Document ofThe World Bank

Report No. 17102-IN

PROJECT APPRAISAL DOCUMENT

ON A PROPOSED CREDIT

IN THE AMOUNT OF SDR 111.8 MILLION

TO

INDIA

FOR A

THIRD DISTRICT PRIMARY EDUCATION PROJECT

October 27, 1997

Education SectorSouth Asia Region

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CURRENCY EQUIVALENTS

Currency Unit = RupeeUS$1.00 = Rs. 35.00US$0.0285 = Rs. 1.00

GOVERNMENT FISCAL YEAR

April 1 - March 31

ACRONYMS AND ABBREVIATIONS

AWPB Annual Work Plan and BudgetBAS Baseline Assessment StudyBEP Bihar Education ProjectBSPP Bihar Shiksha Pariyojna ParishadBRC Block Resource CenterBSTPC Bihar State Textbook Publishing CorporationCRC Cluster Resource CenterDFID UK Department for International Development (previously ODA)DIET District Institute of Education and TrainingDLO District-level Project OfficeDOE Department of EducationDPEP District Primary Education ProjectECE Early Childhood Education CenterECU European Commission UnitEMIS Education Management Information SystemGOB Government of BiharGOI Government of IndiaICDS Integrated Child Development ServiceJSM Joint Supervision Mission..MHRD Ministry of Human Resource DevelopmentMLL Minimum Levels of LearningMS Mahila SamakhyaNCERT National Council of Educational Research and TrainingPMIS Project Management Information SystemSAS Social Assessment StudySC Scheduled CasteSCERT State Council of Educational Research and TrainingSIEMAT State Institution of Educational Management and TrainingSIDA Swedish International Development AgencySIS State Implementation SocietySLO State-level Project OfficeST Scheduled TribeTSG Technical Support GroupUNICEF United Nations Children's FundUPBEP Uttar Pradesh Basic Education ProjectVEC Village Education Committee

Vice President Mieko NishimizuCountry Director Edwin R. LimSector Manager Ralph W. HarbisonTask Manager Juan Prawda

INDIATHIRD DISTRICT PRIMARY EDUCATION PROJECT

CONTENTSPage No.

PROJECT FINANCING DATA ......................................... .1BLOCK 1: PROJECT DESCRIPTION .......................................... 2

1. Project Development Objectives .......................................... 22. Project Components .......................................... 23. Benefits and target population .......................................... 24. Institutional and implementation arrangements .......................................... 3

BLOCK 2: PROJECT RATIONALE .......................................... 65. CAS objectives supported by the project .66. Main sector issues and Government strategy .67. Sector issues to be addressed by the project and strategic choices .78. Project alternatives considered and reasons for rejection .79. Major related projects financed by the Bank, and/or other development agencies . 8

10. Lessons learned and reflected in the project design .811. Indications of borrower commitment and ownership .812. Value added of Bank support .9

BLOCK 3: SUMMARY PROJECT ASSESSMENTS ....................................... 913. Economic Assessment .914. Financial Assessment .1015. Technical Assessment .116. Institutional Assessment .1 17. Social Assessment .1118. Environmental Assessment .119. Participatory Approach .1220. Sustainability .1221. Critical Risks .1322. Possible Controversial Aspects .13

BLOCK 4: MAIN CREDIT CONDITIONS .......................................... 1423. Effectiveness Conditions .......................................... 1424. Other .......................................... 14

BLOCK 5: COMPLIANCE WITH BANK POLICIES ........................................ 14

ANNEXES1 Project Design Summary2 Detailed Project Description3 Estimated Project Costs4 Economic and Social Outcomes of Primary Schooling in India and in Bihar5 Financial Summary6 Procurement Arrangements and Allocations of the Credit Proceeds7 Project Processing Budget and Schedule8 Documents in the Project File9 Statement of Loans and Credits

10 India at a Glance

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTINTERNATIONAL DEVELOPMENT ASSOCIATION

South Asia Region

Project Appraisal Document

IndiaThird District Primary Education Project (DPEP III)

Date: October 27, 1997 [x] FinalTask Manager: Juan Prawda Country Director: Edwin R. LimProject ID: IN-PE-38021 Sector: Education

POC: Human ResourcesLending Instrument: Specific Investment Credit PTI: [x] Yes

Project Financing Data [x] Credit

For Loans/Credits/Others:

Amount: SDR 111.8 million (US$152.0 million equivalent)

Proposed Terms: [x] SDR

Grace period (years): 10

Years to maturity: 35 years including grace periodCommitment fee: not to exceed 1/2 of one

percent per annumService charge: 3/4 of one percent per annum

Financing plan (US$m):Source Local Foreign Total

Government 37.7 0.0 37.7Cofmanciers (UNICEF)' 10.0 0.0 10.0IDA 144.1 7.9 152.0TOTAL 191.8 7.9 199.7

Borrower: Govermment of India (GOI), acting by its PresidentGuarantor:Responsible agency: Bihar Shiksha Pariyojna Parishad (BSPP) of the Government of Bihar (GOB)

Estimated disbursements (Bank FY/US$M): 1998 1999 2000 2001 2002 2003 2004

Annual 7.0 22.5 41.8 36.5 23.3 16.7 4.2Cumulative 7.0 29.5 71.4 107.8 131.1 147.8 152.0

Expected effectiveness date: April 1, 1998 Closing date: September 30, 2003

UNICEF confirmed to IDA, GOI and GOB during the appraisal mission its intention to contribute a grant through a parallel cofinancingarrangement. This grant contribution is pending UNICEF Board approval.

Project Appraisal Document Page 2Country: India Project Tite: DPEP 111

Block 1: Project Description1. Project development objectives (see Annex I for key performance indicators): The project will assist the Government of Bihar(GOB) to build and strengthen state, district and sub-district institutional capacity to ensure that more children, especially fromsocially disadvantaged groups (female, scheduled caste [SC] and scheduled tribe [ST] students, working children, children with mildto moderate learning disabilities and other children who have limited access to educational opportunities2 ), complete a five-yearprimary education cycle of appropriate quality in districts with low levels of literacy.

2. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The proposed project willhave the following three components:

(a) Expanding access to primary education, particularly for disadvantaged groups by: (i) constructing new classrooms and schools,and repairing or rehabilitating existing classrooms; (ii) sanctioning new teaching posts and appointing teachers; (iii) developing andimplementing targeted interventions for socially disadvantaged groups; (iv) mobilizing school and community organizations andcarrying out awareness campaigns in support of education; and (v) establishing a Village Education Committee (VEC) for each schoolin the project districts.

(b) Increasing retention and improving learning achievement in primary school by: (i) selectively establishing new, and strengtheningexisting, early childhood education centers (ECEs); (ii) supporting interventions for women's education and empowerment programs;(iii) installing toilets and water facilities in the primary schools; (iv) establishing and operating block and cluster resource centers(BRCs and CRCs); (v) providing continuous in-service teacher training; (vi) developing and supplying improved textbooks andsupplementary instructional materials; (vii) providing grants to schools, community organizations and individual teachers for thepurchase of educational supplies and other quality inputs; and (viii) carrying out periodic learning assessments of primary levelstudents.

(c) Improving state and district capacity to manage primary education by: (i) building and strengthening state and district programmanagement structures to review and supervise the implementation of state and district investment plans as well as annual work plansand budgets; (ii) establishing and strengthening state and district resource institutions, such as the State Council of EducationalResearch and Training (SCERT), the State Institution of Educational Management and Training (SIEMAT) and the Bihar StateTextbook Publishing Corporation (BSTPC) at the state level, and the District Institutes of Education and Training (DIETs) orequivalent institutions in all project districts, and resource groups at the state and district levels to provide technical support in projectimplementation; (iii) strengthening state and district capacity for carrying out monitoring, research and evaluation activities; (iv)establishing a facility to support innovative approaches to improve primary education; and (v) developing training modules for micro-planning, VEC training and training of master trainers.3

Component Cost Incl. Contingencies % of Total

1. Expanding access to primary education 103.6 51.9

2. Increasing retention and improving learning 75.5 37.8achievement in primary school

3. Improving state and district capacity to manage 20.7 10.3primary education

Project total (may not add up) 199.8 100.0

IDA Financing 152.0

3. Benefits:and target population: The proposed project would target about 5.5 million children aged 6-10 in the 17 educationallydisadvantaged districts of Bihar. Special attention would be given to the most socially disadvantaged groups: (i) 2.75 million girls;(ii) about 825,000 SC and 500,000 ST children; and (iii) children with mild to moderate learning disabilities, working children(currently estimated at 275,000 for each group) and other children who have limited access to educational opportmities. More

2 Hereafter referred to as disadvantaged groups.This last sub-component is fully financed by the UNICEF grant.

Project Appraisal Document Page 3Country: India Project Title: DPEP III

precise numbers and the circumstances that prevent educational access to this latter group are being confrmed by the VECs throughthe ongoing validation of the results of the district-based social assessment studies. Increased access in the 17 districts: The projectwill create about 400,000 new places for children aged 6-10 through the construction of 2,350 new schools and 4,400 newclassrooms, the repair or rehabilitation of about 300 existing classrooms, and the establishment of about 8,000 non-fonnal(alternative) education centers by the beginning of 2001. It is expected that at least 50 percent of these new places will benefit girls.Improved retention in the 17 districts: By the end of the project, current attendance should rise by 50 percent (from the current 50 to75 percent). In other words, 660,000 more children per year would attend school on a regular basis during the entire school year. Inaddition, the current retention rate (children attending class V divided by number of children attending class I) of 37.9 percent shouldrise to 43.6 percent (a 15 percent improvement) by the end of project implementation. This will imply that about 330,000 additionalchildren will graduate per year from the five-year primary education cycle. Improved learning in the 17 districts: The project aims toimprove the quality of instruction and learning achievement for approximately 5.5 million children aged 6-10 attending primaryschool every year on a regular basis. Social and economic benefits: see para. 13 and Annex 4 .

4. Institutional and implementation arrangements:

Implementation period: April 1, 1998 to March 31, 2003Executing agency: Bihar Shiksha Pariyojna Parishad - BSPP (State Implementation Society - SIS). This autonomous Society

headquartered in Patna, Bihar was registered under the 1860 Societies Registration Act in 1991 to managethe Bihar Education Project (BEP) fmanced by GOI, GOB and UNICEF. For purposes of DPEP III, theBSPP will enter a Memorandum of Understanding (MOU) with GOI which has been reviewed by IDA.

Project coordination: District Primary Education Program (DPEP) Bureau of the Department of Education (DOE) at the Ministryof Human Resource Development (MHRD) of the Government of India (GOI), established in 1993 tocoordinate the DPEP.

LPoject oversight: DPEP BureauO GOI

Project implementation: The size, complexity and degree of innovation involved in the start-up phases of DPEP III are recognized byGOI and GOB. The Project Implementation Plan (PIP) prepared by the state-level project office (SLO) of the BSPP was reviewed byIDA during the appraisal mission. Prior to negotiations, IDA received a revised version of the PIP incorporating all the suggestionsmade during the appraisal mission and specified in the corresponding Aide-Memoire. According to the revised PIP, implementationwould be through incremental expansion of the state and district components and subcomponents with the release of fundingreflecting performance and the rate of utilization of previously released funds. The first year of DPEP III implementation would beprimarily focused on developmental activities, including: (a) building management capacity in the SLO and the 17 district-levelproject offices (DLOs); (b) strengthening state and district resource institutions and/or groups; and (c) establishing the basicprofessional capacity and providing the physical infrastructure for improved learning in participating districts.

In accordance with the DPEP Guidelines, annual funding during project implementation will be based on: (i) good state and districtproject implementation; (ii) compliance of the annual work plans and budgets (AWPBs) with the DPEP guidelines; (iii) evidence ofpayment of GOB to the BSPP of the 15 percent state contribution to the ongoing DPEP program; and (iv) demonstrated additionalityof DPEP investments compared to 1995/96 elementary education expenditure levels in Bihar. During negotiations, GOB providedassurances that it will carry out, and cause the BSPP to carry out, the project in accordance with the DPEP Guidelines and the PIPagreed with IDA (para. 24(d) and Annex 2).

The initial year of project implementation would be based on the state and 17 districts AWPBs for 1998, approved by the DPEPBureau on the basis of the national appraisal report and process (NARP) carried out by the technical support group (TSG) of theDPEP Bureau last May. This NARP was reviewed by IDA for the state component and five DPEP III districts (Chatra, Purnia,Sitamarhi, West Champaran and West Singhbhum) during the appraisal mission. The IDA mission endorsed the keyrecommendations of the NARP. The first year AWPBs emphasize project launch and start-up activities.

The IDA appraisal mission reviewed the steps taken by the SLO to ensure project implementation readiness. First, the SLO is fullyoperational and staffed with qualified personnel. Any remaining vacancies will be filled no later than the first semester 1998.Second in addition to the 7 BEP existing DLOs, 10 additional DLOs are being officially established in the other project districts. Theprocess for the appointment of key personnel in the 10 new DLOs has been initiated, and the selection of a full-time qualifiedfnancial/accounting official, civil works engineer and a management information system computer programmer has beensubstantially completed for the DLOs. Orientation and professional training packages for the staff positioned at the SLO and allDLOs are being prepared and will shortly be delivered. During negotiations, GOB provided assurances that it will: (i) maintain theSLO and DLOs with responsibilities to coordinate project implementation, with adequate staff, resources and facilities by the end of

Project Appraisal Document Page 4Country: India Project rdle: DPEP IIl

June 1998; and (ii) establish a program of staff training satisfactory to IDA (paras. 16 and 24(e) and Annex 2). Thid, a limited set ofkey activities to be implemented between the end of the IDA appraisal mission and Credit effectiveness (estimated to occur by April1998) has been identified at the state and district levels and has been included in the first year AWPBs. Fourth, the BSPP has in itsBEP bank account Rs. 26 crores, and an additional Rs. 10 crores in the pipeline, totaling more than the estimated 31 crores needed toimplement agreed project activities in the period up to the end of March 1998. A bank account for the DPEP III implementation willbe opened by the BSPP with an initial deposit sufficient to cover expenditures for the project start up activities. Fifth, the members ofthe state resource groups (SRG) for the various project components have been identified, and some groups have already started theiractivities. Sixth, a draft plan and time schedule for the filling of vacancies in the DIETs is in place. Seventh, twinning arrangementsbetween BEP districts with non-BEP districts to provide technical assistance have been set up. Eigbt, the designs and managementplans for the civil works included from October 1997 through March 1998 in the seven BEP districts have been prepared, and thebidding documents are being prepared. Ninth, the DPEP Bureau sponsored a seminar to train SLO personnel in IDA procurementmethods in August 1997. Finallv, a project launch workshop for the SLO and the 17 DLOs planning and management teams wouldbe carried out after negotiations.

To meet the objectives of increased access and retention and improved learning achievement, the project needs to be implemented,especially during the first two years, in an enviromnent that provides at least the minimum conditions for effective functioning of thesystem. While several proposed project interventions can help with establishing VECs, community mobilization and awarenesscampaigns, CRC school-level support, and repair of existing buildings, etc., broader policy measures will also be required. Duringnegotiations, GOB provided assurances that it will: (a) take all necessary measures to ensure that at least 95 percent of the teachers'posts in the project districts, starting the third year of the project, remain filled throughout the project implementation period (paras.20, 21, 24(g) and Annex 2); and (b) cause the BSPP to establish by December 31, 1999, in an appropriate number of sample ofvillages in each project district, a reliable education database of: (i) the number of public, private recognized and non-recognizedschools through microplanning exercises to be conducted by the VECs; and (ii) the best estimates of teacher and student attendance insuch schools through the establishment of attendance reporting mechanisms by the VECs and the educational managementinformation system (EMIS) (para. 24(j) and Annex 2). In addition, at negotiations, GOI and GOB provided assurances that they willcarry out with IDA and other external financiers, including UNICEF, a joint in-depth review of the project on two occasions byDecember 31, 1999 and December 31, 2001; such reviews to include a status report of the positioning of teachers in project districtsbased on Bihar's norms (paras. 20 and 24(b) and Annex 2). Finally, prior to negotiations, IDA received from GOB a suitableimplementation schedule to fill all teacher vacancies in project districts and a statement of the state norm for posting primary schoolteachers.

The procurement arrangements are explained in Annex 6 (Tables 6A and 6B).

Disbursements: The IDA Credit would be disbursed over five years, consistent with the new standard profile for PHR projects inIndia. The project is expected to be completed by March 31, 2003, and close on September 30, 2003. The IDA Credit would bedisbursed in accordance with the allo ations and category of expenditure shown in Table 6C. UNICEF financing would be separatefrom the IDA Credit. UNICEF's accounting mechanisms will be worked out to maintain a clear coded identification of thesubcomponents financed by UNICEF within a common account held at the BSPP. Table 6B indicates the contracts of civil works,goods and services subject to prior review. All other expenditures not requiring prior review would be disbursed on the basis ofstatements of expenditure (SOE), with supporting documentation retained by the SLO and DLOs for review by IDA during the jointsupervision missions, to be carried out twice a year. During negotiations, GOI agreed to submit to IDA evidence that a MOU hasbeen entered into between the BSPP and GOI as a condition of disbursement of the proceeds of the Credit (para. 24(o)).

In order to accelerate disbursement of IDA's share of expenditures that will be pre-financed by GOI and GOB, and to allow for directpayment of other local and foreign expenditures, during negotiations GOI agreed to maintain a Special Account in the Reserve Bankof India in the amount of US$9 million, to cover four months of estimated disbursements through the Special Account. The GOIwould release an advance of an estimated six months of expected project requirements for IDA-financed items as grants to the BSPP.The GOB would also place their own contribution in the account of the BSPP. These provisions are identical to those employed in theDPEP I and II projects. During appraisal, the IDA mission agreed with GOI and GOB to retroactively fnance up to SDR 4.6 million(US$6.2 million equivalent) of eligible project expenditures. This retroactive financing amounts to about 4 percent of the total Credit.During negotiations, GOI agreed that the following expenditures incurred by the project after August 15, 1997 and up to the expecteddate of Credit signing (January 1998) will be eligible for retroactive fnancing: (i) civil works; (ii) equipment, vehicles, books,teaching materials and furniture; (iii) project management team costs; (iv) training, workshops, fellowships and consultant services;and (v) incremental operating and maintenance costs.

Monitoring and evaluation arranuements: During negotiations, GOI and GOB provided assurances that they will maintain policies

Project Appraisal Document Page 5Country: India Project Title: DPEP IIl

and procedures adequate to enable them to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory toIDA, the carrying out of the project and achievement of the objectives thereof (para. 24(a)). As in DPEP I and II, the central programmanagement monitoring tool would be the annual review by the DPEP Bureau of the AWPBs prepared by the SLO and eachparticipating DLO including: (i) the action plans, investment proposals and fmancing requirements for the next fiscal year; and (ii)reports on the progress of implementation covering physical targets for civil works, procurement, training, software/systemdevelopment and expenditures. The review would be conducted by the DPEP Bureau in the first quarter of each year. Progressreports and work plans would follow a common framework.

Progress towards the achievement of development objectives would be measured in seven ways. First, district-based assessmentsurveys conducted in the third and last year of the project would monitor progress on key education indicators, most importantly,student learnig achievement against the district-based baseline assessment study carried out during project preparation. The resultsof these studies would be discussed at one of the annual implementation review workshops (most probably in the first quarter ofCYOI) and at project completion (by March 2003). Prior to appraisal, GOB provided IDA with fmal reports on the baselineachievement studies for the 17 districts. During negotiations, GOB provided assurances that it will carry out assessment studies onstudent learning achievement in all the project districts, with scope and content satisfactory to IDA, in calendar years 2000 and 2002(para. 24(k) and Annex 2). Project performance indicators developed by the DPEP Bureau/GOI and GOB have also been agreed withIDA and are attached in a Supplemental Letter to the Development Credit and Project Agreements (Annex 1).

Program evaluation and research studies would provide a second source of monitoring information. They would monitor theestablishment of more effective teaching and learning processes at the school level. A third source would be a computerized projectmanagement information system (PMIS) and the EMIS which have been developed and are fully operational in all DPEP I and IIproject states. Certain modules of the PMIS and EMIS are already operational in the SLO and in the 7 BEP DLOs. The PMISprovides quarterly reports concerning the project's physical targets for civil works, procurement, and training, software/systemdevelopment and expenditures. The EMIS provides annual reports on district, sub-district and school attendance, enrollment andretention data and rates, disaggregated by type of disadvantaged and non-disadvantaged group. The IDA appraisal mission confirmedthat the BSPP is taking appropriate steps to have the PMIS and EMIS in the SLO and each DLO made fully operational with key corestaff in place by June 30, 1998.

A fourth source of information would be an attendance reporting mechanism through the VECs and sample surveys. These sources ofinformation will improve the reliability and validity of the database being incorporated in the EMIS. During negotiations, GOBprovided assurances that it will cause the BSPP to establish by December 31, 1999, in an appropriate number of sample of villages ineach project district, a reliable education database of: (i) the number of public, private-recognized and non-recognized schoolsthrough microplanning exercises to be conducted by the VECs; and (ii) the best estimates of teacher and student attendance in suchschools through the establishment of attendance reporting mechanisms by the VECs and the EMIS (para. 24(j) and Annex 2).

The fifithsource of information would be provided by a semi-annual Project Disbursement and Financial Management ReportingSystem. This reporting system comprises semi-annual reports on: (i) sources of project funding; and (ii) applications of funding bycategory of expenditure and by project component. This information will provide twice a year the variance between the actual andbudgeted allocations and applications of project funding. This information would also ensure the accountability of Bank ftmds andthat project implementation is fulfilling the requirements associated with the disbursement process. During negotiations, GOI agreedto explore the possibility of adapting the software of the existing DPEP PMIS and EMIS to prepare the above-mentioned semi-annualreports to be provided to IDA every six months through the Joint Supervision Missions (JSMs).

A sixth-source of information would be the annual supervision reports of the DPEP Bureau and the DPEP JSMs carried out twice ayear by specialist staff appointed by GOI and program donors, including IDA. In addition, the DPEP Bureau and DPEP Projectstates, including Bihar, will conduct an annual implementation review workshop where states would report on their projectimplementation progress and share experiences in the implementation of one program element selected in consultation with theprogram donors. During negotiations, GOI and GOB confirmed the agreement reached during the appraisal mission to: (i) includeDPEP III in the JSM scheme put in place for DPEP I and II; (ii) ensure for the period from February 1, 1998 to November 30, 2000,visits by two 2-member teams, which shall include one IDA and one UNICEF representative, to visit Bihar during each JSM; and (iii)propose, prior to November 30, 2000, a plan, satisfactory to the Association, for supervision missions to DPEP III after such date.

