Document o f The World Bank

Report No: 25876-IN

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 39.7 MILLION (US$54 million equivalent )

TO

INDIA

FOR

FOOD AND DRUGS CAPACITY BUILDING PROJECT

April 28, 2003

Human Development Unit - SASHD South Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 1,2003)

CurrencyUnit = Rupee Rs. 1 = US$0.0205339

USS 1 = Rs. 48.7

ARCS BARC CAA&A CAS CCA CDSCO CFL CFTRI CIDA CPWD

DEA DFID DGGI DSPRUD EHSO EMP FA0 FMR FMS GFR GLP GMP GO1 HACCP HSCC IBRD ICB ICD IDA IEC IP LCS MIS MOHFW MORD N.B.F.

CQ

FISCAL YEAR April 1 -- March 3 1

ABBREVIATIONS AND ACRONYMS

Audit Reports Bhaba Atomic Research Centre Controller o f Aids, Accounts and Audit Country Assistance Strategy Chief Controller o f Accounts Central Drug Standards Control Organization Central Food Laboratories Central Food Technological Research Institute Canadian International Development Agency Central Public Works Department Consultants’ Qualifications Department o f Economic Affairs Department for International Development (UK) Drugs Controller General o f India Delhi Society for Promotion o f Rational U s e o f Drugs Environmental Health and Safety Officer Environmental Management Plan Food and Agriculture Organization Financial Monitoring Report Financial Management System General Financial Rules Good Laboratory Practices Good Manufacturing Practices Government o f India Hazard Analysis and Critical Control Point Hospital Services Consultancy Corporation International Bank for Reconstruction and Development International Competitive Bidding In-land Container Division International Development Organization Information, Education and Communications Indian Pharmacopoeia Least Cost Selection Management Information System Ministry o f Health and Family Welfare Ministry o f Rural Development Not Bank-financed

NACO NCB N D O NGO NICED " NIPER N P V NS PAD PCU PFA PFMS PIP PSR P V

QCBS RFP SACS SFB SOE TOR USAID USFDA VOICE WHO

QBS

National Aids Control Organization National Competitive Bidding New Delhi Office Non-Governmental Organization National Institute o f Cholera and Enteric Diseases National Institution of Nutrition National Institute for Pharmaceutical Education and Research Net Present Value National Shopping Project Appraisal Document Program Coordination Unit Prevention o f Food Adulteration Project Finance Management System Project Implementation Plan Project Status Report Present Value Quality-based Selection Quality and Cost-Based Selection Request for Proposals State AIDS Control Societies Selection under a Fixed Budget Statement o f Expenditures Terms o f Reference United States Aid for International Development United States Food and Drug Administration Voluntary Organization in Interest o f Consumer Education World Health Organization

Vice President: Mieko Nishimizu Country Director: Michael F. Carter

Sector Director: Charles C. Griffin G. N. V. Ramana Task Team Leader:

INDIA FOOD AND DRUGS CAPACITY BUILDING PROJECT

CONTENTS

A. Project Development Objective

1. Project development objective 2. K e y performance indicators

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2. M a i n sector issues and Government strategy 3. Sector issues to be addressed by the project and strategic choices

C. Project Description Summary

1. Project components 2. K e y pol icy and institutional reforms supported by the project 3. Benefits and target population 4. Institutional and implementation arrangements

D. Project Rationale

1. Project alternatives considered and reasons for rejection 2. Ma jor related projects financed by the Bank andor other development agencies 3. Lessons learned and reflected in the project design 4. Indications o f borrower commitment and ownership 5. Value added o f Bank support in this project

E. Summary Project Analysis

1. Economic 2. Financial 3. Technical 4. Institutional 5. Environmental 6. Social 7. Safeguard Policies

F. Sustainability and R isks

1. Sustainability 2. Crit ical risks

Page

2 2

2 2 4

10 10 11 11 11

12 13 14 14 17 18 19

20 20

3. Possible controversial aspects

G. M a i n Conditions

1. Effectiveness Condition 2. Other

H. Readiness for Implementation

I. Compliance w i th Bank Policies

Annexes

Annex 1: Annex 2: Annex 3: Annex 4: Annex 5: Annex 6:

Annex 7: Annex 8: Annex 9:

Project Design Summary Detailed Project Description Estimated Project Costs Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary Financial Summary for Revenue-Earning Project Entities, or Financial Summary (A) Procurement Arrangements (B) Financial Management and Disbursement Arrangements Project Processing Schedule Documents in the Project Fi le Statement o f Loans and Credits

Annex 10: Country at a Glance Annex 11: Project Act iv i ty Mat r ix Annex 12: Supervision Plan

23

23 23

23

24

25 29 35 36 39 40 53 59 60 61 65 67 70

INDIA Food and Drugs Capacity Building Project

Project Appraisal Document South Asia Regional Off ice

SASHD

BORROWER

Date: April 28,2003 Sector Manager: Anabela Abreu Country ManagedDirector: Michael F.Carter

Lending Instrument: Specific Investment Loan (SIL)

Team Leader: G N V Ramana Sector(s): Health (100%) Theme(s): Health system performance (P), Child health

Project ID: PO75056 (SI

18.89 I 0.00 I 18.89

Fi [ J Loan [XI Credit [ ]Grant [ ]Guarantee [ ]Other:

IDA 38.82 I 15.21 I 54.03 Total:

I I I

Borrower: GOVERNMENT OF INDIA Responsible agency: M I N I S T R Y OF HEALTH AND FAMILY WELFARE Address: Nirman Bhavan, N e w Delhi - 110 001 Contact Person: Mr. S. K. Naik, Secretary o f Health and Family Welfare

57.71 I 15.21 I 72.92

Tel: 91 11 301 8863 Fax: 91 11 301 4252

Annual Cumulative

Email:

8.19 14.5 1 13.23 10.86 5.59 1.65 8.19 22.70 35.93 46.79 52.38 54.03

I

A. Project Development Objective

1. Project development objective: (see Annex 1)

The proposed project would be the f i rst stage o f a long-run program to improve the quality and safety of foods and drugs in India by strengthening the regulatory framework and incorporating components o f consumer education and public-private partnerships.

Some important related areas such as quality and safety o f medical devices and biologicals have been le f t outside the ambit o f this project to enable a sharper focus on the most basic problems affecting the quality o f foods and drugs.

2. K e y performance indicators: (see Aruiex 1)

Specific indicators would include the following: 0

0 0

The Government develops recommendations and options for appropriate policies and measures for improving food and drugs quality and safety, in line with i t s new approach. Increased consumer awareness and knowledge (to be measured through household surveys). Increased capacity, quality and timeliness o f food and drug testing (to be measured through audits by independent experts; a composite quantifiable indicator has been designed and details are given in Annex 2). Hazard Analysis and Critical Control Point (HACCP) standards and procedures are developed and introduced in selected priori ty food sectors.

0

B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 22541-IN (CAS)

The proposed project supports the health goals articulated in the CAS, in particular the objective o f developing the capacity to manage public health programs effectively, such as surveillance and food and drug control. I t also draws on lessons leamed f rom the large ongoing health portfol io and analytical work by building into project design the fol lowing areas o f emphasis in the CAS: (a) building state capacity to manage health systems more effectively, and (b) supporting strategies for public private partnerships which focus more than before on the relative strengths o f various sectors.

Date of latest CAS discussion: June 27, 2001

The project i s consistent with recent Bank analytical work on the health sector, which has highlighted "government oversight" as a critical function o f the health system.

2. M a i n sector issues and Government strategy:

The major generic health sector issues are: wide disparities in health status among regions and between poor and non-poor households; inadequate institutional arrangements and weak program management; l o w quality o f services in both the public and private sectors; ineffective targeting o f public funds to the poor; inadequate framework for engaging the private sector; l o w efficiency and l imited financial resources; and poor governance. These problems exist within a general institutional environment o f poor oversight and inadequate measurement o f health system performance.

Food and drugs oversight i s an essential publ ic health function. Monitoring o f foods and drugs for safety and effectiveness including licensing new drugs i s the responsibility o f the Ministry o f Health. Food and drugs oversight i s on the concurrent l i s t o f the Indian Constitution with responsibility shared between the

- 2 -

Central government and the States.

Issues in Food Safety

There i s an increasing concern in the country about unsafe foods and their effect on the health o f the population. WHO estimates indicate that in low-income countries about three-fourths o f all episodes o f diarrhea are caused by unsafe water and poor sanitation, with the remaining one-fourth mostly attributable to food borne infections. W h i l e there are regulations for ensuring food safety, enforcement i s weak and methods outdated. Specific issues include:

Insuflcientpublic awareness about food safety. A vast majority o f the Indian population depend upon the small, unorganized and street food vendors. Food handlers in this informal sector generally lack awareness of safety and quality control issues. The problem i s aggravated by the fact that many households also lack the knowledge for safe handling o f foodstuffs. The single most promising intervention to improve food safety would be to enhance public awareness and knowledge o f food safety issues. Except for a limited group o f consumer advocacy NGOs, there has been little participation from the public in food safety and quality control.

Weak enforcement of existing regulations. Traditionally, the system has depended on spot-checks o f manufacturing conditions and random sampling o f final products. Even this system i s not evenly enforced at all levels. States have shown varying degrees o f cooperation, commitment and participation in enforcing the Prevention o f Food Adulteration (PFA) Act. Incidence o f food adulteration i s higher in the states where the PFA administration i s generally weaker. The institutional ability o f the center to effectively manage and coordinate oversight activities i s limited and i s further constrained by lack o f systems for quick flow o f information between the center and the States. Many States report inadequate number o f staff to cany out the required functions and have difficulties in filling food inspector positions with personnel having the qualifications mandated by the PFA. Regulation o f food safety i s further compromised by lack o f transparency in transactions by some businesses and regulators.

Inadequate capacity of food testing laboratories: The four central and 79 State laboratories, including 13 food laboratories managed by local bodies, do not have sufficient capacity to perform analysis to respond to current needs or to meet future growth. The majority o f State laboratories are able to perform only basic analysis and cannot perform comprehensive testing, including analyzing samples for microbiological contaminants.

Alignment with International Standards: The Hazard Analysis and Critical Control Point (HACCP) system i s the new, efficient and internationally accepted scientific way o f monitoring food safety. HACCP renders the identification, evaluation, and control o f health hazards systematic. I t can be applied at all stages o f the cycle, from primary production to final consumption. There i s a need for technical assistance in order to develop HACCP programs in the domestic food industry.

Issues in Drugs Quality and Safety

As with food, public interest in ensuring that drugs sold in the country are o f good quality i s starting to take hold. The Indian pharmaceutical market, with annual sales o f USs7.2 bil l ion (1999), ranks third in the world. While the Indian govemment has succeeded in realizing i t s policy objectives o f ensuring the availability o f reasonably priced drugs and promoting the growth o f a vibrant domestic industry, the objective o f ensuring uniform good quality s t i l l needs to be effectively addressed. Currently, 75 percent

- 3 -

o f the industry's production i s accounted for by 150 large manufacturers out o f a total o f about 9,000 f i r m s . These large manufacturers generally produce quality products as per current WHO Good Manufacturing Practices (GMP). On the other hand, the smaller production un i t s are often not producing up to the required standards. However, the state policies to encourage the growth o f small scale industry and poorly regulated rural markets encourage such units to thrive.

The specific issues regarding drugs quality largely mirror those for food safety:

Insuflcient consumer awareness. There has been a general absence o f consumer awareness regarding issues o f drug quality and o f misuse o f drugs. Some consumer groups are beginning to emerge but need to be strengthened, particularly with respect to issues such as acceptance o f generic drugs and rational prescription behaviors by the physicians and users.

Weak enforcement of existing regulations. The system for ensuring drug quality i s inadequate. There i s a high level o f heterogeneity in institutional and implementation arrangements. Nineteen states and Union Territories have full-time Drug Controllers, while in 12 states the Directors o f Health Services perform this duty along with other responsibilities. Similarly, enforcement o f GMP i s highly variable. The quality o f training for Drug Inspectors has been uneven. There i s anecdotal evidence o f lack o f transparency in granting o f licenses in manufacturing and retailing.

Inadequate capacig of Drug Testing Laboratories: States' drug testing facilities differ in capacity. O f the 19 drug testing laboratories functioning in 35 States/Union Territories, only seven have the ability to perform a full range o f tests. In both public and private drug testing laboratories, s k i l l s o f analysts need to be updated.

Alignment with International Standards: The Indian Pharmacopeia, the official book o f standards for drugs and their formulations, i s outdated and does not reflect many recently developed drugs.

Government Strategy

Traditionally, the Indian Government has relied on regulation as the main instrument for ensuring food safety and adequate quality o f drugs. For example, a recently gazetted ordinance seeks to enforce Good Manufacturing Practices in the drug producing industry by the end o f 2004, including the closure o f uni ts that fail to comply. It has also started to conduct external audits o f public and private drug testing laboratories.

While many regulations are in place, enforcement i s weak and methods outdated. In recent years, the Government has started to develop a new approach, which during the next 15 years would aim to improve food and drug safety and quality in India and harmonize Indian norms with internationally accepted standards. To achieve this vision, India aims to support consumer education and partnerships with the industry in addition to strengthening the regulatory framework. The proposed project would assist the f i rs t stage o f this evolving program.

- 4 -

3. Sector issues to be addressed by the project and strategic choices:

The project would address the issues in food safety and drugs quality that were highlighted in section B.2. It would do this by supporting activities and reforms that are in l ine with India's emerging approach for public policy in this area --Le., it would support the strengthening o f government's oversight and regulatory capacity through training and the improvement o f laboratories and information systems. But, in addition, the project would support policy development, consumer education programs, and public-private partnerships including training o f private sector staff and the updating and dissemination o f standards.

C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown):

The project would consist o f the following three components.

Component 1: Policy Development, Program Coordination and Monitoring (US$7.0 million)

This component would consist of policy development; strengthening o f the central government food and drug directorates; and improved program coordination and monitoring. Specific activities would include:

Policy Development:

0 0

Policy studies and reviews to underpin the formulation o f policy and institutional reforms. Workshops and consultations with various groups o f stakeholders.

The establishment and operation o f a central Program Coordination Unit (PCU).

Improvement o f central physical facilities for food and drugs oversight, and related staffing.

Monitoring activities, including the implementation o f household surveys to assess public perceptions and knowledge about quality and safety o f foods and drugs, and the organization o f independent audits o f public and private laboratories. The establishment and operation o f a computerized management information system to enhance information flows and coordination between the central and State regulatory agencies.

Program Coordination:

0

Central Facilities and Stafing:

Monitoring: 0

0

0

The component would finance consultants for studies and technical assistance, workshops, goods including computers and software, civil works, and incremental operating costs.

Component 2: Food Safety (US$44.3 million)

This component would consist o f activities to strengthen the government's oversight and regulatory capacity for food safety at the central and State levels, to educate consumers on matters related to food safety, and to upgrade related s k i l l s in the private sector. Specific activities would include:

0 0

A new program for building consumer awareness and knowledge o f food safety issues. Training o f about 2,000 food inspectors and 500 analysts in public sector laboratories and recruitment o f additional qualified staff.

- 5 -

0 0

0

0

0

Training of about 1,000 staff from the private sector. Training in advocacy and other s k i l l s for 20 umbrella consumer organizations throughout the country. Development and dissemination o f Hazard Analysis Critical Control Point (HACCP) standards. New construction and equipping o f six central and nine State laboratories. Renovation and equipping o f nine existing laboratories and public health offices at central and five laboratories at State levels.

This component would finance civ i l works, equipment, furniture, laboratory supplies, training, technical assistance, consultants, contracting o f NGOs and media agencies, and incremental operating and maintenance costs.

Component 3: Drugs Quality and Safety(US$21.6 million)

This component would consist o f activities to strengthen the government's oversight and regulatory capacity for ensuring drugs quality at the central and State levels, to educate consumers on matters related to drugs quality and safety, and to upgrade related sk i l ls in the private sector. Specific activities would include:

Information and education activities to improve consumer and prescriber awareness and behavior regarding quality and rational use of drugs, carried out with the support o f professional media agencies and NGOs. Training o f about 625 regulatory staff and recruitment o f additional qualified staff. Training o f about 2,000 industry personnel in Good Manufacturing Practices (GMP) and Good Laboratory Practices (GLP). Updating and dissemination o f pharmaceutical standards. New construction and equipping o f one central and five State drug testing laboratories. Renovation and equipping o f one existing drug testing laboratory at central and twelve laboratories at State levels.

0

0

0 0 0

The component would finance civil works, equipment and furniture, laboratory supplies, training, technical assistance, consultants, contracting o f NGOs and media agencies, and incremental operating and maintenance costs.

Comp

1. Policy Development & Program Coordination

la. Policy Development lb. Program Coordination IC. Central Facilities and Staffing Id. Monitoring

2a. Consumer Awareness and Education 2b. Training (public and private sectors) 2c. Development and Dissemination o f HACCP 2d. Strengthening o f Central Laboratories 2e. Strengthening o f State Laboratories

2. Food Quality and Safety

3. Drug Quality and Safety

ndicative costs

(US$M)

0.73 1.17 3.02 2.02

2.10 1 .oo 0.09

17.14 24.01

% of Total

1 .o 1.6 4.1 2.8

2.9 1.4 0.1

23.5 32.9

Bank- financing (US$M)

0.64 0.86 2.38 1.79

2.10 0.99 0.09

12.23 16.54

% of Bank-

financing

1.2 1.6 4.4 3.3

3.9 1.8 0.2

22.6 30.6

- 6 -

3a. Consumer and Prescriber Awareness and Education 3b. Training (public and private sectors) 3c. Updating and dissemination o f Pharmaceutical

3d. Strengthening o f Central Laboratories Standards

2.10 1.92 0.35

4.30 3c. Strengthening o f State Laboratories 12.97

2. Key policy and institutional reforms supported by the project:

The following policy matrix l i s ts the key policy and institutional reforms that would be supported by the project.

5.9 3.20 5.9 17.8 9.37 17.3

2.9 2.6 0.5

1.95 3.6 1.60 3.0 0.29 0.5

1 food hygiene increased I -Partnerships with the private ,Publidprivate

100.0 Total Project Costs 72.92 1 Total Financing Required 72.92 I 100.0

artnerships

54.03 100.0 54.03 100.0

sector developed and ~

well-functioning, in areas such as rule making, auditing, and reporting on compliance.

Policy and Institutional Areas

compatible with internationally accepted standards

Government's Long Term Vision for Policy and Institutional Reforms

and drug quality Project-supported Actions Which Would Contribute to

Achievement of the Long Term Vision

- M i x o f Policy Instruments

-Government's regulatory capacity

-Consumer awareness nd education

0 Studies and other technical assistance leading to the formulation o f specific proposals for pol icy and institutional reforms consistent with the new approach.

