Aide MemoireINDIA: Andhra Pradesh Rural Water Supply & Sanitation Project

Implementation Support MissionDecember 16-27, 2013

ContentsI. Introduction................................................................................................................................................2II. Key Project Data.......................................................................................................................................2

II. Achievement of Project Development Objectives (PDO) and Rating......................................................2III. Overall Implementation Status, Issues and Rating..................................................................................3

IV. Project Costs and Disbursements.............................................................................................................9V. Institutional, Technical, Fiduciary and Safeguard Issues.......................................................................10

VI. Key Agreed Actions..............................................................................................................................14Annex 1: Project Indicators – Status as of November 2013........................................................................16

Annex 2: Sanitation Strategy – Implementation Methodology...................................................................18Annex 3: Institutional and Human Development, Community Engagement..............................................19

Annex 4: SVS and MVS Implementation Issues, Engineering and Technical issues.................................22Annex 5: Monitoring and Evaluation..........................................................................................................28

Annex 6: Assessment of O&M issues for the MVSs...................................................................................30Annex 7: Procurement Management...........................................................................................................33

Annex 8: Financial Management.................................................................................................................35Annex 9: Environmental Management........................................................................................................37

Annex-10: Tribal Development Plan Implementation Status......................................................................41Annex 11: List of Persons Met....................................................................................................................43

Annex 12: List of Villages visited by the mission.......................................................................................44

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Aide Memoire

INDIA: Andhra Pradesh Rural Water Supply & Sanitation Project Implementation Support Mission

December 16-27, 2013

I. Introduction

1. A World Bank Mission1 visited Andhra Pradesh duringDecember 16-27, 2013onanimplementation support mission of the Andhra Pradesh Rural Water Supply and Sanitation Project. The focus of the mission was to review overall project performance, particularly after the restructuring of the project in September 2013, analyze the prospects fortimely completion of project activities, identify and agree on key actions for improving project performance. The mission visited five project districts (Annex-12) in the different groups, interacted with officials, district staff, contractors, communities and village committees. In Hyderabad, the mission had interactive meetings with representatives of contractors, with the newly recruited Mandal Resource Persons and members of District Water and Sanitation Committees. The mission had a wrap up meeting with the Secretary, Rural Water Supply and Sanitation Department (RWSSD), Government of Andhra Pradesh (GoAP),Mr. Vikas Raj, and agreed on key actions. This Aide Memoire presents the mission’s assessment of project status, agreed actions for improving implementation performance, and achievingProject Development Objectives.

II. Key Project Data

Table-1: Key Project Data

Key Project Data Previous Ratings and Flags Current Ratings and Flags

Board Date Sep 22, 2009 Development Objectives

Moderately Satisfactory Moderately Unsatisfactory

Closing Date Nov 30, 2014 Implementation Progress

Moderately Satisfactory Moderately Unsatisfactory

Project Age 4 Years 2 Months Problem Flags Project Management Disbursement delays

Project Management Disbursement Delays % Disbursed 31%

II. Achievement of Project Development Objectives (PDO) and Rating

1The Bank mission comprised Messrs./Mmes. RaghavaNeti (Task Team Leader, SASDU), S. Satish (Senior Social Development Specialist, SASDS), Priti Jain (Senior Procurement Specialist, SARPS), ShashankOjha, (Senior e-Government Specialist, TWICT), Tripti Chopra (Financial Management Specialist, SARFM), D.M. Mohan (Engineering Consultant, SASDU), K. Kalyani (Environment Consultant, SASDI), JVR Murty (Consultant, Institutional Capacity Building), BKD Raja (Consultant, Social Safeguards) and Nirmala Chopra (Program Assistant).

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2. PDO: The project aims to improve access to rural water supply and sanitation services to rural communities, through progressive decentralization, community participation and enhanced accountability.