Finally, the seventh source of information would be provided by two in-depth reviews of the project to be conducted by GOI andGOB. During negotiations, GOI and GOB provided assurances that they will: (a) carry out, with IDA and other external fmanciersincluding UNICEF, a joint in-depth review of the project on two occasions by December 31, 1999 and December 31, 2001, whichwill include: (i) a status report, in both reviews, of the positioning of teachers in project districts based on Bihar's norms; and (ii) a

Project Appraisal Document Page 6Country: India Project Ttle: DPEP III

status report, in the latter review, of the proposed strategies to sustain the capacities and services developed under the project, and themodalities and framework of cooperation between the Borrower's Integrated Child Development and ECEs under the project (paras.20, 21 and 24(b) and Annex 2); and (b) duly take into account the comments offered by IDA during each joint review in the course offurther implementation of the project (para. 24(c)).

Accounting. financial reporting and auditing arrangements: The project expenditures incurred by the BSPP would be subject to thenormal GOI and GOB accounting and auditing procedures, with the added requirement that the BSPP would establish and maintain aseparate account and accounting system to record all project transactions and appropriate support documnentation for the transactions.The project account and the BSPP shall be audited annually, in accordance with its Memoranda of Association and appropriateauditing principles conducted by independent auditors acceptable to IDA. GOI agreed to ascertain that the audit of the BSPP includesa separate opinion on SOEs satisfactory to IDA. The BSPP would make appropriate arrangements satisfactory to IDA for auditing theutilization of funds provided by the BSPP to other institutions, including the SOEs of those other institutions. In addition, the BSPPaccounts will be audited by the Accountant General of Bihar. Documentation supporting SOEs would be maintained at least one yearafter the completion of the audit for the fiscal year in which the last withdrawal was made.

The central account and the Special Account would be subject to normal GOI accounting and auditing procedures through theComptroller and the Auditor General of India and his appointees, which is considered satisfactory to IDA. The audit of the SpecialAccount will be in accordance with IDA guidelines. The Special Account would show all withdrawal requests disbursed, amountsadvanced and reimbursed by IDA, and balance at the end of each accounting period. The consolidated audit reports would besubmitted to IDA not later than six months after the end of each fmancial year. Audits will cover all project expenditures until suchtime as the Credit has been closed. The accounting procedures set for the Uttar Pradesh Basic Education Project (UPBEP), DPEP Iand II, similar to the ones described above for DPEP III, have proven to be satisfactory to IDA. Consolidated audit reports for thesethree ongoing Credits have been provided to IDA in a timely fashion.

Block 2: Project Rationale5. CAS objective(s) supported by the project:The project is consistent with the updated version of the Country Assistance Strategy (CAS) Paper discussed by the Board onSeptember 5, 1996. The basic thrust and priorities of the 1995 CAS (discussed by the Board on June 20, 1995) are reconfirmed in theupdated CAS. Within the broad objective of promoting economic reform and speeding up economic growth, alleviating poverty iscentral to IDA's CAS. Human resources development is a key element of this overall strategy, with education playing a central role.Low educational enrollments, high dropout rates, and unacceptably low levels of educational achievement are major constraints tosocial and economic improvements for the poor and socially disadvantaged groups. Hence, IDA's strategy for education, supportedthrough Economic and Sector Work and substantial IDA lending, is to focus medium-term assistance for education exclusively onprimary education given its underdeveloped status in India, its high returns, and its importance to alleviating poverty. Within thisstrategy, targeting IDA's social assistance to Bihar assumes paramount importance as it is one of the poorest states in India. It has thelowest real per capita NDP of all states (1991 data), the second to lowest annualized per capita real NDP growth rate in the 1961-91period, holds almost 14 percent of the total Indian population living in poverty and 20 percent of India's out-of-school children, andrequires about 170,000 new teachers and 170,000 new classrooms to address the state's primary school issues.

6. Main sector issues and Government strategy:The key sector issues in Bihar are: (i) extreme social stratification resulting in severe disadvantage in primary school access andlearning for girls, SC and ST students and working children; (ii) widespread poverty; (iii) public sector institutions in need ofstrengthening; (iv) a system of public education that manages to retain and teach effectively, at most, 35 percent of first gradersthrough to grade 5; and (iv) public fnances that need to be improved.

GOI has expressed its interest in assisting GOB to tackle its enormous educational challenges through the umbrella of the DistrictPrimary Education Program (DPEP). DPEP is a national program supported by a multi-donor financed operation that responds to theRevised National Policy on Education and its accompanying National Program of Action, approved by the GOI and the states in 1992to improve the quality of primary education and to reduce disparities in enrollment, dropout rates, and learning achievement by genderand among socially disadvantaged groups. DPEP is currently being implemented in about 122 educationally disadvantaged districts ofthirteen states (Andhra Pradesh, Assam, Gujarat, Haryana, Himachal Pradesh, Karnataka, Kerala, Madhya Pradesh, Maharashtra,Orissa, Tamil Nadu, Uttar Pradesh and West Bengal), affecting around 30 million children enrolled in 180,000 pritnary schools with600,000 teachers. IDA's DPEP fnancial assistance presently amounts to about US$850 million in three Credits. In addition, theEuropean Commission is contributing with a grant of ECU 150 million (about US$200 million) for DPEP I in Madhya Pradesh, theGovernment of the Netherlands is contributing with a grant of US$25.8 million for DPEP II in Gujarat, and the United Kingdom's

Project Appraisal Document Page 7Country: India Project Title: DPEP III

Department for International Development (DFID), formerly the Overseas Development Administration (ODA), is contributing with agrant of US$100 million for DPEP II in Andhra Pradesh and West Bengal. UNICEF has confirned a grant contribution of US$10million for DPEP III in Bihar.

7. Sector issues to be addressed by the project and strategic choices:Given that 6 million children aged 6-10 are out of the primary school system in Bihar, that two out of three primary school studentsentering first grade will not complete the 5-year primary cycle, and that learing achievement of those completing the primary schoolis dismally low, the following three issues are to be addressed in this state: (i) low enrollment, especially among girls, SC and STchildren, working children, children with mild-to-moderate learning disabilities and other children who have limited access toeducational opportunities; (ii) high dropout and repetition rates, resulting in high cost per graduate and low learning achievement; and(iii) weak education management structures and institutions at the state, district, sub-district and school levels, resulting in sub-optimalutilization of available resources. The project addresses these issues as follows:(i) Increasing enrollment, especially among socially disadvantaged groups by: constructing new classrooms and schools and repairingor rehabilitating existing classrooms; sanctioning new teaching posts and appointing teachers; developing and implementing targetedinterventions designed from the results of the district-based social assessment studies; supporting the design and trialing of alternativeschooling modalities including multi-grade centers, non-formal schools, ashram schools, escort teacher services and peripateticteachers; mobilizing school and community organizations and carrying out awareness campaigns in support of education; andestablishing a VEC for each school in the project districts.(ii) Reducing high dropout and repetition rates and improving low learning achievement by: selectively establishing new andstrengthening existing ECEs; supporting interventions for women's education and empowerment programs; installing toilets and waterfacilities in the primary schools; establishing and operating BRCs and CRCs; providing continuous in-service teacher training;developing and supplying improved textbooks and supplementary instructional materials; providing grants to schools, communityorganizations and individual teachers for the purchase of educational supplies and other quality inputs; and carrying out periodiclearning assessments of primary level students.(iii) Improving weak education management structures and institutions at the state, district, sub-district and school levels by: buildingand strengthening SLO and DLOs to review and supervise the implementation of state and district investment plans and annual workplans and budgets designed to enhance access to and improve the quality and efficiency of primary education; establishing andstrengthening state and district resource institutions, such as the SCERT, the SIEMAT, the BSTPC and the DIETs (sanctioned by GOI)or equivalent institutions in all project districts, and resource groups at the state and district levels, to provide technical support inproject implementation; strengthening the state and district capacity for carrying out monitoring, research and evaluation activities;establishing a facility to support innovative approaches to improve primary education; and developing training modules for micro-planning, VEC training and training of master trainers

8. Project alternatives considered and reasons for rejection.During project preparation GOI, GOB, and IDA discussed different project features, including the following:(a) Project implementation by the State Secretariat of Education was rejected, given the poor performance of the Government of Biharwith other IBRD- and IDA-financed projects. Instead, the DPEP implementation scheme, through the existing BSPP, would beadopted.(b) Designing and operating the project separately from the BEP in seven educational districts of Bihar was rejected in order to fullytap into the accumulated positive experience. Instead, the project has been prepared and would be operated in a context where BEPactivities will be merged into DPEP III in the current seven and ten newly added educational districts (totaling 17 educational districtsequivalent to 27 revenue districts as listed in Annex 2).(c) Implementing the project in the total number of educationally disadvantaged districts in Bihar (55 revenue districts) was ruled outgiven the financial and operational implications in a state context of public institutions in need of strengthening and with high publicfiscal deficits. On the other hand, implementing the project only in the seven BEP districts was also ruled out given the need to takethis project to scale to positively enhance primary education in the state. Instead, an agreement was reached with GOI and GOB toimplement the project in 17 educationally disadvantaged districts (Annex 2).(d) Implementing the civil works component of the project through the Bihar Zilla Parishad Engineering Divisions, which havediscouraging implementation records, was opposed. Instead, the following approach to delivering educational infrastructure wasrecommended: (i) use of cost-effective construction materials and techniques; (ii) employment of consultant architects to assure cost-effective and appropriate designs and to promote quality control in physical works; (iii) BSPP employment of its own cadre of engineers,on contract, in every district to supervise and monitor all works; (iv) supply of water and sanitation facilities in all schools; (v) awarenessand training programs for all stakeholders in use and maintenance of sanitation facilities; and (vi) promotion of community participation inthe initial building of the school and continuous maintenance of the education infrastructure.These alternatives were further analyzed, discussed and confirmed by GOI and GOB during the appraisal mission of July 1997.

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9. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned).

Sector Issue Latest Form 590 Ratings(a) The primary education issues mentioned in paras. 7(i) to (iii) above are being addressed in 13 (Bank-financed projects only)Indian states by the following Bank- and non-Bank- financed sector investments:

Ongoing Bank-financed related projects I?_ 1QUttar Pradesh Basic Education Project (Cr. 2509-lN) S HSDPEP I (Cr. 2661-IN) S SDPEP II cofinanced by the Govermment of the Netherlands (Cr. 2661-IN) S S

Ongoing ojects being fmanced by other development agencies:DPEP in Madhya Pradesh financed by the European CommissionAndhra Pradesh and West Bengal Education Projects fnanced by DFIDBihar Education Project financed by GOI, GOB and UNICEFRajasthan Lok Jumbish Project fnanced by GOI, the Governemnt of Rajasthan and the SwedishInternational Development Agency (SIDA)Women empowerment projects, addressed by the Mahila Samakhya (MS) Program and financedby the Govermnent of the Netherlands

. ...................... w....................................................................................................................................................................................................................................10. Lessons learned and reflected in the project design: The project design has incorporated lessons learned from the followingsources: (i) current IDA-financed education sector portfolio in India (UPBEP, DPEP I and II); (ii) other donor-financed educationprojects in India; and (iii) international experience. Primary school enrollnents in the UPBEP districts have increased 30 percent inlower primary (42 percent for girls) and about 40 percent in upper primary since 1993 (the starting implementation year of the project)against 22.6 percent in non-UPBEP districts in lower primary. In the case of Haryana (a DPEP I state), prinary school enrollment inDPEP districts has increased 10.8 percent for girls and 26.2 percent for SC children since 1995 (the starting year of the project).Preliminary fmdings of the second round of assessment studies in 12 districts of Uttar Pradesh carried out at the end of 1995 indicateimprovements in language (word knowledge and reading comprehension) as well as in mathematics (see deatils in Annex 2A of thePAD of the Second Uttar Pradesh Basic Education Project). In addition, the DPEP Bureau has commissioned the second round oflearning achievement studies of the DPEP I states as part of the mid-term review of October 1997. The results of these studies will bemade available to IDA by the end of CY98 through the JSM. To capture changes in retention it is necessary to get at least three yearsdata. The EMIS has been operational only since the 1995-96 school year, therefore it will be possible to calculate retention data inDPEP districts once the 1997-98 data is compiled in 1998. The results of these fmdings will be made available to IDA by the end ofCY98 through the JSM.

The most important qualitative lessons from ongoing education projects in India (BEP and the total literacy campaign in Bihar, theDFID-assisted project in Andhra Pradesh, and the Lok Jumbish project in Rajasthan), as well as recent international experience inprimary education include: (i) the importance of strengthening management structures and staffing skills, providing quality earlychildhood education, textbooks and learning materials and in-service teacher training; (ii) the relevance of providing such qualitylearning inputs in clusters of primary schools around resource centers; (iii) the value of enhanced community participation in theoperation of schools, monitoring of teacher and student attendance, and school construction and maintenance; (iv) the significance ofwomen's empowerment as a pivotal strategy to create favorable conditions for the enhancement of primary education; and (v) the needto plan and manage education in a decentralized manner involving state, district and sub-district stakeholders, especially to maintainthe quality of the services provided when the project goes to scale. In terms of the implementation of educational investments, theseexperiences have shown the importance of: (a) installing adequate management arrangements at the state and district levels in a timelyfashion; (b) ensuring stability of the core state and district management staff; (c) ensuring the timely provision of funds at theoperational level; (d) paying appropriate attention to logistics, procurement and the maintenance of school buildings; (e) using newconstruction initiatives comprising use of cost-effective construction materials and techniques, and employment of consultantarchitects and an SIS cadre to assure appropriate designs and to promote quality control during the construction process; and (f)making the qualitative aspects of the investments paramount.

11. Indications of borrower commitment and ownership: To tackle the enormous educational challenges faced by the GOI, aRevised National Policy on Education and an accompanying National Program of Action were approved by the GOI and the states in1992. The Policy gives priority to improving the quality of primary education and reducing disparities in enrollment, dropout rates,and learning achievement by gender and among social groups. Consistent with this Policy, the GOI, in close consultation with thestates, established the District Primary Education Program (DPEP) in 1993 as a centrally sponsored program of financial and technical

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assistance to the states and districts for primary education reform. Under the umbrella of the DPEP and related actions, GOI hasworked very closely with the thirteen DPEP Project States over the last four years in preparing and implementing over US$1.2 billionworth of educational investments in about 122 socially disadvantaged districts. There has been widespread participation of researchinstitutions, officials, communities and NGOs in the project design and implementation processes of these investments. According tothe latest IDA supervision reports, these investments are meeting their qualitative aims to a large extent and have been rated"satisfactory". In addition, GOI has expressed its commitment to increase education spending from the current 3.7 of GDP to 6percent by the end of the Ninth Plan (2002). Spending on higher education has been tightly curbed in recent years to less than 13percent of total public education expenditure in India: In spite of Bihar's consistent fiscal deficit, its record in paying its teachers andcontributing its share in the BEP is actually quite good. GOI and BEP's accumulated learnig experiences have been used to assistGOB prepare DPEP III.

12. Value added of Bank support: The Bank is one of the few donor agencies with the capability to provide the key technical adviceand financial support necessary to assist in the implementation of education programs on a large scale. IDA has been instrumental inmobilizing financial and technical support from other donors into the sector. IDA has also provided a lead role in designing andoperationalizing joint supervision mechanisms whereby a group of educational and management professionals nominated by thedonors supporting DPEP and GOI review implementation progress twice a year (in March and October). IDA provides educationspecialists and managers from participating DPEP States and GOI with a much appreciated exposure to the educational innovations ofother developing countries which are relevant to the Indian context. Finally, IDA plays a key role in providing continued technicaland financial support which are essential to ensure that the potential benefits of the past educational investments come to fruition.

Block 3: Summary Project Assessments (Detailed assessments are in the project file. See also Annex 4)13. Economic Assessment (see Annex 4): The social and economic impact of investment in primary schooling in India has beenextensively documented in departmental economic and sector work (ESW) recently published as Primary Education in India in theBank's Development in Practice Series. Recerit survey data on schooling and social outcomes such as fertility and health andnutritional status support two general conclusions: (i) the relationship between education attainment and social outcomes is very strong;and (ii) the impact on an individual's behavior is greater the more extensive the coverage of primary schooling across the population.The impact on economic outcomes is less well documented and relies much on data collected over a decade ago. However, rate ofreturn studies show relatively high returns to primary schooling (13-15 percent) and studies of farmer productivity in areas ofagricultural growth demonstrate much higher returns for the labor of primary school graduates than for the unschooled. There is alsoevidence of spillover effects from the schooled to the unschooled.

Only part of the social and economic outcomes of primary schooling accrue to the individual and his/her own family. If all of the costsof schooling were to be borne privately, the investment would be below that required to optimize the returns to society. This is onejustification for public expenditure on primary schooling. Children of poor families would not attend school at the same rate aschildren of richer families if all of the costs had to be borne by the household.

As in all states, the 1992/93 National Family Health Survey (NFHS) for Bihar documents the strong impact of primary schooling forgirls on social outcomes, such as actual and desired fertility, child health and nutritional status as follows: (a) the desired number ofchildren for illiterate women is 3.6 compared to 3.1 for women with primary schooling; (b) the infant and child mortality rates forchildren with illiterate mothers are 103 and 50 per thousand, respectively, while for children with primary schooled mothers they are 80and 29 per thousand; (c) the rate of complete vaccinations for children with illiterate mothers is 5 percent compared to 21 percent forchildren with primary schooled mothers; and (d) 34 percent of children with illiterate mothers are severely malnourished compared to26 percent of children with primary schooled mothers.

The second general conclusion of the NFHS also holds true for Bihar: while each successive level of schooling has a strong impact, thatimpact is less in states with low enrollment ratios than in states with a wider coverage of education. Overall, the social indicators forBihar describe a very disadvantaged population. Illiteracy and under-5 mortality rates in Bihar are the second highest across all stateswhile the rate of severe child malnourishment is highest and the proportion of vaccinated children is the lowest.

The poor social conditions in Bihar are accompanied by severe material poverty. The majority of the population is extremely poor,even by Indian standards. In 1993/94, 64 percent of households were below the poverty line compared to the national average of 36percent, translating to around 66 million people with access to less than Rs. 33 (US$1) a day. Each of Bihar's three agro-climaticregions is among the poorest six regions in the country. Among the major states, the growth rate of mean consumption and reductionin poverty between 1957/58 and 1990/91 was the lowest in Bihar. While the incidence of poverty has been reduced by one third acrossthe country (and by one half in Kerala), in Bihar there has been little decrease in four decades.

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Recent Bank research has investigated the causes of differences between levels and changes in living standards and poverty acrossIndian states. The differences in farm yields, inflation and development expenditures, initial conditions in both physical infrastructureand human resource development were found to have significant effects. Almost half of the differential in the decline in the povertygap between Bihar and Kerala over a 35-year period could be attributed to the difference in the initial level of human resourcedevelopment. Bihar currently has the seconi lowest literacy rate and the lowest primary enrollment rate. Unless steps are taken toexpand schooling, widespread poverty will remain and the gap between Bihar and the rest of the country will widen.

The low enrollment ratio in Bihar is accompanied by a high dropout rate of around 65 percent. This is inefficient The prevailingdropout and repetition rates result in resources for 8.1 years of schooling being required to produce one graduate of the primary five-year cycle. Sixty percent more resources are being used per graduate than would be necessary in a situation of no dropout or repetition.A principal objective of the project is to increase the quality of schooling and to induce a higher retention rate. Reducing dropout andrepetition rates by half could result in savings of US$40 million a year across the state or around US$20 million in the 17 projectdisticts.

Baseline studies of primary school achievement and its determinants have been carried out for Uttar Pradesh and DPEP states since1992. Among those factors positively influencing achievement are instructional time, student and teacher attendance, physicalfacilities, appropriate instructional materials for teachers and students, the hiring of better educated teachers and the school's academicclimate. The specific effective interventions in each of these areas differ between states and between districts. Similarly, the attemptedanalyses to identify the most cost-effective interventions again demonstrated local variations. Packages of interventions identifiedlocally to meet the needs of specific schools are more likely to be more cost effective than uniform packages. One of the strengths ofthe DPEP, and this project, is that the development of broad strategies is the responsibility of district level personnel while many of thespecific interventions and expenditures are decided by local communities, village education committees and headteachers.

14. Financial Assessment (see Annexes 4 and 5) NPV=US$199.7 millionThe total cost of the project is estimated at Rs. 8,213.3 million or US$199.7 million equivalent including taxes and duties estimated atUS$9 million equivalent (Table 3.1). The direct and indirect foreign exchange cost is estimated at US$7.9 million. In the investmentcost dimension, the project would fnance civil works, furniture, equipment, vehicles, books and libraries, teaching materials,consultant services, information campaigns, training, workshops and fellowships. In the recurrent cost dimension, the project wouldfinance salaries of additional staff, operational expenses, maintenance of vehicles and equipment purchased with project funds,honoraria to non-salaried workers involved primarily with non-formal educational programs, and salaries of incremnental staff, all on adeclining basis (80%, 80%, 55%, 55% and 35% respectively).

In all categories of costs, estimates are based largely on the actual experience for similar work now underway as a part of DPEP I andII. Estimated costs for civil works reflect current unit costs for construction at approximately US$135 per square meter, and costs forfurniture, equipment, vehicles, books and teaching materials are based on purchase prices in neighboring districts under the DPEP I andII programs. Estimated costs for the salaries of additional staff are based on the basic pay scales, including standard allowances forsocial and other benefits applicable in the state of Bihar.

All imported goods are subject to customs duties and taxes. The estimated cost of the project includes import duties and taxes valued atabout US$9 million equivalent. The estimated foreign exchange component of US$7.9 million is calculated on the basis of estimatedforeign exchange proportions as follows: (a) civil works, 9%; (b) equipment, 25%; (c) books and library materials, 5%; (d) locallymanufactured vehicles, 25%; (e) incremental operating costs, 5%; and (f) equipment maintenance, 5%.

Estimated project costs include physical contingencies (US$14.5 million) estimated at 10% for civil works and all physicalcomponents, and 5% for all salaries, technical assistance, training and maintenance items. The estimated costs of the project alsoinclude price contingencies (US$4.3 million) to account for expected price escalation at the following rates: (i) for foreign costs 2.2%in CY98, 2.6% in CY99, 2.8% in CYOO, 2.6% in CY01, 2.5% in CY02 and 2.3% in CY03; and (ii) for local costs 6.7% in CY98, 6.5%in CY99, 6.0% in CYOO, 6.0% in CYO 1, 6.0% in CY02 and 6.0% in CY03.

