1. Water tax as percentageof annual rental value'of property 6.25%S 13.0% 12.0% 14.0% 8.0%

2. Minimum water tat per. year per connected house Rs 16 Rs 18 Rs 24 Rs 24 Rs 24

3. Rate of metered supplyper 1,000 litres

(a) domestic Rs 0.16 Rs 0.20 Rs 0.20 Rs 0.25 Rs 0.20US 6 per 1000 US galls 7.6 9.5 9.5 12.0 9.5

(b) non-domestic Rs 0.22 Rs 0.30 Rs 0.30 Rs 0.50 Rs 0.30

4. Water supply allowancebefore 3(a) above applied

1/c. month 8,300 7,500o 10,000 8;000 10,000

1/c. .a. 275 250 333 267 333

5. Average cost of water for monthfor family of 6 using Rs 4.2 Rs 5.h Rs 5.4 Rs 6.75 Rs 5.4150 l/c.d. each USo 53 USd 68 USU 68 USi 85 USi 68 H

July 18, 1975

Source: LSCED

'TTA00 PR4E000 WA001 SUPPLY AND0 SEWERAGE P007ECT

Table 4: KAVAL TOWNS-1ac-i and PaedtrsOh:iuadSrlee16-0throgh 1973-74

KANPOP AGRA VARAXA2I ASLLAHABAI7 WOWZ

Year ended Mha, 31 1970 1971 1070 1973 1974 1970 1971 1972 1973 1974 1970 1971 1972 1973 1974 19490 1971 1972 1973 19,4 1970 1971 1972 1973 1974

WAYE5 SUPPLY

SenfattanDg Popolatton 'OUCa 1,197 1,235 1,265 1,300 1,337 600 614 628 642 657 5i6 589 602 616 630 484 493 500 511 920 766 785 803 822 842.

Water Connosepta- '~-002 3

Ae-outed for 10,305 20,307 37,400 43,000 64,400 15,455 16,057 22,759 23,779 24,064 6,355 7,336 10.647 12,289 13,332 321614 19,501 13,271 14,449 14,968 9,067 9,118 20,721 17,390 16,899OaJe-ooted for 54,02 54,292 35,9139 32,232 15,1501 13,080 14,307 11,393 12,270 13,710 148,302 47,536 39,367 37,210 39,944 6,800 22,491 28,693 26,395 28,180 57,177 599,488 46,128 50,073 50,136

Total 74377 74,679 73,29 75.232 79,550 29.335 30,439 34,152 36,049 37,774 ja4.6s7 54.872 50,014 49,495 53.276 39,494 41,582 41,964 40,044 43,148 66,244 68,606 66,849 67,563 67.0350s Lkhhn

Meter Charge- 23.54 26.12 44.oo no. no. soO 15.70 12.21 1.57 2.07 3.12 8.. un .00 0.41 8.91 D,A. n.n. 7.81 8.84 7.05Other u. a. 46.30 54.52 75.52 na .. 22.92 Ž0.27 244 A. n 20.10 27.07 24.49 n.a. 0.0. 27.05 29.74 32.28 n.n. a.A. 36.38 34.24 4o.82

Total 69.38 70. 95 69.94 80.64, 119.52 37.79 34.79 33.77 35.27 39.69 07.4.. 30.24 29.67 09.94 07.61 32.94 31.03 35.85 36.15 41.19 30.58 47.09 44.19 43.08 47.87

Operto adMhaenr 51.70 44.99 62.05 67.59 07.74 71.29 07 33 20.43 24.10 23.60 o2.60 74.17 26.02 31.75 32.30 23.44 22.10 29.53 30.14 31.61 28.51 34.16 40.18 42.15 45.00D.ht OrS -ee 13.15 13.50 13.70 1.7.97 15).50 1061 11.92 16.01 17.22 10.01 - 10.64 9.66 lo.4o 00.67 ii.ot 9.63 17.94 15.49 i6.18 n.-64 13.33 17.96 19.63 al.9

Total 64.43 ~85 76.63 40.56 107.24 31.09 29.25 37.24 41.30 41.61 22.6o 34.21 35.69 42.15 42.39 34Ja8 31.74 40.47 45.62 47.79 4o.2.5 47 91 58.i4 51.78 66.s

Canh Sohnldy-Wnt-r Supply [4.95) (12.44) 6.79 (o.49) (10.20) 0.90 (5.03) 3.47 6.03 2. 92 (4.01) 3.97 6.01 10.21 15.38 1.64 0.71 6.62 7.47 6.60 9%?7 0.41 13.95 18.70 19.07

C-) = urpl-n

Ino-n no . 6.09 4.74 10.92 .. 00 1.70 7.16 2.60 .. 00 0.00 0.29 0.30 na na. 0.87 0.09 i.i8 n.e. n.. 4.58 4.6? 4.53