-Complement the regulatory approach with consumer education, industry self-regulation, and public/private partnerships -Adequate capacity at central

and state levels to enforce food and drugs regulations -Governance problems eliminated o r greatly reduced

- Well-educated food and drugs consumers who can contribute to food and drugs quality improvement (eg. through their purchasing power and other avenues) - Households knowledge about

0 Strengthening o f the central food and drugs directorates through technical assistance and infrastructure development

0 Establishing an enhanced information management system for the central and state regulatory agencies

0 Training o f regulatory staff 0 Recruitment o f qualif ied staff 0 Construction and equipping o f new laboratories 0 Upgrading and equipping o f existing laboratories a Household surveys to better understand consumer perceptions

and practices about quality and safety o f foods and drugs 0 Information and education activities to improve consumer

awareness and behavior in the areas o f food safety and drug quality and use.

0 Increased participation o f industry associations in government efforts to improve quality o f foods and drugs such as po l i cy reviews, workshops and consultations

0 Training o f personnel working in small and medium scale industries to enhance adherence to good manufacturing practices

0 Updating and dissemination o f pharmaceutical standards. 0 Supply o f reference standards to testing laboratories 0 Hazard Analysis Cr i t ical Control Point (HACCP) standards

and procedures developed for pr ior i ty food sectors (milk, cereals. Dulses and oils)

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3. Benefits and target population:

The main benefits from the project would accrue to the society at large. Increased safety and quality o f foods and drugs would result in lower morbidity and premature mortality. The poor would especially benefit because they are more likely to be victims o f poor quality foods. For example, recent household surveys in India indicate that the incidence o f diarrhea in children under five i s 20 percent higher for the lowest income quintile (Le., poorest) as compared to the highest (i.e., richest) quintile. The true difference i s probably greater, since poor households are known to under-report illnesses.

In the private sector, medium and small scale manufacturers would benefit from the opportunities for training and assistance in improving manufacturing processes and product quality.

4. Institutional and implementation arrangements:

Central Government. The proposed project would be part o f a Central program. The Central Government through the MOHFW would provide financial sponsorship and be responsible for policy development, overall program coordination and monitoring o f the project. In addition, MOHFW would coordinate the implementation of s k i l l development and consumer-focused activities working closely with the States and with the technical support from expert institutions such as the National Inst i tute for Pharmaceutical Education and Research, and the National Institute o f Nutrition and Central Food Technology Research. The MOHFW would coordinate project activities with the Ministry o f Food & Agriculture and other stakeholder organizations including private sector associations (Confederation o f Indian Industries, Federation o f Chambers o f Commerce o f India), NGOs and consumer groups using existing institutional mechanisms such as the National Codex Committee. The existing network o f home science colleges under the Ministry o f Human Resource Development would be actively involved in carrying out household surveys. The MOHFW would engage a procurement agent for procurement o f all goods and works for the central laboratories as well as o f major goods and works at the State laboratories. Such procurement support from center to the States i s expected to ensure adequate technical oversight for sophisticated equipment as well as better price.

States. All states in India benefit from project support to consumer (and in the case o f drugs also prescriber) education and training. However, new constructions will be limited to few states, especially those newly created. States would be responsible for appointment o f incremental staff, deputation o f staff for s k i l l enhancement training, providing sites free o f encumbrances for buildinglrenovation o f laboratories, and procurement o f consumables and furniture for the program. A nodal officer from each State would be designated to prepare annual action plans for the State, coordinate and monitor program implementation in the State, and provide quarterly feedback to the center in the agreed format. The funds flow to the states would be through existing State Aids Controllintegrated health societies as being done in other IDA financed centrally sponsored programs in India. Past experiences suggest that such mechanism ensures timely availability o f funds to the implementing entities and better financial monitoring.

Private Sector. Industry, NGOs and consumer groups would play an active role in creating consumer awareness of food and drug regulations, standards, food handling, and hygiene. These groups are already members o f key advisory bodies such as the National Codex Committee for promotion o f food standards. They would also extend help in ensuring nomination o f appropriate candidates from the private sector for the s k i l l enhancement training under the project.

International Partnerships. The World Health Organization and the Food and Agriculture Organization are already key partners in developing the food and drug safety program and would provide

- 8 -

technical assistance for training and updating o f standards.

Management o f Project Implementation. At the central level in MOHFW, the project would be implemented through the existing directorates responsible for food and drugs quality control: the Prevention o f Food Adulteration (PFA) directorate and the Drugs Control directorate under the Drug Controller General (see figure below). These units would manage their respective components. A Program Coordination Unit (PCU) has been formed within the Ministry under the supervision o f the Joint Secretary of Health. The PCU would include: (i) an IECiNGO consultant responsible for promoting consumer (and in the case o f drugs, prescriber) awareness and knowledge through media and NGO channels; (ii) a procurement specialist; (iii) a financial controller and accountants; and (iv) architects. All o f these posts have already been filled except for the IECiNGO consultant. A senior officer from the financelincome tax cadre, at the level o f Deputy Secretary, would act as Financial Controller for the project. The PCU would coordinate the activities o f participating organizations and States, and would be integrated within the MOHFW at the end o f the project.

The Joint Secretary, MOHFW would have overall responsibility for the project and would be assisted by the Drug Controller General o f India and the Assistant Director General (PFA).

The Consumer/Prescriber Awareness and Education program (sub-components 2.a. and 3 .a. in the summary cost table in Section C.1.) i s a critically important part o f the proposed project. It i s also a program where the MOHFW and the States would need outside expertise for successful implementation. Apreliminavy action plan for this program would be prepared by the MOHFW as a condition o f Negotiations. The MOHFW would also contract with a specialized private firm with expertise in mass media and interpersonal communications to assist in finalizing the action plan and in implementation.

C o n t r o l l e r

A u d i t o r ....... G e n e r a l o f I I n d i a

Food & Drug Capacity Building Project - Implementation Arrangements

........... M i n i s t e r

Center Secretary H e a l t h External Audit

S p e c i a l Secretary .......... ...... .... .......... D i r e c t o r G e n e r a l H e a l t h Serv ices Overall coordination & Direction Chief .... .L rnntmiipr ..... I .........

o f Accounts

........ B l o o d Banks Internal Audit ........................................

Asst. Dir. Gen. PFA r

Funds flow, Reporting & Auditing

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

- 9 -

Financial Management and Procurement are dealt with in sections E(4.3) and E(4.4) respectively.

Sector Issue

D. Project Rationale 1. Project alternatives considered and reasons for rejection:

1. Maintaining the Status Quo. As already noted, the current approach to ensuring safety and quality o f foods and drugs has not been effective. A new approach needs to be developed which supplements regulation with other pol icy instruments.

2. Addressing Food and Drugs Quality Separately. This alternative was rejected because i t makes more sense to address food and drugs simultaneously. The two programs face similar challenges. Moreover, at the Central level food and drugs units are under combined management in the MOHFW, and the same i s true in several States (e.g. Maharastra).

3. Strengthen the Central Level or the State Level Only. The unevenness o f food and drug quality assurance systems across States i s an important concern. In addition, the easy movement o f foods and drugs among the States cal l for a comprehensive national program rather than a series o f State-specific programs. Strengthening the central level only would also not suffice since the responsibilities between center and States are complementary.

Project

2. M a j o r related projects financed by the Bank andor other development agencies (completed, ongoing and planned).

Other development agencies WHO

FA0

Various technical assistance programs Various technical assistance

Bank-financed (i) Prescription patterns and patient compliance for the treatment o f communicable diseases

(ii) General prescription patterns, use o f generic drugs

(iii) Safety and nutr i t ion aspects o f foods for pregnant women and small children

Tuberculosis Control

Malaria Control Second Leprosy El imination Andhra Pradesh First Referral Health System Second State Health Systems Maharashtra Health Systems Orissa Health Systems Integrated Chi ld Development Services I1

Women and Chi ld Development Reuroductive and Chi ld Health

(Bank-f'inance Implementation

Progress (IP)

S

S H S S

S S S S

S

S

Latest Supervision lPSRl Ratings

projects only) Development

Objective (DO)

S

S S S

H S S S S

S

S

- 1 0 -

programs IPlDO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design:

Lessons from international experience

0

0

An effective national commitment to food and drugs quality and safety requires shared responsibility by government, consumers, industry, consumer organizations, and NGOs. There has been a global shift in the approach to ensuring food and drugs quality and safety, which has broadened national programs beyond mandatory inspection, sampling and prosecution o f offender. Alignment with international standards for food and drugs improves quality and safety o f foods and drugs.

0

Lessons from India Health Projects

0

0

0

0

I t i s critical to focus on institutional arrangements, including clarity in center-State responsibilities. Collaboration with community-based organizations and consumer groups i s important for project success. Public health education strategy development and implementation benefit from support by professional media agencies. Early preparedness and up-front actions facilitate timely implementation and disbursement.

4. Indications of borrower commitment and ownership:

There are strong indications o f borrower commitment and ownership:

0

0 0

0

0

0

0

The proposed project has been included in the 10th Five Year Plan and the MOHFW i s keen to start implementation in FY 2003-04. 17 States have provided Letters o f Undertaking for effectively implementing the project. An Environmental Management Plan has been prepared and disseminated as per IDA disclosure policy. Site surveys have been completed for five major civil works planned for the second year and preliminary plans have been prepared. Notice for the project's procurement has been published in the United Nations Development Business o f December 3 1,2002. A qualified finance professional has been appointed to the PCU and a draft finance manual has been prepared. Draft terms o f reference have been prepared for most studies and consultancies planned.

5. Value added of Bank support in this project:

The proposed project would be a vehicle to support the long run vision o f government in an important aspect o f social welfare. Among the development assistance agencies, the Bank i s best positioned to assist in major long-term policy reforms such as this one. The Bank also has the ability to tap international experience and coordinate with other donors with an interest in food and drugs quality and safety. I t has an ongoing partnership with WHO and FA0 and would further strengthen i t s collaboration with these agencies under the project.

- 1 1 -

E. Summary Project Analysis (Detailed assessments are in the project fi le, see Annex 8)

1. Economic (see Annex 4): 0 Cost benefit

- 1 Cost effectiveness ' Other (specify) Benefits and Costs of the Project A cost-benefit analysis of the project was carried out and i s described in more detail in Annex 4. The estimates o f benefits are based on benefits arising from improved food safety only; benefits from improved quality and safety o f drugs and more rational use o f drugs were not included because o f data limitations.

NPV=US$ million; ERR = % (see Annex 4)

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Improved food safety would result in the prevention of many episodes o f food-borne infections. The economic benefits associated with such prevention would include (i) medical costs avoided; (ii) loss o f earnings avoided; and (iii) the value o f years o f l i f e saved that would otherwise have been lost because o f premature death caused by food borne infections. For young children, because o f better nutritional status from avoiding repeated episodes o f diarrhea, there could also be benefits in the form o f higher cognitive abilities later in childhood and higher productivity once employed. In the present illustrative cost benefit calculations only (i) and (ii) have been included. Costs included in the calculations are the estimated costs o f the entire project, as well as the costs o f sustaining the activities initiated under the project up to 2017.

Main assumptions for the cost-benejt analysis:

In the base case, it i s assumed that the number o f annual episodes o f food-borne infections i s initially (i.e., in 2003) around 655 mill ion (estimated as 25% o f total annual episodes o f diarrhea). In the absence o f the project, it i s assumed that this number would remain constant throughout the projection period (2003-2017). With the project, it i s assumed that the annual number o f food borne-infections would decline by 5% by year 5 (relative to the 2003 figure), remaining at that level thereafter. With these assumptions, about 380 mill ion episodes o f food-borne infections are estimated to be prevented during the 15-year period 2003-20 17- out o f which about 357 mill ion episodes would be mild and the remaining 23 mill ion moderate to severe.

I t was also assumed that the average number o f days o f work lost per mild episode o f food-borne infection i s one day in the case o f a child (wages lost by attendant) as well as in the case o f an adult (wages lost by self). In cases o f moderate to severe episodes, four days o f wages are assumed to be lost in case o f children (one parent's wages) and seven days in case o f adults (four days for se l f and three days for attendant). Average daily earnings were assumed to be US$2 initially, increasing by 3% per year thereafter (at constant prices). Average medical treatment costs per episode o f food infections were estimated to be around US$1 for mild episodes and US$10 for moderate to severe episodes. A discount rate o f 10% per year was used to compute present values.

Cost-benejt Results in the Base Case

The net present value (NPV) o f the project in the base case i s estimated to be positive at US$733 million. About one-third o f the benefits are in the form o f medical treatment costs avoided, and the remaining two-thirds in the form o f lost earnings avoided. The simulations conducted around the base case show that the result o f a positive NF'V i s robust (Annex 4).

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Justification for Government Financing The services provided by a program to ensure food safety and good quality o f drugs for a country's population (deterrence of h a d l practices by industry through oversight and legal action, consumer education, encouragement o f self-regulation) are by and large in the nature o f apublic good in the Public Finance sense --i.e., the "consumption" o f such services by a given person or household does not detract from the ability of other persons or households to consume the same services. The benefits o f the program accrue automatically to the entire population, and in the absence o f a government's program it would be difficult (though not impossible) for private business to provide the same services and make a profit. Because of these considerations, throughout the world services to ensure food and drugs safety and quality are a government function.

Net Fiscal Impact An estimate was made of the net fiscal impact the project would have, under the assumptions o f the Base Case, and with the following additional assumptions:

one half o f moderate to severe ones are met by the Government. About one-third o f the costs o f medical treatment o f mild episodes o f food-borne infections and

The tax rate on forgone earnings avoided i s 13% (mostly consisting o f indirect taxes).

With the above assumptions, the Ne t Fiscal Impact o f the project (in Present Value) would be positive at US$85 million. This figure i s obtained by subtracting the P V o f government outlays (the government's share o f project cost financing and the repayments o f the IDA credit) from the s u m o f the PV o f tax gains (US$74 million) and the P V o f government spending avoided on account o f averted medical treatment (US$107 million).

Poverty Aspects As already noted, while the benefits o f an enhanced food and drugs safety and quality program would be enjoyed by the entire population, a strong program would be especially important for poor households. Household studies suggest that Indian children born in households in the poorest quintile have 20 percent higher risk o f suffering from diarrhea --a common manifestations o f unsafe food-- compared to those from in the richest quintile.

Market Analysis The preparation o f the project included a basic analysis o f the market for pharmaceuticals in India. The analysis shows a thriving industry, with an annual growth o f about 10% in recent years. An enhanced program to improve drugs quality for the Indian public may also be helpful in opening increased export opportunities for Indian industry.

2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) Financial Management Issues Financial management issues are discussed in section (4.4) below and Annex 6(B).

Financial Sustain ability The burden o f recurrent government expenditure generated by the proposed project i s estimated at about US$10 mill ion per year by the end o f the project. This i s a very small amount by comparison with total government spending in the health sector (currently about US$2 bil l ion per year for the central government and States combined). Thus, since the program i s likely to be given high priority by future governments, financial sustainability i s not expected to be an issue.

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Fiscal Impact:

The net fiscal impact o f the project was discussed under the economic analysis section.

3. Technical: The new government vision and enhanced program for ensuring food and drugs safety and quality, o f which the proposed project would be part, are in line with current international thinlung. Experience from many countries has shown that regulation by i t se l f often does not produce the desired results, and this i s true a fortiori in developing countries. This does not mean that regulation should be given up, but rather that it should be complemented by other approaches, such as i s the case in India's envisaged enhanced program. At the same time, the government's regulatory apparatus should be provided with adequate resources (laboratories, skilled personnel, etc.) to do the job.

4. Institutional: The project would have an important element o f institution building within the public sector. Consumer education activities supported by the project are likely to contribute to the growth o f consumer advocacy groups.

4.1 Executing agencies:

The project would be implemented through existing organizational arrangements at the center and State levels, which would be strengthened.

4.2 Project management:

The Joint Secretary, MOHFW would have overall responsibility for the proposed project assisted by the Drug Controller General and the Assistant Director General, PFA. A Program Coordination Unit would be assigned within MOHFW to coordinate project activities and the proposed staffing i s adequate to perform this function. See also Section C.4.

4.3 Procurement issues:

Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995, revised in January and August 1996 and in September 1997 and January 1999) would apply to all goods and works financed under the project. The Guidelines for Selection and Employment o f Consultants by World Bank Borrowers (January 1997, revised in September 1997 and January 1999) would apply to all consultants' services financed under the project.

Civ i l works in this project involve new construction as well as renovation o f laboratories both at the State and central levels. Other goods and services that would be procured under the proposed project include laboratory materials and supplies, furniture, lab equipment, training and workshops, local I foreign consultants, fellowships, and contracts for N G O services.

Procurement o f small items o f low value would be at the State level. Remaining items would be procured at the central level through a procurement agent using National Competitive Bidding (NCB) and International Competitive Bidding (ICB).

The Hospital Services Consultancy Corporation (HSCC), a dependent agency o f MOHFW, has been appointed on a single source basis as procurement agent for the project. All c iv i l works, goods, equipment and furniture will be procured through this agency. Procurement schedules for the f i rs t year have been prepared and reviewed by IDA and technical specifications o f equipment planned to be procured in the f i r s t year have been agreed. Detailed site surveys and plans for new works planned during the second year o f the project also have been completed and reviewed by IDA.

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Procurement i s discussed in more detail in Annex 6(A).

4.4 Financial management issues:

This i s the first IDA project that would be implemented by the food and drug directorates within the MOHFW. The proposed financial management arrangements for the project are detailed in Annex 6(B). The project would has a financial management system which would be able to adequately account for project resources and expenditures.

Approx 75% o f the project expenditures, which includes the bulk o f physical works, goods and equipment, services, trainings and workshops (delivered both at the central and State levels) would be budgeted, paid for and accounted for at the central level by the PCU. The procurement at central level would be done mainly by the central procurement agent and would include civil works, goods & equipment, furniture, and consultant services. The procurement agent would be advanced funds by the MOHFW and the invoices I bills after payment to the suppliers1 contractors would be certified by the central procurement agent as per the contractual terms and would be passed on to the finance and accounting section o f the PCU for settlement o f advances. The funds at the central level would be made available to the line ministry ( M o W W ) through separate identifiable budget heads in the Union budget under Central Administration o f Drug Control and Prevention o f Food Adulteration (different components I activities under separate heads). The costs paid at the State level would essentially be incremental operational costs (salaries, vehicle hire, office operating cost, maintenance o f equipment and buildings and purchase o f consumables). The funds for the expenditure at the States would be routed through the State Aids Control Societies (SACS) and would be available to the States on a reimbursement basis.

A Financial Management System (FMS) for the project, based on a simplified software platform, has been designed to accurately record and report the project expenditures at the aggregate project level in a timely manner within the overall reporting system as required within the government. The books o f accounts for the overall project would be maintained by the PCU using double entry book-keeping through an o f f the shelf accounting software with a modified focus on using the financial information and reports for managerial decision-making. This would be an enhancement o f the existing Government accounting system. A finance manual laying down the financial policies and procedures, reporting formats, f low o f information, chart o f accounts, external and internal audit for the project and operation o f the FMS has been prepared. Financial Monitoring Reports (FMRs) have been designed in consonance with the project components to track financial, physical and procurement related progress o f the project and would meet the needs and requirements o f MOHFW, IDA, and the project management. They would be submitted at quarterly intervals.