The project would be financed by an IDA Credit of US$152.0 million. It is also anticipated that UNICEF would provide DPEP III witha grant of US$10.0 million. The IDA portion of the financing arrangements amounts to about 80 percent of the total project costs netof taxes. The combined contributions of IDA and UNICEF would amount to 85 percent of the total project costs net of taxes. GOBwould contribute 15 percent of total project cost (US$28.7 million). GOI/GOB would also contribute all duties and taxes (US$9million). The yearly breakdown of the total project cost by investment and recurrent expenditures, as well as the yearly fmancingsources as a percentage of total project costs are shown in Table 5.1 in Annex 5. The Credit would be made available to GOI on

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standard terms and conditions and made available to the GOB as a grant.

15. Technical Assessment: DPEP III has been conceived and prepared based on the UPBEP, DPEP I and II projects. In all theseongoing Credits, the following two technical objectives are worth highlighting: (i) the sustained progress towards the implementationon a large scale of project-financed activities for improved pedagogy and enhanced learning achievement (such as child-centeredteaching and activity-based learning); and (ii) the introduction of specific interventions to reach girls, working children, students withmild-to- moderate disabilities, ST and SC students and other children who have limited access to educational opportunities, especiallythose living in remote rural habitations, to increase their regular attendance to school and thus their school retention. These twoobjectives are in effect not notably different in Bihar than in any of the other 13 DPEP Project States.

Changes in classroom practices and student-teacher transaction are slow to become observable. While the thrust of the DPEP-basedpedagogical renewal is well focused, it needs to be deepened if it is to result in lasting change. In addition, teachers ought to beprovided with practical diagnostic instruments to enable periodic student progress assessment in the classroom during the school year.

Specific interventions to reach the socially disadvantaged groups will emerge from the social assessment studies that each DPEP IIIdistrict carried out during project preparation under TORs agreed with IDA. These studies, completed at the pre-appraisal stage,include relevant information for designing specific activities, some similar in nature to those already proven effective under DPEP andBEP. The challenge is to take such strategies to scale and make them work in the very difficult context of Bihar.

16. Institutional Assessment: Two issues are of particular concern: one pertaining to the project's management; the other involvingthe project's pedagogical renewal dimension. Previous sector investments in India have required a considerable start-up time to buildeffective state, district, sub-district and school managerial and professional capacity for sustainable primary education development.Measures to ensure timely project implementation launch and to accelerate building managerial and professional capacity in DPEP IIIdistricts were reviewed by the IDA appraisal mission and are described in para. 4 and Annex 2. Concerning pedagogical renewal,SCERT and DIETs in participating districts have proven to be institutions in need of strengthening, often understaffed and/or staffedwith faculty with little experience in primary education. The effort to build capacity of these institutions was discussed at appraisal.During negotiations, GOB provided assurances that it will: (a) maintain the SCERT and SIEMAT with responsibilities to coordinateproject implementation with adequate staff, resources and facilities by the end of June 1998, and establish a program of staff trainingsatisfactory to IDA (paras. 4 and 24(e) and Annex 2); and (b) establish and maintain DIETs (sanctioned by GOI) or equivalentinstitutions in project districts and appoint key staff at such DIETs in accordance with a schedule satisfactory to IDA by December 31,1998 (para. 24(f) and Annex 2). In order not to delay the in-service teacher training activities, state and district resource groups (SRGand DRGs) are being established in the SLO and each DLO to carry out these activities, gradually integrating them with the SCERTand DIETs. During negotiations, GOB provided assurances that by December 31, 1998, it will cause the BSPP to establish technicalresource groups at the state level and project district levels to assist in the development and implementation of the project (para. 24(i)and Annex 2).

17. Social Assessment: The National Education Policy and the DPEP implementation program have as priority objectives to reducedisparities in access, completion and learning achievement in primary school among girls, SC and ST students and other children whohave limited access to educational opportunities. In addition, DPEP III will address the issue of working children. Several projectdistricts have high concentrations of SC population requiring tailored-made strategies. The districts have prepared draft AWPBs inaccordance with information gathered in the social assessment studies (SAS) required as part of project preparation. The state and fivedistrict AWPBs.were appraised by the IDA mission. Each DPEP III district carried out SASs in 18 villages selected on the basis of theirsize and composition of population. The study conducted in each village adopted the Participatory Rural Appraisal Technique to collectprimary data. A total of about 1,800 meetings were held in 306 villages involving about 300,000 village participants (between 100 to 200people per village per meeting). Household heads, women, teachers, and village authorities participated in the focus group meetingsrequired in carrying out the SASs which were completed by pre-appraisal. The SAS results have served the dual purpose of: (i)highlighting the general and specific issues affecting the education of the socially disadvantaged groups of children; and (ii) orienting thecommunity in the basic requirements of planning for the educational development of the village. These results will be the basis fordesigning and piloting, during the first two years of project implementation, district-tailored strategies to address these issues. In addition,the high female illiteracy rate prevailing in Bihar has slowed down the school enrollment of girls, the reduction of fertility and infantand child mortality rates and delayed an increase in nutritional status, infant vaccinations and use of modern contraceptive methods. Toaddress the high female illiteracy level in Bihar, the project will support convergence and expansion of the MS (women empowerment)program, currently operating in 26 blocks of the seven BEP districts.

18. Environmental Assessment: Environmental [X] CCategory

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The project would not raise any environmental concerns. GOB has furnished to IDA an official document dated June 10, 1997 (in theProject's File) confirming that no involuntary resettlement issues will arise from implementing the civil works component of the Creditin the DPEP III districts and explaining how the districts will secure this land. During negotiations, GOB provided assurances that noinvoluntary resettlements will arise from any use of land, or change of land use for the Project, except to the extent that IDA agrees inwriting prior to such resettlement that the arrangements for such involuntary resettlement are satisfactory to IDA (para. 24(i)). Inaddition, the Bihar laws provide for the maintenance of transfer deeds documents at the District offices.

........... ...................................................................................................................................................................................................................19. Participatory Approach: Identification/Preparation Inplementation Operation

Beneficiaries/community groups IS/CON IS/CON/COL IS/CON/COLIntermediary NGOs IS/CON/COL IS/CON/COL IS/CON/COL

Academic institutions IS/CON IS/CON/COL IS/CON/COLLocal government IS/CON/COL IS/CON/COL IS/CON/COL

Other donors IS/CON/COL IS/CON/COL IS/CON/COL[Information sharing (IS); consultation (CON); and collaboration (COL)]

Popular participation is a cornerstone of DPEP. Like DPEP I and II, SASs under terms of reference satisfactory to IDA were required aspart of project preparation in each DPEP In district. In addition, documented participatory meetings involving women, SC and ST parents,teachers, NGOs and local officials were held during the preparation of DPEP Im at the district, block and community levels forconsultations on problems facing primary education and likely solutions in Bihar. To carry out the district-based baseline assessmentstudies (BAS), about 5,600 students of class I, 3,200 of class IV, 800 dropouts and 1,150 primary education teachers were selected bysimple random sampling in 45 schools per district. The schools were selected on the basis of "multipharic" sample design. Paragraph 17above descnbes the participatory scheme for carrying out the district-based SASs. Focus group discussions comprising 100- 200 peopleper village were held as part of the gender and tribal studies. Strengthened community/school organizations in all states and districtsthrough the VECs are already providing a mechanism for continuing beneficiary participation in program implementation. One example ofsuch participation is the involvement of communities in the formulation of AWPBs. Another example would be the establishment, throughthe VECs, of a reliable data base of teacher and student attendance at schooL During negotiations, GOB provided assurances that byDecember 31, 1998, it will establish for all schools in each project district VECs with responsibility for assisting with projectimplementation (para. 24(h)).

20. Sustainability: Public finances in Bihar need to become more efficient (Annex 4). In the immediate future, high interest paymentobligations and constraints on further borrowing are likely to result in a continuation of recent trends which have led to low and fallinglevels of capital expenditures, a falling share of development expenditures in total expenditures and overall increases in developmentexpenditures at a rate below population growth. The Reserve Bank of India (RBI) data show a small decline in education expendituresat constant prices between 1990/91 and 1995/96, while GOB data suggests an increase of around one percent a year. Overall,education expenditures are 23 percent of total revenue expenditures. Expenditure on elementary education has increased at a slightlyhigher rate (around 2.5 percent a year) than for education as a whole taking 69 percent of the total in 1995/96 compared to 66 percentin 1990/91. In 1995/96, about 99 percent of the combined plan and non-plan expenditure on elementary education was for pay andallowances. Total expenditure on primary schooling (grades I-V) is roughly 60 percent of all elementary education expenditures andequal to Rs. 785 crores in 1995/96 (Annex 4). Plan expenditures on elementary education over the past six years have averaged Rs. 30crores a year.

The annual state project contribution would average about US$7.6 million (Rs. 26 crores), representing a 3.4 percent increase over the1995/96 level of total primary education expenditure (2 percent of total elementary education expenditure). Maintenance of pasttrends in education expenditure should be just sufficient to ensure that counterpart funding would be manageable. Further, ithas been argued that the tied allocations to backward states for the GOI's Common Minimnum Program (amounting to Rs. 227 croresfor Bihar in 1997/98) could be used. However, counterpart funding will not be the only incremental financial obligation for the GOB.In the project districts there are 10,290 teacher vacancies which are required to be filled as a condition of the project. This will addaround Rs. 50 crores a year to the budget. Filling these vacancies and providing the counterpart funding will require the equivalent ofa trebling of plan expenditures. Further, the GOB plans to fill an additional 22,000 teacher vacancies in non-project districts with anestimated annual cost of Rs. 110 crores. In all, GOB will need to allocate an extra Rs. 186 crores a year during project implementation(Rs. 26 crores as counterpart funding, Rs. 50 crores for filling vacancies in project districts and Rs. 110 crores in non-project districts),equivalent to around 14 percent of current expenditure on elementary education. In spite of the state's fiscal position, the Ministry ofFinance of GOB has authorized the Bihar Public Service Commission to advertise and fill all the vacant posts. GOB has assured IDAthat this teacher posting process will be completed by January 1, 1999. During negotiations, GOB provided assurances that it will takeall necessary measures to ensure that at least 95 percent of the teacher's posts in the project districts, starting the third year of theproject, will remain filled throughout the project implementation period (paras. 21 and 24(g) and Annexes 2 and 4);

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Sustaining project activities following project completion in March 2003 will require incremental expenditures estimated at Rs 49.6crores (UJS$14.2 million equivalent). This is equal to 6.4 percent of the 1995/96 expenditure on primary education and should notalone be problematic. More of an issue is the ability of GOB to sustain the overall system with only a minimal level of teachervacancies without which the long-run benefits of the project would not accrue. The overall trends in public finances in Bihar aredisturbing. Both revenue receipts and expenditures have been falling as a share of state domestic product, and developmentexpenditures per capita have also been declining, though more in economic services than in social services. Interest payments are equalto 27 percent of all tax revenues and state non-tax revenues. The ability of GOB to sustain both the existing educational base andproject activities will depend on future developments in its overall public finances, including center-state resource transfers. Thecommitments given by GOB during project preparation, the intention of GOI to ensure that total education expenditures increase from3.7 to 6 percent of GDP by the end of the Ninth Plan, and the recent directive of the Supreme Court to government to implementuniversal elementary education, suggest that the financial risk of the project is worth taking in the context of a state which has thehighest incidence of poverty, severe child malnutrition, and the second highest level of illiteracy and under five year-old childrenmortality across all states. The agreement by GOB to prepare modalities for ensuring the post-project sustainability of each componentand to discuss these with IDA during the second in-depth review in December 2001 (see paras. 4, 21 and 24(b) and Annex 2) shouldalso increase the likelihood of project and system sustainability.

21. Critical Risks (see fourth column of Annex 1):Project outputs to development objectives

Aisk Risk Rating Risk Minimization MeasureThe status of public finances and competing H The use of the BSPP for flow of funds.demands for state resources may affect the The strong role played by the DPEP Bureau in ensuring stateavailability of state funds for education governments' annual contributions of 15% of total project cost.during project implementation and following During negotiations, GOI and GOB provided assurances that the secondits completion. in-depth review to be carried out by 12/31/01 with IDA and other

external financiers of DPEP, including UNICEF, will comprise a statusreport of the proposed strategies to sustain the capacities and servicesdeveloped under the project (paras. 4, 20 and 24(b) and Annex 2).During negotiations, GOB provided assurances that it will take allnecessary measures to ensure that at least 95 percent of teachers' posts inthe project districts, starting the third year of the project, remain filledthroughout the project implementation period (paras. 4, 20 and 24(g) andAnnexes 2 and 4).

Project components to outputsik Risk Rating Risk Miuimization Measure

There are increasing difficulties in efficiently L to M Intensive training would be provided to VECs.managing a large-scale construction program.There may be state opposition to bring the L to M Using student attendance data, specific agreements are proposed for: (i)student/teacher ratio in line with the state filling all teacher vacancies in project districts; (ii) sanctioning additionalnorm of 50:1, and allow for a more rational teacher posts in project district to lower the student teacher ratio to theteacher deployment policy. state-norm of 50: 1; and (iii) rationalizing teacher deployment.On the basis of current data, community- L Incorporation of health-related matters in the renewed pedagogy.specific cultural patterns in some villages Convergence with other health-related programs in the community.may forestall students' use of toilet facilitiesfinanced by the project.Weaknesses in state and district professional M State and district technical resource groups, including skilled personnelresource institutions (SCERT, DIETs) may from SCERT and DIETs, will initiate quality improvement activities atslow down the quality improvement efforts. the same time that resource institutions are being strengthened.Irregular teacher attendance may jeopardize VECs will monitor teacher attendance to school.quality improvement efforts.

Overall project risk rating M

22. Possible Controversial Aspects: None. So far, no opposition to the project has been identified. The participatory nature ofproject preparation will allow such issues to be identified and appropriately addressed, if they ever arise.

Project Appraisal Document Page 14Country: India Project Tls: DPEP lil

Block 4: Main Credit Conditions23. Effectiveness Conditions: None

24. Other Conditions: At negotiations. GOT and GOB provided assurances that they shall:(a) maintain policies and procedures adequate to enable them to monitor and evaluate on an ongoing basis, in accordance withindicators satisfactory to IDA, the carrying out of the project and achievement of the objectives thereof (para. 4);(b) carry out with IDA and other extemal financiers of DPEP, including UNICEF, a joint in-depth review of the project on twooccasions by December 31, 1999 and December 31, 2001, which will include: (i) a status report, in both reviews, of the positioning ofteachers in project districts based on Bihar's norms; and (ii) a status report, in the latter review, of the proposed strategies to sustain thecapacities and services developed under the project, and the modalities and framework of cooperation between the Borrower'sIntegrated Child Development and ECEs under the project (paras. 4, 20 and 21 and Annex 2); and(c) duly take into account the comments offered by IDA during each joint review in the course of further implementation of theproject.

At negotiations. GOB provided assurances that it shall:(d) carry out, and cause the BSPP to carry out, the Project in accordance with the DPEP Guidelines and the PIP agreed with IDA (para.4 and Annex 2);(e) (i) maintain the SLO, DLOs, SCERT and SIEMAT with responsibilities to coordinate project implementation with adequate staff,resources and facilities by the end of June 1998; and (ii) establish a program of staff training satisfactory to IDA (paras. 4 and 16 andAnnex 2);(f) establish and maintain DIETs (sanctioned by GOI) or equivalent institutions in project districts and appoint key staff at such DIETsin accordance with a schedule satisfactory to IDA by December 31, 1998 (para. 16 and Annex 2);(g) take all necessary measures to ensure that at least 95 percent of the teachers' posts in the project districts, starting the third year ofthe project, remain filled throughout the project implementation period (paras. 4, 20 and 21 and Annex 2);(h) by December 31, 1998, establish for all schools in each project district, VECs with responsibility for assisting with projectimplementation (para. 19 and Annex 2);(i) by December 31, 1998, cause the BSPP to establish technical resource groups at the state level and project district levels, to assist inthe development and implementation of the project (para. 16 and Annex 2);(j) cause the BSPP to establish by December 31, 1999, in an appropriate number of sample of villages in each project district, a reliableeducation database of: (i) the number of public, private recognized and non-recognized schools through microplanning exercises to beconducted by the VECs; and (ii) the best estimates of teacher and student attendance in such schools through the establishment ofattendance reporting mechanisms by the VECs and the EMIS (para. 4 and Annex 2);(k) carry out assessment studies on student learning achievement in all the project districts, with scope and content satisfactory to IDA,in calendar years 2000 and 2002 (para. 4 and Annex 2);(1) ensure that no involuntary resettlements arise from any use of land or change of land use for the Project, except to the extent thatIDA agrees in writing prior to such resettlement that the anrangements for such involuntary resettlement are satisfactory to IDA (para.18);.(m) (i) implement the project in accordance with strategies acceptable to IDA for improving primary education of female students; (ii)implement the project in any tribal area (as designated by GOB in accordance with applicable state laws) in accordance withprocedures and delivery strategies satisfactory to IDA; and (iii) ensure that all investments in project districts which are classified bythe Borrower as tribal districts, or which include blocks classified by the Borrower as tribal blocks, are appraised and implemented inaccordance with a plan satisfactory to IDA for the delivery of project benefits to tribal people (Annex 2); and(n) select non-governmental and community organizations participating in the project in accordance with criteria and proceduressatisfactory to IDA (Annex 2).

Disbursement Condition: (o) During negotiations, GOT agreed that no withdrawals of the Credit proceeds will be made in respect ofpayments in or with respect to GOB until BSPP has entered into a MOU with GOI satisfactory to IDA (para. 4 and Annex 2).

Block 5: Compliance with Bank Policies[x] This project complie ith all applicable Bank policies.

Te r: Juan Prawda Cou"DirectorEdwinR

Annex 1Page 1 of 4

Annex 1Project Design Summary

Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions (CA)and Risks (R)

CAS Objective: Improve the Literacy rates, especially of Census data. (R) There is considerablequality, effectiveness and women. uncertainty regarding theservice delivery of India's Household survey data. stability of the UF governmentsocial and anti-poverty Years of education completed and its ability to followprograms, particularly at the by the population of 15 years Economic and Sector Work. through a credible program ofstate-level, where primary and over, disaggregated by fiscal adjustment and reform.responsibility resides. gender.

(CA) Expected economic andsocial benefits might notmaterialize because of lowquality of schooling.

Project Development Increase in the percent of National Educational (R) Lower than anticipatedObjectives: Assist the GOB people in the 11-15 and 16-20 Statistics. state growth rate may affectto build and strengthen state, age groups by the the financial sustainability ofdistrict and sub-district disadvantaged groups (female, Census Data. the long-term implementationinstitutional capacity to ensure SC, ST, working children, of the project, thus preventingthat more children, especially children with learning Household Surveys. poor people from putting theirfrom socially disadvantaged disabilities and other children enhanced literacy skills togroups, complete primary who have limited access to Educational Management productive use.education of appropriate educational opportunities) Information System (EMIS).quality in low literacy with completed primarydistricts. education.

Project Outputs:1. Expanded access to 1. About 400,000 additional 1. EMIS; and VECs (CA) More accessibleprimary education, children in the age group 6-10 attendance reporting education facilities, increasedparticularly for disadvantaged years, especially from the mechanism. retention, improved quality ofgroups. disadvantaged groups, will be instruction and community

enrolled from 2000 onwards. mobilization result inincreased demand for

2. Increased retention and 2.1 Compared to 1998 data, 2.1 Same as 1 above, education amongimproved leaming and from 2001 onwards: (i) impoverished groups.achievement in primary the attendance rate willschools. improve by 50 percent; (ii) (R) Competing demands on

about 660,000 more children state resources may affectper year would attend school availability of funds foron a regular basis during the education, further hamperingentire school year; (iii) the meeting increased demandretention rate will improve by generated by project15 percent; and (iv) about interventions.330,000 additional childrenwill graduate from the five-year primary cycle.

2.2 Compared with the 1997 2.2 Baseline and periodicbaseline assessments, the leaming achievement surveysachievement scores with in the third and fifth year ofrespect to language and math project implementation. Twoby type of disadvantaged in-depth review studies bygroup (to be measured in 2000 12/31/99 and 12/31/01.and 2002) will improve.

Annex 1Page 2 of 4

3. Improved state and district 3. By June 30, 1998, the SLO 3. Quality of annual state andcapacity to manage primary and 17 DLOs would be fully district AWPBs.education. functional. Every year from

1998 to 2003, the SLO and allDLOs will prepare sound andimplementable annual stateand district-based AWPBs.

Project Components:1.1 Constructing new 1. I By the end of 2000, 2,350 1.1 Annual Project 1.1 (R) Difficulties inclassrooms and schools, and new schools and 4,400 new Management Information efficiently managing a large-repairing or rehabilitating classrooms would have been System (PMIS) reports. scale construction program.existing classrooms. constructed and about 300

classrooms would have beenrepaired and/or rehabilitated.

1.2 Sanctioning new teaching 1.2 By the end of 2000, about 1.2 Annual EMIS and PMIS 1.2 (CA) Brings the studentposts and appointing teachers. 5,700 new teachers would reports; regular attendance /teacher ratio in line with the

have been appointed. reporting mechanisms through state norm of 50:1; and allowsthe VECs; and sample surveys. for a more rational teacher

deployment policy.(R) There may be stateopposition to this measure.

1.3 Developing and 1.3 Number of targeted 1.3 Annual EMIS and PMIS 1.3 (CA) Targetedimplementing interventions interventions designed and reports. interventions address thefor socially disadvantaged trialed. By the end of 2002, social patterns of access andgroups. about 8,000 alternative schools exclusion to schooling of the

would have been opened. disadvantaged groupsidentified in the district-basedsocial assessment studies; andalternative schooling result inlevels of learning equivalent tothose in the formal system.

1.4 Mobilizing school and 1.4 Number of awareness 1.4 Annual EMIS and PMIS 1.4 and 1.5 (CA) Communitiescommunity organizations and campaigns carried out. reports; progress reports; and are best fit to effectivelycarrying out awareness field visits by joint supervision address locally specific issuescampaigns in support of missions (iSMs). of school access and retention.education. Community support can be

sustained for several years.1.5 Establishing a VEC for 1.5 By 12/31/98, about 32,000 1.5 Annual EMIS and PMISeach school in the project VECs would have been reports; progress reports; anddistricts. established. By the end of field visits by the JSMs.

2002, about 10,000 five-daytraining events for VECsmembers would have beenprovided.

2.1 Selectively establishing 2.1 By the end of 2002, about 2.1 Annual EMIS and PMIS 2.1 (CA) Early childhoodnew, and strengthening 700 ECEs would have been reports. stimulation raises the readinessexisting, ECEs. opened. levels required to perform

adequately in the first gradesof primary education andreduces harmful effects of lateentry.

Annex 1Page 3 of 4

2.2 Supporting interventions 2.2 Number of women's 2.2 Annual PMIS reports; 2.2 (CA) Empowered mothersfor women's education and groups that have created an progress reports; field visits by from the poorest segments ofempowerment programs. enabling self-reliance the JSMs. society will increase accepting

environment to sustain their the value of education and willempowerment activities. send and keep their children,

especially girls, in school.