3. Status: The project’s performance indicators were revised as part of restructuring in September 2013. The revised set of indicators and their status as of November 2013 is given in Annex1. There are three key PDO indicators: a) people with access to improved water sources; b) improved latrines constructed under the project; and c) improvement in cost recovery. As per data reported by the Project Supervision Unit (PSU), by November 2013 access to water supply has been improving, and has reached1.23 millionbeneficiaries. Toilet construction has made marginal progress, as the revised strategy has yet to be implemented in poor habitations, as discussed during the last mission; firm strategies have now been finalized. Contribution to capital cost from the community has reached 33 percent. A formal system for monitoring O&M cost collections has not yet been put in place, as only a limited number of Single Village Schemes (SVS) have reached O&M stage (about 10%). The summary of key indicators is given in Table2 below.

Table2: Status of Key Project Indicators

Aspect Sl.No Key Indicator Achievement by Nov 2013

Target

Improved access to water supply and sanitation

1 Number of people in rural areas provided with access to improved water sources under the project

1.23 m 2.15 m

2 Improved latrines constructed under the project 4,232 12,000Community participation, Decentralization &Accountability

3 Improvements in cost recovery (%): (i) Contribution to capital cost(ii) Contribution to O&M cost(iii) Collection efficiency

33%Not AvailableNot Available

100%70%70%

4. Information collection system on key indicators is being streamlined, along witha system of regular verification and confirmation (see details in para.20). This will enhance the reliability of data being reported.

5. PDORating: The mission’s assessment shows that the PDO remains relevant, but the full extent of targets may not be achieved by the current project closing date. There are two main reasons: there could be delays in completion of Multi-Village Schemes (MVSs); and progress on sanitation depends on actions that are to be initiated based on the strategies agreed. Further, the newly elected Gram Panchayatrepresentatives (elections were held in August 2013) need to be fully involved with project activities, and have ownership of the project;this requires considerable effort from the project teams. For sustainability of MVSs, proper O&M arrangements have to be established upon scheme completion.Given these dimensions, the project’s PDO rating has been revised to ‘Moderately Unsatisfactory’.

III. Overall Implementation Status, Issues and Rating

6. Background: Till the end of 2012, project procurement progress on MVSs was limited. Thereafter,through focused efforts, the project has completed procurement of most water supply works by June 2013 and has committed most of the project funds, as agreed during the Mid-Term Review (MTR) in May 2013. A restructuring mission in August 2013 reviewed project

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status and proposed restructuring through:i) cancellation of US$25 million of the IDA credit;ii) a revised strategy for sanitation; and iii) revision ofkey projectindicators. The project was restructured in September 2013, and the partial cancellation of the credit was affected.

7. The MTR mission recommended: i) strengthening of staff at the district level; ii) close monitoring of contracts; iii) strengthening of O&M arrangements, particularly for the MVSs; and iv) a new outline of sanitation strategy.Staff strength has been substantially enhanced since then (see para. 14). Contract monitoring has improved but further improvements are needed (see para.17). The present O&M situationof MVSs was reviewed in the field by this mission, and suggestions were made for further actionsfor improvement (see para.21). The August 2013 mission developed the details of the sanitation strategy, for which implementation mechanisms have been worked out during this mission (see para.11).

8. Overall status: Water Supply.The overall status of implementation of water supply works is summarized in Table3 below. It can be seen that almost 50 percent of the SVSs have been completed. However, the project is yet to exit from these villages, which requires substantial work in terms of last mile closure activities, including improving interface with the newly elected village representatives and reviving the village committees with representation from those newly elected to the Gram Panchayats (see para 15).In the case of MVSs, all 46 works (including Y. Palem, which was the last one) have been awarded and works have started. Two DBO contracts of MVSs (Podili, Khanapur) were supposed to go ahead with procurement, as discussed during the MTR. However, subsequent political developments to bifurcate the state haveled to protests in some parts of the state, whichhad slowed down the process. The mission discussed the prospects for success of these DBOs under the current political situation and continued government commitment to maintain separate funds to be able to pay the contractor’s investment (as per the design of DBOs). It was concluded that in the current situation it would not be possible to go ahead with the DBOs, and hence they would be dropped.