Staffing arrangements:The Finance wing o f the Project would be headed by a Financial Controller (of a rank o f Deputy Secretary, Central Govt.) and would be assisted by a finance professional, designated as Finance Manager for the project. The other members o f the finance team would include 2 junior level accountants (with IT background) & and other support level staff as required under the project. The SACS are adequately staffed with a financial controller1 Finance manager heading the finance function in each o f the SACS and adequately supported by a accountant and support accounting staff. There may however be a need for additional staff (one accountant) in the larger states (five to six in number) from the second year onwards. It has been agreed that additional staff, if necessary, would be employed by SACS in consultation and concurrence with the P M U o f this project and the expenditure would be met out o f this project. A training plan, which i s detailed in the PIP, has been drawn up which aims at providing sufficient training to the finance staff in the proposed Financial Management System,

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disbursement policies and procedures and the financial reporting requirements.

Disbursement & Payment arrangements: An advance would be paid to the Central Procurement Agency and the bills and invoices in respect o f c iv i l works, goods (equipment, including off ice and laboratory equipment, furniture, materials and supplies), and services I consultancies, which would be procured through the central procurement agent, would be certified by this agent in terms o f contractual arrangements, deliverables, quality, etc., and would be passed on to the PCU for settlement o f advances. The Finance Section o f the P C U would scrutinize the bills and would recommend for settlement o f the advance.GO1 would open a special account with the Reserve Bank o f India to receive the disbursements f rom the Bank. Disbursements f rom the IDA credit would init ial ly be made in the traditional system (reimbursement with full documentation and against statement o f expenditures) and could be later converted to the Financial Management Report (FMR) based disbursement at the option o f GO1 and the participating States after the project entities successfully demonstrate capacity to generate good quality FMRs. Expenditure to be incurred at the States would be made available to the States on a reimbursement basis through the respective States Aids Control Societies.

Retroactive Financing: Retroactive financing up to US$2 15,000 equivalent f rom the credit amount would support training, consultancies, travel, conferenceslmeetings, furniture and equipment, c iv i l works for eligible project expenditures incurred one year before project effectiveness.

Audit- External : Under the proposed audit arrangement for this project, unlike other centrally sponsored schemes, IDA would receive two sets o f annual audit reports under the project: (i) an audit report in respect o f the central P C U (including project financial statement) audited by the off ice o f the Controller and Auditor General o f India, which would be acceptable to IDA as an independent auditor, under terms o f reference agreed with IDA, and (ii) a comprehensive audit report (including project financial statement) compiled at the national level in respect o f a l l the SACS, audited by an independent auditor, under terms o f reference agreed by IDA. As the expenditure in the States wou ld be incurred and accounted for by the SACS (which are currently audited by independent Chartered Accountants firms), the TOR currently approved for the audit o f SACS would be suitably modif ied to include the audit o f the proposed project. All such audit reports (along with project financial statements) would be consolidated into a single audit report by a firm o f chartered accountants/ independent auditor appointed at the national level.

Audit - Internal: An internal auditor would assess the operation o f the project's financial management system, including the review o f internal control mechanisms and procurement process, and suggest remedial measures in a t imely manner to the project management. The office o f the Chief Controller o f Accounts within M o H F W has the mandate for conducting internal audit o f the entire ministry. A TOR specific to the project has been agreed with the Chief Controller o f Accounts in consultation with the Off ice o f the Controller General o f India.

5. Environmental: 5.1 Summarize the steps undertaken for environmental assessment and E M P preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis.

The project proposes the construction o f new food and drug laboratories, and the renovation and upgrading o f existing laboratories. An Environmental Management Plan (EMP) has been prepared and disclosed. I t would minimize negative environmental impacts o f current and future operations and increase the overall safety at the laboratories. The project would al low for the enhancement o f the existing national Good Laboratory Practices (GLP) Guidelines with an environmental management health and safety component and standard Codes o f Practice. These would include specific provisions for improved environmental practices, worker safety, and activities related to procurement, storage and

Environmental Category: B (Partial Assessment)

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handling o f chemicals and management o f wastes in food and drug testing laboratories.

A f ie ld study was undertaken o f a sample o f drug and food testing laboratories. Most o f them are small laboratories, with few workers and minimal amount o f materials usage and waste generation. Whi le there are basic standards for safe management o f hazardous chemical materials and safety protocols related to treatment and disposal o f hazardous chemical wastes, capacity and awareness training i s required to ensure implementation o f existing environmental rules. Site investigations indicated that there are no trained staff in environmental health and safety management in most o f the laboratories. At the pol icy level, there i s an urgent need to refine the existing set o f laws and regulatory provisions currently in place to clearly and specifically address the handling and management o f hazardous chemicals and biohazardous wastes used and generated in drug and food testing laboratories.

5.2 What are the main features o f the E M P and are they adequate?

The E M P defines the potential impacts o f laboratory upgrading and new construction and details appropriate mitigation measures. Since the laboratories under the project do not handle drug development, the environmental impacts o f the project are expected to be manageable and the proposed mitigation measures to be implemented are standard. The mitigation measures recommended in the generic E M P will be adapted and implemented in accordance with the identified project sites. The E M P envisages a phased approach, including an assessment o f a representative sample o f laboratories, formulation o f Standard Operation Procedures and training modules, and implementation o f monitoring. An environmental management framework for mitigation o f main environmental issues has been prepared prior to Negotiations.

5.3 For Category A and B projects, timeline and status o f EA: Date o f receipt o f final draft: October 25, 2002

5.4 H o w have stakeholders been consulted at the stage o f (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms o f consultation that were used and which groups were consulted?

The key stakeholders consulted include laboratory staff, food and drug regulatory personnel and NGOs involved in promoting food and drug safety and environment. These consultations were held through site visits and interviews.

5.5 What mechanisms have been established to monitor and evaluate the impact o f the project o n the environment? D o the indicators reflect the objectives and results o f the EMP?

Monitoring plans for implementation o f safe laboratory procedures would be developed during project implementation. The MOHFW would be the lead agency coordinating implementation supported by the PCU. Each laboratory would have one officer designated as Environmental Health and Safety Officer (EHSO), who would be accountable for implementation o f the EMP. Implementation o f the E M P would be included into the scope o f the quality audit o f laboratories, to enable periodic feedback, based on which refresher training on safety issues can be provided. T w o health, safety and environmental surveys would be undertaken (once during the mid-term review and another pr ior to project closure) by a competent independent agency.

6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes.

The key social challenge o f the project would be engaging consumers and consumer organizations, as

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well as the food and drugs industry (formal and informal; manufacturers and retailers) in safety and quality assurance issues. The poor and uneducated are less aware o f the potential dangers from consuming unsafe food and sub-standard drugs and are victims o f (i) the unsafe practices in food production, distribution, and handling within the household, and (ii) bad quality drugs and inappropriate drug use based on non-professional advice. Existing consumer groups would have to be effectively used to create awareness among the vulnerable groups.

Small manufacturing f i r m s o f food and drugs, and street vendors could be affected if regulatory capacity i s enhanced. The project would assist these groups by providing guidelines and technical training on good manufacturing practices and common testing facilities.

Information dissemination and awareness generation are critical for improving the public's participation in food and drug quality control. A participation strategy would be evolved during project implementation with roles for different stakeholders. Specific strategies would address the information needs o f women's groups, female vendors, poor households and the tribal populations. The Information, Education and Communications (IEC) strategy would take account o f the specific needs o f both providers (drug dispensers, food vendors) and consumers. Household surveys would ensure coverage o f women, poor households and the tribal populations.

N o land acquisition would be required as the laboratory constructions would take place on land already in the possession o f the Government. The Government would provide a certificate documenting that the land i s free o f encroachment and that no resettlement i s warranted as there are no adverse impacts on anybody.

6.2 Participatory Approach: How are key stakeholders participating in the project?

Drug Quality : Stakeholders would include representatives o f drug manufacturing organizations, medical practitioners, drug control organizations, Central Government laboratories, Government drugs procurement agencies, retail chemists, and consumers.

Food Safety : Stakeholders would include representatives o f food manufacturing organizations, food testing laboratories (government and private), consumers, food quality control agencies, hotels, street food vendors, groceries and provision stores.

The roles that have been envisaged for the major stakeholders in project implementation are as follows: 1. Food and drug government units at the center and State levels: To play a proactive role and

move from only policing to being change agents - educating and creating awareness; 2. Private sector : Food and drug producers and distributors to enhance technical quality, employ

better testing mechanisms for process quality control. 3, Consumer groups and NGOs: Greater role in policy dialogue and program actions. Consumer

groups as members o f the National Codex Committee are playing an important role in public awareness and participation through creating consumer awareness o f food safety and drug quality issues.

4. Panchayati Raj Institutions - Explore possibility o f better engagement o f PRIs in the implementation o f laws - especially the food laws.

5. Expert Institutions: Expert institutions would be closely involved in training, carrying out surveys and strengthening information systems. Home Science Colleges would revise their curriculae to emphasize hygiene, GMP and HACCP issues as well as help enhance voluntary compliance o f food safety measures in the small scale food manufacturing and service industry.

6. International Partnerships. The project would seek to complement the ongoing actions o f WHO and FA0 on providing training and updating standards.

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6.3 H o w does the project involve consultations or collaboration w i th NGOs or other c iv i l society organizations?

Many key consumer groups and industry associations are already involved with government on working committees related to food and drug regulation. NGOs involved in other health programs would be contacted to participate in a planned series o f consultations with States and expert institutions. The home science college network has organized a set o f consultations with i t s members, NGOs and community groups interested in nutrition. Similarly VOICE, an umbrella group for consumer agencies, and the Delhi Society for Promotion o f Rational Use o f Drugs (DSPRUD) would be involved in the program.

Natural Habitats (OP 4.04, BP 4.04, GP 4.04) Forestry (OP 4.36, GP 4.36) Pest Management (OP 4.09)

The effectiveness o f these NGOs, consumer groups and institutions would be enhanced through: 1. Developing Client Charters for food and drugs laboratories to enhance transparency (at least 5 by

mid-term). 2. Designing and implementing an effective IEC strategy, and monitoring based o n detailed surveys

capturing the attitudes, beliefs and practices regarding food and drug safety issues. 3. Creating a network o f NGOs, industry associations and expert institutions such as home science

colleges, research institutions and consumer groups to make the regulatory mechanism more effective and sustainable.

6.4 What institutional arrangements have been provided to ensure the project achieves i t s social development outcomes?

The PCU i s to have an IEC/NGO consultant responsible for promoting consumer awareness through both media and NGO channels. The project design makes provision for implementation o f activities by stakeholders including NGOs and industry associations. These involve jo in t training, pilots for promoting community feedback and voice (complaint systems), participation in key working committees and campaigns to raise consumer awareness. Professional media agencies wou ld be contracted to promote public awareness and behavior change giving special attention to non-literate and disadvantaged populations.

6.5 H o w wil l the project monitor performance in terms o f social development outcomes?

The project would monitor through surveys and special studies (e.g., to veri fy increased knowledge and behavior change among the public) and feedback mechanisms such as mechanisms for the public to lodge complaints.

L' Yes 0 NO

(-' Yes 0 NO

L) Yes 0 NO

7. Safeguard Policies:

- Cultural Property (OPN 11.03) Indigenous Peoples (OD 4.20) Involuntary Resettlement (OP/BP 4.12) Safety o f Dams (OP 4.37, BP 4.37) Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)"

0 Yes 0 NO

Yes 0 NO

1 3 Yes 0 NO

L~ Yes 0 NO

u Yes 0 NO

C; Yes 0 NO

I '

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7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.

Environmental Assessment: See section E(5).

F. Sustainability and Risks 1. Sustainability:

Financial sustainability. See section E(2).

Institutional Sustainability. As noted in section A( l), the project i s part o f a long-term program to develop and implement a new approach to food and drugs quality and safety. As such, activities supported under the project are expected to be continued, and reforms deepened, beyond completion o f the proposed project. Moreover, the project would be implemented through existing institutional arrangements which would also facilitate sustainability.

Political Sustainability. As the nation develops and the population becomes increasingly sophisticated, it can be expected that the public’s demands for collective action to ensure the safety and quality o f foods and drugs wou ld grow steadily. This in turn would make maintaining and further developing the mechanisms for such collective action a prominent aspect o f the regular pol i t ical agenda.

2. Critical Risks (reflecting the failure o f critical assumptions found in the fourth column o f Annex 1): ~

Risk ~ ~

From Outputs to Objective Government commitment to pol icy and institutional reforms related to food and drugs quality and safety tu rns out to be weak.

The IEC program, though we l l conceived and executed, does not sufficiently improve consumers’ awareness and knowledge o f unsafe foods and unsafe handling o f foods, especially for poor uneducated people who are not able to grasp the significance o f the messages conveyed. Alternatively, there are some other constraints that prevent households to take action to ameliorate problems arising f rom unsafe foods sold in the market and f rom the unsafe handling o f foods within the household.

The IEC program, though we l l conceived and executed, does not sufficiently

Risk Rating

H

S

S

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Risk Mitination Measure

The government o f India has demonstrated a strong commitment by developing a pol icy note articulating i t s long term vision and the project i s being proposed o n the basis o f this. Strong consumer demand through implementation o f effective I E C strategy i s expected to support development o f enabling policies and mearues.

The contents o f the project’s I E C strategy would emphasize simple principles for households to recognize signs o f unsafe food in the market and the hygienic handling o f food within households. Periodic household surveys would assess how wel l the strategy i s working and corrections would be made accordingly. Households without adequate water facilities may find i t dif f icult to implement some o f the hygiene-related messages such as frequent washing o f hands. This i s a constraint being addressed by various other government and NGO programs which seek to improve household water facilities, but which obviously cannot be totally removed in the short to medium term. The contents o f the project’s IEC strategy would emphasize simple principles for

mprove consumers’ awareness and nowledge o f how to protect themselves .gainst unsafe or ineffective drugs being old in the market, or does not ignificantly change household behavior oncerning inappropriate use o f drugs iought from the market. This may be specially true o f poor uneducated people vho are not able to grasp the significance If the messages conveyed.

iood and drugs inspectors and laboratory nalysts do not take advantage o f their nhanced s k i l l s (acquired through n-service training) to do a more effective 3b because they have weak or perverse ncentives.

mproved infrastructure does not lead to ubstantially better service by central and ltate regulatory agencies because iovernance problems are severe.

idoption o f HACCP guidelines may educe the profits o f medium and small cale food manufacturing or marketing irms.

idoption o f Good Manufacturing ’ractices may reduce the profits o f iedium and small scale drug ianufacturing f i r m s rom Components to Outputs

H

H

M

M

households to recognize the dangers o f making inappropriate use o f drugs on their own initiative (e.g., their abuse o f antibiotics). Periodic household surveys would assess how well the strategy i s working and corrections would be made accordingly. I t would be more difficult for the households to be able to recognize (and stay away from) sub-standard quality drugs being sold in the market, so that the effects o f the IEC program may be modest concerning this second objective. There i s no easy solution to this problem, and it w i l l probably take many years before it can be ensured that regulatory staff have the right incentives, i.e., that their main concern be to serve the public (and it i s precisely for this reason that it i s very important that India’s approach to ensuring quality and safety o f foods and drugs be expanded to include consumer education and measures to encourage industry self-regulation). For laboratory staff, the project would support independent audits, which would to an extent deter inappropriate behavior by laboratory staff.

This problem i s similar to the one immediately above, i.e., incentives o f regulatory staff are no conducive to uniformly good behavior. In addition to strong focus on consumer education, in some states client charters would be piloted to give better voice to the consumers.

The importance o f this risk i s difficult to assess in the absence o f a detailed economic analysis o f the small and medium size segments o f the food and drugs industries. I t i s reasonable to assume that there would be a certain distribution o f the f i r m s by the magnitude o f the potential profit gain or loss from adopting HACCP, and that the firms that would profit from such move would be the ones to adopt HACCP.

A similar argument as in the risk immediately above would apply here also.

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M O H F W P C U do not have adequate implementation capacity

The States are not sufficiently committed or do not have adequate implementation capacity

Government commitment to educating zonsumers in matters related to food and drugs quality and safety i s not strong.

The quality o f training i s inadequate.

The large number o f institutions reporting to P C U (after state level FM arrangements are finalized) might delay the consolidation & overall financial reporting

Overall Risk Rating

M

M

S

M

M

S iisk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N

As in the States, fixed-term personnel would be appointed under contract until statutory positions are filled. For the I E C sub-component, MOHFW would contract with a qualified private firm to coordinate the implementation, using ICB. Only States that have made a formal commitment through Letters o f Undertaking would be included in infrastructure development. The project would support provision o f technical assistance to the States and regular State/Union coordination. Fixed-term personnel wou ld be appointed under contract until statutory positions are filled. The IEC program supported by the proposed project wou ld include a component o f advocacy vis-a-vis senior c iv i l servants and politicians. As already noted, disbursements against infrastructure would be tied to satisfactory implementation o f the IEC program. The P C U wou ld organize post-training assessments to veri fy that the trainees have acquired the intended s k i l l s and would take remedial measures as required.

P M U wil l closely monitor the financial aspects and wil l be adequately staffed w i th experiencec personnel for this purpose. Formats for monthly reporting o f expenditures and funds transfers will be made a part o f the reporting system. As most o f the expenditures would be incurred at the central level (over 75% the project cost), financial involvement at each state wou ld be minimal.

degligible or Low Risk)

3. Possible Controversial Aspects: T o the extent that providing food and drugs regulatory staff with better sk i l ls and infrastructure resulted in more rigorous enforcement o f current laws and regulations, opposition can be expected f rom the affected businesses. Implementation o f the IEC program i s unl ikely to provoke much opposition, contrary to what could be the case for say an HIV/AIDS-related information campaign.

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G. Main Credit Conditions 1. Effectiveness Condition

There are no conditions o f Effectiveness

1.

2.

3.

4.

5.

2. Other [classify according to covenant types used in the Legal Agreements.]

In accordance with i t s long term vision to improve food and drug quality and safety, the GO1 shall: carry out the project with due diligence and efficiency and in conformity with appropriate administrative, financial, public health and environmental practices and shall provide, as promptly as needed, the funds, facilities, services and other resources required for the project. formulate an IEC strategy and action plan for improving behaviors o f key stakeholders on issues o f safety, quality o f foods and drugs and rational use o f drugs by June 30,2004 and thereafter implement them in a manner satisfactory to the Association. fully establish the Program Coordination Unit by October 3 1,2003 in a form and with functions, membership, staffing and resources satisfactory to the Association. review with the Association in the month o f July o f each Project Year progress made in carrying out the project. carry out jointly with the Association a Mid Term Review review o f the progress made by the project not later than December 2003,

H. Readiness for Implementation E 1. a) The engineering design documents for the f i rs t year's activities are complete and ready for the

start o f project implementation. 1. b) Not applicable.