2.3 Installing toilets and water 2.3 By the end of 2002, about 2.3 Annual EMIS and PMIS 2.3 (CA) Availability of toiletsfacilities in the primary 7,600 toilets and 8,100 water reports. increases girls retention atschools. facilities would have been school. (R) Community-

provided. specific cultural patterns mayforestall students' use of toiletfacilities.

2.4 Establishing and operating 2.4 By the end of 1999, 206 2.4 Annual PMIS reports; field 2.4 (CA) CRCs are enablingBRCs and CRCs. BRCs and 2,476 CRCs would visits by the JSMs. enviromnents for teachers'

be fully operational. self-reflection and action toimprove pedagogical practices.

2.5 Providing continuous in- 2.5 About 100,000 teachers 2.5 Annual PMIS reports; 2.5 (R) Weaknesses in stateservice teacher training. will receive 10 days of training Classroom observations; and district professional

per year during the period External evaluations; resource institutions (SCERT,1999 - 2002. Institutional visits; JSMs. DIETs) may slow down

quality improvement efforts.

2.6 Developing and supplying 2.6 By March 2001, titles for 2.6 Annual PMIS reports; 2.6 Same as above.improved textbooks and classes I to V in language, classroom observations;supplementary instructional math and EVS in Hindi, Urdu, external evaluations.materials. Bangla, Oriya and Tribal

languages would have beendeveloped and trialed.

2.7 Providing grants to 2.7 Number of schools and 2.7 PMIS and JSMs. 2.7 (CA) This grant schemeschools, community teachers in project districts induces participation andorganizations and individual receiving Rs. 2,000 and Rs. ownership of teachers andteachers for the purchase of 500, respectively, per year. communities in the crusade foreducational supplies and other improving the quality ofquality inputs. education.

2.8 Carrying out periodic 2.8 Item analysis results of the 2.8 Baseline assessment study. 2.8 (CA) Educationallearning assessment of assessment studies to be authorities could detectprimary level students. carried out in 2000 and 2002. curricular skills not being

mastered by students andapply corrective and/orpreventive pedagogicalmeasures.

3.1 Building and 3.1 By 6/30/98, the SLO and 3.1 AWPBs; JSMs. 3.1 (CA) Decentralizingstrengthening state and district 17 DLOs would be fully operational tasks to the districtprogram management staffed with full-time qualified and sub-district levels ofstructures (SLO, DLOs). personnel and operational. decision making will allow the

states to focus mainly onstrategic and state educationalpolicy issues. Interest to learnfrom other state and/orworldwide experiences.

Annex 1Page 4 of 4

intensifies;Transfer of key managerialstaff at state and district levelsare minimized.

3.2 Establishing and 3.2 By 6/30/98, the staffing of 3.2 AWPBs; JSMs; progress 3.2 See (R) in 2.5 above.strengthening state and district SCERT and SIEMAT with reports.resource institutions and/or full-time qualified personnelgroups (SCERT, SIEMAT, would be substantiallyBSTPC and DIETs or completed. By 2002,equivalent institutions). improved BSTPC efficiency in

textbook production forsocially disadvantagedstudents in project districts.By 12/31/98 the: (i) staffing ofthe DIETs sanctioned by GOIor equivalent institutions withfull-time qualified personnelwould be substantiallycompleted; and (ii) state and17 district technical resourcegroups would have beenestablished.

3.3 Strengthening state and 3.3 Number of project-related 3.3 Research reports.district capacity for carrying studies completed.out monitoring, research andevaluation activities.

3.4 Establishing a facility to 3.4 Number of innovations 3.4 Annual PMIS reports; field 3.4 (CA) Provides ansupport innovative approaches field tested. visits by the JSMs. environment to testto improve primary education. innovations before they are

taken to scale.

3.5 Developing training 3.5 Number of training 3.5 Annual PMIS reports. 3.5 (CA) Ownership of projectmodules for microplanning, modules developed and innovations is induced byVEC training and training of imnplemented for empowermentmaster trainers. microplanning and VEC

training and number oftraining programs provided tomaster trainers.

Annex 2Page 1 of 9

Annex 2

Detailed Project Description

Capitalizing on the experience gained by the ongoing DPEP I and II IDA Credits (Credits 2661-IN and 2876-IN), the Uttar PradeshBasic Education Credit (Credit 2509-IN) and the recently published ESW (Primary Education in India), the project would assist theDOE/GOI to extend DPEP into 17 educational (27 revenue) socially disadvantaged districts in Bihar. Like the Uttar PradeshEducation Project, DPEP I and II, the project would build state, district and sub-district4 level managerial and professional capacityfor the sustainable development of primary education in the project districts, and would support district-based activities aimed atensuring that more children, especially from socially disadvantaged groups, complete a five-year primary education cycle ofappropriate quality in low literacy districts. At negotiations, GOB provided assurances that it shall carry out, and cause the BSPP tocarry out, the project in accordance with the DPEP Guidelines and the PIP agreed with IDA (paras. 4 and 24(d)).

Scope and Approach: The specific investment Credit, with a strong degree of program and policy content, is designed to continueproviding program support to GOI and GOB for the development of primary education in Bihar, with the DPEP Bureau operating asthe national management authority which appraises the state and district AWPBs. The project has been prepared based on theexperience gained by the BEP project in 7 districts. The project would finance program expansion in the 7 BEP districts plus 10additional non-BEP districts (see page 9 of this Annex). All 17 educational (27 revenue) districts, with the exception of one BEPdistrict (Purbi Singhbhum), have an average female literacy rate below the national average (39.1 percent). To assist theimplementation of DPEP III in Bihar, further strengthening of the national management structure will be financed under DPEP I andII, including the establishment of a national distance education program to assist in-service teacher programs in DPEP Project States(including Bihar). Additional support for the DPEP III in the form of a grant has been confirmed by UNICEF through a parallelfinancing arrangement.

Project Description: The project will have three components: (a) Expanding access to primary education, particularly fordisadvantaged groups; (b) increasing retention and improving learning achievement in primary school; and (c) improving state anddistrict capacity to manage primary education.

Project Component 1 - Expanding access to primary education, particularly for disadvantaged groups (US$103.6 million,including contingencies; 51.9 percent of total project cost). This component includes the following five sub-components:

Constructing new classrooms and schools, and repairing or rehabilitating existing classrooms. Although reducing dropout andimproving learnig achievement would have priority under DPEP III, the program would also fmance expanded access through theconstruction of new schools and classrooms and the rehabilitation of existing ones. Approximately 400,000 new places would becreated with the construction of 2,350 new schools and 4,400 new classrooms and the reparation and/or rehabilitation of about 300existing classrooms financed by the project. Construction would be mostly undertaken by communities through the VECs, with thegovernment engineer as technical adviser. This scheme ensures a greater sense of ownership and a more likely acceptance ofresponsibility for maintaining the school by the village. The project would employ a cadre of engineers on contract at the SLO, and itsown engineers at district level to supervise works and make use of consultant architects to produce a variety of cost-effective designs thatreflect end-users requirements. The construction program is built upon the excellent initiatives that are currently being deployed by BEP.The Credit will finance civil works, furniture and equipment, and on a declining basis, the salaries of additional teachers required innew facilities. The Credit will also finance, on a declining basis, the salaries of new teachers required by enrollment expansionresulting from project activities.

As in DPEP II, a Rs. 50 lakh School Construction Innovation Fund would be established to assist GOB in undertaking research,experimentation and evaluation of alternative "low cost" techniques for construction of school facilities. This Innovation Fund wouldbe utilized in part to finance design work though a collaborative effort of an architectural advisory group involving consultantarchitects, education specialists, higher education institutions in the state and state construction agencies. The fund would also financethe actual construction of prototype designs in communities covered by the DPEP HI project. Initially, the construction of theseprototype schools would be in parallel to the ongoing project construction of more traditional designs during the early stages of theDPEP III implementation period. However, once an evaluation has been made of successful, replicable techniques in the prototype

Sub-district means a level below the district level, consisting of one or more of the following: Sub-division, block, panchayat and village, as well as an area definedas a cluster by a Project state.

Annex 2Page 2 of 9

schools, it is expected that these alternative methods of construction would be incorporated into the school construction programduring the remaining project period.

Sanctioning new teaching posts and appointing teachers. The Credit would reimburse, on a declining basis, the salaries of about5,700 new teachers required by enrolhment expansion and by increased student attendance resulting from project activities. The needfor these teacher appointments would be documented by each district based on mitial attendance data collected on a school-by-schoolbasis and would be authorized by DPEP beginning in the third year of the project. New teacher posts in schools not constructed orexpanded with project fnancing would be eligible for financing from the third year of the project only on the basis of evidence ofincreased regular school student attendance provided by a reliable attendance database in each district school. At negotiations, GOBprovided assurances that it will cause the BSPP to establish by December 31, 1999 in an appropriate number of sample villages ineach project district a reliable education database of: (i) the number of public, private recognized and non-recognized schools, throughmicroplanning exercises to be conducted by the VECs; and (ii) the best estimates of teacher and student attendance in such schoolsthrough the establishment of attendance reporting mechanisms by the VECs and the educational management information system(EMIS) (paras. 4 and 24(j)). This reliable database could also be used to rationalize teacher deployment to eliminate unjustifieddifferences in staffmg ratios between schools, and to sanction additional positions based on attendance. GOB has not filled teachervacancies resulting from retirement since 1993. It is estimated that there are about 10,290 primary education teacher vacancies in theDPEP III districts and another 22,000 in non-project districts. During the appraisal mission, GOB informed the IDA team that: (i) theBihar Public Service Commission has initiated the process to fill all these vacancies; and (ii) most of these vacant positions will befilled by December 1998. Prior to negotiations, GOB provided to IDA an implementation schedule to fill all teacher vacancies inproject districts and the state norm for positioning primary school teachers. During negotiations GOB provided assurances that it willtake all necessary measures to ensure that at least 95 percent of the teachers' posts in the project districts, starting the third year of theproject, remain filled throughout the project implementation period (paras. 4, 20, 21 and 24(g). In addition, during negotiations GOIand GOB provided assurances that they will carry out with IDA and other external financiers of DPEP including UNICEF, two jointin-depth reviews of the project by December 31, 1999 and December 31, 2001, which will include a status report of the positioning ofteachers in project districts based on the state norms (paras. 4 and 24(b)).

Developing and implementing targeted interventions for socially disadvantaged groups (girls, SC and ST students, workingchildren, children with mild to moderate learning disabilities and other children who have limited access to educationalopportunities). The project will provide for the development, trailing and large-scale implementation of targeted interventions toaddress equitable access, retention and delivery of quality education to the above-mentioned socially disadvantaged groups ofchildren in DPEP IH districts. To achieve this aim, each district has carried out a required social assessment study (SAS) as part ofthe preparation of their first year AWPBs. Each one of these district-based studies have analyzed the: (i) existing social structures,their relationship and impact on the education system; (ii) pattern of exclusion to schooling and the constraints of location, gender,social, economic and cultural factors to access; (iii) patterns of working children; and (iv) constraints to women/girls' educationaldevelopment. These studies have also provided the basis for which district-specific strategies and interventions would be developedand implemented under the Credit. The fmdings of these studies will be discussed with state and district planning teams during thefirst year of the project. Some DPEP III districts have already identified through their SAS a variety of activities to improve learnigachievement for girls, including a gender sensitive review of curricula and instructional materials, teacher sensitization throughtraining, ECE programs, establishment of alternative schooling modalities including multi-grade centers, non-formal schools,residential schools (Ashrams) for tribal children, escort teacher services and peripatetic teachers. At negotiations, GOB providedassurances that it will: (i) implement the project in accordance with strategies acceptable to IDA for improving primary education offemale students; (ii) implement the project in any tribal area (as designated by GOB in accordance with applicable state laws) inaccordance with procedures and delivery strategies satisfactory to IDA; and (iii) ensure that all investments in project districts whichare classified by the Borrower as tribal districts, or which include blocks classified by the Borrower as tribal blocks, are appraised andimplemented in accordance with a plan satisfactory to IDA for the delivery of project benefits to tribal people (para. 24(m)). Forthese targeted interventions, the Credit will finance educational materials, consumable supplies, training, and consultant services. TheCredit will also finance civil works, furniture and equipment for residential schools that may be approved by IDA.

Mobilizing school and community organizations and carrying-out awareness campaigns in support of education. Popularparticipation in the development of district investment proposals has raised awareness among beneficiaries of impendingimprovements in the quality of schooling. Building from this base, a variety of awareness building activities-campaigns, communitymeetings, fairs-would be undertaken by the VECs to increase awareness of the program and the benefits to communities andschools. Emphasis would be given to the accessibility of children belonging to the socially disadvantaged groups currently deprivedof educational opportunities, on the importance of integrating into primnay school children with disabilities as well as workingchildren, and keeping in school all other children, especially girls, SC and ST students. The Credit will finance training, educational

Annex 2Page 3 of 9

materials and consumable supplies for strengthening community/school organizations and awareness campaigns and consultantservices.

Establishing a Village Education Committees (VEC) for each school in the project districts. At the school level, DPEP III, likethe UPBEP and DPEP I and II, would be implemented through district-level bodies, including the Panchayati Raj structures and theVECs. The approximate 32,000 VECs to be established under DPEP III are expected to oversee the operations of schools and non-formal education centers, conduct annual surveys of village children to estimate teacher and student attendance and identify non-enrollees and dropouts, contribute services and resources to the school and encourage parents to send their children to school and keepthem there. Depending on local circumstances, additional activities such as microplanning may be entrusted to the VECs. In addition,DPEP III envisages a very important role of the VEC in establishing a reliable database of student attendance in primary school(paras. 4 and 24(j)). The constitution of VECs is more or less similar across districts and includes the gaon panchayat president, headteachers, headmasters, NGO representatives, members of panchayat, and representatives of parents/guardians of the village. Theseorganizations function with varying degrees of effectiveness. In states such as Kerala and Maharashtra (both DPEP I and II projectstates) with long traditions of community involvement in schools, VECs meet regularly and are effective in their tasks. In other states,surveys show that some VECs meet less frequently and, as a result, are less effective. Based on lessons learned from the DPEP I andH projects, and especially from the BEP, the DPEP III district investment proposals have defined the functions of community/schoolorganizations, their membership (including reserving at least one third of all places for women), and a training and supervisionstrategy. During negotiations GOB provided assurances that by December 31, 1998, it will establish VECs across every school in allproject districts with responsibility for assisting with project implementation (paras. 19 and 24(h)). The Credit will finance training,educational materials and consultant services.

UNICEF would finance, as a pilot, the development of a training program and learning materials, as well as of strategies, to empowercommunities through the training of VECs. The development of these tasks would be based on the successes of the trainingpackage/process developed for the VEC under BEP (including microplanning, participation, learning and action through analysis andassessment for empowering village communities to plan and monitor both participation in and effectiveness of their local primaryschool).

Project Component 2 - Increasing retention and improving learning achievement in primary education (US$75.5 million,including contingencies; 37.8 percent of total project cost). This component includes the following eight sub-components:

Selectively establishing new, and strengthening existing, early childhood education centers (ECEs). ECE is an important DPEPstrategy to improve readiness to learn, especially for children from illiterate households. ECE is also expected to contribute toenrollment and retention for girls by providing an altemative source of sibling care during school hours. ECE is provided in Bihar bythe centrally-sponsored integrated child development service scheme (ICDS). National evaluations have found that participation inthe ICDS program improves retention in primary school. However, the timings of schools and ICDS Anganwadi Centers whichprovide ECE and supplementary nutrition rarely match, thereby reducing the potential contributions of the program for sibling care.In addition, Anganwadi Centers serve a population of 1000; this catchment area can include as many as three schools, only one ofwhich is likely to be located within easy walking distance. Moreover, ICDS coverage is very low in Bihar. Finally, the ECEcomponent of ICDS is unevenly implemented across the districts, raising concems for quality. Because of these factors, DPEP IIIdistricts have proposed to expand or establish ECE programs for the 0 to 6 age group, often on a large scale. Existing programs haverarely been evaluated systematically, and new programs would involve the creation of materials, training and supervision systems,and facilities. For these reasons, the GOI would require that expanded and new ECE programs financed under the Credit first bedeveloped and tested on a pilot basis with concurrent evaluations. Proposals for ECE pilot programs and evaluations would beconsidered by the DPEP Bureau for financing, beginning with the second year of the project. During negotiations, GOI and GOBprovided assurances that they will carry out with IDA and other external financiers of DPEP, including UNICEF, a second joint in-depth review of the project by December 31, 2001, and such a review will include a status report of the modalities and framework ofcooperation between the Borrower's ICDS and ECEs under the project (paras. 4 and 24(b)). The Credit will finance the establishmentof about 700 ECEs and the provision of educational materials, consumable supplies, training and consultant services, furniture andequipment, salaries on a declining basis and limited civil works.

Supporting interventions for women's education and empowerment programs. The project will strengthen existing and expandnew women's empowerment programs (Mahila Samakhya [MS]) in the state. These programs which form village women's groupsare a forum for discussion, reflection and action on problems confronting village women. They have also included literacy campaignsand health-related activities, as well as education on women's legal rights and on public services available to them. These demand-driven programs are based on facilitation, rather than directive processes. The collective comprised of village women are madeaccountable for the planning, decision making and evaluative processes of all the activities inherent in their empowerment. The

Annex 2Page 4 of 9

participating women determine the form, nature, content and timing of all group activities in their village, and the staff selectionprocesses are participatory. These programs take the time necessary to develop and do not have programmatic "targets". Instead theyare self-paced processes built on existing knowledge and the women's own priorities for learning. MS in Bihar has been run by anautonomous society, and will continue to be so in the project. At the state and district levels, the MS will interact in a structured waywith the SLO and all DLOs to ensure synergy with other DPEP III-fnanced activities, especially those geared to increase access toand improve the retention and learning of girls in schools. The support and expansion of MS in DPEP Ill will be phased in a mannerappropriate to their existing principles and methods of operation. The support of MS will be phased out in participating villages oncethe women's groups have created an enabling self-reliance environment to sustain the empowerment activities developed under theproject. During negotiations, GOB provided assurances that it will select NGO and community organizations participating in theproject in accordance with criteria and procedures satisfactory to IDA (para. 24(n)). The Credit will fnance training, consultingservices, education materials, consumable supplies, incremental operating costs and salaries for MS staff on a declining basis.

Installing toilets and water facilities in the primary schools. The absence of toilets and water supply in a large number of schoolsin DPEP In districts often makes school an unattractive place to parents and their children, especially for girls. The installation oftoilets and water supply is expected to make a major and visible contribution to the quality of services, and hence to increase retentionin schools. Provision for water and waste disposal at classroom sites financed under the Credit will be fully integrated into the schoolconstruction program explained above. These civil works programs would be implemented mainly by community/schoolorganizations. The Credit will fmance the installation and maintenance of about 7,600 toilets and sanitation civil works and 8,100water facilities in primary schools in all DPEP III districts states, including equipment, costs of electricity connections, andprofessional services.

Establishing and operating block and cluster resource centers (BRCs and CRCs). At the sub-district level, the in-service teachertraining envisaged by DPEP Ill would be implemented by block and cluster level offices. Training activities under the project wouldoperate at the block level through a network of 206 BRCs, which would provide the facilities for decentralized training and teachersupport activities fmanced under the project. BRCs would be managed by an education department officer. BRC training teamswould be drawn from carefully selected teacher trainers. Below the BRC level, and assuming one BRC for every 12 CRCs, DPEPwould be implemented through 2,476 CRCs, each comprising a lead primary school serving a group of about 12 to 16 primaryschools. These clusters would provide continuous support to primary school teachers within the cluster through classroom visits,short meetings and pedagogical discussions at the lead school. Continuous support would be supplemented by periodic residentialtraining at the BRCs, with trainers drawn from DIETs. A senior and experienced primary school teacher would be assigned to serveas the cluster resource teacher. Construction of these facilities would be completed by the third year of the project. The Credit willfinance civil works, equipment, furniture, vehicles, training, consulting services, educational materials, consumable supplies,incremental operating costs, and salaries for block and cluster staff on a declining basis.

Providing continuous in-service teacher training. DPEP is seeking to transform India's approach to in-service training bydeveloping the training systems and infrastructure needed to make training a continuous classroom and school-based process. Thetraining conceived in the DPEP is expected to build teacher awareness and motivation for alternative classroom practices and developfurther training strategies for enriching the learning environment. The training may include an introduction to child-centered teachingand active learning methods, applications in multigrade settings and possibilities for teacher preparation of teaching aids. The trainingmaterials may be adapted as needed and translated into the principal regional languages of Bihar (Hindi, Urdu, Bangla, Oriya andtribal languages). The core activities established for the UPBEP and DPEP I, fine-tuned for DPEP II and enriched with the in-serviceteacher experiences from BEP, would be the basis for the in-service teacher training to be provided and financed under DPEP m. Thebasic traits of the strategy are the: (a) development of initial modules and systems for training trainers, teachers and school principals,based on the results of the new pedagogy visioning exercises carried out at the state, districts and sub-district levels with primaryeducation stakeholders; (b) development of the physical infrastructure needed to bring training to the BRCs and CRCs level; and (c)expansion of training modules and materials to incorporate the minimum levels of learning (MLL) instructional materials, teachingand learning materials for the integration of working children and children with disabilities into primary schools, and a variety ofeffective classroom and school management and leadership practices. Teachers in DPEP districts would be provided withapproximately 25 days of training, preferably at the BRC level, throughout the life of the project, reinforced by monthlymeetings/workshops at the CRC level and school visits by cluster resource teachers.

Key to the success of the program is the development of good training materials and the training of effective master trainers andresource persons. With the assistance of the national program, master trainer programs would be developed to train DIET faculty andother teacher educators. Master training teams would test materials and approaches on a trial basis in districts using the facilities ofDIETs and Teacher Training Institutes. One source for carrying out this training would be the prototype training designs andmaterials for school-based in-service training that have been developed and tested in several states by the Department of Teacher

Annex 2Page 5 of 9

Education at NCERT and other state resource institutions for UPBEP, DPEP I and II and other primary education projects. Anothersource for the development and delivery of in-service teacher training strategies would be a strengthened SCERT and the state anddistrict resource groups (SRG and DRGs) which are in the process of being established in the SLO and all the DLOs (see paras. 16and 24(i)). The in-service teacher training devised for DPEP III includes: (i) implementing visioning workshops at the district andsub-district levels to enable key stakeholders in primary education to understand more clearly what child-centered pedagogy entailsand what classrooms will look like by the end of the project under this new pedagogical paradigm; (ii) providing training andtechnical assistance to DIETs; (iii) adapting national prototype training and classroom materials in regional languages; (iv) providingtraining to assist teachers in the identification, assessment and teaching of children with mild to moderate disabilities; (v) training ofmaster trainers; (vi) adapting, testing and disseminating ECE materials; (vii) developing instructional materials, pedagogical processesand in-service teacher training for effective multi-grade teaching; and (viii) developing instructional materials in tribal languages, incooperation with Tribal Welfare Departments and other concerned agencies. The nationally sponsored distance education programfmanced under DPEP II will complement the in-service teacher training activities of DPEP IH.