Table3: Status of Water Supply Schemes and SanitationSl.No

Scheme Detail Total Works

Awarded Started Completed Likely Compl. Dt.

Water Supply1 SVS Works 1503 1503 1503 876 June2014*

Cost (Cr) 326.1 326.1 326.1 173.1

% of Cost 100% 100% 100% 53%

2 Aug of SVS Works 1117 1117 1117 792 March 2014

Cost (Cr) 42.1 42.1 42.1 26.8

% of Cost 100% 100% 100% 64%

3 MVS Works 46 46 45 0 May 2015

Cost (Cr) 272.2 272.2 248.2 --

% of Cost 100% 100% 91% --

4 Innovative technology-SCADA for large MVSs

Nos 8 MVS identified

By April 14

0 0 Along with MVS schemes

Cost (Cr) 6.55 Innovative Nos. 30 (5 for Feb 14 0 0 May 2014

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Sl.No

Scheme Detail Total Works

Awarded Started Completed Likely Compl. Dt.

technology-SOLAR for SVSs

each District)

Cost (Cr) 1.5

Sanitation

6 Individual Household toilets

Works 12000 units Community

Community

4232 units November 2014

Cost (Cr) 5.2Ground Water Management

7 Ground Water Recharge Structures

Works 250 By March 2014

1 1 June 2014

Cost 1.25

* along with last mile closure activities (see para.15)

9. Likelihood of Completion: It is likely that the SVSs would be completed before the current closing date of the project, including completion of last mile closure activities (see para.15). However, of the 45 MVSs, which had been awarded by June 2013 and where work has started (cost Rs. 248 Cr), progress has been less than expected, with only 13 percent of the expenditure (Rs 33 Cr) incurred by November 2013. Component-wise progress of MVSs, where has work started, is shown in Table4 below.

Table4: Component-wise Progress of MVSs (November 2013)

Work started Component-Wise Progress45 MVSs Intake well,

Source, SS Tank

Head-Works

Balancing / Service Reservoirs

Pumping Main

Gravity / Transmission main

Distribution main

(Nos) (Nos) (Nos) (m) (m) (m)Total 23 9 295 138,892 858,534 205,349Completed 4 2 21 13,865 126,392 25,495% Completion 17% 22% 7% 10% 15% 12%

10. This backlog in progress is due to the state officials protesting the decision to bifurcate the state, which led to loss of 2-3 months of working period. Intake and Head-works are crucial for taking up the remaining activities (pipelines and reservoirs). At the time of the mission, work had resumed, and in the coming working season commencing January 2014, work is likely to pick up. However, two externalities may still affect: a) general elections in April/May 2014; and b) formal central cabinet clearance on bifurcation of the state, which may once again lead to agitations in the state.As of now, the project needs an extension of at least six months in order to complete the MVSs.

11. Sanitation: As stated earlier (see para 9), a revised sanitation strategy was developed during the August 2013 mission to focus on poor habitations and provide incentives to promote 100 percent coverage of households. The implementation methodology of the strategy was worked out during this mission (see Annex2), involving new staff hired under the project recently and the existing District Water Sanitation Committee (DWSC) staff to promote IEC activities (see details in para.13 and Annex3). As project performance on sanitation has so far

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been poor, the revised strategy has to be implemented and progress monitored closely, going forward.

12. Staffing and Logistics: Lack of staff, particularly at the field level (there were more than 50 percent vacancies) was one of the major issues earlier. This has since been resolved AndGoAPhas takensteps to fill 288 posts of Engineers (Assistant Executive Engineers / Assistant Engineers) in the six project districts. In addition, based on earlier agreements, 186 Technical Consultants were recruited in the six project districts. The addition of these 474 technical field staff is likely to help in improved implementation. The new Project Director is spending a part of his time on other programs. The mission requested that the Project Director focus fully on the project, including undertaking regular field visits and monitoring.