E 2. The procurement documents for the first year's activities are complete and ready for the start o f project implementation.

quality. 3. The Project Implementation Plan has been appraised and found to be realistic and o f satisfactory

4. The following items are lacking and are discussed under loan conditions (Section G):

None

1. Compliance with Bank Policies

- 2. The following exceptions to Bank policies are recommended for approval. The project complies 1. This project complies with all applicable Bank policies. -

with all other applicable Bank policies.

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GNVRamana Team Leader

Michael F.Carter Sector Manager Country MamgerlDirector

Annex 1 : Project Design Summary INDIA: Food and Drugs Capacity Building Project

T o improve the health status o f the population, especially

0 bjective: T o improve the quality and safety o f food and drugs.

Output from each Component: Component 1: Policy Development, Program Coordination and Monitoring. Policy Development: (i) Studies and po l i cy reviews to underpin the formulation o f pol icy and institutional reforms. (ii) Workshops and consultations with stakeholders.

Program Coordination :

(iii) The establishment and operation o f a central Program Coordination Unit (PCU).

(iv) The establishment and operation o f a computerized

Sector Indicators: Child mortality rate, incidence 2 f diarrhea

Outcome I Impact Indicators: The Govemment in ;onsultation w i th major stakeholders, develops recommendations and options for appropriate policies and measures fo r improving food and drugs quality and safety, in line w i th i t s new approach.

Increased consumer awareness and knowledge about quality and safety o f foods and drugs and their proper use Increased capacity, quality and timeliness in food and drug testing laboratories.

Output Indicators:

(Refer Annex 11)

(i) Number and quality o f the studies

[ii) Number o f workshops and :onsultations and number o f participants

:iii) The PCU i s fully staffed with qualified personnel appointed on :ontract basis.

:iv) New computerized

Data Collection Strategy

iectorl country reports: 'ublished government reports

'roject reports:

'eriodic Project Progress teports

ceports f rom household iurveys

'roject reports:

i) Periodic project progress 'eports.

ii) Periodic project progress 'eports.

iii) Periodic project progress 'eports.

iv) Periodic project progress 'eports, reports generated by the

Critical Assumptions from Goal to Bank Mission) 3road-based improvements in he health o f the Indian )opulation would contribute to ncreased productivity and ilt imately to poverty ,eduction.

from Objective to Goal)

<educing the proportion o f ow-quality drugs and unsafe 'oods sold in the country, and mproving households ' iwareness and knowledge ibout the proper handling and ise o f foods and drugs, would ead to a broad-based mprovement in the health o f .he Indian population.

(from Outputs to Objective)

(i), (ii): There i s a strong government commitment that results in an effective updating o f policies and institutions related to food and drugs quality and safety.

(i i i) ,(iv):The lack o f adequate information and coordination has hampered the effectiveness o f government efforts to improve quality and safety o f foods and drugs.

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management information system.

Central Facilities and Stafing:

(v) Improvement o f central physical facilities for food and drugs oversight, and related staffing.

Monitoring:

(vi) Monitoring activities, including the implementation o f household surveys to assess public perceptions and knowledge about quality and safety o f foods and drugs, and the organization o f independent audits o f public and private laboratories.

Component 2: Food Safety

(i) A new program for building consumer awareness and knowledge o f food safety issues.

(ii) Training o f about 2,000 food inspectors and 500 analysts in public sector laboratories in new standards and guidelines for priority food sectors.

(iii) Training ofabout 1,000 staff from the private sector in HACCP guidelines.

(iv) Training in advocacy and other ski l ls for 20 umbrella consumer organizations.

(v) Development and dissemination o f Hazard Analysis Critical Control Point (HACCP) standards.

iformation system i s in place and enerating periodic reports by lid-term.

v) Facilities completed.

vi) Number and timing o f ousehold surveys: a baseline urvey conducted by March 2004; NO follow-up surveys conducted ftenvards.

vi) Number of food laboratories udited.

i) Detailed IEC strategy and rogram regarding food safety eveloped by June 2004 and nplemented thereafter.

ii) The number of food ispectors and analysts trained quals or exceeds the targets in l e left-hand side column. ii) Training i s successful as ieasured by skills actually cquired by the trainees measured through post-training ssessments). iii & iv) As in (ii).

,v) HACCP guidelines for medium and small scale manufacturers in selected priority food sub-sectors (e.g. cereals, pulses, oils, fats and milk) are

ew information system.

J ) Periodic project progress :ports.

ti) Periodic project progress :ports.

i) Periodic project progress eports, reports from household urveys.

ii) Periodic project progress eports, post-training assessments

iii) Periodic project progress eports, post-training assessments

iv) Periodic project progress eports, post-training assessments

v) Periodic project progress eports, information from industr

vi) Information on households’ lerceptions of issues pertaining to ood and drugs quality and safety 3 key to design an effective IEC trategy and to measure progress in awareness and knowledge. vi) Independent audits of aboratories would be followed by :ffective remedial measures taken iy the government.

i) There i s much that consumers :an do themselves to ameliorate xoblems arising from unsafe bods being supplied in the narket and from the unsafe iandling o f foods within the lousehold. ii) Training o f food inspectors ind laboratory analysts results in heir acquiring the sk i l l s intended ind these staff use the enhanced ;kills to do a more effective job.

,... ,111) The trainees’ firms would ncrease their profits by adopting HACCP guidelines in their iperations. :iv) Better trained members o f imbrella consumer organizations Nould result in more effective .obbying for better policies and x-ograms in the area of food safety and in more effective :ducation o f their members.

:v) Small and medium scale food nanufacturers would increase [heir profits if they adopted HACCP.

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vi) New construction and :quipping o f six central and line State food laboratories.

vii) Renovation and quipping o f nine existing ood laboratories and public iealth offices at central and ive food laboratories at State :vels. Iomponent 3: Drugs Quality nd Safety ) Information and education Ztivities to improve consumer wareness and behavior :garding quality and rational se o f drugs, carried out with le support o f professional iedia agencies and NGOs. i) Training o f about 625 :gulatory staff and recruitment f additional qualified staff.

ii) Training o f about 2,000 ersonnel from small and iedium scale industry in Good lanufacturing Practices 3MP) and Good Laboratory ractices (GLP). v) Updating and issemination o f harmaceutical standards.

i ) New construction and quipping o f one central and ve State drug testing iboratories. ii) Renovation and equipping f one existing drug testing iboratory at central and twelve iboratories at State levels.

'roject Components I iu b-components:

introduced for at least three sub-sectors by the end of the project. (v) Standards for food additives harmonized with Codex by March 2004. (vi) Timely procurement and implementation.

(vii) Timely procurement and implementation..

i) Detailed IEC strategy and xogram regarding drugs quality md safety developed by June 2004 md implemented thereafter.

ii) The number of staf f trained :quals or exceeds the targets in the eft-hand side column. ii) Training i s successful as neasured by skills actually icquired by the trainees (measured hrough post-training assessments) iii) As in (ii).

iv) Pharmacopoeia Commission ,et up by December 2003; Indian 'harmacopoeia updated by lecember 2004; new drug eference standards prepared by lecember 2005. v) Timely procurement and mplementation

vi) Timely procurement and mplementation.

Inputs: (budget for each component)

(vi) Periodic project progress reports.

(vii) Periodic project progress reports.

i) Periodic project progress 'eports, reports from technical :onsultants.

(ii) Periodic project progress 'eports, post-training assessments.

,... ,111) Periodic project progress .eports, post-training assessments.

:iv) Periodic project progress .eports, information from industry

:v) Periodic project progress .eports

:vi) Periodic project progress -eports

Project reports:

(vi), (vii): Improved infrastructure would lead to better service.

:i) There i s much that consumers :an do themselves to ameliorate xoblems arising from sub-standar hugs being supplied in the markei and from the improper use of Irugs.

[ii) Training o f drug regulatory staff results in their acquiring the skills intended; and these staff use the enhanced skills to do a more Effective job.

(iii) The trainees' firms would increase their profits by adopting GMP and GLP in their operation:

(iv) Indian drug standards harmonized with international norms.

(v), (vi): Improved infrastructure would lead to better service.

(from Components to Outputs)

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'olicy Development, Program :oordination and Monitor ing e Policy Development e Program Coordination e Central Facilities and

Staffing e Monitor ing

:ood Safety e Consumer Awareness and

e Training e HACCP e Central Laboratories e State Laboratories

)rug Quality and Safety e Consumer Awareness and

e Training e Pharmaceutical Standards e Central Laboratories e State Laboratories

Education

Education

J$$7.0 mi l l ion equivalent

JS$44.3 mi l l ion equivalent

JS$2 1.6 mi l l ion equivalent

Project Status Reports

Financial Monitor ing Reports

Audit Reports

Project Status Reports

Financial Monitor ing Reports

Audit Reports

Project Status Reports

Financial Monitor ing Reports

Audit Reports

MOHFWiPCU have adequate mplementation capacity.

rhere i s strong govemment :ommitment to policy and .nstitutional reforms.

UOHFW/PCU and the States lave adequate implementation :apacity. rhere i s strong govemment :ommitment to educating :onsumers

MOHFWiPCU and the States nave adequate implementation :apacit y. There is strong government :ommitment to educating zonsumers

A comprehensive indicator for increased capacity, quality and timeliness in food and drug testing laboratories has been developed in consultation with the center and project states to monitor the roject output, and it i s described below.

Composite Indicator for Enhanced Laboratory Capacity I Sonre

reduced time.

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Annex 2: Detailed Project Description INDIA: Food and Drugs Capacity Building Project

Project Objectives and Description

Food and drug regulatory activity i s an essential public health function that contributes to good health. In India, quality assurance monitoring i s the responsibility o f the Ministry o f Health, while the production o f drugs i s overseen by the Ministry o f Chemicals & Fertilizers. The Ministr ies o f Commerce and Agriculture are also involved in the food chain and safety standards. Food and drugs administration i s on the concurrent l i s t o f the Indian constitution with substantial responsibility being shared with the States.

India has a large and rapidly expanding food and drugs industry. The pharmaceuticals industry now ranks as the worlds third largest in terms o f volume and i s growing at over 10% annually. Drugs are widely available in the Indian market and pharmaceuticals are a large and growing component o f health care expenditure. On the food side, a majority o f the Indian population continues to depend on the small and informal sectors, including street food vendors. However, with growing urbanization, increasing numbers o f Indians are consuming processed food products - both domestic and imported.

There i s increasing concern for consumer protection, particularly for the poor, from unsafe and poor quality foods and drugs. While there are regulations for quality assurance, enforcement i s weak and methods outdated. Together with strengthening the regulatory infrastructure, a new approach, based on self-regulation, consumer education, and public-private partnerships, i s needed for carrying out these essential public health functions.

In addition to the primary concern for public safety, investments in food and drug safety have an intemational trade dimension. Improved food and drug regulation and safety would contribute to increased confidence in Indian products, making them more competitive internally and for exports in global markets.

The scope o f the project’s physical investments w i l l comprise central and selected state laboratories, based on needs. During project implementation, several studies and reviews will be conducted to facilitate an informed policy dialogue on the evolving functions and long te rm development o f food and drug administration in India. The project i s part o f a Central Sector Program, with both financial sponsorship and major implementation role by the Center and active participation o f the states. Some important related areas, such as prescribing practices, quality and safety o f medical devices including those emitting radiation, and biological products such as vaccines, have been le f t outside the ambit o f this project to enable a sharper focus on the most basic problems affecting the quality and safety o f foods and drugs.

The Project consists o f three components as described below.

By Component:

Project Component 1 - US$7.00 million Policy Development, Program Coordination and Monitoring

This component would consist o f activities related to policy development; strengthening o f the central government food and drug directorates; and improved program coordination and monitoring. Specific

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activities would include:

1.a. Policy Development:

e Studies and policy reviews to underpin the formulation o f policy and institutional reforms. The project would support studies and technical assistance with a view to developing options for policy and institutional reform in the following areas: (i) improving efficiency and effectiveness o f food and drug administrations reviewing different successful models; (ii) collecting information on health problems associated with food and drug quality and use; (iii) financing o f food and drug regulatory agencies; (iv) revising o f existing laws and rules for promoting drug quality in light o f recent changes in the international trade and business environment; (v) rationalizing the number o f formulations in the Indian pharmaceutical market; (vi) motivating staff to maintain professional standards in inspection duties and in the laboratories; (vii) developing more specific roles in public and private partnerships in areas such as rule-making, auditing, reporting on compliance; (viii) improving governance, especially in markets patronized by the poor, and (ix) obtaining consumer feedback.

e Workshops and consultations with various groups o f stakeholders concerning options for institutional and policy reform.

The establishment and operation of a central Program Coordination Unit (PCU). A Program Coordination Unit would be established at MOHFW. Key functions o f the PCU would include: coordination with other l ine departments, ministr ies and technical agencies; project implementation including preparation o f annual action plans; monitoring and evaluation; financial management; and procurement o f project inputs. The functions o f this unit w i l l be integrated within MOHFW at the end o f the project.

Improvement of central physical facilities for food and drugs oversight, and related staffing. This sub component would strengthen the capacity o f the central government through critical infrastructure and human resource development inputs such as training and fellowships.

Monitoring activities, including the implementation o f household surveys to assess public perceptions and knowledge about quality and safety o f foods and drugs, and the organization o f independent audits o f public and private laboratories.

1. Annual household surveys. These surveys would be undertaken by independent agencieslconsumer groups covering a representative sample o f population using standardized instruments to understand community perceptions and practices related to food safety and drug quality. An expert committee would provide technical advice and monitor the quality o f these surveys. Four regional agencies would be responsible for coordination o f survey activities, selection o f survey agencies, quality assurance and compilation o f the reports. In each o f the major States one survey agency would be selected to undertake the household survey covering a representative sample between 500-600 households. Three rounds o f households surveys are envisaged during the project period. After analysis o f data the findings would be discussed in each region in a workshop which would be followed by a national consultation. The findings o f the survey would be used as inputs for validating and improving IEC messages.

2. Audit ofprivate andpublic testing laboratories. MOHFW already has a panel o f independent experts for auditing public testing laboratories and assess the implementation status o f good manufacturing and laboratory practices introduced under the schedule M o f the Drugs and Cosmetics Act. This system which i s well implemented in the drug sector would be continued under the project and extended to cover recognized private testing laboratories also. Similar

1 .b. Program Coordination:

e

1 .c. Central Facilities and Stafjng:

e

1 .d. Monitoring:

e

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audits have also been started for the food sector. 3. Auditing for compliance of environmental management plan. A consultant agency would be

hired to oversee the implementation o f agreed environmental management plan. e The establishment and operation of a computerized management information system to enhance

information flows and coordination between the central and State regulatory agencies. A computerized information networking system for food safety-related oversight would be supported to ensure timely and comprehensive exchange o f information between the central and State food laboratories. GO1 i s already in the final phase o f implementing a similar networking system for drug regulatory agencies.

The Policy Development, Program Coordination and Monitoring component would finance consultants for studies and technical assistance, workshops, goods including computers and software, civil works, and incremental operating costs.

Project Component 2 - US$44.35 million Food Quality and Safety This component would consist o f activities to strengthen the government's oversight and regulatory capacity for food safety at the central and State levels, to educate consumers on matters related to food safety, and to upgrade related s k i l l s in the private sector. Specific activities would include:

A new program for building consumer awareness and knowledge of food safety issues. This sub-component would support initiatives to raise consumer awareness and knowledge o f and participation in issues concerning food safety. It would also support strategies to disseminate such information along the food supply chain, including small manufacturers, retailers and street food vendors. The objective would be to encourage consumers to adopt quality and safety as criteria in making choices o f food products, retail outlets and street vendors, as well as adopting safe practices for the handling o f food within the household. Services o f professional media agencies, NGOs and consumer organizations would be utilized to develop and implement strategies.

Training of about 2,000 inspectors and 500 analysts in public sector laboratories and recruitment of additional qualijied stafJ: Training of about 1,000 stafffrom the private sector. Training in advocacy and other skills for 20 umbrella consumer organizations.

The training sub-component would support enhancement o f regulatory staff s k i l l s through in-service training, and joint training o f public and private sector personnel. For private sector personnel, emphasis would be placed on the adoption o f processes such as GMP and HACCP. Priority would be given to personnel from small and medium sized manufacturers for such training. By the end o f the project, 2000 food inspectors, 500 analysts working in public laboratories and 1000 professionals from private sector and consumer organizations would have been trained by national apex training centers.

e Development and dissemination of Hazard Analysis Critical Control Point (EtACCP) standards. The Hazard Analysis and Critical Control Point (HACCP) system i s the new, efficient and internationally accepted scientific way o f quality assurance. HACCP renders the identification, evaluation, and control o f health hazards systematic by primarily stressing on quality control at the source i.e., at the manufacturing level. I t can be applied at all stages o f the cycle, from primary production to final consumption. There i s a need for technical assistance in order to develop HACCP programs in the domestic food industry to formulate standards relevant to India, prepare detailed manuals and guidelines and to coordinate and streamline their implementation in

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the priority food sectors such as cereals, pulses, oil, and milk.

New construction, renovation and equipping of central and State laboratories. During preparation a number o f key infrastructure gaps were identified that hamper timely and comprehensive testing o f food samples by central government laboratories. This sub-component supports inputs to fil l those gaps, as well as gaps at the State level. With increased international trade in food products, the central laboratories handling food imports and exports at ports and international borders would be given priority for upgrading. Specifically, the following central government facilities would be supported by the project: (i) new construction and equipping o f 10 laboratories in Mumbai, Ghaziabad, Kandla, Attari, Raxaul, Sonali and four locations along the Indo-Nepal border; (ii) renovation, upgrading, and equipping o f 11 laboratory facilities and public health offices at the following cities and border sites: Kandla, Mumbai, Chennai, Kolkata, Delhi including ICD, Kochi, Visakhapatnam, Attari, I C D Jodhpur, Raxual, Sonali, National Institute o f Nutrition, Hyderabad and Central Food Technology Research Institute, Mysore.

A t the State level, there are currently 79 food testing laboratories, including some managed by local bodies. Most o f these laboratories are able to perform only routine analysis and are not in a position to test the latest food additives and high risk contaminants, including microbiological contaminants, which are emerging as important challenges o f the future. Further, the three newly created states (Chattisgarh, Jharkhand and Uttaranchal) urgently need food testing laboratories to perform their statutory oversight function. The project would support infrastructure inputs for these new and existing laboratories. The project would ensure that all State laboratories adopt minimum quality standards in testing by filling critical infrastructure gaps. Specifically, the project would finance civil works, furniture, equipment, laboratory supplies, and incremental operating and maintenance costs in order to: (i) construct and equip nine State laboratories in Visakhapatnam, Gangtok, Imphal, Chennai, Raipur, Ranchi, Rudrapur, Panaji and Gorakhpur; and (ii) renovate and upgrade existing facilities at six places in Shillong, Kohima, Jaipur, Baroda, Bhuj and Moreh.