In-service teacher training in participating DPEP III districts would start in the second year of project implementation and wouldincorporate the first generation of training materials financed under the Credit. In later years, additional training modules would bedeveloped with technical support from DIETs and SCERTs, with priority given to multigrade teaching, teaching of reading andmathematics, using new MLL in the instructional materials as they become available, the use of supplementary materials and teacherpreparation of educational aids. SCERTs and the DPEP Bureau/TSG would cooperate throughout the process to identify bestpractices and innovations for dissemination throughout India. Master trainers and resource persons would participate in refreshertraining as new training modules are developed and introduced. The Credit will fnance limited civil works, furniture, equipment,vehicles, consultant services, educational materials, visioning workshops, training, fellowships, and incremental staff salaries on adeclining basis.

Developing and supplying improved textbooks and supplementary instructional materials. The project will assist the BSPP andthe Bihar State Textbook Publishing Corporation in improving the quality and efficiency of instructional materials development,production and distribution (including textbooks, student workbooks, supplemental readers, teacher guides and other related materials,as well as appropriate teaching and learnming materials designed to assist in the integration and mainstreaming of children with mild-to-moderate disabilities in primary schools). This program includes: (i) preparation of a new generation of quality instructional materialsbased on the state's approved MLLs; (ii) field tryout of instructional materials prior to publication; (iii) improvements in the design,illustration, layout and durability of instructional materials; (iv) improvements in distribution efficiency including computerization ofstocks; and (iv) professional training for instructional materials agency staff. Technical support to improve pedagogy would beprovided by NCERT or equivalent organizations and the SRG and DRGs at the state and district levels. The activities of the SRG andDRGs to develop improved textbooks and supplementary materials will be gradually integrated with the SCERT and DIETs orequivalent institutions. During negotiations, GOB provided assurances that by December 31, 1998, it will cause the BSPP to establishtechnical resource groups at the state level and project district levels, to assist in the development and implementation of the project(paras. 16 and 24(i)). A teaching and learning material study was completed and analyzed by IDA at pre-appraisal to guide futureinstructional materials improvement efforts in DPEP III. The Credit will finance equipment required up to the stage of "cameraready copy", training and consulting services.

In addition to the annual grants described below for the purchase of teaching materials by teachers, the program would also providefunding for the establishment of small libraries and book banks (for example, for poor boys who are not covered under existing freebook schemes) in schools in project districts. Special allocations may be considered for materials purchased for one- and two-classroom schools.

Providing grants to schools, community organizations and individual teachers for the purchase of educational supplies andother quality inputs. Evaluations of the centrally sponsored operation blackboard scheme have shown the weaknesses of deliveringpre-determined packages of teaching aids to schools, without training and involvement of teachers and local education staff. UnderDPEP I and II, districts have been provided annual grants to schools, community organizations and individual teachers for thepurchase of consumable educational supplies, materials and other quality inputs. This grant-scheme has proven to be an effectivestrategy to induce participation and ownership of teachers and communities in the crusade for improving the quality of education intheir schools. Likewise, under DPEP III, grants of Rs. 2,000 would be authorized for schools and community organizations. Inaddition, annual grants of Rs. 500 would be made to each primary teacher in project districts to purchase materials for use inpreparing teaching aids. Schools and teachers would keep records and receipts for purchases. In-service training in the developmentof teaching aids would be provided. The DPEP Bureau and the BSPP will closely monitor the use of these grants by schools andteachers. In addition, the DPEP Bureau will periodically review the grant amounts.

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Carrying out periodic learning assessments of primary level students. Baseline assessment studies (BAS) were carried out byeach DPEP III district in a random sample of primary schools as a requirement for project preparation. The district-based BAS: (i)measure achievement level in mathematics and language of class I and IV students and its determinants; (ii) assess status andfunctioning of elementary schools in terms of physical facilities, teaching and teaching processes; (iii) provide a background profile ofteachers, headteachers and headmasters; and (iv) determine the achievement level of a random sample of children who have droppedout from the system. Another set of district-based assessment studies are to be carried out at the mid and concluding points of projectimplementation to assess changes in learning achievements in mathematics and language by type of student (belonging or notbelonging to any of the socially disadvantaged groups), region (district, block, school) and type of school (urban or rural). Theproject would finance the undertaking of these BAS. During negotiations, GOB provided assurances that it will carry assessmentstudies on student learning achievement in all DPEP m project districts, with scope and content acceptable to IDA, in calendar years2000 and 2002 (paras. 4 and 24((k)). Prior to negotiations, IDA received information concerning the findings of the second round oflearning achievement studies carried out for the UPBEP districts (see the details in Annex 2A of the PAD of the Second Uttar PradeshBasic Education Project). In addition, the DPEP Bureau has informed IDA that the second round of learning achievement studies forthe DPEP I districts are currently being carried out and the findings of the results will be submitted to IDA by December 31, 1998through the joint supervision missions.

Project Component 3 - Improving state and district capacity to manage primary education (US$21 million, includingcontingencies; 10.3 percent of total project cost). This component includes the following five sub-components:

Building and strengthening state and district program management structures (SLO, DLOs). The GOB would implementapproved DPEP HII state and district AWPBs (investment proposals) through its SIS (BSPP).; A bank account for the DPEP HIimplementation will be opened by the BSPP with an initial deposit from GOI and GOB, sufficient to cover project start-up activitiesup to effectiveness (estimated by April 1998)6. The BSPP through its State Level Project Office (SLO) would review and supervisethe implementation of state and district AWPBs. The BSPP would also coordinate the cooperation of other state agencies, NGOs,consulting companies and individuals to carry out project-related tasks. The SLO is fully operational and substantially staffed withqualified personnel including a full-time State Project Director and full-time Unit Heads for Civil Works, Planning and Monitoring,State Programs, District Programs, and Finance, Monitoring and Accounting. Some vacancies still exist that would be filled no laterthan the first semester 1998. To ensure rapid start-up of implementation, at negotiations GOB provide assurances that it will: (i)maintain the SLO with responsibilities to coordinate project implementation, with adequate staff, resources and facilities by the end ofJune 1998; and (ii) establish a program of staff training satisfactory to IDA (paras. 4 and 24(e)).

The capacity of districts to plan and manage program delivery to improve the quality and expand the access to primary educationwould require the strengthening of the district management structure. The day-to-day implementation would be managed by aDistrict Level Project Office (DLO) that would be directed, in most cases, by the District Education Officer (DEO). The staff whoparticipated in the planning teamns that developed investment proposals are expected to also play a key role in the actualimplementation. The DLOs would receive advances of funds from the BSPP against AWPBs approved by the BSPP and reviewed bythe DPEP Bureau. Funds would be maintained in separate accounts by the DLO director and advanced to schools and communities,as required by individual sub-projects, where they would be maintained in separate dual-signature accounts. The above arrangementwould be implemented through local resources with IDA funds disbursed on a reimbursable basis for expenditures incurred.

The DLO would be staffed by a small team of specialist staff appointed and fnanced by the SISs. The staff would be headed by afull-time project coordinator and include a fnance/procurement officer and a specialist to coordinate the implementation of programcomponents in functional areas (civil works, PMIS/EMIS and training) or in areas of special emphasis. In addition to managing the

DPEP Guidelines mandate the establishment of a registered SIS in each DPEP project state, like Bihar, to receive, disburse andaccount for program funds, to manage program implementation, and to monitor and report on progress. The SIS is accountable to aGeneral Council chaired by the State Chief Minister or Education Minister and an Executive Committee chaired by the State ChiefSecretary/Education Secretary. Membership in both bodies includes representatives from other State Government departments andthe GOI. These structures under the UPBEP and DPEP I and II projects have been shown to have administrative flexibility combinedwith public accountability.

6 The Bihar BSPP was established in 1991 to manage the BEP. The model Memoranda of Association and By-laws used arecompatible with the Memorandum of Understanding (MOU) used in the establishment of other SISs for the UPBEP, DPEP I and IIProjects. This MOU model was reviewed by IDA against managerial and legal criteria during the appraisal of DPEP I. Duringnegotiations, GOI agreed to submit to IDA evidence that the BSPP has entered a MOU with the Borrower (GOI) as a condition ofdisbursement of the proceeds of the Credit (paras. 4 and 24(o)).

Annex 2Page 7 of 9

flow of project funds to project activities and supervising their implementation at the block, cluster, school and village levels, keyresponsibilities of DLO staff would be awareness building activities, school mapping, management of the school statistics (EMIS) andproject (PMIS) management information systems and preparation of AWPBs. The 7 BEP DLOs are already functioning, while theadditional 10 DLOs are being officially established in the new districts. The process for the appointment of key DLO personnel in the10 non-BEP DLOs has been initiated, and the selection process for a full-time qualified fmancial/accounting official, civil worksengineer and a management information system computer programmer was satisfactorily completed prior to negotiations. Orientationand professional training packages for the staff positioned at the SLO and all the DLOs are being prepared. At negotiations, GOBprovided assurances that it will: (i) maintain the DLOs with responsibilities to coordinate project implementation in each projectdistrict, with adequate staff, resources and facilities by the end of June 1998; and (ii) establish a program of staff training satisfactoryto IDA (paras. 4 and 24(e)).

Establishing and strengthening state and district resource institutions and/or groups (SCERT, SIEMAT, BSTPC and DIETsor equivalent institutions). The project will finance the strengthening of SCERT's capacity to provide technical support forcurriculum revisions, improvement of textbook and instructional materials development, development of improved classroomteaching models and in-service teacher training. The SCERT's strengthening activities comprised under DPEP III would be carriedout with support from national technical assistance programs developed for DPEP I and II, from the SRG to be established during thefirst year of project implementation (paras. 16 and 24(i)), and from the experience acquired in the BEP project. SIEMAT, or anequivalent agency, would be established as a small planning and management unit within SCERT to provide technical assistance andtraining in education planning, school mapping, management and monitoring to state and district education staff. Duringnegotiations, GOB provided assurances that it will: (i) maintain SCERT and SIEMAT with responsibilities to coordinate projectimplementation with adequate staff, resources and facilities by the end of June 1998; and (ii) establish a program of staff trainingsatisfactory to IDA (paras. 4 and 24(e)).

The Bihar State Textbook Publishing Corporation (BSTPC) is an independent organization, established under the 1956 CompaniesAct and is the sole authorized publisher and copyright holder of the state's core textbooks for Class I to X as well as for theirproduction. Less than 20 percent of the textbook production is carried out in the BSTPC's own printing plant while the larger share iscarried out by outside suppliers (printers) which it contracts. The project aims at promoting increased competition and efficiency inthe printing services for textbooks being provided under the project by the BSTPC (see Annex 6). The project will also fnance theprovision of training, consultant services and publishing software to upgrade BSTPC publishing skills in the development ofimproved instructional materials (including textbooks) under the project up to camera-ready stage only.

The capacity of districts to improve the quality of primary education would require the strengthening of its District Institute ofEducation and Training (DIET). DIETs would play a key role in the design and implementation of training programs at the districtand sub-district levels, in particular, at the block and cluster resource levels. DIETs would be developed as the principal technical andprofessional resource agency for training, materials development, planning and management for district plans and work programs.The work of the DIETs would be supported by the SCERT and the SRG and DRGs established at the state and district levels. TheGOI has recognized that the standard model for DIET organization, staffmg and equipment needs to be adapted to the supportrequirements of DPEP, especially in regard to primary in-service teacher training. In addition, in some DPEP III districts, substantialenhancement of DIET physical facilities would be needed. During negotiations, GOB provided assurances that it will establish andmaintain DIETs (sanctioned by GOI) or equivalent institutions in project districts and appoint key staff at such DIETs in accordancewith a schedule satisfactory to IDA by December 31, 1998 (paras. 16 and 24(f)). The Credit will finance civil works in selectedDETS, equipment, vehicles, consultant services, educational materials, consumable supplies, incremental operating expenses andsalaries on a declining basis.

Strengthening state and district capacity for carrying out monitoring, research and evaluation activities. With training andtechnical support from the national program on program evaluation, research and studies financed under DPEP I and 11, SCERTswould be strengthened and expanded to conduct or contract program evaluation and research studies pertaining to the attainment ofthe DPEP III objectives, as well as the effectiveness of the innovations implemented for such purposes. To carry out these studies, theSLO may consider contracting out the services of NGOs, universities and other apex institutions. During negotiations, GOB providedassurances that it will select non-governmental and community organizations participating in the project in accordance with criteriaand procedures satisfactory to IDA (para. 24(n)). After a start-up period, these agencies would in turn assist DIETs to develop similarcapabilities. The Credit will finance civil works, equipment and furniture, vehicles, educational materials, consumable supplies,training, consultant services, incremental operating costs, and salaries on a declining basis.

In addition to the above, the Credit would develop the capacity of state, district and sub-district level staff to manage the improvedschool statistics and project management information systems (EMIS and PMIS), carry out school mapping exercises, consult with

Annex 2Page 8 of 9

parents and community leaders, prepare annual work programs and monitor project implementation. In support of district capacitydevelopment, the Credit would finance limited civil works, vehicles, equipment (including computer equipment for the EMIS),educational materials, consumable supplies, training, consultant services, incremental operating costs and salaries on a declining basis.

Establishing a facility to support innovative approaches to improve primary education. The GOB has proposed a number ofinnovative but un-tested approaches to improve primary education, including new cost-effective construction designs (see SchoolConstruction Innovation Fund above). In addition, a number of core intervention strategies, including ECEs, would require pilottesting prior to adoption and replication. Other innovations have been emerging during the UPBEP, DPEP I and DPEP Himplementation. Lessons learned from the implementation of these innovations will be considered in the execution of DPEP III.NGOs are already involved in DPEP in a variety of ways, including innovative activities, work with women's groups and carrying outnon-formal and alternative education programs financed under DPEP. A facility called the "Fund for Innovations" managed by theDPEP Bureau under DPEP I and II financing in accordance with the DPEP Guidelines, appraises proposals from states and districtsand commissions independent evaluation studies through the national program of research and evaluation. Following this model, theDPEP HI Credit will support the establishment of an innovation fund with the BSPP (approximately US$60,000 annually) and withthe district implementation teams (approximately US$3,000 annually per district). The DPEP Bureau will approve innovativeactivities under this fund as part of the DPEP Bureau's review of the state and district annual work programs and budgets.

Developing training modules for microplanning, VEC training and training of master trainers. Subject to UNICEF Boardapproval, UNICEF will finance the development and provision of continuous in-service teacher training and supply of instructionalmaterials for such training, including: (i) a ten-day teacher empowerment module and related training; and (ii) state-level training formaster trainers. UNICEF would fund this specific subcomponent under the following general guidelines: (a) building on the successesof the Ujala training initiated under BEP to develop an in-service teacher training program to be provided at the DIETs/BRCs and inrecurrent monthly sessions at the CRCs; (b) developing a training package/process for VECs, emphasizing microplanning,participation, learning and action through analysis and assessment for empowering village communities to plan and monitor bothparticipation in, and effectiveness of, their local primary school; and (c) developing learnig materials through participatoryapproaches for classroom use (such as multigrade materials) as well as for use in teachers' training and VECs. This sub-component isfully financed by the UNICEF grant.

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List of Participating Districts

Education District Revenue Districts Type of theIncluded Education District

1. Bhojpur 1. Buxar Non-BEP District

2. Bhagalpur 2. Banka Non-BEP District

3. Chatra BEP District

4. Darbhanga Non-BEP District

5. Dumka Non-BEP District

6. East Singhbhum (Jamshedpur) BEP District

7. Gaya Non-BEP District

8. Hazaribagh 3. Koderma Non-BEP District

9. Munger 4. Jamui

5. Lakhisarai

6. Sheikhpura

10. Muzaffarpur BEP District

11. Pumia 7. Araria Non-BEP District

8. Kishanganj

12. Ranchi BEP District

13. Rohtas 9. Kaimur BEP District

14. Sitamarhi 10. Sheohar BEP District

15. Vaishali Non-BEP District

16. West Champaran BEP District

17. West Singhbhum (Chaibasa) Non-BEP District

Annex 3Page 1 of 1

Annex 3

Table 3.1 Estimated Project Costs

Project Component Local Foreign Total-----------------------US$ million-------------------

Expanding access to primary education 90.5 3.3 93.8Increasing retention and improving learning achievement in primaryschool 65.3 2.8 68.2Improving state and district capacity to manage primary education 18.3 0.6 18.9

Total 174.2 6.7 180.9

Total Baseline CostPhysical Contingencies 13.8 0.7 14.5Price Contingencies 3.8 0.5 4.3

Total Project Cost 191.8 7.9 199.7(totals may not add up due to rounding errors)

Annex 4Page 1 of 7

Annex 4

Economic and Social Outcomes ofPrimary Schooling in India and in Bihar

Economic and Social Outcomes of Primary Schooling in India. The economic and social returns to investment in primaryschooling in India have been extensively documented in departmental ESW recently published as Primary Education in India in theBank's Development in Practice Series (1997). The summary of the results of the economic studies are as follows:

(a) the most recent rate of return studies are based on data from 20 years ago in Andhra Pradesh. Adjusted to take account ofschool dropouts, the rates were 13 and 15 percent for primary and upper primary, respectively. These rates are higher than thosefor secondary and higher education;

(b) recent analysis of historical data on rural households (1968-1982) living in areas where rural development programs (IRDPs)were in effect concluded that for every one rupee increase in profit due to the effects of exogenous technical change, thosehouseholds with primary schooling experienced an additional 1.38 rupees and that schooling had a substantially larger effect onproductivity than did the extension services. In addition, farmers with no schooling benefited from their more schooledneighbors who were the first to adopt new technologies;

(c) an attempt to disaggregate the sources of economic growth between 1971 and 1981 using a production function approachindicated significant effects from education and from primary education in particular. However, cross-country evidence suggeststhat there is a threshold level of average educational attainment across the labor force above which the impact is intensified. TheIndian labor force is below that threshold; and

(d) a recent Bank study to investigate the unevenness in changes in rural living standards and levels of poverty across statesbetween 1957 and 1991 concluded that higher agricultural output, lower inflation and higher state spending on developmentprograms provided only a partial explanation. States with better infrastructure in general, and higher literacy in particular, hadsignificantly higher rates of consumption growth and poverty reduction.

The National Family Health Surveys of 1992/93 collected data in each state on fertility, child health and nutritional status by mother'seducation. The two major sets of conclusions conceming the relationship between schooling and social outcomes are:

(a) within each state there are very clear relationships between levels of schooling and total and desired fertility, women's age atfirst marriage, infant and child mortality, child immunization rates and severely malnourished children. Both individualhouseholds and society at large benefit from the impact of schooling on these outcomes; and

(b) equally important, comparisons across states indicate that the fertility, health and nutritional outcomes for a given level ofeducation differ between states. They are greater in those states with a wider education coverage. For instance, while a womanin Bihar with secondary schooling has a desired fertility level below a similar woman with primary schooling, the level is stillabove that of women in Karen with just a primary schooling. This suggests that the social benefits are greatest once the coverageof a particular level of educational has gone beyond some critical point.

What are the implications of these conclusions for government financing of primary education in India? The direct and opportunitycosts to households of sending children to primary school are significant in India. Two sets of consideration support the sharing ofcosts between government and parents. First, economic efficiency would be reduced if the provision of schooling was limited toparental willingness to pay since social benefits are greater than the private ones - via, for instance, adoption by unschooled farmers ofthe more productive agricultural practices followed by their schooled neighbors and of new health practices by unschooled womenlearned from the behavior of the schooled. The social benefits from girls schooling are particularly high compared to the benefitswhich accrue to the immediate household which bears the cost of schooling. The second consideration supporting governmentsubsidy is social equity. If credit markets and information were perfect even the poorest parents might borrow to finance theirchildren's education. But they are not. Requiring parents to bear the entire cost of schooling would reduce access to education formuch of the Indian population, leading to losses in both equity and efficiency. Government resources, whether generated locally, bythe state or by central government, are required for funding the provision of schooling.

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Economic and social outcomes of primary schooling in Bihar. The level of economic returns to education depend in large part onthe economic environment within which graduates fnd employment and, as argued above, on the degree of coverage across thepopulation. Bihar, at present, is characterized by extensive poverty, low growth rates and the lowest educational coverage in thecountry. Without complementary changes in the social environment it is not likely that the immediate economic returns to primnaryschooling will be large. No rate of return studies have been carried out in Bihar. However, the links between literacy and povertylevels and reductions have been investigated and the results indicate that, in the medium term, raising the literacy level is likely tohave a major impact.

The majority of the population in Bihar is extremely poor, even by Indian standards. The proportion of households in Bihar below thepoverty line is higher, at around 64 percent (1993/94) than in any other state. This translates to 66 million people with access to lessthan Rs. 33 or US$1 a day. The average proportion across the country is 36 percent. Dividing the country into 61 agro-climaticregions, Bihar falls into three. Each of these is among the six regions with the highest proportion of the population living below thepoverty line and two of them are among the ten regions which have witnessed to slowest reduction in poverty levels since the early1970s. Of the major states, the growth rate of mean consumption and the reduction in poverty between 1957/58 and 1990/91 was thelowest in Bihar. For instance, over this period, the headcount index of poverty fell by an average of 2.26 percent a year in Kerala andonly 0.06 percent in Bihar. As a result, while the proportion of households below the poverty line fell from 54% to 36% across allstates combined, in Bihar the fall was far less, dropping from 65% to 58% (and in Kerala from 66% to 33%). As a consequence ofhigh population growth rates, more people are below the poverty line today than in the 1950s. Table 4.1 presents estimates of theproportion of rural households living below the poverty line in Bihar, Kerala and across the country for selected years between19957/58 and 1993/94. The results for Bihar in particular are distressing. While the incidence of poverty has halved in Kerala andbeen reduced by one third across the country as a whole, in Bihar there has been little decrease over almost four decades.

Table 4.1. Proportion of Households Below the Poverty Line.India, Kerala and Bihar. Selected Years

(percent)

All India Kerala Bihar

1957/58 55.1 66.9 65.41963/64 48.5 63.2 55.01969/70 57.6 78.2 66.01977/78 50.6 52.7 66.21983 45.3 43.7 69.91988/89 39.6 38.9 58.61993/94 36.7 31.1 63.5

Source: G.Datt, Poverty in India and Indian States. IFPRI, Washington DC.Based on National Sample Survey results.