Op-rtnon od Mi.toten- .a n. 14.47 01.44 26.73 u.. 00 .65 3.20 0.06I a 6.64 7.02 8.08 enAun, 6.39 3.44 9.9 n .. 3.0 17.18 18.10Snbt Se-1a-.. n 6.49 6.62 7.50 n. . 32 313 1985 I n o. 40 .6 70 a .. 9.70 9.74 10.14 ng n.. 12.3 33 06

TotnO 0.0. n.a. 20.~~~~~~~~O95 20.06 34.23 05 na. 5.92 5.33 5493 I:: 00 0.87 14.98 15.11 ii. 0a 6.o5 19.18 09.23 n.n. n.A. 13.43 29.32 30.75

TC.. O0bnOdy.Oe-ergc . a 14.86 23.32 15.24 n. 00 4.14 3.17 2.33 lo.. u.. 1.67 14.73 14.8i .0 .. 15.19 19.09 sho ne. .a 11.15 24.85 26.22

Total CanO loh,-dy u-n n. 21.65 33.24 2.96 na .. 7.61 9.20 5.25 n-A. 1.. 6.68 26,94 30.139 .. 00 21.80 26.56 24.65 D.A. n.. 25.10 43.99 43.29

PER CAPITAorome 0,.-

Water Con-uptuon 170 i66 159 138 163 134 136 149 154 157 .J-20 02 228 720 232 224 231 229 019 227 216 219 228 so so8

Conono pay-eta Wat-r 3.79 5.76 5.52 6.20 8.94 5.41 5.58 5.38 5.49 0.09 I4.75 5.17, 4.93 4.86 4.38 6.78 6.20 7.14 7.47 7.92 3.96 5.99 5.50 5.24 5.70par ano Oc--rge . . o.48 0.36 1.4a .. 0 0.28 0.33 0.30 o uS 0.03 5.04 0.04 0.0 .. 017 0.01 0.202 .. ne 0.53 0.56 0.53

E.pend=orc un nerviacpernnn- Wate 5.34 4.75 4.25 6.oo 8.02 4.31 4.76 5.33 6.4~ 6.33 3.92 v.80 5.33 4.84 4 82 7.12 6.43 8 44 0.93 9.19 5.02 6.05 7.04 7.57 7.96

Senerago u.. I.,. 1.65 2.15 2.56 0. 0. 0.94 0.03 0 75 j1.. 00 .80 2.43 2.33 0.0. 0.. .1 9

3.75 3.69 u.. o. 1.92 3.59 3.65Total baa So4-ty n.. n. 1.72 1.79 0.22 u. . 1.71 1.44 0. S n u un 2.77 4.37 4.79 -iA. -lu. 4.34 5.20 4.74 n.. o. 3.13 5.39 5.38

Ianoa-Water 5.09 0 09 0.10 0.11 0.15 0.11 0.11 0.17 0.10 0.12 0.00 2.06 o.06 o.06 7.05 0.06 0.07 0.58 2.03 0.09 0.05 0.07 o.06 0.06 0. 07-Osnornon 0.0. u.s. ~~~~~ ~~~~~0.01 0.01 0.72 0, 0.. 0.01 0.01 0.51a0 . a 0.05 0.01 00 0.. 0 -00. 00 0.01 0.01 0.01

Rcc-ret Taco of WaTterO oOF 5.04 0.00 0.11 7.03 0.1 0.09 0.11 0.1i 0.11 0.04 Ž.o6 5D.07 0.09 .9 0.09 o.o8 slB 0.1-0 0.10 .10 0.06 0.07 o.06 0,09 0.10Re-urr-t Coat U eeuo .. 00 0.01 o.64 0.64 -0 0.. 30Ž 0 0.0 0.01 O' 0 0. .n. C,)2 003 0.03 -. a. u.. o.o4 0.05 0.5o4 0.. n. 0.02 o.04 0.05

50T741 1A20 00U00I a. 0.00 0.03 0±3 0.. 00 .0' 0.02, .1 01 I o. .3 0.05 O.0 .0. I.. 0 06 Ž.0c6 o.o6 un un. 0.03 O.0C6 0.97

Hnter ConnupmysOn iota p-obsbly u--elnble, Osog bn-d on roted -oP-etY of P-oPu Per T-p-gn thurs-,not n--rte onteran ii -nsc uP-rtio-l.