The Food Safety component would finance training, technical assistance, consultants, contracting media agencies and NGOs, media time, equipment, furniture, civil works and incremental operating costs.

Project Component 3 - US$21.65 million This component would consist o f activities to strengthen the government's oversight and regulatory capacity for ensuring drugs quality at the central and State levels, to educate consumers on matters related to drugs quality and safety, and to upgrade related ski l ls in the private sector. Specific activities would include:

Information and education activities to improve consumer and prescriber awareness and behavior regarding quality and rational use of drugs, carried out with the support o f professional media agencies and NGOs. This sub component would support initiatives to raise consumer and prescriber awareness and knowledge o f and participation in issues concerning drug quality and safety. I t would also support strategies to disseminate such information along the drug supply chain, including small manufacturers and retailers. The objective would be to encourage consumers to adopt quality and safety as criteria in making choices o f drugs and retail outlets. Services o f professional media agencies, NGOs and consumer organizations would be utilized to develop and implement strategies.

0 Training of about 625 regulatory staffand recruitment of additional qualified sta8 Training of about 2,000 industry personnel in Good Manufacturing Practices (GMP) and Good

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Laboratory Practices (GLP). A detailed training needs assessment o f staff in public and private sectors has been carried out by NIPER and training plans prepared to address critical skill gaps. This sub-component would support enhancement o f staff s k d l s through in-service training and joint training o f public and private sector personnel, including those from related ministries. The emphasis would be on s k i l l development for personnel o f small scale industry. B y the end o f the project, about 2,000 workers from small scale industry, and 625 staff and analysts from the public sector would have been trained in GMP and Good Laboratory Practices (GLPs).

Updating and dissemination ofpharmaceutical standards. The Indian Pharmacopoeia, the official book o f standards for drugs and their formulations, i s outdated and does not reflect many recently developed drugs. The project would support the updating o f the Pharmacopoeia and i t s dissemination.

New construction and equipping of one central andfive State drug testing laboratories. Renovation and equipping of one existing drug testing laboratory at central and twelve laboratories at State levels. As per the national drug policy, the central govenunent laboratories are to function as appellate authorities and have the responsibility to test the imported drugs as well as blood products. To reduce the backlog and enhance the range o f tests, the project would support building o f a new Central drug laboratory at Mumbai and renovation o f the Central India Pharmacopoeia laboratory at Ghaziabad.

At the State level, limitations in testing drug samples are related to the absence o f sophisticated instruments, lack o f trained analysts, shortage o f funds to procure reagents for the new instruments, lack o f adequate instruments and understaffing. To address these constraints and to increase sample testing three-fold (from about 36,000 to 100,000) over the project period, this sub component would finance civil works, furniture, equipment, laboratory supplies, and incremental operating and maintenance costs to construct and equip five new State drug testing laboratories at Kolkata, Raipur, Ranchi, Rudrapur and Panaji; and renovate 12 State laboratories at Hyderabad, Vij aywada, Baroda, Thiruvananthapuram, Bangalore, Bhopal, Bhubaneshwar, Pondicheny, Khandaghat, Chennai, Agartala and Lucknow.

The Drugs Quality and Safety component would finance training, technical assistance, consultants, contracting media agencies and NGOs, media time, equipment, civil works and incremental operating costs.

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Annex 3: Estimated Project Costs INDIA Food and Drugs Capacity Building Project

Project Cost By Component

1. Policy Development Program Coordination and

Local Foreign Total US$ mi l l ion US$ in i l l ion US$ mil l ion

Total Base costs

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Annex 4: Cost Benefit Analysis Summary INDIA: Food and Drugs Capacity Building Project

million Net Benefits: In US$ million IRR:

[For projects with benefits that are measured in monetary terms]

733

Medical treatment costs avoided, US$ million

Lost earnings avoided, US$ million

270

57 1

108 Project costs in US$

74

I

-107

96

' If the difference between the present value o f financial and economic flows is large and cannot be explained by taxes and subsidies, a b r i e f explanation o f the difference i s warranted, e.g. "The value o f financial benefits i s less than that o f economic benefits because o f controls o n electricity tariffs."

Summary of Benefits and Costs:

Improved food safety would result in the prevention o f many episodes o f food-borne infections. The economic benefits associated with such prevention would include (i) medical costs avoided; (ii) loss o f earnings avoided; and (iii) the value o f years o f l i f e saved that would otherwise have been lost because o f premature death caused by food borne infections. For young children, because o f better nutritional status from avoiding repeated episodes o f diarrhea, there could also be benefits in the form o f higher cognitive abilities later in childhood and higher productivity once employed. In the present illustrative cost benefit calculations only (i) and (ii) have been included. The calculations do not include any benefits accruing to society on account o f better quality drugs and more rational use o f drugs by consumers (the types o f benefits in the case o f drugs would be similar to those described for food safety).

Costs included in the calculation are the estimated costs o f the entire project, which are shown in Annex 3. The post-project annualized costs o f continuing the project activities up to 2017 have been estimated at USS lO mill ion per year.

Main assumptions for the cost-benept analysis:

In the base case, i t i s assumed that the number o f annual episodes o f food-borne infections i s initially

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(i.e., in 2003) around 655 mi l l ion (estimated as 25% o f total annual episodes o f diarrhea). In the absence o f the project, i t i s assumed that this number would remain constant throughout the projection period (2003-2017). With the project, it i s assumed that the annual number o f food borne-infections would decline by 5% by year 5 (relative to the 2003 figure), remaining at that level thereafter. With these assumptions, about 380 mi l l ion episodes o f food-borne infections are estimated to be prevented during the 15-year period 2003-2017-- out o f which 357 mi l l ion episodes would be mild and the remaining 23 mi l l ion moderate to severe.

Other assumptions used in the cost-benefit calculations for the base case are:

assumed to be mild and 10% moderate to severe.

assumed to be mild and 5% moderate to severe.

be one day in the case o f a chi ld (wages lost by attendant) as wel l as in the case o f an adult (wages lost by self). In cases o f moderate to severe episodes, 4 days o f wage loss i s assumed in case o f children (one parent’s wages) and 7 days (4 days self and 3 days attendant) in case o f adults.

initially, increasing by 3% per year thereafter (at constant prices).

US$1 for mild episodes and US$10 for moderate to severe episodes.

e Children under 15 account for 20% o f episodes averted. For this group, 90% o f a l l episodes are

Persons over 15 account for 80% o f episodes averted. For this group, 95% o f al l episodes are

The average number o f days o f work lost per mild episode o f food-borne infection i s assumed to

e

e

e Average daily earnings o f workers (patient as wel l as attendant) were assumed to be US$2

Average medical treatment costs per episode o f food infections were estimated to be around

Discount rate: 10% per year.

e

0

Cost-benefit Results in the Base Case

The net present value (NPV) o f the project in the base case i s estimated to be positive at US$733 million. About one-third o f the benefits are in the fo rm o f medical treatment costs avoided, and the remaining two-thirds in the fo rm o f lost earnings avoided.

Net Fiscal Impact

An estimate was made o f the net fiscal impact the project would have, under the assumptions o f the Base Case, and with the fol lowing additional two assumptions:

e About one-third o f the costs o f medical treatment o f mild episodes o f food-borne infections and

The tax rate on forgone earnings avoided i s 13% (mostly consisting o f indirect taxes). one ha l f o f moderate to severe ones are met by the Government. e

With the above assumptions, the Net Fiscal Impact o f the project (in Present Value) would be positive at USS85 mil l ion. This figure i s obtained by subtracting the P V o f government outlays (the government’s share o f project cost financing and the repayments o f the IDA credit) f rom the s u m o f the PV o f tax gains (US$74 mil l ion) and the P V o f government spending avoided on account o f averted medical treatment (US$107 million).

Main Assumptions: The main assumptions were indicated above.

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Sensitivity analysis / Switching values of critical items:

The most uncertain variables in the above estimate o f Net Present Value are: (i) the annual number o f food-borne infections in the without-project situation and (ii) the percentage o f such episodes that would be prevented in the with-project situation. Some alternative scenarios were examined in this regard.

The NPV of the project would be lower the lower the number o f food-bome infections in the without-project situation and the lower the percentage of episodes prevented in the with-project situation. For example, keeping (i) as in the Base Case, if we assumed that in the with-project situation the number of infections would be lower by 2% instead o f 5% as in the Base Case, the NPV would fall to US246 million. If i t were lower by only 1%, the NPV would still be positive at US$69 million. Hence the reduction in the number o f infections in the with-project case would have to be less than 1% for the NPV to fall to zero.

Conversely, if we kept (ii) as in the Base Case, and assumed that the number o f infections in the without-project situation would be only 50% of what was assumed for the Base Case, the NPV would fall to US316 million. Even if (i) were only 20% of what was assumed in the Base Case the NPV would still be positive at US$62 million. An NPV value o f zero i s only reached when (i) i s only about 15% of what was assumed in the Base Case.

The above results, together with the fact that several important categories o f project benefits were left out o f the calculation (as already indicated), suggest that the NPV o f the project would be positive.

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Annex 5: Financial Summary INDIA: Food and Drugs Capacity Building Project

Years Ending June 30 (FY)

(US$ million, base year 2003)

IMPLEMENTATION PERIOD I Year1 I Year2 I Year3 I Year4 1 Year5 I Year6 I Year7

Total Financing Required Project Costs Investment Costs 17.0 13.3 14.0 7.1 2.0 0.0 0.0 Recurrent Costs 1.5 2.0 4.6 5.4 6.1 0.0 0.0

Total Project Costs 18.5 15.3 18.6 12.5 8.1 0.0 0.0 Total Financing 18.5 15.3 18.6 12.5 8.1 0.0 0.0

IBRDllDA 16.4 12.6 13.8 7.9 3.3 0.0 0.0 Government 2.1 2.7 4.8 4.6 4.8 0.0 0.0

Central 2.1 2.7 4.8 4.6 4.8 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User FeeslBeneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 18.5 15.3 18.6 12.5 8.1 0.0 0.0

Main assumptions:

Financing

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Annex 6(A): Procurement Arrangements INDIA Food and Drugs Capacity Building Project

Procurement The procurement arrangements to be undertaken in the project w i l l be the responsibility o f the Implementing Agency - Program Coordination Unit in the Ministry o f Health & Family Welfare, Government o f India and Food and Drug Laboratories, in accordance with the Bank Procurement Guidelines and Procedures. The project would be a central sector project implemented nation-wide. 24 food laboratories at the central level and 41 food laboratories at the state level w i l l be upgraded to improve the existing system for food safety. Similarly, 1 central drug laboratory and 23 State Drug Laboratories will also be upgraded under this project to improve quality o f drugs. In addition, the project envisages (i) setting up o f laboratories under the central sector along the Indo Nepal Border for testing imported food articles; and (ii) strengthening o f three national institutes in the Food and Drug sector. These institutes are (i) National Institute o f Nutrition (NIN), Hyderabad for the purpose o f training; (ii) Central Food Technological Research Institute (CFTRI), Mysore; and (iii) National Institute o f Pharmaceuticals Education and Research (NIPER), Chandigarh.

Most o f the procurement w i l l be at Central Level (Program Coordination Unit). Procurement o f small value items w i l l be done at the State Level by the various laboratories. Procurement at the Central Level w i l l be through a Procurement Agent to be appointed under the project. Hospital Services Consultancy Corporation (HSCC) India Limited, has been identified by the Ministry o f Health & Family Welfare, Government o f India as Procurement Support Agency under the project at the Central Level on sole source basis. All Civ i l Works, Goods and Equipment, Furniture etc. w i l l be procured through this Procurement Support Agency. As HSCC i s a dependent agency o f Ministry o f Health and Family Welfare, no fee w i l l be reimbursed to them under the project. Procurement methods (Table A)

A. Civil Works:

Civi l Works include new construction, renovation and extension o f the Central and State Food and Drug Laboratories. There wil l be 5 1 packages o f c iv i l works (21 packages o f new construction, 23 packages o f renovation and 7 packages o f extension) all to be procured in the second year o f the project. 20 new construction packages w i l l be in the range o f US $0.20 mill ion to 1.3 1 mill ion and one package o f US $2.05 million, all to be procured under National Competitive Bidding (NCB). 29 renovation and extension packages w i l l be in the range o f US $0.04 mill ion to 0.49 million, all to be procured under National Competitive Bidding (NCB) and one renovation package o f US $0.009 mill ion to be procured under National Shopping.

B. Goods:

referral standards] would be phased on an annual basis to synchronize with the project activities. Procurement o f goods [laboratory / office equipment, furniture, materials and supplies and

[i] o f the project. Some o f these include: Various Types o f Spectrophotometers; H.P.T.L.C., Microwave Digestion Unit; Power Pack; Gel Electrophoresis System; Digital Polarimeter; Electronic Analytical Balance; Vacuum Oven; Water Purification System etc. In al l there will be 420 packages consisting o f : 67 ICB packages (total estimated cost: US $ 14.80 million) in the range o f US $0.001 mill ion to 1.85 million, 123 N C B packages (total estimated cost : US $4.02 million) in the range o f US S 0.003 mill ion to 0.13 mill ion and the remaining 230 National

Laboratory Equipment: There are 185 items to be procured during the f i rs t four years

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Shopping (NS) packages (total estimated cost: US $0.68 million) in the range o f US $ 0.0001 mill ion to 0.017 million.

C.

[ii] the project. These are computer system [which includes printer, UPS, modem and software], fax machine, photocopy machine, spiral paper binding machine, telephone instrument, air-conditioners and consumables. There w i l l be total 17 packages consisting o f 1 ICB package (total estimated cost US S 0.41 million); 7 NCB packages (total estimated cost: US $ 0.56 million) in the range o f US $ 0.03 mill ion to 0.14 mill ion and 9 N S packages (total estimated cost: US $0.06 million) in the range o f US S 0.00004 mill ion to 0.025 million.

Office Equipment: In all seven items are to be procured during the first three years o f

[iii] computer tables, side racks, book shelves, steel shelving cabinets, catalogue cabinets, revolving stools, and curtains etc., to equip the laboratories and Program Coordination Unit. There wi l l be 642 packages under Food Laboratories (total estimated cost US $0.96 million) in the range o f US $0.001 mill ion to 0.02 mill ion and 125 packages under Drug Laboratories (total estimated cost US $0.52 million) in the range o f US $0.0001 mill ion to 0.03 million, all contracts to be awarded under National Shopping procedures by the Laboratories and at National Level by the Procurement Support Agency as the value o f each contract w i l l be below U S $30,000 equivalent.

Furniture: The scope involves procurement o f office furniture l ike chairs, tables,

[iv] reagents, f i l ter paper, indicators etc. for effective functioning o f food and drug laboratories. There w i l l be 944 packages in the range o f US $0.0001 mill ion to 0.025 million. Since the value o f each item w i l l be small, materials are hazardous / inflammable and also breakable, these w i l l be procured by the various laboratories under National Shopping procedures.

Materials & Supplies: The items to be procured are glass warel apparatus, chemical

[VI decomposition, impurity, quantitative analysis for the drugs, validation o f analytical methods and calibration o f analytical equipments supplied by the manufacturers. These reference standards are used by the Central and State Government laboratories as well as Private sector. Indigenous production i s not sufficient to meet the demand and these are to be imported from overseas. These will, therefore, be procured under Shopping. Total value o f procurement w i l l be US$0.33 million.

Reference Standards: The reference standards are to be procured for identification,

Services:

Procurement o f services i s planned for a range o f project activities which include hiring o f personnel on contractual basis for the Central and State Laboratories as well as for the Program Coordination Unit in the Ministry o f Health and Family Welfare, training and workshops, Information, Education and Communication [IEC], MIS, Surveys and other Consultancy Services.

[i] in all 108 personnel w i l l be hired for the Food & Drug laboratories as well as Program Coordination Unit o f the Ministry o f Health & Family Welfare, Government o f India, New Delhi. All 108 personnel w i l l be hired under annual contracts but not at the same time. In year one, the number o f personnel to be hired w i l l be 44, which by the fourth year o f the project w i l l reach 108. There will be a total o f 426 contracts in five years costing US $0.001 mill ion to

Contractual Services: For the effective implementation and monitoring o f the project

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0.014 mill ion with an overall estimated cost o f US $0.93 million.

For quality and safety assurance in drugs personnel (pharmacologists - 8 , Computer Operator and Data Manager - 2) w i l l also be hired for the proposed ZonalIRegional Pharmaco -vigilance centers and Peripheral centers to be set up under the project at a total cost o f U S $0.17 mill ion (annual expenditure o f U S S 0.034 million).

The job descriptions, minimum qualifications, terms o f employment and selection procedures shall be agreed with the Association. For individual consultants on shodlong term assignment, the project authorities w i l l follow the Bank’s model formats for Letter o f Assignment to enter into contracts.

[ii] Training & Workshops: To improve the sk i l ls o f personnel engaged in analysis work in the laboratories at the central and state level, to enhance the operational s lu l l s o f the enforcement staff in modem methods, to improve management s k i l l s o f food safety authorities, and to create greater awareness in the private industries and the consumers, training o f personnel i s necessary. Similarly to keep themselves abreast with the latest regulatory requirements, the personnel engaged in the quality control o f drugs in the laboratories as well as in the small scale and private sector drug manufacturing industry w i l l be trained. These trainings would be organized through nationally renowned institutions l ike CFTRI, NIN, NIPER, National Inst i tute o f Cholera and Enteric Diseases (NICED), Kolkata, Central Food Laboratories (CFL) and Bhaba Atomic Research Centre (BARC). These institutions have developed specialized expertise in Food Safety and Drug Quality and w i l l be hired on single source basis for imparting training. There w i l l be 249 courses for food safety during the project period and a total o f 7,746 personnel w i l l be trained (estimated cost U S $0.37 million).

CFTRI w i l l be hired on single source basis for development and printing o f training materials (Estimated cost U S $0.10 million).

Training for personnel in Management Information System (MIS) will also be arranged. Total number o f courses -97 and total personnel to be trained 291 (97x3) at an estimated cost o f U S S 0.09 million.

There w i l l be a total o f 17 programs [ 13 training programs and 4 national workshops] per year for drug quality control to be arranged by NIPER and a total o f 2,625 personnel w i l l be trained. Total estimated cost o f these workshops and trainings i s U S $0.74 million.

Program Coordination Unit (PCU) at central level will also hold training programs for Central and State officers and workshop in the final year o f the project for evaluation o f the project (estimated cost U S $0.06 million). In addition, PCU w i l l also hire an environmental consultant agency for preparation o f training module, manual and check l i s t (estimated cost U S S 0.03 million) on QCBS basis. Jinplementation and monitoring o f the plan w i l l be done in house by Environmental Health & Safety Officer (estimated cost US S 0.10 million).