Recent Bank research has investigated the causes of differences between levels and changes in living standards and poverty acrossIndian states since the mid 1950s utilizing the results of the National Sample Surveys (Datt and Ravallion 1995). Higher growth ratesin farm yields, lower rates of inflation and higher growth in state development expenditures all led to higher rates of growth ofconsumption and poverty reduction. However, differences in the initial conditions of physical infrastructure and human resourcedevelopment, in particular female literacy, were also found to have significant effects on performance. For instance, the question isposed: how much of the difference between each state's and Kerala's rate of poverty reduction is attributable to differences in theirinitial conditions? In the comparison with Bihar, almost half of the differential in the decline in the poverty gap over a 35 year periodcould be attributed to differences in the initial level of human resource development.

Unless steps are taken now to expand primary schooling in Bihar, the gap between its literacy rate and that of other states will grow.Already, the literacy rate is second lowest (Rajasthan is the lowest) and the net enrollment ratio of 6-10 year olds (estimated at 50percent) is the lowest across all states. Children not in school tend to be female and poor males. Using enrollment data for 1992/93,there is an enormous 42 percentage point difference between the gross enrollment rate for boys and girls (compared to a nationaldifference of 22 percentage points), and a 27 point gap between children from families with per capita incomes of below Rs. 3,000and over Rs. 10,000 a year. Enrollment rates between children of landless wage earners and those from families with land differ by30 percentage points. There is a reasonable presumption that the expansion of primary schooling arising from the project will mostlybenefit poor children and particularly girls.

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Poverty in Bihar goes side by side with poor social indicators. Table 4.2 presents estimates of actual and desired fertility, maternaland child health and nutritional status for Bihar, Tamil Nadu (the state with the best indicator), the state with the worst indicator andfor India as a whole. On all indicators Bihar scores well below the average across all India. In three of the five indicators, the staterecords the worst situation across all states and in one other the second worst. Undoubtedly, the social and economic situation facingthe population of Bihar is dire.

Table 4.2. Selected Social Indicators:Bihar, Tamil Nadu and All India. 1992/93

Worst Indicator Bihar Best Indicator India

(i) Total fertility rate 5.2 4.1 2.1 3.7(ii) Ideal number of children 3.4 3.4 2.1 2.9(iii) Under 5 mortality 131.0 127.5 32.0 109.3(iv) All vaccinations 10.7 10.7 64.9 35.4(v) Severely undernourished 31.1 31.1 6.1 20.6

Source: India: National Family Health Survey 1992/93Note: (i) is rural women 15-49 years; (ii) is ever married women; (iii) is per thousand births;

(iv) is percentage; and (v) is percent below 3 standard deviations weight for age.

Table 4.3. Total Fertility Rates and Ideal Numberof Children by Women's Education

Total Fertility Ideal Children

Illiterate 4.3 3.6Less than middle 3.8 3.1Middle complete 2.7 2.7Secondary + 2.6 2.5

Table 4.4. Infant and Child Mortality by Woman's Education

Infant Child Infant VaccinationsMortality All None

Illiterate 103.1 49.5 5.4 61.7Less than middle 80.1 28.6 21.1 32.6Secondary + 54.1 5.7 39.6 16.7

Note: The rates for mortality are per thousand and for vaccinationspercent.

Table 4.5. Child Nutritional Status by Mothers Education(percent)

Severely MalnourishedWeight for Age Height for Age

Illiterate 33.5 42.2Less than middle 25.7 32.4Middle complete 19.3 31.2Secondary + 19.1 24.7

Annex 4Page 4 of 7

While the social indicators are generally very poor across the population of Bihar, schooling has a strong effect on an individual'ssocial behavior affecting fertility, health and nutritional outcomes as Tables 4.3, 4.4 and 4.5 demonstrate. Both total fertility anddesired number of children decrease by educational attainment with large reductions for both literacy and the completion of middle(upper primary) school. Again, the incidence of maternal and child mortality are decreased substantially through higher levels ofschooling, and infant vaccinations are increased substantially. The most significant reduction in malnutrition is associated with thefirst level of education. The impact of schooling on behaviors which affect social outcomes is significant in Bihar, as elsewhere.However, for the effect of each level of schooling to be maximized requires a much wider educational coverage.

Increasing internal efficiency: A principal focus of the DPEP program in general, and the project in particular, is to increase thequality of schooling. This is intended to result in a higher quality education for graduating students. In addition, the expectation isthat a higher quality schooling will increase the perceived returns and induce an increasing number of enrolled students to remain atschool and not to drop out. Official dropout rates over the primary I-V cycle in India average 35 percent. Repetition rates are alsohigh with an average of around 30 per cent of students repeating at least one year. In Bihar, the dropout rate is estimated to be around56 percent (Mehta 1995). Roughly 35 percent of dropouts occur during or at the end of the ffrst year, with a further 15, 12, 11 and 10percent a year in future years. The repetition rate has been estimated to be between 3 and 8 percent a year (Mehta 1995). Using thesimulation model outlined by Cuadra and Fredriksen (1992), these rates imply that, in Bihar, for every 1000 students entering the firstgrade, only 404 graduate from the five-year cycle. To produce these 404 graduates, the system uses an amount of resources equal to3263 pupil-years or 8.1 years per graduate of a five year cycle. This implies that over 60 percent more resources are being used thanwould be necessary with no repetition or dropout. Expenditure on elementary education (grades I - VIII) in 1995/96 was Rs. 1297crores. For the primary cycle I -V, expenditure can be estimated at 60 percent of this total - Rs. 780 crores. With no repetition ordropout, expenditure could have been around Rs. 490 crores, implying a saving of Rs. 290 crores or US$83 million. The cost of theproject is US$198 million. Around 40 percent of the expenditures will be used to increase new enrollments. Another 40 percent willbe utilized to increase the retention rates and enhance learnig achievement. The rest (about 20 percent) will be utilized for improvingthe state and district capacity to manage primary education. The first two sets of expenditures will both increase the educationaloutcomes of those who graduate and decrease dropouts and repetition. Reducing dropout and repetition rates by half might result insavings of the equivalent of US$40 million a year.

Effective and cost-effective school-level interventions: As part of the requirement for involvement in the DPEP, state governmentsare required to carry out baseline surveys of primary pupils' learning achievement and of the factors influencing achievement Aresearch program has assessed the impact of a variety of personal, household and school related factors on achievement. Animportant overall conclusion from the data analyzed for districts in eight states is that the factors judged important in one district or inone state are not necessarily important in all districts or states. However, multivariate analysis which controlled for studentbackground found that the most consistently significant school-level characteristics are related to the opportunity to learn. Studentachievement was higher in schools with more total instructional time and more instructional time on the subjects tested and whereboth students and teachers attended regularly. The school's academic climate was also found to be important. In addition, physicalfacilities, the provision of appropriate instructional materials for both teachers and students and the hiring of better educated teachersall had positive effects.

An attempt was also made to assess the relative cost effectiveness of a number of interventions. The difficulties of undertaking suchanalyses are well known and, at most, the results are only meaningful for small variations in mean expenditures per child. Among themost cost effective interventions identified by the analysis are increased floor space per child, packages of instructional materials,increasing the number of years of education prior to teacher training and increased time allocated to language classes. Again,however, variations between districts, and particularly between states, are quite large. Packages of interventions identified locally tomeet the needs of specific schools are more likely to be cost-effective than uniform packages. What is effective in a state with agenerally high level of educational development may be different to what is effective in a state with a low level of educationaldevelopment. One of the strengths of the DPEP, and of this project, is that the development of the broad strategies is theresponsibility of district level personnel while many of the specific interventions and expenditures will be decided upon more localcommunities, village education committees and headteachers.

Assessment of GOB finances and implications for the DPEP m project. Analysis of Reserve Bank of India (RBI) reports onpublic expenditures in Bihar show that:

(a) revenue receipts increased from 16.8 to 18.6 per cent of GSDP between 1985/6 and 1992/93, falling back to 16.7 per cent in1995/96. The cause of the recent fall was mainly a decrease in grants from the Center;

Annex 4Page 5 of 7

(b) revenue expenditures increased from 14.7 to 20.5 percent of GSDP between 1985/6 and 1992/3 falling back to 17.6 percentin 1995/96. Most of the fall occurred under the category Economic Services, mainly for rural development and energy;

(c) the revenue budget was in surplus until 1989/90. The deficit peaked at 3.0 per of GSDP in 1991/92 and had fallen to 0.9percent by 1995/96;

(d) net capital expenditure was 4.4 percent of GSDP in 1985/86 peaking at 5.8 percent in 1987/88 and falling to 1.3 percent in1995/96;

(e) the overall fiscal deficit was equal to 2.3 percent of GSDP in 1985/86. It rose to 6.0 percent in 1990/91. Since then it hasfallen each year and stood at 2.2 percent in 1995/96. This is below the average for 14 major states of 3.2 percent; and

(f) the primary account (obtained after subtracting interest payments from expenditures) was in deficit until 1992/93 but hasbeen in surplus in subsequent years to the equivalent of 1.6 percent of GDP in 1995/96.

In spite of the small fiscal deficits and primary account surplus' which seem to suggests a healthy fiscal situation, further analysisdispels such complacency. The level of outstanding debt as a share of GSDP is 35.7 percent, which is almost twice the overall levelacross 25 Indian states. Interest payments have more than doubled as a share of GSDP over the past decade from 1.6 to 3.8 percent.As a share of tax revenues and state non-tax revenues, they have been equal to over 27 percent in each of the past three yearscompared to just 13 percent in 1988/89.

The fiscal deficit has been contained by measures which are likely to be detrimental to the further development of the economy andwhich cannot be taken much further. Development revenue expenditures (on social and economic services) as a share of total revenueexpenditures have fallen since 1988/89 from 69 to 58 percent while interest payments have increased from 12 to 22 percent. Inconstant prices, development expenditures increased by just 7.3 percent over the seven year period from 1988/89 - well below theincrease in population of around 15.5 percent. Expenditures per capita are falling by around one percent a year. Developmentexpenditures on economic services have fallen from 28 percent of total revenue expenditures to 20 percent of the total. Majorchanges to revenues and expenditures have occurred since 1992/93. After increasing in each of the previous seven years (at least),their share in GSDP has been falling. On the revenue side this has resulted from slower growth in grants from the center, and to asmaller extent, a reduction in the growth rate of the state's own tax revenues. At constant prices there has been no increase inrevenues since 1992/93. To compensate for this reduction and simultaneously reduce the fiscal gap, two major steps have been taken.First, on the revenue account there has been an absolute reduction in expenditures on economic services which translates to a 40percent decrease in its share of GSDP (down from 6 percent to 3.5 percent in just three years) and a decrease of 14 percent in theshare of social services. Within economic services, there have been particularly substantial reductions for rural development andpower. The second route taken to contain the fiscal deficit has been to reduce expenditure on capital outlays. The capital share oftotal expenditures has been falling over the past decade, and not just since 1992/93. The share fell from 18.4 percent in 1985/86 to9.6 percent in 1992/93 and to 7.9 percent in 1995/96. As a share of GSDP capital expenditures fell from a peak of 5.8 percent in1987/88 to 1.3 percent in 1995/96.

Revenue expenditures at constant prices on social services since 1985/86 have demonstrated two separate patterns over the pastdecade. Between 1985/86 and 1990/91 they increased by 40 percent at constant prices and from 6.1 to 7.3 percent of GSDP. Sincethen, real expenditures have fallen by 6 percent and their share of GSDP has been reduced to 6.3 percent. For education, expendituresincreased from 3.6 percent of GSDP in 1985/86 to 4.6 percent in 1990/91, falling back to 3.9 percent in 1995/96. In the earlier fiveyear period real expenditure increased by 34 percent and in the later period fell by 6 percent. As shares of total revenue expenditures,social sector spending fell from 41 to 36 percent and education spending from 25 to 22 percent. As described above, capitalexpenditures on the social sector in general, and education in particular, have been negligible in recent years.

The future. Per capita own-tax revenues in Bihar are the lowest across all states, and well below the next lowest levels in Orissa andUttar Pradesh. At constant prices they have not increased since 1992/93. With grants from the center in 1996/97 ahnost 25 percentbelow the level in 1993/94 (at current prices), the overall future revenue position appears unhealthy. Adjustmnent has so far been onthe expenditure side of the accounts resulting in an almost halving of expenditures on economic services as a share of GSDP and acontinuing sharp fall in capital expenditures. In the social sectors such expenditures are now virtually non-existent.

To what extent can these overall responses to revenue trends and interest payment obligations continue? With real interest rates ofaround four percent, even a constant ratio of debt to GDSP will increase the share of interest in a pool of revenues which shows littlegrowth. In addition, even a constant size of government labor force (the increase 1991-95 was 5.2 percent) generates an increased

Annex 4Page 6 of 7

wage bill as workers move up salary scales. Bank state finance studies have assumed an annual four percent real growth in the wagebill. In the absence of increases in revenues, the share of development expenditures and capital expenditures in GSDP and totalexpenditure would have to fall further. The growth of real development expenditures which have been increasing by less than onepercent a year since 1988/89 would need to be further reduced. Since salaries of existing employees are relatively protected,resources for additional employees, such as teachers, and non-salary items would be particularly squeezed. How much further can thecapital budget be reduced? Outlays at current prices in 1987/88 were Rs. 625 crores and just Rs. 345 crores in 1994/95. Suchexpenditures have virtually disappeared for all but irrigation, water supply and sanitation and a small allocation for roads.

Counterpart funding. The data on education expenditure in Bihar presented by the RBI in its surveys of state finances differsomewhat from those received directly from the state government. Table 4.6 presents both sets of data covering the period 1991/92 to1995/96 plus state government data for elementary schooling.

Table 4.6 Estimations of Education Expenditure, Bihar1990/91 - 1995/96

(Rs. crores)

Total RBI State GovernmentRevenue Exp Education Education Elementary

1990/91 4890 1210 1131 7491991/92 5740 1270 1143 7521992/93 6570 1330 1411 9091993/94 7320 1400 1529 9921994/95 7730 1680 1646 11011995/96 8170 1830 1891 1308% Growth 67 51 67 74

According to RBI data, total education expenditure fell from 25 percent to 22 percent of total revenue expenditure between 1990/91and 1995/96 and increased by an average of 10 percent a year in current prices. State govermnent data suggest that the share hasremained at 23 percent during the period and that growth has averaged around 13 percent a year. The government expendituredeflator increased by 61 percent over the same period. RBI data, therefore indicate a small decline in real expenditure while stategovernment data indicate a real increase of around one percent a year. Expenditure on elementary education has increased at aslightly higher rate than for education as a whole taking 69 percent of the total in 1995/96 compared to 66 percent in 1990/91. Realgrowth has been around 2.5 percent a year. Taking a longer view, between 1985/86 and 1995/96, real expenditure on educationincreased by an annual average of 3.5 percent. Expenditure on primary schooling (grades I-V) is roughly 60 percent of all elementaryeducation expenditures - or Rs. 785 crores in 1995/96.

The project has a total cost of US$199.7 million over five years. The Bihar Government's obligations under the DPEP Guidelines areto contribute with 15 percent of total project expenditures. The annual state project contribution would average about US$7.6 million(Rs. 26 crores), representing a 3.4 percent increase over the 1995/96 level of total primary education expenditure (2 percent of totalelementary education expenditure). Although the project districts cover under half of the population (48 percent), maintenance ofpast trends in education expenditure should be sufficient to ensure that counterpart funding would be manageable. However, theprovision of counterpart funding will not be the only additional financial obligation for the state government. In the project districtsthere are 10,290 teacher vacancies, resulting from retirements not being filled since 1993, which are to be filled as a condition of theproject. This would add around Rs. 50 crores a year to the budget. Filling the 22,000 teacher vacancies in non-project districts wouldadd a further Rs. 110 crores a year. In all, GOB will need to allocate an extra Rs. 186 crores a year during project implementation(Rs. 26 crores as counterpart funding and Rs. 160 crores for filling up teacher vacancies), which is equivalent to around 14.3 percentof current expenditure on elementary education (about 24.3 percent of current primary education expenditures). However, evidencehas been presented that, in spite of the state's fiscal position, the Ministry of Finance of GOB has authorized all the vacant primaryeducation teaching posts to be advertised and filled by the Bihar Public Service Commission, and the GOB has assured that postingwill be completed by January 1, 1999 (see paras. 4, 20, 21 and 24(g) and Annex 2).

Sustainability. Sustaining project activities following project completion in March 2003 will require incremental expendituresestimated at Rs 49.6 crores (US$14.2 million equivalent). This is equal to 6.4 percent of the 1995/96 expenditure on primaryeducation and should not, alone, be problematic. More of an issue is the ability of GOB to sustain the overall system with only aminimal level of teacher vacancies. Without this, the long run benefits of the project would not accrue. The overall trends in public

Annex 4Page 7 of 7

finances in Bihar are disturbing. Both revenue receipts and expenditures have been falling as a share of state domestic product anddevelopment expenditures per capita have also been declining, though more in economic services than in social services. Interestpayments are equal to 27 percent of all tax revenues and state non-tax revenues. The ability of GOB to sustain both the existingeducational base and project activities will depend on future developments in its overall public finances, including center-stateresource transfers. The commitments given by GOB during project preparation, the intention of GOI to ensure that total educationexpenditures increase from 3.7 to 6 percent of GDP by the end of the Ninth Plan and the recent directive of the Supreme Court togovernment to implement universal elementary education, suggest the financial risk of the project is worth taking in the context of astate which has the highest incidence of poverty and severe child malnutrition and the second highest level of illiteracy and under fiveyear-old children mortality across all states. The agreement by GOI and GOB to prepare modalities for ensuring the post-projectsustainability of the capacities and services developed under the project and to discuss these with IDA during the second in-depthreview in December 2001 (see paras. 4, 20, 21 and 24(b)) should also increase the likelihood of project and system sustainability.

Annex 5Page I of 1

Annex 5

Table 5.1 Financial Summary

Operational Period (Calendar Year of Expense)1998 1999 2000 2001 2002

Project Costs (US$ Million, IncludingContingencies)

Investment Costs 24.1 39.5 30.6 15.9 14.3

Recurrent Costs 11.7 16.4 15.8 16.0 15.4Total 35.8 55.9 46.4 31.9 29.7

Financing Sources (% of Total Costs)IDA 85 86 75 68 57UNICEF 4 3 5 7 8Govemment of India 11 11 20 25 35

Total 100 100 100 100 100

Annex 6Page I of 9

Annex 6

Procurement Arrangements and Allocation of the Credit Proceeds

6.1 The procurement plan reflects the widespread and decentralized nature of the activities that will be conducted by the stateand the 17 project districts throughout the five year life of the Credit. Many of the procurement actions in support of project work donot lend themselves well to aggregation for bidding as large single contracts. Civil works, for example, is dominated by the small-scale: (i) construction of about 2,350 new two-classrooms schools and about 4,400 additional classrooms in existing schools; (ii)rehabilitation of about 300 existing classrooms; and (iii) additions of about 8,100 wells and 7,600 toilets at thousands of schoollocations. Likewise, the purchases of consumables, education and teaching materials amount to about US$41.7 million in aggregate,but over 80 percent of it is comprised of small scale purchases of easily acquired local materials for both new and existing schools inthe project districts, estimated to cost less than US$15 per classroom each year.

6.2 Table 6A summarizes the project items, their related cost estimates and proposed methods of procurement. Table 6Bsummarizes the threshold for procurement methods and prior review. Project-related procurement of goods and works would followprocedures acceptable to IDA using National Competitive Bidding (NCB) documents (already approved by IDA for DPEP I and II)and National Shopping Procedures acceptable to the Association. Project-fnanced consultants would be recruited according toGuidelines on the Use of Consultants by World Bank Borrowers. Procurement of equipment, vehicles, furniture, books andeducational materials would be bulked to the extent possible and would generally be procured as follows: (a) individual contractsestimated to exceed US$300,000 would be procured using ICB (although there are no plans at present for individual purchases greaterthan US$300,000); (b) individual contracts with an estimated value between US$50,000 and US$300,000 would be procured usingNCB; and (c) individual purchases of off-the-shelf items through rate contracts or prudent shopping procedures would be acceptablein packages of less than US$50,000 up to the aggregate limits as outlined in Table 6A. All the costs shown in parenthesis belowinclude contingencies.

6.3 Civil Works Construction and Maintenance (US$46.4 million). Over eighty-five percent of civil works would be forsmall, scattered construction of school classrooms, and for classroom rehabilitation and repair, with an average estimated base costper primary school site of US$8,000. All such school and classroom construction and rehabilitation/repair estimated to cost equal orless than US$20,000, up to an aggregate not exceeding US$37.1 million, would be carried out using one of following three methods:(i) community construction; (ii) prudent shopping with solicitation of price quotations from at least three qualified bidders eligibleunder the guidelines; or (iii) Force Account as a last resort, and usually in the case of repairs to existing facilities, in a mannersatisfactory to IDA (Force Account method will be limited to an aggregate ceiling of not more than US$2.3 million which is roughly 5percent of all civil works costs). Generally, the day-to-day management and supervision of construction would be done by a cadre ofengineering supervisors hired (under terms of reference acceptable to IDA) by the DLOs. Civil works at BRCs buildings or otherfacilities estimated at more than US$20,000 per site, up to an aggregate not exceeding US$9.3 million, would be carried out throughNCB procedures acceptable to IDA under the management of a cadre of engineers hired by the SLO. A summary of the categories ofcivil works to be constructed under the project is shown in the table 6A.

6.4 Furniture (US$1.9 million) and Equipment (US$2.8 million). Furniture and equipment would be purchased on an annualbasis in accordance with the phasing of project activities. Equipment consists of office and audio visual equipment (computers, TVs,VCRs, typewriters) with unit costs less than US$10,000, and small items (science laboratory equipment, science kits) with unit costsof less than US$500. Because of the phasing of the project and the diversity of items to be procured, ICB procedures would generallynot be practicable. Contracts for equipment or furniture valued at more than US$50,000 per contract, up to an aggregate notexceeding US$0.6 million equivalent for furniture and US$0.8 million equivalent for equipment, would be made through NCBprocedures acceptable to IDA. Purchases of furniture and equipment totaling US$50,000 or less per contract, up to an aggregate notexceeding US$1.3 million equivalent for furniture and US$2.0 million equivalent for equipment, or about 70 percent of total furnitureand equipment costs, may be awarded on the basis of rate contract or prudent shopping with solicitation of price quotations from atleast three qualified vendors.