N4aa.=St -en blahi Scora LSOES cad Appr-heel Mieehee f741 1, 13"

IJ IA-I1

lITTAlR PRADESH WATESR SUPPLY ANIt SEWERACGE PROJECT

Table 5: Waterworks Other than Kaval Tow.:s - Cash Receipts end Paymcnts

1967/68 - 1972/713

WMter Cons.mptiU- Cash Receipts PaymenSample Benefiting Operation & De t ICashsaze population 1etered lnmetcrei Total Metered Unmetered Total maintenance service 2o0a_ subsidy

(Teems) (in thousands) inkillon titers R inlas) (7Rs. lahes) (Rs. l.-khs)

1967/68 128 4,1i2 47,S56 30,286 121,502 97.3' 42.72 140.09 84.02 40.89 124.91 (15.18)

1968/69 149 4,791 53,7]8 87,579 139,297 1C4.01 53.52 157.53 io.26 47.66 149.92 (i.Sl)

1969/70 169 6,936 64,i5b 91,35(5 155,533 124.65 51.64 176.29 1i6.34 5.G66 1i'4.00 (2.29)

1970/71 62 2,121 20,602 27,741 48,35-3 20.38 40.oo 60.38 38.83 33.23 72.06 -11.68

1971172 76 3,600 32,399 43,406 7y,3B0 61'7 61.27 t12.o4 63.23 36.41 99.69 (23.35)

1972/73 60 1,636 27,992 39,050 67,042 19.57 40.90 60.47 48.24 23.31 '1.55 -11.08

OData expressed as per capitaand oer cubic meter

CostsConsumption Operation & Deet Cash Cost of Cash

10Do 1/year 1/day Ineome maintenance service Total subsidy water Incone subsidy(per capita) (sa (Rs 'n3)

1967/68 31.01 85 3,41 2.05 0.99 3.04 (0.37) 0.10 0.11 0.01

1968/69 29 C/ 80 3 29 2.13 1.00 3.13 (0.16) 0.11 0.11 -

1969/70 31 51 86 3.57 0.35 1.17 3.52 (0o05) 0.11 0.11 -

1970/71, 22.79 62 2.85 1.83 1,57 3.40 -0.55 0.15 0.12 -0.03

1971/72 29.15 8o 4.73 2.43 1,40 3.83 (0.90) 0.13 0.16 0.03

1972/73 40.98 112 3.'70 P.94 1.43 4.37 -0.67 0.11 0.09 -0.02

Source: LSGED andJinly 18, 1975 Appraisal Misaion

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 6: YalZRecurrent Subsidy on Water Supply- C~~~~~Rs per capita)

1969/70 1970/71 1971/72 1972/73 1973/74

1. Kaval towns 0.02 -0.33 0.97 1.14 0.79

2. Other urban areas 0.20 0.50 0.60 0.70 0.80

3. Rural towns 0.20 0.50 o.60 0.70 0.80

4. Rural village schemes 2.00 2.00 2.00 2.25 2.50

i/ Minus (-) = surplus.

July 18, 1975 Source: Appraisal Mission

ANNEX 11INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 7: Estimated Total Annual EZpenditures and Subsidieson Water Supply and Sewerage in Uttar Pradesh

(in Rs lakhs)

1969/70 1970/71 1971/72 1972!73 1973!74 Total

A. CAPITAL EXPENDITURES 477 430 687 952 902 3,448

B. RECURRENT EXPEEDIUBES 602 617 26 839 899 3,683

Of which in:

1. Kaval towns

a. water supply (193) (201) (250) (272) (307) (1,223)

b. sewerage (64) (67) (69) (97) (104) ( 401)

2. Other urban areas

a. water supply (281) (282) (325) (372) (375) (1,635)

b. sewerage (31) (31) (36) ( 41) (42) ( 181)

3. Rural towns ( i0) (11) (17) (20) (21) ( 79)

4. Rural village schemes (23) (25) (29) (37) (50) ( 164)

C. TOTAL EXPENDITURES 1,079 1,047 1,413 1,791 1,801 7,131

D. CAPITAL GRANTS 422 179 253 246 253 1,353

Of which:

-urban areas ( 2) 1 i) ( 1) ( 1) ( 1) ( 6)

-ural towns ( 3) ( 1) ( 2) ( 2) ( 2) ( 10)

- rural village aehenes (417) (177) (250) (243) (250) (1,337)

E. RECURRENT SUBSIDIES 96 121 205 263 267 952

Of uhih in:

1. Kaval towns

a. water supply ( 1) (-12) (37) (45) (32) ( 103)

b. sewerage (30) (40) (56) (84) (77) ( 287)

2. Other urban areas

a. water supply (16) (41) (51) (61) (70) ( 239)

b. aewerage (25) (25) (29) (33) (34) ( 146)

3. E,ral tooss- ( 1) ( 2) ( 3) ( 3) ( 4) ( 13)

4. Rural village schenes (23) ( 25) (29) (37) (5o) ( 164)

F. LSGED SUBSIDY 5 5 7 9 9 35

G. TOTAL SUBSIDY 523 305 465 518 529 2,340

Of which:

- in urban areas ( 75) ( 97) (177) (228) (218) ( 795)

- in rural areas (448) (208) (288) (290) (311) (1,545)

(including rural towns)

Subsidy-G as % of Total Expenditures -C 48.4% 29.1% 32.9% 28.9% 29.3% 32.8%

Capital Subsidy D + F 427 184 260 255 262 1,388

- as o of Capital Expenditures - A 89.5% 42.8% 37.8% 26.8% 29.0% 40.2%

Recurrent Subsidy - E 96 121 205 263 267 952

- us 4o of Recarrent Expenditures - B 16.4%h 19.5% 28.0% 30.9% 29.1% 25.7%

I! These are towns which do not qualify as "urban" areas under the census definition.

8/ Including the hidden subsidy granted by LSGED.

3/ Surplus.

The LSGED subsidy has been split bet-een urban and rural are-as i proportion ts the

other subsidies.

Source: Appraisal Mission

July 18, 1975

INDIA AMEX 11

TUTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 8: Total Projected Yearly Expenditures on Uttar PradeshWater Supply and Sewerage-197 /75 through 197 /79

(in Rs lakhs)

1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 TOTAL(Estimated (Projection)actuals)

A. CAPITAL EXPESNDITURES 902 1,000 1,4oo 1,800 2,200 2,8oo 9,200

B. RECURRENT EXPENDITURES 899 1,077 1,303 1,512 1,758 2,045 7,695

Of which in:

1. Kaval towns

a. water supply (307) (368) (442) (508) (584) (672)

b. sewerage (104) (123) (147) (169) (195) (224)

2. Other urban areas

a. water supply (375) (450) (540) (621) (714) (821)

b. sewerage ( 42) ( 50) ( 60) ( 69) ( 79) ( 91)

3. Rural towns (21) (26) (33) (40) (48) (58)

4. Rural village schemes ( 50) ( 60) ( 81) (105) (138) (179)

C. TOTAL EXPENDITURES 1,801 2,077 2,703 3,312 3,958 4,845 16,895

D. CAPITAL GRANTJS 253 300 4oo 550 700 950 2,900

E. RECURBENT SUBSIDIES 267 310 310 293 354 429 1,696

Of which in:

1. Kavel towns

a. water supply ( 32) ( 37) ( 22) ( - ) ( _ ) ( -

b. sewerage ( 77) ( 91) (109) (125) (144) (166)

2. Other urban areas

a. water supply (70) (77) (44) (_) (_) (_)

b. sewerage (34) (40) (48) (55) (63) (73)

3. Rural towns ( 4) ( 5) ( 6) ( 8) ( 9) (11)

4. Rural village schemes ( 50) ( 60) ( 81) (105) (138) (179)

F. LSGED STJBSIDY 9 (- ) (-) (-) (_) (- _

.. TOTAL SUESIDY 529 610 710 843 1,054 1,379 4,596

Subsidy -G as % of Total Expenditures -C 29.3% 29.4% 26.3% 25.4to 26.6% 28.5% 27.2%

Capital Subsidy D + F / 262 300 400 550 700 950 2,900

- as % of Capital Expenditures -A 29.0% 30.0% 28.6% 30.5% 31.8% 33. X 31.5%

Recurrent Subsidy -E 267 310 310 293 354 429 1,696

- as % of Recurrent Expenditures -B 29.1% 28.8% 23.8% 19.4% 20.1% 21.0% 22.0%

i Including the hidden subsidy granted by LSGED.

Source: Appraisal Misaion

July 18, 1975

INDIA

UTTAR PRADESH WATER SUPPLY AND SEWERAGE PROJECT

Table 9: Per Capita Monthly Consumption Pattern in 1970/71

(in Rs.)

Rural AreasSmall Landless Urban U.Pfarmers families Rest Total areas State

I. FOOD PRODUCTS

1. Cereals and pulses 13.16 12.62 14.86 14.67 13.34 14.51

2. Milk and milk products 1.84 1.79 4.09 3.88 5.41 4.07

3. Other food items 4.77 5.52 .6.22 6.13 10.24 6.63

Total 19.77 19.93 25.17 24.68 28.99 25.21

II. NON-FOOD PRODUCTS

1. Fuel and light 2.o6 1.99 2.14 2.13 2.84 2.22

2. Clothing and shoes 1.67 2.59 3.43 3 32 3.04 3.28

3. Others 2.54 3.05 4.96 4.75 8.97 5.28

Total 7.27 7.63 10.53 10.20 14.85 10.78

III. TOTAL (I + II) 26.04 27.56 35.70 34.88 43.84 35.99

IV. TOTAL CONSUMPTION PER YEAR 312 331 428 418 526 432

Source: Economic Review of UP, 1972.

July 18, 1975

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