Personnel o f the Pharmaco- Vigilance centers and National Pharmaco- Vigilance Advisory Committee will be trainted at Central Drug Standard Control Organization (CDSCO) at an estimated cost o f U S S 0.17 million.

Although the institutions listed above w i l l be strengthened by providing equipment, contractual

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staff, etc. they w i l l not be paid any service fee for training purpose. However, actual cost for movement o f the trainees from their place o f posting to these institutions and special faculty, if any, hired for imparting training w i l l be paid to them. The duration o f each training module w i l l range between 2 days to 14 days.

Fellowship (local) : Outside faculty w i l l be hired for delivering lectures, demonstration, seminars, and workshops for training o f Drug regulatory staff at an estimated cost o f U S $0.03 million.

[iii] evolved and implemented to improve behavior and practices with regard to food safety and drug quality. For this purpose an IEC consultant (individual) w i l l be hired to advise the Program Coordination Unit at the national level. The estimated cost o f this consultant i s US S 0.0036 mill ion per year (total U S $0.018 million). This cost i s included in contractual services.

Information, Education and Communication (IEC): A viable IEC strategy w i l l be

To support development and implementation o f an IEC strategy under the project including development and printing o f IE material, messages and broadcasting them through mass media (television and radio in English / Hindi and other 13 regional languages), an extemal IEC agency will be hired following Quality and Cost Based method o f selection (QCBS) as per World Bank’s Consultancy Guidelines. Estimated cost for this consultancy services i s U S $4.07 million.

[iv] online networlung o f state and central food control laboratories to enable instantaneous exchange o f information on laboratory performance and overall surveillance. The MOHFW has already financed similar networking for the drug sector by engaging Messrs. Hospital Services Consultancy Corporation (India) Ltd., (HSCC), NOIDA an organization under the Ministry o f Health. Computerization o f food labs and training o f personnel engaged in MIS i s proposed to be carried out by the same agency viz. HSCC. As HSCC i s a dependent agency o f the Ministry o f Health and Family Welfare, no fee will be reimbursed to them under the project. However, the cost o f hardware i.e. computer systems and cost o f training o f personnel in handling software (97 Units x 3 persons/unit @ Rupees 15,000 per person) w i l l be bome under the project. The procurement o f this hardware has been included under the heading ‘Office Equipment’ and cost o f training has been added under the head - Training & Workshops. An agency for development o f software for M I S will be hired following QCBS method o f selection at an estimated cost o f US $0.41 mill ion (this cost has been added under the head ‘Other Consultancy Services’).

Management Information System [ M I S Services]: An MIS system w i l l provide

[VI and rural areas will be undertaken to understand community perceptions and practices related to food safety and quality towards street food and domestic/imported food products. Four regional agencies w i l l be identified for this purpose who in turn will identify local N G O d Home Science Colleges to undertake the Surveys.

Surveys: Household surveys covering representative sample o f population both in urban

These regional agencies, which will basically be Home Science Colleges, w i l l be selected on single source basis, on account o f their expertise developed over a period in community based research. These surveys w i l l be undertaken thnce during the project cycle beginning from the second year o f the project. Each contract for the regional agency i s estimated to cost U S $0.10 mill ion (total cost US $ 0.41 million). These regional agencies will identify, hire (in consultation with MOHFW) and train the survey agencies, monitor the quality o f data, arrange workshops to disseminate the survey findings and submit a consolidated report to the Borrower (Ministry o f

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Health & Family Welfare). Ministry o f Health & Family Welfare w i l l hire the services o f the survey agencies recommended by the regional agencies based on the consultant’s qualification as per the Bank’s Consultancy Guidelines.

The surveys for street foods w i l l be carried out in 10 major cities o f India which have large number o f street vendors. About 16 institutes w i l l be hired on single source basis for these surveys. Estimated cost o f each contract would not exceed U S $0.038 mill ion (total cost US S 0.62 million).

[vi] Other Consultancy Services:

These services will be hired at national level and w i l l include:

[a] Consultants (agency) for overseeing the installation and commissioning o f the equipment being procured under the project, hands on training on operation and maintenance o f equipment to the laboratory staff. This agency w i l l be hired following QCBS method o f selection (Estimated cost U S $ 0.33 million).

[b] Consultants (agencies) for carrying out important studies and policy reviews identified under the policy matrix o f the project w i l l be hired following Consultant’s Qualification method o f selection (Estimated cost o f each contract not to exceed U S $0.02 mill ion - Total cost U S $ 0.20 million).

[c] A Training Consultant [Individual] w i l l be hired in the Program Coordination Unit to advice, coordinate and monitor the quality o f various training programs (Estimated cost U S $ 0.068 million). This cost i s included in contractual services.

[d] An agency for development o f software for MIS w i l l be hired following QCBS method o f selection (estimated cost o f US $0.41 million).

[vii] NGO Services: NGOs w i l l be involved in promoting food safety by creating awareness in smallkottage and unorganized sectors including street food sector. About 20 NGOs w i l l be selected (5 in each region - north, south, east and west) under Quality and Cost Based Selection (QCBS). Total value o f services w i l l be US$0.3 1 mill ion

D. Miscellaneous:

This involves operational expenses for all the components o f the project and would include office operations & consumables (US$ 3.22 million), hiring o f vehicles (US$ 1.04 million), maintenance o f buildings (US$0.68 million), maintenance o f equipment(US$6.86 million), and salary o f incremental staff (US$ 5.20 million). Contracts for hiring o f vehicles, and maintenance o f buildings would be procured on the basis o f direct contracting or National Shopping (three quotations depending on the situation). Value o f each contract i s estimated below US$ 10,000 equivalent.

E. Bidding Documents:

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Contracts for ICB and NCB w i l l be awarded by the Procurement Support Agency while procurement under National Shopping/Direct Contracting w i l l be done by the Central I State Laboratories themselves.

Standard Bidding Documents, as finalized by the Government o f India Task Force and agreed with the Bank would be used for all ICB and NCB contracts. These are W-1, W-2, W-9, D-1 (New), D-2 (New), E-1, E-4, E-6, and E-7. Contracts for National Shopping i.e. by collecting quotations would be concluded based on the formats developed by New Delhi Office (NDO) - Procurement Unit and approved by the Bank. These are E-5, and W-5

Similarly, Request for Proposals (RFP) for consultancy services for different assignments which are based on Bank’s Standard RFP and available with N D O - Procurement Unit o f the Bank shall be adopted. Formats o f letter o f agreements for short te rm I long term assignments o f individual consultants as well as RFP for small assignments for f i r m s as per Bank’s New Delhi Office model documents shall be adopted. These are C-8 (Lump Sum), C-9, C-10, C-13, C-13lPFC.

F. norms for such procurement i.e. procedure to be followed, range o f prices and acceptable / preferable brand names etc. shall be clearly indicated in the guidelines to the laboratories so that these are followed while procuring these items. The auditors appointed under the project, apart from the usual financial aspects, should also audit the procurement and comment whether stipulated national shopping procedures were followed.

For the items to be procured under national shopping procedures and lor direct contracting, the

G. dated July 25, 2002.

Technical Specifications for all these equipments have already been cleared vide Bank’s letter

H. Cost estimates o f the civil works, items to be procured, estimates o f bid packages for procurement o f works I goods I equipment & consultancy services, details o f value o f works I goods I equipment / consultancy services for each year o f the project and procurement schedules o f works1 goods/ equipment & consultancy services for all the five years o f the project are attached with the Project Implementation Plan (PIP) o f the borrower (MOHFW).

I. Post Award Review: Because o f the nature o f this operation, a large number o f contracts would be below prior review l i m i t s . It i s expected that the project will have about 4,000 contracts over a five year period. Except a few contracts, all other contracts w i l l be in the range o f U S S 100 to S 30,000. The project i t se l f provides for a s e l f audit to be conducted by independent auditors hired by the Borrower for expenditures as well as procurement reviews for contracts under national shopping procedures. The normal Bank’s requirement o f ex-post review o f not less than 1 in 5 contracts for high risk project can not be achieved in this project due to resource constraints, since annual budget allocations only allow for a total o f roughly 1,000 ex-post contract reviews for the entire India Portfolio. Given the sheer numbers o f contracts envisioned in this project, the Bank’s resource constraints, the mitigating effect o f the sel f audit and technical audits mentioned above, we would consider the “benchmark’ review level o f 1 in 5 contracts to be excessively large for this type o f operation. In addition to a review o f the independent self-audit reports called for in this project, Bank staff w i l l also conduct post award reviews during supervision missions. These reviews w i l l be periodically supplemented by an appropriate allocation o f random ex-post reviews conducted by f i r m s engaged by the Region for post award review coverage on the India portfolio as a whole.

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PROCUREMENT METHODS: [Table A]:

IDA Financed Works and Goods wil l be procured in accordance with Bank Guidelines - Procurement under IBRD Loans and IDA credits [January 1995, revised January and August 1996, September 1997 and January 19991. IDA Financed services wil l be procured using Bank Guidelines - Selection and Employment o f Consultants by Wor ld Bank Borrowers (January 1997, revised September 1997, January 1999 and M a y 2002). Attachment 1 to this Annex summarizes the procedures for undertaking procurement o n the basis o f National Competitive Bidding (NCB).

Specific Procurement Arrangements summarized in Table ‘A’ are as follows :

0

0

0

0

Contracts for works valued U S $30,000 equivalent or less each may be procured through direct contracting or national shopping or force account Contracts for works valued more than U S $ 30,000 equivalent each may be procured through National Competitive Bidding. Contracts for goods I equipments valued more than US $300,000 equivalent each may be procured through International Competitive Bidding (ICB). Contracts for goods I equipment valued more than U S $30,000 equivalent but less than U S $ 300,000 may be awarded on the basis o f N C B procedures acceptable to IDA.

Items or groups o f items valued at U S $30,000 equivalent or less per contract each may be procured o n the basis o f National Shopping procedures.

Other items or small groups o f items such as furniture, equipment, materials and other supplies valued at less than U S $ 30,000 equivalent per contract may be procured through direct contracting.

0 Contracts estimated to cost equivalent o f U S $ 10,000 or less per contract for maintenance o f buildings I equipmentlvehicles, hiring o f vehicles and off ice consumables may be awarded through :

Direct Contracting; or National Shopping.

Table A Project Costs by Procurement Arrangements (US$ million equivalent)

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I I (0.00’) I (11.07) I (1.48) I (0.00) I (12.55) I

3. Services

12. Goods I 16.38 I 5.26 I 6.28 I 0.00 I 27.92 I (14.97) (4.79) (5.36) (0.00) (25.12)

0.00 0.00 10.03 0.00 10.03

4. Incremental Operating Costs

Total

(0.00) (0.00) (9.77) (0.00) (9.77) 0.00 0.00 18.11 2.10 20.21

(0.00) (0.00) (6.59) (0.00) (6.59) 16.38 18.29 36.15 2.10 72.92

(14.97) (15.86) (23.20) (0.00) (54.03)

*/ Includes c i v i l works and goods to be procured through national shopping, consulting services, services o f contracted staff o f the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project h n d s to local government units.

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Table A I : Consultant Selection Arrangements (optional) (US$ million equivalent)

B. Individuals

Total

(5.61) (0.00) (0.00) (0.00) (0.21) (2.77) (0.00) (8.59) 0.00 0.00 0.00 0.00 0.00 1.24 0.00 1.24

(0.00) (0.00) (0.00) (0.00) (0.00) (1.18) (0.00) (1.18) 5.74 0.00 0.00 0.00 0.22 4.07 0.00 10.03

(5.61) (0.00) (0.00) (0.00) (0.21) (3.95) (0.00) (9.77) I\

Including contingencies

Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed Figures in parentheses are the amounts to be financed by the Bank Credit.

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Prior review thresholds (Table B) 0

0 e

0

All contracts for works with an estimated value o f more than US $500,000 equivalent. All contracts for goods /equipment with an estimated value of more than U S $300,000 equivalent. The first NCB contract for works valued more than U S $30,000 but less than equivalent. The first two NCB contracts for goods valued more than U S S 30,000 equivalent but less than U S $ 300,000 equivalent. Consultant’s contracts with an estimated value of U S $ 100,000 equivalent or more for f i r m s and U S $ 50,000 equivalent or more for individuals.

U S $ 100,000

Table B: Thresholds for Procurement Methods and Prior Review’

1. Works

2. Goods Laboratory/Office Equipment, Furniture, and Materials & Supplies

(US$ thousands) Civil Works estimated to :ost the equivalent o f US$ 30,000 or less per contract

may be executed by:

(i) direct contracting; or

(ii) on the basis o f comparison o f price

quotations obtained from at least three qualified

contractors eligible under the guidelines; or

:iii) by Force Account as a last resort in a manner

satisfactory to the Association

Civil Works estimated to :ost the equivalent o f more

than US$30,000 per contract

US$30,000 or less per :ontract up to an aggregate not exceeding US$6.17

million

US$300,000 or less per contract but more than

USS 30,000

Direct Contracting

Solicitation of three bids

Force Account

National Competetive Bidding (NCB)

National Shopping (NS) Procedures or DGS&D

Rate Contracts

National Competitive Bidding (NCB)

Post review only

Post review only

Post review only

Prior review of first contract below US$

100,000 but above US$ 30,000 and all contracts

above US$500,000. Value o f prior review

US$7.05 million. All others bv Dost review.

Post review only

Prior review o f first two contracts below US$

300,000 but above USS

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IEC Services

Training and workshops, IEC services, MIS, Surveys, Contractual services and other consultancy services

Training and workshops, IEC services, MIS, Surveys, Contractual services and other :onsultancy services

4. Miscellaneous

Incremental operating costs

More than US$300,000 per contract

For f i rms, US$200,000 equivalent or more per

contract

US$200,000 equivalent 01 less per contract

US$ 100,000 equivalent 01

less per contract for f i r m s md US$ 50,000 equivalen and less per contract for

individuals

Each contract for hiring 01

International Competitive Bidding (ICB)

Quality and Cost Based Selection (QCBS)

QCBS method o f selection with shortlist (may be comprised entirely o f national consultants).

(i) QCBS method o f selection with short l i s t

(may be comprised entirely o f national consultants).

(ii) Consultant's qualification as per

paragraph 3.7 o f Bank Consultants Guidelines

111) Single Source Selectior as per paragraph 3.8 o f

Bank Consultants Guidelines

(iv) Service Delivery Contractors as per

paragraph 3.19 o f Bank Consultants Guidelines

(v) Individual Consultants as per Section V o f Bank Consultants Guidelines

I.. .

30,000 and all contracts above US$300,000.

411 others by post review.

Prior review for all contracts costing more

than US$300,000 each. Total Value o f prior

review US$9.80 million

Prior review o f US$4.07 million.

Prior review for all contracts above US$

100,000 equivalent for f i r m s and above US$ 50,000 equivalent for

ndividuals. Total value of x ior review o f 7 contracts

- U S $ 1.25 million

Prior review for all contracts above US$

100,000 equivalent for f i r m s and above US$ 50,000 equivalent for

individuals.

Value o f Prior Review NIL.

Other contracts - Post review only.

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vehicles, maintenance o f buildingslequipment, and

supply o f consumables estimated to cost the

equivalent o f US$ 10,000 )r less may be awarded by:

(i) direct contracting; or

(ii) on the basis o f comparison o f price

quotations obtained from at least three qualified contractorslsuppliers

eligible under the guidelines; or

(iii) Force Account as a last resort

Direct contracting

Solicitation o f three bids

Force Account

Post reveiw only

Post review only

Post review only

Total value of contracts subject to prior review:

Frequency o f procurement supervision missions proposed:

US$ 22.17 mi l l ion

One every 6 months (includes special procurement supervision for post-reviewiaudits)

Overall Procurement Risk Assessment: High

ATTACHMENT - 1 IDA Financed Works and Goods wil l be procured in accordance with Bank Guidelines - Procurement under IBRD Loans and IDA credits [January 1995, revised January and August 1996, September 1997 and January 19991. IDA Financed services will be procured using Bank Guidelines - Selection and Employment o f Consultants by Wor ld Bank Borrowers (January 1997, revised September 1997, January 1999 and M a y 2002). All National Competitive Bidding (NCB) contracts to be financed f rom the credit under the project would fo l low procedures satisfactory to the IDA, which are :-

[ 11 Only the model bidding documents for NCB agreed with the Government o f India Task Force [and as amended f rom time to time], shall be used for bidding.

[2] Invitations to bid shall be advertised in at least one widely circulated national daily newspaper, at least 30 days prior to the deadline for the submission o f bids.

[3] N o special preference wil l be accorded to any bidder when competing with foreign bidders, state-owned enterprises, small-scale enterprises or enterprises f rom any given State.

[4] Except with the prior concurrence o f the BanWAssociation, there shall be n o negotiation o f price with the bidders, even with the lowest evaluated bidder.

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[5] Except in cases o f force majeure and/or situations beyond control o f Ministry o f Health & Family Welfare, extension o f bid validity shall not be allowed without the prior concurrence o f the BankiAssociation (i) for the first request for extension if it i s longer than eight weeks; and (ii) for al l subsequent requests for extension irrespective o f the period.

[6] Re-bidding shall not be carried out without the prior concurrence o f the BankJAssociation. The system o f rejecting bids outside a pre-determined margin or bracket o f prices shall not be used.

[7] Rate contracts entered into by DGS&D will not be acceptable as a substitute for N C B procedures. Such contracts wil l be acceptable for any procurement under National Shopping procedures.

I\ Thresholds generally differ by country and project. Consult "Assessment o f Agency's Capacity to Implement Procurement" and contact the Regional Procurement Adviser for guidance.

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Annex 6(B): Financial Management and Disbursement Arrangements INDIA Food and Drugs Capacity Building Project

Significant weaknesses Staffing: Staffing for finance function at PCU needs to strengthened.

Financial Management

1. Summary o f the Financial Management Assessment The project has a financial management system, which would be able to adequately account and report the project resources and expenditures.

Mitigation Controller Finance (Deputy Secretary) and Finance Manager (qualified finance professional) have been olaced at the PCU.

Country Specific Issues

An ex is t ing accounting system which primari ly focuses on book keeping, and not on financial management

The fol lowing generic country level issues and specific resolutions wil l apply:

A simple FMS, with required levels o f computerization, has been developed under the project. A Finance manual has also been developed for the project, which focuses on financial reporting and monitoring.

(i) GoI’s existing accounting system concentrates mainly on book keeping and transactional control over expenditures and there i s l i t t le in the way o f a concept o f financial management information being used for decision making. However, a separate projectfinancial management system has been designed for the project to address this issue which wi l l enable generation of reliable financial reports for enabling timely managerial decision making.

(ii) The issue o f availability o f funds o n a timely basis to the project implementing entity does not apply to this project as the funds to meet the expenditure at the States will be remitted directly to the State Aids Control Societies (SACS)

(iii) Quality and timeliness o f audit reports as the audit o f the project (PCU) wi l l be conducted by C & AG, India for centrally funded portion o f the project. I t has been agreed with the MoHFW& C&AGS office that the project financial statements generated by the project would be audited in accordance with TOR agreed with the Bank and consented to by the C & AG’s office.