6.5 Vehicles (US$0.9 million). The majority of costs are for 4 wheel drive vehicles, automobiles and vans to be used at the SLOand DLOs headquarters. Over the 5 year period of the project, plans call for the acquisition of some 81 vehicles. Experience in DPEPI and II has shown that since competitive bidding of small lots as either ICB or NCB has not yielded adequate vendor interest, theprogram does not lend itself to ICB. Purchases of like types of vehicles would be bulked whenever possible, but the timing of thepurchases will be related to the readiness of the districts, and it is expected that the purchase contracts would be valued at US$100,000or less. For purchases not exceeding US$100,000 equivalent, procurement will be through national rate contracts entered into by the

Annex 6Page 2 of 9

Directorate General of Supplies and Disposals (DGS&D) or local shopping procedures, comparing price quotations from at least threequalified suppliers to ensure competitive prices up to an aggregate amount not exceeding US$0.9 million. Bulked purchasesestimated to cost in excess of US$100,000 would be procured through ICB.

6.6 Educational and Teaching Materials (US$22.1 million). Educational and teaching materials would be purchasedthroughout the life of the project in accordance with the phasing and entry of each participating district into the DPEP III Program.These educational materials would be in the district's local language, and are available from local manufacturers. Efficientpurchasing, storage and distribution of these types of materials to over 31,500 school sites in the 17 Project districts does not lenditself to bulking of requirements for ICB. With some exception for common reference books or teaching materials, bulkingrequirements for purchase through NCB is also not a practical solution. Nevertheless, purchases would be bulked whenever possibleand procured at the state level in contracts valued at more than US$50,000 equivalent through NCB procedures acceptable to IDA foran aggregate amount not exceeding US$4.4 million equivalent. For small purchases equal of less than US$50,000 equivalent,procurement will be through: (i) national rate contracts entered into by the DGS&D; or (ii) local shopping procedures, comparingprice quotations from at least three qualified suppliers to ensure competitive prices up to an aggregate amount not exceeding US$17.7million equivalent. This amounts to local shopping procedures totaling approximately $210,000 per district per year.

6.7 Books and libraries (US$23.6 million). Provision of textbooks comprise the bulk of this category (US$ 18.0 million), andlike the teaching materials, they would also be purchased throughout the life of the project in accordance with the phasing and entryof each participating district into the DPEP III Program. Textbooks financed under the project are to be purchased for freedistribution to SC/ST and girls in project districts. Since these textbooks are available only from the BSTPC, which is the soleauthorized publisher and copyright holder of textbooks in the state, there is no alternative source for procuring of textbooks for theproject except through direct contracting with BSTPC. Nevertheless, to promote competition and efficiency, the project authoritieshave agreed with IDA that for textbooks being provided to the project the BSTPC would obtain printing services through competitivebidding procedures consistent with IDA procurement guidelines. However, it was recognized there was a practical problem withregard to the purchasing of textbooks for the first year of the project, since there is insufficient time for BSTPC to adopt newprocedures for printing services and conduct actual tendering for the new textbooks for delivery by the start of the new school year inJanuary 1998. Therefore, as a one time exception, IDA will permit direct contracting with BSTPC in an amount of up toUS$3,000,000 equivalent for production of textbooks in which BSTPC would be allowed to engage private printing firms utilizing itsexisting contracting procedures. It was further agreed as a condition of disbursement that no Credit withdrawals would be made withrespect of payments for the procurement of textbooks for the project over US$3,000,000 until GOB furnishes evidence satisfactory toIDA that BSTPC has adopted and followed competitive bidding procedures acceptable to IDA for the procurement of printingservices for the textbooks financed under the Credit.

6.8 Other purchases of books in this category amount to US$5.6 million and would be categorized as: (a) NCB (US$2.0 million);(b) national shopping procedures (US$3.1 million) for stocking of libraries at schools and teacher training centers; and (c) directcontracting (US$0.5 million) for books and library material that may be available from only one source (other than BSTPC).

6.9 Training and Workshops (US$11.5 million). This category includes expenses related to the preparation and delivery oftraining programs for master trainers, teachers, school principals and other project staff over the life of the project in respect ofseminars, workshops, fellowships, travel and subsistence allowances.

6.10 Consulants and Studies (US$22.6 million) and Honorarium ($US4.6 million). Consultants required under the projectwill be hired following procedures prescribed in the Guidelines on the Use of Consultants by World Bank Borrowers. Documentsused for inviting proposals, terms of reference for all consultancies and single source contracts will be subject to prior review for allcontracts valued at US$200,000 equivalent or more awarded to firms and US$50,000 equivalent or more to be awarded to individuals.The vast majority of these contract arrangements will be for individual service delivery type agreements at costs not exceedingUS$5,000 per annum to be selected under standard terms of reference (including job descriptions, minimum qualifications and termsof employment) already approved by IDA for DPEP I and II.

6.11 Incremental Operating Costs (US$5.6 miUion) and Maintenance (US$0.9 million). Incremental operating costs andmaintenance for vehicles and equipment items estimated to cost less than US$20,000 per contract up to an aggregate amount ofUS$6.5 million would be carried out using one of following four methods: (i) prudent shopping with solicitation of price quotationsfrom at least three qualified bidders eligible under the guidelines; (ii) direct contracting; (iii) rate contracts to qualified contractors orregistered NGOs or other beneficiary associations; or (iv) Force Account as a last resort in a manner satisfactory to IDA. The totalamount for this category amounts to less than US$77,000 per district per annum.

Annex 6Page 3 of 9

6.12 IDA Review. The first three procurement contracts for goods and works regardless of value, and thereafter each contract forcivil works and goods estimated to cost the equivalent of US$300,000 or more will be subject to prior review by IDA. Each contractfor vehicles estimated to cost the equivalent of US$100,000 or more will also be subiect to prior review by IDA. All other contractsfor civil works or goods would be subject to random post review in the field by IDA visiting missions. The standard model contractwith BSTPC concluded after March 31, 1998, will be subject to prior review by IDA on an annual basis prior to execution All othercontracts for textbooks with BSTPC would be subject to random post review in the field by IDA visiting missions. Contracts for thehiring of consulting firms costing US$200,000 equivalent or more and contracts for hiring individual consultants costing US$50,000equivalent or more would be subject to prior review and approval by IDA. Approximately 20% percent of the value of contractscovered by the IDA Credit would require priur review, which is a reflection of the decentralized nature of the work and substantialreliance on Community Construction of Schools and National Shopping Procedures for small goods purchases throughout the life ofthe project. This relatively low percentage is considered satisfactory since GOB will have gained experience in procurement fromDPEP I and II and other previous Bank projects.

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Table 6A: Procurement Arrangements&(Total Costs in US$ Millions)

Prourement Metbod

NatlonalCompetive Nations Other Consuling

Biddina Shannina Metbods Benlices N.B.F. Total

CIVIL WORKSCivil Works 9.3 7.0 30.1 - - 46.4

(8.4) (6.3) (27.3) (41.9)

GOODSFurniture 0.6 1.3 - - - 1.9

(0.5) (1.2) (1.7)

Equipment 0.8 2.0 - - 2.8

(0.8) (1.8) (2.5)

Vehicles - 0.9 - - - 0.9

(0.9) (0.9)

Books & Libraries 2.0 3.1 18.5 - - 23.6(18.2) (2.8) (0.4) (21.4)

Educational & Teaching Materials (incl. contingencyfumds at BRC & school levels) 4.4 17.7 - - 0.0 22.1

(2.9) (11.5) (14.3)

TRAINING AND CONSULTANTSProject Preparation & Implementation (includingWorkshops & Fellowships) - - 11.5 - 9.7 21.2

(11.5) (11.5)

Insitutional Development (includes Local and ForeignConsultant type contracts, Studies) - - - 22.6 0.2 22.8

(22.6) (22.6)

MISCELLANEOUSSalaries of Additional Staff & Project Management - 46.9 - - 46.9Team (28.5) (28.5)

Honorarium (e.g. for ECE program workers) - - 4.6 - - 4.6

(2.8) (2.8)

Vehicle & Equipment Maintenance - 0.4 0.4 - - 0.9(0.3) (0.3) (0.5)

Incremental Operating Costs (includes officeconsumables and expenses) - 2.8 2.8 - - .5.6

(1.7) (1.7) (3.4)

TOTAL 35.2 35.2 96.8 22.6 10.0 199.7(30.7) (26.3) (72.4) (22.6) (152.0)

NOTES: /a Figures in parenthesis are the respective amounts financed by IDA

Annex 6Page 5 of 9

Table 6B: Thresholds for Procurement Methods and Prior ReviewExpenditure Contract Value Procurement Contracts Subject to

Category (Threshold) Method Prior Review

1. Works

Civil Works Civil works estimated to cost the equivalentof US$20,000 or less per contract, up to anaggregate not exceeding US$37,200,000(including Force Account) may be executed by:

(i) Community construction methods; Direct Contracting Post review only

(ii) on the basis of comparison of price Solicitation of 3 Bids Post review onlyquotations obtained from at least three qualifiedcontractors eligible under the guidelines; or

(iii) by Force Account up to an aggregate not Force Account Post review onlyexceeding US$2,300,000, usually in the case ofsmall repairs, and as a last resort in a mannersatisfactory to the Association.

Civil works estimated to cost more than the National Competitive First three works contractsequivalent of US$20,000 per contract, up to an Bidding regardless of value and allaggregate not exceeding US$9,300,000. contracts equal or more than

US$300,000 by prior review inaccordance with paragraphs 2 and3 of Appendix I to the Guidelines.All others by post review.

2. Goods

(a) Furniture, Equal or less than US$50,000 per contract, up National Shopping Post review onlyequipment, to an aggregate not exceeding US$21,000,000 Procedures (includeseducational and equivalent. DGS&D Rateteaching materials Contracts)

More than US$50,000 per contract. National Competitive First three goods contractsBidding regardless of value by prior review

in accordance with paragraphs 2and 3 of Appendix 1 to theGuidelines. All others by postreview.

Equal to or more than US$300,000 per contract. International Prior ReviewCompetitive Bidding

(b) Books Equal or less than US$50,000 per contract, up National Shopping Post review onlyto an aggregate not exceeding US$3,100,000 Proceduresequivalent.

Equal or less than US$50,000 per contract, up Direct Contracting On an annual basis, prior reviewto an aggregate not exceeding US$18,500,000 of standard model contract withfor books available from only one source. BSTPC concluded after March 31,(Note that for textbooks purchased through 1998. All contracts with othersBSTPC, the first US$3,000,000 is allowed firms as post review.through BSTPC's existing contractingprocedures for printing services. Beyond US$3million, condition of disbursement requiresBSTPC to adopt procedures acceptable to IDAfor procurement of printing services.)

Annex 6Page 6 of 9

More than US$50,000 per contract. National Competitive First three goods contracts by priorBidding review in accordance with

paragraphs 2 and 3 of Appendix Ito the Guidelines. All others bypost review.

Equal to or more than US$300,000 per contract. National Competitive Prior ReviewBidding

(c) Vehicles Less than US$100,000 per contract, up to an National Shopping Post review onlyaggregate not exceeding US$900,000 Procedures (includesequivalent. DGS&D Rate

Contracts)

More than US$100,000 per contract. International Prior ReviewCompetitive Bidding

3. Services

(a) Contacts for More than US$100,000 per contract. QCBS. (Short List Prior review of all consultantProcurement Agents, Comprising Domestic contracts shall be governed by thepublicity, training Firms only applies for provisions of paragraphs (i), (ii)and workshops, contracts less than and (ii) below:management US$200,000). (i) with respect to each contrcinformation systems, for the employment of consultingeducation research, firms estimated to cost theIEC, and NGO equivalent of US$200,000 orservices.euvln f S2000o

services. more, the procedures set forth inparagraphs 1, 2 and (other than thethird subparagraph 2(a)) and 5 ofAppendix I to the ConsultantGuidelines shall apply.

(ii) With respect to each contractfor the employment of consultingfrms estimated to cost theequivalent of US$100,000 ormore, but less than the equivalentof US$200,000, the procedures setforth in paragraphs 1, 2 (Otherthan the second subparagraph ofparagraph 2(a)) and 5 of AppendixI to the Consultant Guidelinesshall apply.

(iii) With respect to eachcontract for the employment ofindividual consultants estimated tocost the equivalent of $50,000 ormore, the qualifications,experience, terms of reference andterms of employment of theconsultants shall be furnished tothe Association for its prior reviewand approval. The contract shallbe awarded only after the saidapproval shall have been given.

Annex 6Page 7 of 9

US$100,000 or less per contract, up to an Single Source Selection - Same prior review limitsaggregate not exceeding US$21,600,000 (acceptable for tasks as in paragraph 3(a) aboveequivalent. representing a natural

continuation ofassignment, when rapidselection essential, whenonly one firm is qualified,or for small individualconsultant contracts).

(b) Honorarium, US$5,000 or less per contract, up to an Hiring of Service Post review onlyservices delivery aggregate not exceeding US$4,600,000. Delivery Contractors -contractors (applies to large

numbers of servicedelivery contractorscontemplated underproject such as ECEcentre workers, andsmall individualconsultant contracts).

(c) Individual US$10,000 or less per contract. Hiring of Individual Post review onlyConsultants Consultants - (applies

to individualconsultants forinstitutionalstrengthening procuredin accordance withparagraphs 5.1 through5.3 of the Consultantguidelines).

(d) Training, (Normal Government procedures for Not applicable Not applicableworkshops & travel and per diem allowance for individualsfellowships and incidental expenses associated with the

training being conducted. Estimated aggregateamnount US$11,500,000 equivalent - primarilyas TA/DA expenses).

4. Miscellaneous

(a) Incremental Incremental operating costs and maintenanceoperating costs and estimated to cost the equivalent of US$20,000maintenance or less per contract, up to an aggregate not

exceeding US$6,400,000 may be executed by:

(i) direct contracting up to an aggregate Direct Contracting Post review onlynot exceeding US$2,000,000; or

(ii) on the basis of comparison of price Solicitation of 3 Bids Post review onlyquotations obtained from at least three qualifiedcontractors eligible under the guidelines up toan aggregate amount not exceedingUS$3,400,000; or

(iii) by Force Account, up to an aggregate not Force Account Post review onlyexceeding $1,000,000, as a last resort and in amanner satisfactory to the Association.

Annex 6Page 8 of 9

(b) Salaries estimated (Normal Government deputation or staff hiring Not applicable Not applicableat US$46,900,000 practices)

Annex 6Page 9 of 9

Table 6C: Allocation of Credit Proceeds

Expenditure Category Amount in IDA FinancingUS$ Million Percentage

* Civil Works US$37.5 90%

* Equipment, vehicles, books, teaching materials, and US$26.3 100% of foreignfurniture expenditures, 100% of

local expenditures (ex-factory cost) and 80% oflocal expenditures forother items procured

Items (including contingencies) locallyUS$1.7 FurnitureUS$2.5 EquipmentUSS0.9 Vehicles

US$24.2 Books & Libraries

* Training, workshops, fellowships, and consultant services US$32.3 100%

Items (including contingencies)US$22.6 ConsultantsUS$11.5 Staff Training (Incl TAIDA)

3 Incremental operating and maintenance costs US$42.2 80% of local expendituresincurred until March 31,2000; 55% ofexpenditures incurredfrom April 1, 2000 untilMarch 31, 2002; and 35%of expenditures incurredthereafter.

Items (including contingencies)US$28.5 Salaries ofAdditional StaffUS$14.9 Incr Opn Costs (incl BRC, Office)USS0. 7 Operation & Maint of Vechicles, Equipment & BuildingsUSS2.8 Honorarium

* Unallocated (summation of contingencies) US$13.7

TOTAL US$152.0

I

I

Annex 7Page I of 1

Annex 7

Project Processing Budget and Schedule

A. Project Budget (US$000) Planned Actual(At final PCD stage)

360.5 303.9

(Prior to negotiations)421.0 326.4

B. Project Schedule Planned Actual(At final PCD stage)

Time taken to prepare the project (11 months)First Bank mission (identification) 07/22/1996 07/22/1996Appraisal mission departure 09/24/1997 07/20/1997Negotiations 01/02/1998 09/15/1997Planned Date of Effectiveness 06/01/1998 04/01/1998

Prepared by: Bihar Shiksha Pariyoqna Parishad (State Implementation Society - SIS) ofGOB under the general coordination of the DPEP Bureau of the Departmentof Education of the Ministry of Human Resource Development of GOI

Preparation assistance: Japanese Grant (TF022582); andBEP Project Funds (this project is being financed by GOI, GOB and UNICEF)

Bank staff who worked on the project included: Juan Prawda (Senior Education Specialist, SASED, TaskManager), Audrey Aarons (Education Specialist, SASED), Kevin Casey (Senior Implementation Specialist,SASPH), Keith Hinchliffe (Senior Economist, SASED), N.K. Jangira (Education Specialist, SACIF), V.J.Ravishankar (Economist, SACIF), Sam Thangaraj (Social Development Officer, SACIF), AdriaanVerspoor (Education Adviser, SACIF), Roger Bonner (Consultant, Civil Works Specialist) and PhilipCohen (Consultant, Learning Materials Specialist). Margaret Png and Salman Salman (LEGSA), CecilPerera (LOAAS) and Agustin Litvak (SARPS) assisted the team prior and during negotiations. DavidHarding (Chief Education, UNICEF-Delhi) and Tejinder Singh (Education Project Officer, UNICEF-Patna-Bihar) participated as observers throughout the entire project preparation cycle. Jacob Bregman(LASHC, formerly at SAIPH), Bruno Laporte (HDDED) and Jamil Salni (LASHC) acted as peerreviewers. Susan Hirshberg, Mark Schlagel and Gertrude Stubblefield (SASED) assisted in preparing andediting the document. Sudesh Ponnappa (SACIF) assisted in the mission's preparation. At the time of thePAD Review Meeting, and prior to the reorganization of the South Asia Region, the project was endorsedin the South Asia Country Department II (Bhutan, India, Nepal) by Richard Skolnik, Division Chief,Population and Human Resource Division; Kazuko Uchimura, Project Adviser; Robert S. Drysdale,Director, South Asia Country Departnent II and Edwin R. Lim, Director, Resident Staff in India (currentlyDirector, SACIN). After the reorganization, the project was also endorsed by Ralph Harbison, SectorManager (SASED).

Annex 8Page I of I

Annex 8

Documents in the Project File

A. Project Implementation Plans

1. Third District Primary Education Programme. Project Implementation Plan. Bihar. August 1997

2. Third District Primary Education Programme. Transition Plan. Bihar. May 1997

3. Third District Primary Education Programme. Management Plan. Bihar. March 1997

4. Third District Primary Education Programme. Annual Working Plans and Budgets for the Districts of: Bhojpur; Bhagalpur;Chatra; Darbhangal; Dumka; East Singhbhum (Jamshedpur); Gaya; Hazaribagh; Munger; Muzaffarpur; Purnia; Ranchi;Rohtas; Sitamarhi; Vaishali; West Champaran; and West Singhbhum (Chaibasa). May 1997.

5. Third District Primary Education Programme. District Plans (1997-2002) for the Districts of: Bhojpur; Bhagalpur; Chatra;Darbhanga; Dumka; East Singhbhum (Jamshedpur); Gaya; Hazaribagh; Munger; Muzaffarpur; Purnia; Ranchi; Rohtas;Sitamarhi; Vaishali; West Champaran; and West Singhbhum (Chaibasa). May 1997.

6. Third District Primary Education Programme. State Plan. Department of Secondary Education, Prhnary and AdultEducation, Government of Bihar, Patna. May 1997

B. Assessment Studies

1 . Third District Prinary Education Programme. Final Reports of the Social Assessment Studies Conducted in the Districts of:Bhojpur; Bhagalpur; Chatra; Darbhanga; Dumka; East Singhbhum (Jamshedpur); Gaya; Hazaribagh; Munger;Muzaffarpur; Purnia; Ranchi; Rohtas; Sitamarhi; Vaishali; West Champaran; and West Singhbhum (Chaibasa). May 1997.

2. Third District Primary Education Programme. Final Report of the Baseline Assessment Study in the Districts of. Bhojpur;Bhagalpur; Chatra; Darbhanga; Dumka; East Singhbhum (Jamshedpur); Gaya; Hazaribagh; Munger; Muzaffarpur;Purnia; Ranchi; Rohtas; Sitamarhi; Vaishali; West Champaran; and West Singhbhum (Chaibasa).. May 1997

3. Third District Primnary Education Programme. Report on Bihar State Finance Study on Education. May 1997

4. Third District Prinary Education Programme. National Appraisal Report of Bihar (May 5-20, 1997). Ed.CIL. May 1997

C. Other

1. Third District Primary Education Programme. Draft Manual ofMaintenance ofSchool Buildings. May 1997

2. Third District Primary Education Programme. Construction Manualfor Buildings Development Program. May 1997

3. Third District Primary Education Programme. Standard LCB Bidding Documents for the Acquisition of Hardware andSoftware Requiredfor the EMIS and PMIS at the State and District Levels. May 1997

4. Government of Bihar, Secretary of Education. Resettlement Letter. Patna, Bihar, June 10, 1997

Annex 9Page I of 5

Annex 9Status of Bank Group Operations in India

IBRD Loans and IDA Credits in the Operations Portfolio(As of June 30, 1997)

Original Amount in US$ DifferenceMillions Between

expectedLoan Fiscal and actualor Year Project IBRD IDA Cancel- Undis- disburse-

Credit lations bursed ments a/No.