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Finance Staffing & training

The Finance wing o f the Project would be headed by a Financial Controller (of a rank o f Deputy Secretary, Central Govt.) and would be assisted by a finance professional, designated as Finance Manager for the project. They would be responsible for establishment o f the agreed financial management arrangements including Project Financial Management System (PFMS), providing timely financial reports to the stakeholders including the Bank, ensuring smooth and timely flow o f funds and providing overall guidance in respect o f the financial management issues for the project. The other members o f the finance team would include 2 junior level accountants & and other support level staff as required under the project. The SACS are adequately staffed with a financial controller1 Finance manager heading the finance function in each o f the SACS and adequately supported by a accountant and support accounting staff. As the expenditure in the f i rst year o f the project in the states i s projected to be limited, i t has been discussed and agreed with the NACO (the PCU o f the 2nd National Aids Control Project that the existing staff would be adequate to take care o f the accounting function. There may however be a need for additional staff (one accountant) in the larger states (5-6 in no.) from the second year onwards. It has been agreed that additional staff, if necessary, would be employed by SACS in consultation and concurrence with the P M U o f this project and the expenditure would be met out o f this project. A training plan, which i s detailed in the PIP, has been drawn up which aims at providing sufficient training to the finance staff in the proposed Financial Management System, disbursement policies & procedures and the financial reporting requirements. The staff would also be provided on-the-job training at other projects executed at the central Government o f India (MoHFW and M o m )

Budgeting, Fund Flows and expenditure booking

More than 75% of the project expenditures would be budgeted, paid for and accounted at the central level by the PCU. This would also include the bulk o f physical works, goods & equipment, services, trainings and workshops which w i l l be delivered both at the central & state level. The procurement at central level would be done mainly by the central procurement agent and would include civil works, goods & equipment, furniture, and consultant services. The MOHFW would advance funds to the procurement agent and the invoices I bills after payment, would be certified by the procurement agent as per the contractual terms and would be passed on to the Finance & accounting section o f the PCU for settlement /liquidation o f the advance. The funds at the central level would be made available to the l ine ministry (MOHFW) through the Union budget (after project effectiveness) and would be budgeted in a manner to facilitate performance monitoring (different components I activities under separate heads). The annual budget would be based on the annual work program at the central PCU and the requirements o f the participating states in respect o f their specific annual work plans. The respective State Aids Control Societies (SACS) set up under the 2nd national Aids Control Project w i l l be used for the purposes o f routing the funds and accountinglreporting o f the expenditure. The funds w i l l be made available to the states on a reimbursement basis every quarter based on submission o f certified invoices and other supporting documentation. A separate bank account for depositing the funds o f this project wil l be opened and initially books o f account w i l l (cash book, general ledger etc) w i l l be maintained manually and subsequently modification o f the chart o f accounts in the CFMS used by the SACS w i l l be considered. The initial allocation for States w i l l be based on their cash flow forecasts (which in turn would be based on their work programs and budgets). Subsequent funding w i l l also take in to consideration state performance and the projected funds requirement for the next period. GO1 would make the funds available to MoHFW, on a pre-funding basis, under the budgetary mechanism for central level spending. As this i s 100% centrally sponsored scheme, funds would be made available to the States, on a full grant basis.

- 53 -

Books of accounts and Accounting Policies & Procedures

The accounting policies & procedures and the formats for existing financial reports for Go1 are captured in the various accounting forms (‘Books o f Forms’), cash book, the reports, the public works account code, the CPWD manual and General Financial Rules (GFR) as issued from time to time. These policies and procedures are exhaustive and capture the requirements o f the A.G., Department o f Finance and other stakeholders requiring financial information. In spite o f an well established system o f accounting and reporting the expenditures, this system, however, has no established method for capturing physical information and integrating I linking it with the financial information. Further as the system i s maintained on a manual basis, the retrieval o f information for evaluation purposes, because o f voluminous data, i s very time consuming and difficult.Under the project, the current system o f book keeping has been enhanced, by implementing a project financial management system (based on double entry book keeping and cash basis o f accounting) with required levels o f computerization at centre to facilitate timely and qualitative financial reporting under the project. Expenses would be recorded on cash basis and would follow the government classifications, project components and activities for ease in reporting to various stakeholders. States (SACS) would be required to report to center on manual pre-designed simple reporting formats

The Books o f accounts for the project maintained by the PCU using double entry book keeping though an o f f the shelf accounting software (TALLY) with a focus on using the financial information and reports for managerial decision-making. This would be an enhancement o f the existing Government accounting system. A finance manual laying down the financial policies and procedures, periodic & annual reporting formats including financial statements, f low o f information and methodology o f compilation, budgeting & flow o f funds, format o f books o f accounts, chart o f accounts, information systems, disbursement arrangements, external & internal audit for the project and operation o f the Financial Management System (FMS) has been prepared for guiding the project personnel. A subsidiary chart o f Accounts has been developed for the project as part o f the Finance Manual to enable data to be captured and classified by expenditure center, budget heads, project components, activities and disbursement categories. This would match closely with the classification o f expenditures and sources o f funds indicated in the project documents (Project Implementation Plan and Project Cost Tables).

Information Systems

Physical attributes indicating projects’ progress on various activities1 components would be captured in pre-designed format on a manual basis. States would be required to report in pre-designed excel sheets for ease in comparison. Contract monitoring information w i l l be generated by the central procurement agent and reported to PCU. PCU w i l l consolidate the physical progress, procurement progress and financial progress for preparing Finanacial Monitoring Report (FMR) and submit to IDA on a quarterly basis.

Reporting and Monitoring

Financial reporting (SOE’S, F M R s and other financiallphysicaliprocurement progress related reports as specified in the Finance Manual) from implementing agencies at the State level to the PCU w i l l be on a quarterly basis. The PCU w i l l consolidate the quarterly claims to send i t to CAA&A in DEA.The FMR formats are a part o f the Finance Manual. PCU w i l l prepare the FMRs (on cash basis) in the prescribed format, which i s similar to the format o f the annual financial statements, for the project, every quarter after consolidating the information received from the participating state level implementing agencies and forward it to the Bank with in 45 days o f the end o f the quarter. FMRs w i l l be used for disbursement on a mutually agreed time schedule after the project has demonstrated the capability o f producing consistent,

- 54 -

timely and accurate FMRs. The Quarterly Financial Management Reports w i l l include comparison o f budgeted and actual expenditures and analysis o f major variances, forecast for next two quarters and information for procurement management o f major contracts.FMR s would meet the information needs and requirements o f (i) MOHFW; (ii) IDA; and (iii) the project management.

Implementing Agency PCU, MoHFW

Impact of Procurement Arrangements Most o f the procurement o f works, goods and services under the project will be managed by a central procurement agent (HSCC) with assistance from PCU. The procurement agent w i l l open a separate bank account to receive the advance funds for this project and for making payments to the suppliers and civil contractors. All the invoices and other supporting documents would be certified by the procurement agent and submitted to the PCU for liquidation o f advances and accounting for the expenditure.

Audit Auditors SOE / Project Comptroller & Auditor General o f India

Supervision Plan The project would require an in-depth supervision in the initial year especially for ensuring successful implementation o f the state level FM and fund flow arrangements. Mid term review would be conducted after two and a hal f years o f the project to comprehensively review the FM performance o f the project.

2. Audit Arrangements Audit - External : This i s the f i rs t IDA assisted project being implemented by the Food & Drug Directorate (within MOHFW) at Central Government. Under the proposed audit arrangement in respect o f the current project, unlike other centrally sponsored schemes, the project would be required to submit two sets o f annual audit reports to be shared with the Bank,

1. an audit report in respect o f central PCU at MoHFW (including project financial statement) audited by C&AG, who shall be acceptable to IDA as an independent auditor, under terms o f reference agreed with IDA and

2. a comprehensive audit report (including project financial statement) consolidated at the national level based on audited accounts o f all the SACS, audited by an independent auditor, under terms o f reference approved by the Bank.

In addition, an audit report for special account held at Go1 would also be submitted in usual manner. The existing audit arrangements at the SACS w i l l be suitably modified to include the Food & Drugs Component also. All such audit reports (along with project financial statements) will be consolidated into a single audit report by a firm o f chartered accountants/ independent auditor appointed at the national level. The annual project financial statement to World bank would include: (i) a summary o f funds received (showing funds received from the IDA, and a Summary o f expenditures shown under the main project components/ activities and by main categories o f expenditures; and (b) a Balance Sheet showing accumulated funds o f the Project, bank balances, other assets o f the project, and liabilities, if any. The audit o f the project accounts would also include an assessment o f (a) the adequacy o f the accounting and internal control systems, (b) the ability to maintain adequate documentation for transactions and (c) the eligibility o f incurred expenditures for Bank financing. The annual project financial statements duly audited would be submitted within 6 months o f the close o f GoI's fiscal year. Thus the following audit reports will be monitored in Audit Reports Compliance System (ARCS):

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State level Implementing Agencies

DEA / GO1

Internal Audit An internal auditor, under the project, would assess the operation o f the project financial management system, including review o f internal control mechanisms and procurement process and suggest remedial measures in a timely manner to the project management. The office o f the Chief Controller o f Accounts (CCA) within MoHFW has the mandate o f conducting internal audit o f the entire ministry. A Terms o f Reference specific to the project has been agreed with CCA in consultation with the Office o f Controller General o f India. The Internal auditors would report on a half yearly basis on i t s findings to the Project Management and any issues arising in the external and internal audits, including systemic issues would need to be promptly and timely addressed by the project authorities. The report o f the Internal auditors would be made available to the Bank on request.

Audit SOE I Project Consolidated audit report from an independent auditor Audit Special Comptroller & Auditor General o f India Account

3. Disbursement Arrangements Disbursements from the Loan would initially be made in the traditional system (replenishment and reimbursement with full documentation and against statement o f expenditure) and could be converted to the Financial Monitoring Report based disbursements at the option o f the Go1 after demonstration o f robustness o f the FMRs.

Civ i l Works Goods (Equipment, furniture, materials, medical and other supplies Consultants' Services: (a) NGO services, training and workshops

Allocation of credit proceeds (Table C)

11.30 85% 22.61

3.94

100% o f foreign or ex-factory costs and 80% for other items procured locally

100% o f the total expenditure

Table C: Allocation of Credit Proceeds

Consultants' Services: (b) Other servcies including surveys, IEC and MIS Services Incremental Operating costs

4.85 90% o f the total expenditure

8.63 80% through July 3 1,2005,70% through July 3 1,2006,60% through

Total Project Costs with Bank Financing

Total

July-3 1,2007 and 25% thereafter Unallocated 2.70

54.03

54.03

Use of statements of expenditures (SOEs):

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Disbursement wil l be made on the basis o f statement o f expenditure for (a) c iv i l works for contracts not exceeding US$500,000 (b) Goods for contracts not exceeding US S 300,000; (c) consultants for contracts not exceeding U S $ 100,000 for f i r m s and USS50,OOO for individuals and for (d) training and workshops, and incremental operating costs.

Special account: A Special Account would be maintained in the Reserve Bank o f India; and would be operated by the Department o f Economic Affairs (DEA) o f Government o f India (GOI). The authorized allocation o f the Special Account would be USS4,500,000 that represents about 4 months o f in i t ia l estimated disbursements f rom the IDA Credit. The Special Account would be operated in accordance with the Bank’s operational policies. The project wil l submit withdrawal applications to Controller o f Aid, Accounts and Audit (CAA&A) in DEA for onward submission to the Bank for replenishment o f the special account or reimbursement.

Retroactive Financing: Retroactive financing up to US$215,000 would support training, consultancies, travel, ConferencesJmeetings, furniture and equipment for eligible project expenditures incurred before the date o f effectiveness but after April 1,2003.

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Annex 7: Project Processing Schedule INDIA: Food and Drugs Capacity Building Project

/Time taken to prepare the project (months) I 12 I 14 I IFirst Bank mission (identification) I 1 1 /09/200 1 I 11/09/2001 I 1 Appraisal mission departure I 121 14l2002 I 12/14/2002 I I Negotiations I 03/15/2003 I 041 1012003 I I Planned Date of Effectiveness I 07/08/2003 I I Prepared by: Ministry o f Health and Family Welfare

Preparation assistance: WHO, FDA, consultants

Bank staff who worked on the eroiect included: I Name G. N. V. Ramana

Salim Habayeb Hugo Diaz-Etchevehere Abdo Yazbeck M a m Chand Manoj Jain Sara Gonzalez-Flavell Syed I. Ahmed Rashmi Sharma Laura Kiang Pradeep Kakkar Mohan Goplakrishnan Ruma Tavrath Varalaxmi Vemuru N ina Anand Kat ia Visconti

Speciality Task Team LeaderISenior Public Health Specialist

Principal Public Health Specialist Lead Operations Off icer Lead Economist, Health Sr. Procurement Specialist Sr. Financial Management Specialist Sr. Counsel Sr. Counsel Operations Officer Operations Off icer Communications Management Specialist Financial Management Specialist Environment Specialist Senior Social Development Specialist Program Assistant Program Assistant

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Annex 8: Documents in the Project File* INDIA Food and Drugs Capacity Building Project

A. Project Implementation Plan Proposed Capacity Building Project on Food Safety and Quality Control and Quality Control o f Drugs, Ministry o f Health and Family Welfare, Government o f India, March 2002.

B. Bank Staff Assessments Govindaraj, Ramesh, 2002. Draft Concept Note: Improving the Regulation o f Drug Quality in India. Govindaraj, Ramesh, 2002. Regulation o f Pharmaceutical Quality in Gujarat. H e m , James, 2002. India Food and Drug Capacity Building Project, Institutional Assessment. Yazbeck, Abdo, 2002. Economic and Financial Analysis. Expanded Summary. *** add Stakeholder Analysis

C. Other

Central Drugs Standards Control Organization, Directorate General o f Health Services, Ministry o f Health, Government o f India, GLP: Good Laboratory Practice Guidelines for *** add Codex *** add Consumer safety Drug Testing Laboratories in India. Drugs Control Administration, Tamil Nadu State. Food Analysis Laboratory, King Institute Campus, Guindy, Chennai, On the Job Training on Prevention o f Food Adulteration and Food Testing. Food and Drug Administration, HACCP: A State-of-the-Art Approach to Food Safety, October, 200 1 * Food and Drug Administration Maharashtra State, Presentation made to the World Bank team, February, 2002. * * * add GLP Joshi, K, Development o f an Environmental Plan and Health and Safety in Food and Drug Testing Laboratories o f State and Union Ministry o f Health and Family Welfare, 2002. Maharashtra State, Proposal o f Strengthening o f Laboratory Services, 200 1. State Drug Testing Laboratory, Profile o f the Tamil Nadu State Drug Testing Laboratory. State Food Analysis Laboratory, Food Sector Components Tamil Nadu, World Bank Assisted Capacity Building Project.

*Including electronic files

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Annex 9: Statement of Loans and Credits INDIA: Food and Drugs Capacity Building Project

0 1 -Mar-2002 Difference between expected

and actual

PO50647

PO50653 PO50658 PO55454 PO59242 PO10566 PO55455 PO38334 PO67543 PO70421 PO67216 PO71244 PO35173 PO50657

PO45049 PO49770 PO35172 PO10505 PO09972

PO59501 PO67330 PO50667 PO55456 PO45050 PO49537 PO45051 PO50637 PO41264 PO50646 PO50651 PO10496

PO10561 PO49385 PO49477 PO38021 PO35824 PO35827 PO35169 P 0 4 9 3 0 1 PO10511 PO10531 PO35158 PO10473

PO09995 PO44449

PO43728 PO09584 PO36062 PO10480 PO10484 PO10485 PO35821

2002 UrTAR PRADESH WTER SECTOR 2002 RESTRUCTURING 2001 KARNATAKA R m S II 2001 TECHN EDUC 111 2001 KERALARWSS

2001 MPDPIP 2001 GUJARAT H W S 2001 RAJ DPEP II 2001 RAJ POWER I 2001 LEPROSY II 2001 KARNHWS 2001 KAR WSHD DEVELOPMENT 2001 Grand Trunk Road Improvement Projed 2000 POWERGRID II 2000 UP Health Systems Development Probct 2000 AP DPlP 2000 REN EGY II 2000 UP POWER SECTOR RESTRUCTURING PRCYECT 2000 RAJASTHAN DPlP

2000 NATIONAL HGHWAYS 111 PROJECT 2000 TA for Econ Reform Project 2000 IMMUNIZATION STRENGTHENING PROJECT 2000 UP DPEP 111 1999 Telecommunications Sector Reform TA 1999 RAJASTHAN DPEP 1999 AP POWER APLl 1999 2ND NATLHlViAlDS CO 1999 TN URBAN DEV I 1999 WTRSHD MCMT HILLS II

1999 UP SODIC LANDS I 1998 MAHAWSH HEALTH SYS 1998 ORISSA HEALM SYS 1998 NATLAGR TECHNOLOGY 1998 AP ECON RESTRUCTURIN 1998 KERALAFORESTRY 1998 DPEP 111 (BIHAR) 1998 UP DIVAGRC SUPPORT 1998 WOMEN &CHILD DEVLPM 1997 UP FORESTRY 1997 A.P. EMERG. CYCLONE 1997 MALARIA CONTROL 1997 REPROWCTIVE HEALTH1 1997 AP IRRIGATION 111 1997 TUBERCULOSIS CONTROL

1997 STATE HIGHWAYS I(AP) 1997 RURAL WOMEN'S DEVELOPMENT

1997 ENV CAPACITYBLDG TA 1997 ECODEVELOPMNT 1996 ECODEVELOPMNT 1996 BOMBAY SEW DISPOSAL 1996 UP RURAL WATER 1996 HYDRCLOGY PROJECT DPEP II