Number of Closed Loans/Credits: 365

Active LoansC19230 1988 TAMIL NADU URBAN 0.00 300.20 45.47 20.51 65.02L30960 1989 MAIIARASHTRA POWER 400.00 0.00 62.67 85.04 141.61L30240 1989 NATHPA JHAKRI HYDRO 485.00 0.00 0.00 227.97 217.27L29940 1989 STATE ROADS I 170.00 0.00 61.41 9.95 151.36C20080 1989 VOCATIONAL TRAINING 0.00 250.00 103.33 41.94 168.62L32370 1990 NOR REG TRANSM 485.00 0.00 0.00 259.06 251.06L31190 1990 TECHNOLOGY DEVELOP. 145.00 0.00 10.00 27.71 37.71C21580 1990 SECOND TN NUTRITION 0.00 95.80 29.81 3.49 23.71C21330 1990 POP. TRG (VII) 0.00 86.70 22.74 8.71 31.93C21310 1990 WTRSH PLAINS 0.00 55.00 0.00 17.90 9.92C21300 1990 TECH EDUC I 0.00 235.00 24.26 60.59 78.90C21150 1990 HYDERABAD W/S 0.00 79.90 0.00 24.36 21.30C21000 1990 WTRSH HILLS 0.00 75.00 0.00 32.76 40.26C20760 1990 PUNJAB IRR & DRAINAG 0.00 150.00 4.72 36.70 34.71C20640 1990 TECHNOLOGY DEVELOPME 0.00 55.00 0.00 24.51 17.53L33640 1991 GAS FLARING REDUCTIO 450.00 0.00 0.00 25.87 25.87L33340 1991 IND POLLUTION CONTRO 124.00 0.00 0.00 20.53 -6.07L33000 1991 AGR.DEV.I (TN) 20.00 0.00 0.00 20.00 1.25L32590 1991 PETROCHEMICALS 233.00 0.00 70.30 30.77 -131.93L32580 1991 PETROCHEMICALS 12.00 0.00 0.00 1.88 1.88C22520 1991 IND POLLUTION CONTRO 0.00 31.60 0.00 19.44 18.30C22410 1991 DAM SAFETY 0.00 130.00 0.00 99.39 115.38C22340 1991 MAHARASHTRA RURAL WS 0.00 109.90 0.00 43.21 45.11C22230 1991 TECH EDUC II 0.00 307.10 51.37 132.95 138.85C22150 1991 AGR.DEV.I (TN) 0.00 92.80 0.00 17.07 14.39C21730 1991 ICDS I (ORIS & ANDHR 0.00 96.00 21.65 22.46 41.43L34980 1992 MAHARASHTRA POWER II 350.00 0.00 0.00 237.75 230.55L34700 1992 NAT. HIGHWAYS II 153.00 0.00 0.00 153.00 0.00L34360 1992 POWER UTIL EFFIC IMP 265.00 0.00 25.00 72.31 92.01C23940 1992 POPULATION VIII 0.00 79.00 0.00 71.51 45.93C23650 1992 NAT. HIGHWAYS II 0.00 153.00 0.00 79.77 56.68C23500 1992 AIDS PREVENTION AND 0.00 84.00 0.00 32.13 30.91C23410 1992 WEST BENGAL FORESTRY 0.00 34.00 0.00 4.67 1.22C23290 1992 SHRIMP & FISH CULTUR 0.00 85.00 48.51 24.81 58.93C23280 1992 MAHARASHTRA FORESTRY 0.00 124.00 16.18 63.41 43.52L36320 1993 NTPC POWER GENERATIO 400.00 0.00 0.00 256.65 256.65L35770 1993 PGC POWER SYSTEM 350.00 0.00 0.00 189.40 140.20C25280 1993 NATL LEPROSY ELIMINA 0.00 85.00 0.00 59.30 36.58C25 100 1993 UP SODIC LANDS RECLA 0.00 54.70 0.00 33.64 10.65C25090 1993 UTTAR PRADESH BASIC 0.00 165.00 0.00 76.32 4.86C24830 1993 KARNATAKA WS & ENV/S 0.00 92.00 0.00 70.11 43.04

Annex 9Page 2 of 5

Original Amount in US$ DifferenceMillions Between

expectedLoan Fiscal and actual

or Year Project IBRD IDA Cancel- Undis- disburse-Credit lations bursed ments a/

No.C24700 1993 ICDS II (BIHAR & MP) 0.00 194.00 0.00 170.35 73.25C24490 1993 RENEWABLE RESOURCES 0.00 115.00 0.00 87.81 73.70C24390 1993 BIHAR PLATEAU 0.00 117.00 0.00 87.29 64.15C24330 1993 ADP - RAJASTHAN 0.00 106.00 0.00 47.02 16.83C24090 1993 RUBBER 0.00 92.00 36.58 40.46 46.45L37530 1994 CONTAINER TRANSPORT 94.00 0.00 0.00 82.54 54.54C26300 1994 POPULATION IX 0.00 88.60 0.00 75.85 13.06C26110 1994 BLINDNESS CONTROL 0.00 117.80 0.00 101.34 20.96C25940 1994 MAHARASHTRA EARTHQUA 0.00 246.00 29.19 63.00 80.11C25920 1994 WATER RES CONSOLID H 0.00 258.00 0.00 197.61 50.01C25730 1994 ANDHRA PRADESH FORES 0.00 77.40 0.00 55.97 14.19C25720 1994 FORESTRY RESEARCH ED 0.00 47.00 0.00 35.04 20.04L39076 1995 MADRAS WATER SUP II 269.80 0.00 189.30 77.10 -3.40L38576 1995 FINANCIAL SECTOR DEV 144.00 0.00 0.00 142.46 -1.54L38560 1995 FINANCIAL SECTOR DEV 350.00 0.00 0.00 200.00 -150.00L37806 1995 INDUS POLLUTION PREV 50.00 0.00 0.00 45.51 -4.49L37790 1995 INDUS POLLUTION PREV 93.00 0.00 0.00 85.93 3.98C27450 1995 TAMIL NADU WRCP 0.00 282.90 0.00 239.67 44.30C27330 1995 ASSAM RURAL INFRA 0.00 126.00 0.00 108.63 15.59C27000 1995 MP FORESTRY 0.00 58.00 0.00 43.60 2.53C26990 1995 AGRIC HUMAN RES DEVT 0.00 59.50 0.00 50.10 19.59C26630 1995 AP 1ST REF. HEALTH S 0.00 133.00 0.00 117.44 20.01C26610 1995 DISTRICT PRIMARY ED 0.00 260.30 0.00 192.43 15.67C26450 1995 INDUS POLLUTION PREV 0.00 25.00 0.00 24.68 25.00L40560 1996 UP RURAL WATER 59.60 0.00 0.00 57.20 -.20L40140 1996 ORISSA POWER SECTOR 350.00 0.00 0.00 334.57 -.43L39920 1996 ILFS-INFRAS FINANCE 200.00 0.00 0.00 175.00 -3.50L39230 1996 B SEWAGE DISPOSAL 167.00 0.00 0.00 153.85 27.15C28760 1996 DISTRICT PRIM EDUC 2 0.00 425.20 0.00 398.44 6.51C28620 1996 COAL ENV&SOCIAL MIT. 0.00 63.00 0.00 57.47 1.11C28380 1996 ILFS-INFRAS FINANCE 0.00 5.00 0.00 4.74 5.00C28330 1996 STATE HEALTH SYS II 0.00 350.00 0.00 316.11 16.94C28010 1996 ORISSA WRCP 0.00 290.90 0.00 237.34 -5.81C27740 1996 HYDROLOGY PROJECT 0.00 142.00 0.00 119.69 15.24L41920 1997 STATE HIGHWAYS I(AP) 350.00 0.00 0.00 350.00 0.00L41660 1997 AP IRRIGATION III 175.00 0.00 0.00 175.00 0.00L41560 1997 A.P. EMERG. CYCLONE 50.00 0.00 0.00 50.00 0.00L41140 1997 TA ST'S RD INFRA DEV 51.50 0.00 0.00 47.76 6.26C29640 1997 MALARIA CONTROL 0.00 164.80 0.00 166.17 0.00C29520 1997 AP IRRIGATION III 0.00 150.00 0.00 150.70 0.00C29500 1997 A.P. EMERG. CYCLONE 0.00 100.00 0.00 100.51 0.00C29420 1997 RURAL WOMEN'S DEV 0.00 19.50 0.00 18.82 0.00C29360 1997 TUBERCULOSIS CONTROL 0.00 142.40 0.00 132.50 -1.18C29300 1997 ENV CAPACITY BLDG TA 0.00 50.00 0.00 48.37 0.00C29160 1997 ECODEVELOPMENT 0.00 28.00 0.00 25.62 -1.00CN018 1997 REPRODUCTIVE HEALTH1 0.00 248.30 0.00 250.24 0.00

Total 6,445.90 7,688.30 852.48 8,481.50 3,286.36

Annex 9Page 3 of 5

Original Amount in US$ DifferenceMillions Between

expectedLoan Fiscal and actual

or Year Project IBRD IDA Cancel- Undis- disburse-Credit lations bursed ments a/

No.Active Loans Closed Loans Ital

Total Disbursed (IBRD and IDA): 4,778.67 29,571.14 34,349.81of which has been repaid: 168.78 8,544.66 8,713.44

Total now held by IBRD and 13,112.93 20,479.55 33,592.48IDA:Amount sold : 0.00 133.77 133.77

Of which repaid : 0.00 133.77 133.77Total Undisbursed : 8,481.50 96.81 8,578.31

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.

Annex 9Page 4 of 5

IndiaSTATEMENT OF IFC's

Committed and Disbursed Portfolio(As of June 30, 1997)

Amounts in US$ MillionsCommitted Disbursed

IFC IFCFY Approval Company Loan Equity Quasi Partic Loan Equity Qua Partic

Si1964/75/79/90 MUSCO 0.00 1.08 0.00 0.00 0.00 1.08 0.00 0.001978/87/91/93 HDFC 40.00 2.29 0.00 0.00 40.00 2.29 0.00 0.001981 Nagarjuna Steel 0.00 .07 0.00 0.00 0.00 .07 0.00 0.001981/86/81/91/93/96 ITW Signode 0.00 1.55 0.00 0.00 0.00 1.55 0.00 0.001981/86/89/94/92 TISCO 8.45 15.37 0.00 0.00 8.45 15.37 0.00 0.001981/90/93 M&M .83 6.49 0.00 3.33 .83 6.49 0.00 3.331982 Modi Cement 16.83 0.00 0.00 0.00 16.83 0.00 0.00 0.001984/90/94 India Lease 1.31 .86 0.00 0.00 1.31 .86 0.00 0.001984/91 Bihar Sponge 13.05 .68 0.00 0.00 13.05 .68 0.00 0.001986 EXB-City Mills .48 0.00 0.00 0.00 .48 0.00 0.00 0.001986 EXB-CECL .01 0.00 0.00 0.00 .01 0.00 0.00 0.001986 EXB-NB Footwear .19 0.00 0.00 0.00 .19 0.00 0.00 0.001986 EXB-Paharpur .15 0.00 0.00 0.00 .15 0.00 0.00 0.001986 EXB-STG .46 0.00 0.00 0.00 .46 0.00 0.00 0.001986 EXB-TAN .03 0.00 0.00 0.00 .03 0.00 0.00 0.001986 EXB-Wires & Fab. .07 0.00 0.00 0.00 .07 0.00 0.00 0.001986/92/93/94 GESCO 0.00 13.05 0.00 0.00 0.00 13.05 0.00 0.001986/93/94/95 India Equipment .60 .77 0.00 1.47 .60 .77 0.00 1.471987 Hindustan 7.40 0.00 0.00 0.00 7.40 0.00 0.00 0.001987/88/90/93 Titan Watches 2.74 1.03 0.00 0.00 2.74 1.03 0.00 0.001988/90/92 Tata Telecom 0.00 .10 0.00 0.00 0.00 .10 0.00 0.001988/94 GKN Invel 0.00 1.40 0.00 0.00 0.00 1.40 0.00 0.001989 AEC 13.72 0.00 0.00 0.00 13.72 0.00 0.00 0.001989 UCAL 0.00 .63 0.00 0.00 0.00 .63 0.00 0.001989/90/94 Tata Electric 64.24 0.00 0.00 0.00 64.24 0.00 0.00 0.001989/91 Gujarat State 11.35 0.00 0.00 0.00 11.35 0.00 0.00 0.001989/95 JSB India 0.00 1.21 0.00 0.00 0.00 1.21 0.00 0.001990 HOEL 0.00 .28 0.00 0.00 0.00 .28 0.00 0.001990 TDICI-VECAUS II 0.00 1.94 0.00 0.00 0.00 1.94 0.00 0.001990/92 CESC 48.79 0.00 0.00 67.00 48.79 0.00 0.00 67.001990/93/94 IL&FS 27.75 3.11 1.81 10.00 27.75 3.11 1.81 10.001990/94 ICICI-IFGL 0.00 .30 0.00 0.00 0.00 .30 0.00 0.001990/95 ICICI-SPIC Fine 0.00 1.88 0.00 0.00 0.00 1.88 0.00 0.001991 Block KG-OS-IV 0.00 .02 0.00 0.00 0.00 0.00 0.00 0.001991 BSES 45.00 0.00 0.00 0.00 45.00 0.00 0.00 0.001991/93 Triveni 0.00 1.11 0.00 0.00 0.00 1.11 0.00 0.001991/96 VARUN 11.35 1.35 0.00 5.33 11.35 1.35 0.00 5.331992 Indus VC Mgt Co 0.00 .01 0.00 0.00 0.00 .01 0.00 0.001992 Indus VCF 0.00 1.00 0.00 0.00 0.00 1.00 0.00 0.001992 Info Tech Fund 0.00 .64 0.00 0.00 0.00 .64 0.00 0.001992 SKF Bearings 6.70 0.00 0.00 0.00 6.70 0.00 0.00 0.001992/93 Arvind Mills 0.00 17.10 0.00 0.00 0.00 17.10 0.00 0.001992/94/97 Ispat Industries 85.55 5.77 0.00 85.00 38.19 5.77 0.00 0.001992/95 Creditcapital VF 0.00 1.05 0.00 0.00 0.00 1.05 0.00 0.001992/96/97 NICCO-UCO 1.88 .50 0.00 0.00 1.88 .50 0.00 0.001993/94/96 IndoRama 20.31 11.98 0.00 8.13 20.31 11.98 0.00 8.131993/97 20TH Century 15.78 .80 0.00 4.62 5.78 .80 0.00 4.621994 Centurion Growth 0.00 2.39 0.00 0.00 0.00 2.39 0.00 0.001994 Chowgule 15.00 4.58 0.00 27.00 13.75 4.58 0.00 24.75

Annex 9Page 5 of 5

Amounts in US$ MillionsCommitted Disbursed

IFC IFCFY Approval Company Loan Equity Quasi Partic Loan Equity Qua Partic

Si

1994 Crdcap Asset Mgt 0.00 .32 0.00 0.00 0.00 .32 0.00 0.001994 DLF Cement 11.00 4.94 0.00 17.00 11.00 4.94 0.00 17.001994 Global Trust 0.00 3.19 0.00 0.00 0.00 3.19 0.00 0.001994 Gujarat Ambuja 0.00 8.23 0.00 0.00 0.00 8.23 0.00 0.001994 Taurus Starshare 0.00 7.17 0.00 0.00 0.00 7.17 0.00 0.001994 TCAMC 0.00 .16 0.00 0.00 0.00 .16 0.00 0.001994/97 GVK 40.00 8.30 0.00 37.65 30.00 8.30 0.00 37.651995 Centrion Bank 0.00 3.87 0.00 0.00 0.00 3.87 0.00 0.001995 EXIMBANK 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.001995 ISIC 0.00 .32 0.00 0.00 0.00 .32 0.00 0.001995 Prism Cement 15.00 5.02 0.00 15.00 15.00 5.02 0.00 15.001995 Rain Calcining 19.25 5.40 0.00 0.00 10.50 4.72 0.00 0.001995 RPG Communicatis 0.00 8.30 0.00 0.00 0.00 8.30 0.00 0.001995 SaraFund 0.00 7.03 0.00 0.00 0.00 1.10 0.00 0.001995 SRF Finance 13.89 5.00 0.00 0.00 13.89 4.39 0.00 0.001996 CVF Oil Gas-AL 8.00 8.00 0.00 0.00 0.00 0.00 0.00 0.001996 India Direct Fnd 0.00 7.50 0.00 0.00 0.00 .82 0.00 0.001996 Indus II 0.00 5.00 0.00 0.00 0.00 3.00 0.00 0.001996 Indus Mauritius 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001996 Moser Baer 5.70 .60 0.00 0.00 5.70 0.00 0.00 0.001996 United Riceland 10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001997 CEAT 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001997 Owens Coming 25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001997 WIPRO 10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Portfolio: 662.86 190.74 1.81 281.53 512.50 166.22 1.81 194.28

Approval Pending Commitment

Lon Equity Qui Partic1997 AEL 16.00 5.50 0.00 0.001996 CESC II -BLINC 0.00 0.00 0.00 37.001996 . DEV CREDIT BANK 0.00 1.89 0.00 0.001997 DUNCAN HOSPITAL 7.00 1.00 0.00 0.001997 EEPL 0.00 .03 0.00 0.001995 IB VALLEY POWER 50.00 20.00 0.00 0.001997 ITC CLASSIC 20.00 0.00 10.00 0.001994 NEYVELI POWER 30.00 18.00 0.00 150.001997 NUFSL 5.00 0.00 0.00 5.001997 SAPL 0.00 .07 0.00 0.001995 SPIC-RGHTS ISSUE 0.00 .86 0.00 0.001997 SREI 15.00 3.00 0.00 0.001996 TARUN SHIPPING 0.00 .80 0.00 0.001997 WALDEN - MGMT 0.00 .08 0.00 0.001997 WIV 0.00 6.00 0.00 0.00

Total Pending Commitment: 143.00 57.23 10.00 192.00

Annex 10Page l of 2

India at a glance 8/20/97

POVERTY and SOCIAL South Low-India Asia Income Development dlamond'

Population mid-1996 (millions) 943.2 1,264 3,229GNP per capita 1996 (US$) 380 380 500 Life expectancyGNP 1996 (billions US$) 358.4 481 1,601

Average annual growth, 1990-96

Population (%) 1.7 1.9 1.7 GNPLabor fobre (%) 2.0 2.1 1.7pmry

Most recent estimate (latest year available since 1989) capita enroliment

Poverty: headcount index (% of population) 35Urban population (% of total population) 27 26 29Life expectancy at birth (years) 62 61 63Infant mortality (per 1,000 live births) 68 75 69 Access to safe waterChild mainutrtion (% of children under 5) 63Access to safe water (% of population) 63 63 53Illiteracy (% of population age 15+) 48 50 34 /Gross primary enrollment (% of school-age populaion) 102 98 105 - windra

Male 113 110 112 Low-ncome groupFemale 91 87 98

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1976 1985 1996 1996Economic ratlos

GDP (billions US$) 91.0 214.3 328.3 355.8Gross domestic investmentUGDP 20.8 24.2 26.2 26.5 Openness d economyExports of goods and services/GDP 6.2 6.0 12.2 12.3Gross domestic savings/GDP 20.4 21.1 23.6 23.9Gross national savings/GDP 20.6 21.6 24.0 25.1

Currentaccountbalance/GDP 0.0 -2.8 -1.8 -1.18Interest payments/GDP 0.3 0.6 1.2 .. Savings InvestmentTotal debtUGDP 15.1 19.1 28.6 27.6Total debt servicelexports 13.1 22.7 28.2Present value of debtUGDP .. .. 22.8Present value of debtlexports .. .. 161.4 Indebtedness

1975-86 1986-96 1996 1996 199746(average annual growth) IndiaGDP 4.2 5.6 7.3 7.5 Low4ncome gfoupGNP per capita 1.9 3.5 5.4 5.2 ouExports of goods and serVices 3.9 11.5 31.6 7.4

STRUCTURE of the ECONOMY

1975 198) 1996 1996 Growth rates of output and Investment (%)(X of GDP)

Agriculture 40.5 33.0 27.9 27.8 30

Industry 23.7 28.1 30.1 29.2 1Manufacturing 16.7 17.9 19.7 20.1

Services 35.8 38.8 42.1 43.0

Private consumption 70.2 67.8 65.8 65.6 -1sGeneral govemment consumption 9.4 11.1 10.6 10.5 GDI GDPImports of goods and services 6.6 9.1 14.9 14.9

1975-8 1986-96 1995 1996(average annual growth) Growth rates of exports and imports (Y)Agriculture 2.5 3.6 -0.1 5.7 40

Industry 5.3 6.6 11.6 7.0Manufacturing 5.5 6.7 13.6 8.1 20

Services 5.1 6.7 8.8 7.4

Private consumpton 4.5 4.8 2.6 7.1 02 9 ' / seGeneral govemment consumption 6.5 3.9 5.1 6.4 92 93 94 95 9

Gross domestic investment 4.1 7.1 17.9 8.5 420

Imports of goods and services 9.1 6.0 17.3 7.0 Expots I IportsGross national product 4.1 5.4 7.2 6:7

Note: 1996 data are preliminary estimates. All GDP data other than sectoral value-added are in market prices.

' The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will

Annex 10Page 2 of 2

India

PRICES and GOVERNMENT FINANCE1975 1985 1995 1996

Domesticprices Inflation (%)(% change) 15Consumer prices .. 5.6 10.2Implicit GDP deflator -1.5 7.5 7.3 7.0 10

Government rinance(% of GDP) 0 I .Current revenue .. 23.8 24.3 .. 91 92 3 94 95 9SCurrent budget balance .. 2.2 1.0Overall surplusideficit .. 11.0 10.1 -GOPdel. CPI

TRADE1975 1985 1995 1996

(millions USS) Export and Import levels (mill. USS)Total exports (fob) 8,793 31,783 33,107 40,000

Tea 1 35Iron 473 518 30,000

Manufactures ,, 5,640 24,483Total imports (cit) .. 15,957 36,354 38,548 20,5000

Food .. 1,321 1,243Fuel and energy 4,054 7,201 . 000Capital goods .. 3,502 6,577 .. o

Export price index (1987=100) .. 94 99 90 91 92 93 94 95 so

Import prce index (1987=100) .. 90 121 .. Export r ImporsTerms of trade (1987= 100) .. 104 81

BALANCE of PAYMENTS1975 1985 1995 1996

(millions US$) Current account balance to GDP ratio (%)Exports of goods and services 5,650 12.773 40,181 43,855 -

Imports of goods and services 5990 19,422 48,788 53,087 90 91 |2 |3 94 95 96

Resource balance -340 -8.e49 -8,607 -9,232

Net income -150 -1,552 4,157 4,429Net current transfers 470 2,207 7,000 9,780 2

Current account balance,before official capital transfers -20 -5,994 -5,764 -3,881 3_

Financing items (net) 20 6,542 2,040 9,803Changes in net reserves 0 -548 3,724 -5,922 4

dremo:

Reserves including gold (rni/l. US$) 2,085 9,493 22,843 24,919Conversion rate (bocalUUS$) 8.7 12.2 33.5 35.5

EXTERNAL DEBT and RESOURCE FLOWS1975 1885 1995 1996

(millions US$) Compositon of total debt 1995 (mill. US$)Total debt outstanding and disbursed 13,708 40,960 93,768 98,193

IBRD 436 2,398 9,849 8,768 G AIDA 2,809 9,750 17,499 17,616 5049 S849

Total debt service 822 3,532 13,123 13,742IBRD 89 313 1,714 1,514 BIDA 24 124 357 364 1749929280149

Composition of net resource flowsOffidal grants 511 450 556 \ COfficial creditors 1,260 1,424 -867 .. 2374Private creditors 83 2,277 775 D /Foreign direct investment 85 108 1,300 2638Portfolio equity 0 0 1,517 | 27097

World Bank programCommitments 917 2,882 1,697 1,725 A A-BRD E- 846teraIDisbursements 531 1,375 1,318 1,592 8 - IDA D- Other multilateral F- PrivatePrincipal repayments 63 157 1,170 1,074 C-IMF G -Short-efnnNetflows 467 1,218 149 518 __1

Interest payments 50 280 901 804Net transfers 417 938 -752 -287

Development Economics 8120197