0.00

0.00

0.00 0.00 0.00

381 .OO 0.00

180.00 0.00

360.00 0.00

589.00 450.00

0.00 0.00

80.00 150.00

0.00 516.00

0.00 0.00 0.00

62.00 0.00

210.00 0.00

105.00

85.00 0.00 0.00 0.00

96.80 301.30

0.00 0.00

79.90 0.00 0.00

50.00 0.00 0.00

175.00 0.00

350.00 0.00 0.00

0.00

0.00 167.00 59.60 0.00 0.00

149.20 151.60 64.90 65.50

110.10

0.00 74.40

0.00 30.00 0.00

100.40 0.00 0.00

110.00 111.00 50.00 0.00

100.48 0.00

45.00 142.60 182.40

0.00 85.70 0.00

191.00 0.00

50.00 194.10 134.00

76.40 100.00 241.90 39.00

152.00 50.00

300.00 52.94

100.00 164.80 248.30 150.00 142.40

0.00 19.50 50.00 0.00

28.00 25.00 0.00

142.00 425.20

0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

20.00 0.00 0.00

0.00 0.00

0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00

0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

19.00 0.00 0.00 0.00 0.00

0.00 0.00 0.94 0.00 0.00

10.00 7.20

19.64 0.00

137.15 145.88 151.22

57.44 59.00

102.79 329.52 70.72

160.85 25.57

343.18 97.20

563.11 395.07

100.80 99.77

122.24

103.69 89.30

456.97 40.93 80.42

109.73 58.16 66.65 84.68

117.66 31.72 94.28

136.93

113.26 59.86

120.76 264.05

19.36 109.54

95.39 219.41

24.51 32.12

103.11

80.84 186.04 91.03

174.39 13.94 22.46 7.56

13.89 65.86 22.62 30.47 79.49

0.00 0.00

0.00

5.62 4.35

-3.79 50.52 -0.18 14.35

-0.31 8.18 1.41

22.1 1 50.73 13.58 9.10

13.80

24.81 14.39 65.31 7.40 1.06

33.77 26.16 56.71 84.68 26.11 -5.40 29.35 64.13

53.82 32.10 72.27

156.56 8.05

93.07 69.42 70.45 21.87 55.78 97.32 76.05

145.90

100.56 107.73 15.86 24.63 9.47

15.75 75.68 27.02 74.33 30.73

0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00 0.00

0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00

0.00 3.47 0.00

49.54 0.00 0.00 0.00

-1.71 0.00

0.00

0.00 35.82 17.62 29.25

0.00

- 60 -

Difference between expected and actual

disbursements' Original Amount in US$ Miilions

Project ID FY Purpose IBRD IDA GEF Cancel. Undisb. Orig Frm Rev'd

PO35170 1996 PO 10529 1996 PO35825 1996 PO43310 1996 PO10461 1995 PO10463 1995 PO10464 1995 PO10476 1995

PO10489 1995 PO10522 1995 PO10455 1994

PO09977 1993 PO09963 1992 PO09946 1992 PO09869 1989

ORISSA POWER SECTOR ORISSA WRCP STATE HEALTH SYSll

COAL ENV &SOCIAL MITIGATION MADRAS WAT SUP II INDUS POLLUTION PREV DISTRICT PRlM4RY ED TAMIL NADU WRCP AP 1ST REF. HEALTH S ASSAM RURAL INFRA BLINDNESS CONTROL ICDS II (BIHAR 8 MP) POPULATION VII NAT. HIGHWAYS II NATHPA JHAKRI HYDRO

350.00 0.00

0.00 0.00

275.80 143.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

153.00 485.00

0.00 290.90

350.00 63.00 0.00

25.00 260.30 282.90 133.00 126.00 117.80 194.00 79.00

153.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

60.00 0.00

0.00 6.09

189.30 68.31 0.00 0.00 0.00 0.00

10.00

0.00 0.00 2.73 0.00

140.12 186.78 77.13 76.37

107.06 152.90 15.70 28.89 16.10 204.55 52.36 123.11 62.76 78.72

100.03 138.19 17.52 30.30 44.46 43.23 26.39 41.25 16.95 23.81 16.38 19.78 19.25 11.27 53.10 53.10

0.00

0.00 0.00

0.00

11.50 25.03

0.00 109.04

0.00 49.51

0.00 23.82

0.00

11.27 42.56

Total: 5854.40 6864.72 20.00 393.21 7147.94 3264.64 406.70

- 6 1 -

INDIA STATEMENT OF IFC's

Held and Disbursed Portfolio

In Millions U S Dollars Jan - 2002

Committed Disbursed IFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic MahInfra 2001

1996199100

1992196197

2001 200 1 1997 1981 1995 200 1 200 1 1995 1997 1997100 1995 2001 1986193194195 2000 1998 1990 1981186189192194 2000 1989190194 198718819Ol93 1989 1996 199 1196101 2001 1997 1997 1989 1994 1992193 1997 2001 2001 198419 1 2001 1997 1990192 1995197 2000 1994 1997 1997

Moser Baer

NIIT Orchid Owens Coming Pennar Steel Prism Cement RCIHL RTL Rain Calcining SAPL SREI Sara Fund Spryance Sundaram Finance Sundaram Home TCWIICICI

TISCO Tanflora Park Tata Electric Titan Industries UCAL United Riceland VARUN Vysya Bank WIV Walden-Mgt India AEC Ambuja Cement Arvind Mills Asian Electronic BTVL Basix Ltd. Bihar Sponge CCIL CEAT CESC Centurion Bank Chinai Chowgule Duncan Hospital EEPL

NICCO-UCO

TDICI-VECAUS I1

0.00 22.02

2.60 0.00 0.00

25.00 0.00

13.13 0.00 0.00

14.82 0.00

10.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

10.00 0.00 0.00 0.00 0.00 3.90 0.47 0.00 0.00 0.00 0.00 0.00 9.00

19.60 18.00 4.00 1 .oo

10.27 7.00 0.00

10.00 14.80 0.00 0.00 0.00 0.00 0.07 5.02 1.97 0.45 5.46 0.07 0.00 5.94 2.00 0.00 2.19 7.15 0.54 0.00 0.51 0.00 0.52 0.54 0.00 0.00 7.30 2.39 0.03 0.00 4.94 5.02 5.50

20.00 1 .oo 0.05 0.00 0.00 0.00 0.00 0.00 4.58 0.00 0.03

0.00 0.00 0.00 0.00

30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 9.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

11.50 0.00

40.20 0.00 0.00

15.75 0.00 0.00

0.00 8.15 2.60 0.00 0.00

25.00 0.00

13.13 0.00 0.00

14.82 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1 .oo 0.00 0.00 0.00 0.00 3.90 0.47 0.00 0.00 0.00 0.00 0.00 5.50

19.60 18.00 4.00 0.00

10.27 7.00 0.00

0.00 14.80 0.00 0.00 0.00 0.00 0.07 5.02 1.97 0.45 5.46 0.07 0.00 5.94 2.00 0.00 1.67 7.15 0.54 0.00 0.00 0.00 0.52 0.54 0.00 0.00 7.30 2.39 0.03 0.00 4.94 5.02 5.50

20.00 0.98 0.05 0.00 0.00 0.00 0.00 0.00 4.58 0.00 0.03

0.00 0.00 0.00 0.00

20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 9.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.00 0.00

40.20 0.00 0.00

15.75 0.00 0.00

Total Portfolio: 197.74 185.55 50.36 76.45 154.07 152.14 40.36 71.95

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Aoorovals Pending Commitment

FY Approval Company Loan Equity Quasi Partic 2000 APCL 7.10 0.00 1.90 0.00 2001 GI Wind Farms 9.19 0.98 0.00 0.00 2001 GTF Fact 10.00 0.00 0.00 0.00 2000 IL&FS-GF 40.00 0.00 0.00 0.00 2000 Orissa NESCO 28.00 0.00 0.00 0.00 2000 Orissa WESCO 11.00 0.00 0.00 0.00 2001 Samtel 21.30 0.00 0.00 0.00 1999 Sarshatali Coal 4.00 0.00 0.00 0.00 2002 Sundaram Home I1 10.42 0.00 0.00 0.00 2002 Webdunia 0.00 0.00 2.00 0.00

Total Pending Commitment: 141.61 0.98 3.90 0.00

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Annex I O : Country at a Glance INDIA: Food and Drugs Capacity Building Project

19S1 1991 2000 2001 (% of GDP) Agriculture 3 8 9 31 3 262 2 4 9 Industry 245 276 260 269

Manufacturing 163 171 1 5 2 158 Services 3 6 6 41 1 4 7 8 482

Private consumption 7 4 8 6 7 0 666 6 6 5 General government consumption 1 0 1 11 6 129 1 3 2 imports of goods and services 9 8 9 9 15 1 166

POVERTY and SOCIAL

2001 Population, mid-year (millions) GNI per capita (Atlas method, US$) GNI (Atlas method, US$ billions)

Average annual growth, 1994-00

Popuiation (“h) Labor force (%)

Most recent estimate (latest year available, 1994-00) Poverty (% of population below national poverty line) Urban population (% of total population) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Chiid malnutrition (% of children under 5) Access to an improved water source (% ofpopulation) illiteracy (% ofpopulation age 15+) Gross primary enroilment (% of school-age population)

Male Female

KEY ECONOMIC RATiOS and LONG-TERM TRENDS

I981

GDP (US$ billions) 182.1 Gross domestic investmenffGDP 18.7 Exports of goods and services/GDP 6.2 Gross domestic savings/GDP 15.1 Gross national savingslGDP 16.7

Growth of Investment and GDP ( O h )

30

15

0

15

-GDi - 0 - G D P -

Current account baiance/GDP Interest payments/GDP Total debffGDP Total debt service/exports Present vaiue of debVGDP Present vaiue of debvexports

-2.0 0.3

11.4 4.4

1981-91 1991-01 (average annual growfhj GDP 5.7 5.9 GDP per capita 3.5 4.1

India

1,015.9 450

453.4

1.8 2.2

29 28 63 68 47 88 43

101 109 92

1991

316.8 24.1

7.3 21.4 20.9

-3.2 1.2

26.4 19.1

2000

6.1 4.2

South Asia

1,380 450 616

1.9 2.4

28 62 73 49 87 44

101 109 93

2000

445.2 23.6 12.0 20.5 22.5

-1.1 0.8

22.1 15.3 15.9

107.0

2001

4.0 2.1

Low- income

2,511 430

1,069

1.9 2.3

31 59 76

76 37 96

103 88

2001

457.0 22.9 14.0 20.3 22.3

-0.6 0.9

22.7 13.8

2001-05

5.4 3.9

Development diamond*

Life expectancy

I

Access to improved water source

I -lndia Low-income group

Economic ratios‘

Trade

T Investment Domestic

savlngs

-

Indebtedness

-lndia Low-income group

(average annual growihj Agricuiture Industry

Services Manufacturing

1981-91 1991-01 2000 2001

3.1 3.1 1.3 -0.2 6.9 6.3 4.9 6.3 7.4 7.0 4.2 6.7 6.9 7.9 9.5 4.8

Private consumption 5.8 4.6 0.4 1.7 General government consumDtion 4.2 6.9 12.0 6.5

I Growth of exports and imports (“A)

45 T 30

15

0

-15 Gross domestic investment Imports of goods and sewices

6 2 7 8 15 7 2 0 -Exports -.O-lmports 5 9 103 127 106

Note: Data are for fiscal year ending March 31 of the year shown, except for population (mid-year 2000): 2001 data are preliminary estimates. * The diamnds show four hey indicators in the country (in bold) compared Mth its income-group average. If data are missing, the diamnd wili be incomplete.

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India PRICES and GOVERNMENT FINANCE

Domestic prices (% change) Consumer prices implicit GDP deflator

Government finance (% of GDP, includes currenf granfsj Current revenue Current budget balance Overall surplus/deficit

TRADE

(US$ millions) Total exports (fob)

Tea Iron Ma nufactures

Total imports (cifj Food Fuel and energy Capital goods

Export price index (1995=100) Import price index (1995=100) Terms of trade (1995=100)

BALANCE of PAYMENTS

(US$ millions) Exports of goods and services Imports of goods and services Resource balance

Net income Net current transfers

Current account balance

Financing items (net) Changes in net reserves

Memo: Reselves including gold (US$ millions) Conversion rate (DEC, /oca//US$)

EXTERNAL DEBT and RESOURCE FLOWS

(US$ millions) Total debt outstanding and disbursed

IBRD IDA

Total debt service IBRD IDA

Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment Polffoiio equity

World Bank program Commitments Disbursements Principal repayments Netflows Interest payments Net transfers

1981 1991

.. 12.8 11.5 10.5

1981 1991

8,501 18,477 .. 535 .. 970

5,105 12,996 15,862 27,914 1,348 557 6,669 6,0281 2,416 5,836

28 51 27 46

105 109

1981 1991

11,249 23,028 17,821 31,485 -6,572 -8,457

325 -3,753 2,693 2,0681

-3,554 -10,142

2,564 7,6501 990 2,492

6,623 5,8343 7.9 17.9

1981 1991

20,695 83,717 827 7,685

5,142 13,312

645 4,8151 137 1,087 50 211

750 461 908 2,334 789 1,606

97 6

2,503 2,186 826 1,981 86 586

739 1,395 101 712 639 683

2000

3.4 4.5

18.9 -8.3

-1 1.2

2000

37,542 1,183

916 29,714 55,383

2,417 2,611 8,965

116 150 77

2000

53,251 67,028

-13,777

-3,559 2,256

-5,080

1,482 -6,402

8,036 43.3

2000

98,312 7,816

18,930

0,110 1,390

469

382 1,068

-1,658 2,155 3,036

817 1,460 1,229

231 630

-399

2001

3.8 4.1

19.9 -8.6

-1 1.3

2001

44,894 1,394 1,158

34,511 59,264

1,432 15,650 8,785

122 162 75

2001

63,764 75,656

-1 1,692

-3,821 12,798

-2,915

8,771 -5,856

42,281 45.7

2001

103,677 7,080

18,888

10,727 1,423

506

336 589

4,340 2,346 2,756

2,064 1,760 1,361

399 568

-169

I 1 lnflatlon (Oh) 115 -

~ * 96 97 98 99 00 011

-GDP deflator -CPI

Export and import levels (US$ mill.)

Oo0 1 60 000

40 000

20 000

0

I 95 96 97 96 99 00 01

i Expoits Imports

Current account balance to GDP (%)

-2 1

Composition of 2001 debt (US$ mill.)

18 888

F 39539

1 4 6 4 8

E 20,060

A - IBRD B - IDA D -Other multilateral F - Private C ~ IMF G -Short-term

E - Bilateral

Development tconomics Note: Data are for fiscal year ending March 31 of the year shown, except for population (mid-year 2000); 2001 data are preliminary estimates.

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Additional Annex 11 Project Activity Matrix INDIA: Food and Drugs Capacity Building Project

Activities Sub Component Time By whom? Yr. I I Yr. 11 1 Yr. I Yr. I Yr. V.

1.1. Policy Development

1.2. Improving Program Coordination

1.3. Strengthening Central Food and

D w Administration 1.3. Monitoring

Component I. Policy development, program coordination and monitoring

Base Cost (US $. Mill.)

0.66

1.05

2.64

1.93

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Sub Component Time Yr. I I Yr. I Yr. I Yr. I Yr.

2.1, Building Consumer Awareness

By whom?

2.2. Improving Skills

2.3. Development and dissemination o f Hazard Analysis Critical Control Point standards and procedures for priority foodstuffs (milk, cereals, pulses and oils) 2.4. Strengthening Infrastructure - Central Laboratories

2.5. Strengthening Infrastructure - State Laboratorics

Component II. Food Qu Activities

Effective IEC Strategy Developed and

Impact assessment o f IEC Strategy

Skill development training to about 5,800 regulatory staff Training in food safety for 200 food handlers from Industry Advocacy training for representatives o f 20 Umbrella Consumer Organizations

Implemented

Development of HACCP standards

Dissemination of standards

Construction of 10 new, and renovation and extension of 1 I central laboratories

Supply o f equipment to central laboratoncs Staffing Operation and maintenance of laboratories

Construction of 9 new, renovation and extension of 6 state laboratories

Supply of equipment to State laboratories Staffing Operation and maintenance of laboratories

ity and Safety - Base cost :us$. a 2.02

- 3.95

- 3.08

- 15.62

- 21.76

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Sub Component

3.1. Building Consumer Awareness

3.2. Improving Skills

3.3. Updating and dissemination of Indian pharmaceutical standards

3.4. Strengthening Infrastructure - Central Laboratories

3.5. Strengthening Infrastructure - State Laboratories

COl Activities

Effective IEC Strategy Developed and Implemented Impact assessment of IEC Strategy Skill development training to about 625 regulatory staff Training in GMP, GLP and validation procedures to 2000 quality control and production staff from Industry 20 Advocacy Workshops and seminars Updating

standards

Supplyof standards

Construction of one new and renovation and extension of one central drug laboratory Supply of equipment to central laboratories Staffing Operation and maintenance of laboratories Construction of 5 new, renovation and extension of 14 state laboratories Supply of equipment to State laboratories Staffing Operation and maintenance of laboratories

Donent 111. Drw Oualitv and Safetv By whom?

Center: IEC Consultant PCU, State: FDAs

Center- ADG-PFA & Nodal Institutions Organization of training States- Selection and Nomination of participants

Center - PCU, Central Procurement Agent (PA) and ADG-PFA

ADG-PFA, Heads o f respective labs

State FDAs, Central PA

State FDAs

Base Cost (Rs. Mill.) 2.02

1.80

0.33

3.86

11.68

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Additional Annex 12: Supervision Plan INDIA Food and Drugs Capacity Building Project

The project w i l l require intensive supervision during the f irst year, given the nation-wide scope and strong emphasis on early implementation o f software activities related to consumer education. Being the f i rs t Bank supported project in this sector, project management at national and state levels wil l require additional assistance and supervision on issues related to development o f comprehensive IEC strategy, and designing and implementing the household surveys. The project supports more formal consultations between the center and states at regular intervals including development o f annual plans o f action. The first year wil l provide a critical opportunity to ensure that a l l these processes are in place in a timely, transparent and accountable manner and we l l integrated into the national and state programs.

During the f i rs t year o f implementation, the project w i l l have three formal supervision missions, in addition to ongoing implementation support by Bank staff located in N e w De lh i office. The core supervision team will consist o f the fol lowing members: (i) Task Team leader, with experience in public health program operations in development countries; (ii) Financial management specialist who wil l review project's adherence to fiduciary requirements; (iii) Procurement Specialist who wil l review and advice o n issues related to procurement, in particular selection o f consultants and procurement of goods and works; (iv) I E C specialist who wil l focus on development and implementation o f IEC strategy; (v) M I S specialist who wil l review the household survey design and monitoring arrangements; (vi) Environmental specialist who wil l review the implementation o f environment management plan; and (vii) Social Development Specialist who wil l review the implementation o f NGO activities. In addition, the team wil l re ly on support f rom WHO staff who have been providing technical assistance for development o f standards which wil l be continued during the project implementation.

The first mission wil l take place shortly after the Board presentation and will pay particular attention to the fol lowing areas: (i) preparatory activities and consultations for development o f I E C strategy; (ii) launch workshop to familiarize implementing authorities at state level with the Bank procedures; (iii) monitoring and evaluation arrangements; (iv) development o f information systems; (v) formation o f technical advisory committee for designing household surveys (vi) init iat ion o f procurement actions for good and works planned during the first year. The mission will also follow-up on the recommendations and actions agreed upon between Bank staff and Government o f India in developing the standards.

The second and third missions wil l include f ie ld visits to major states, particularly Maharashtra and Utttar Pradesh to identi fy implementation issues and challenges faced by state governments, food and drug authorities, state aids control societies and NGOs. During the subsequent years, two supervision missions are planned every year with a mid term review in 2005.

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