13. In order to bridge the gap on community interface and social intermediation including sanitation,RWSSD has taken a decision to provide additional remuneration tothe existing 188 Mandal2Resource Persons (MRPs) in the project districts (except in Visakhapatnam district, where MRPs do not exist). In addition, 15 Divisional Resource Persons are being hired to guide MRPs. During the mission it was agreed to hire Village-Resource Persons (VRPs) for each village, who will actively engage with the community. The mission hadconsultations with the existing District Water and Sanitation Committee3 (DWSC)for IEC support.This team should be roped in to facilitate project implementation. This will significantly enhance community interface under the project. See details in Annex3.Project teams can hire the required number of vehicles to facilitate effective field supervision.

14. Key Issues:The mission has identified the following key issues in implementation of water supply schemes and in sanitation

15. SVSs: While SVSs are getting completed, a number of last mile closure activities remain to be addressed, as listed below. For on-going works these need to be addressed during implementation.Further details on these issues and actions agreed are indicated in Annex4.

a) Need to have better integration between existing schemes and new schemes in the villages, with required rehabilitation and improvement measures and operational control measures, with service delivery as the primary objective. In order to promote house connections, the project would finance saddle pieces, where pipelines are yet to be laid. This needs to be taken up.

b) Quality of works in certain schemes is less than satisfactory (see para.33). This requires better coordination between the Quality Audit consultants (ICQSC) and Engineers, with differential focus on critical, semi-critical and routine activities and remedial actions. An action plan has been agreed.

c) Social and sustainability audits of schemes should be taken up, for which procedures would have to be developed. Sustainability of ground water sources is a concern, which requires source strengthening works (see para.43).

d) Physical and financial closure of schemes has to be carried out through a systematic Exit process. The methodology has to be worked out. Certain critical aspects of Exit, as listed in Annex4 need to be complied with on a priority basis.

2Mandal is sub-district level.3 This team exists in RWSSD, but has so far not been involved in project implementation.

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e) Community interface has to be improved (see para.19, 27), particularly in terms of withdrawal of officials from village committees and establishing new village committees with elected representatives, raising the awareness of the community on O&M; establishing proper O&M arrangements, including proper accounting, tariff fixing and collection arrangements, resolution of issues, regular water quality and surveillance monitoring with the community. An action plan has been discussed during the mission, which needs to be followed up.

f) Monitoring of schemes entering O&M, including arrangements for post implementation support from the district level, has to be initiated.

16. MVSs: While there are 46 MVSs under the project, most of them are small, as shown in Table-5. There are two categories of MVSs: extension and new. Extension schemes are the ones where there is an existing scheme, which is extendedto cover additional villages. A new scheme is the one where scheme is built afresh, connecting a couple of villages under it.

Table5: Sizes of Multi-Village Schemes

Size of MVSs ($m) < 1 1-2 2-3 3-4 TotalNo of MVSs 32 9 4 1 46

17. The mission identified the following issues in terms of implementation of MVSs. Further details on these issues and actions agreed are indicated in Annex4.

a) All works have started, except Y.Palem MVS which was awarded in December 2013, but progress on intake and head-works is less than expected (see Table4). By the next summer season, these works should be completed and work plans should be modified accordingly.

b) Y.Palem, which was converted to a regular scheme from an earlier DBO format, is the largest, about $4millionin value. It requires construction of a Summer Storage(SS) tank. In order to control implementation of this work, the following should be ensured:

Contract Signing (grounding) by January 31, 2014 Work start by February 07, 2014 Work start on SS tank by February15, 2014

c) Contract management plans need to be modified based on the latest situation, in order to be able to complete the works within the time schedule. Contract-by-Contract review for each contract should be initiated by the DPSUs and the PSU.

d) All required rehabilitation measures and operational control mechanisms on extension schemes should be assessed and implemented under the project / through National Rural Drinking Water Program4 (NRDWP) funds. The Bank will hire a consultant to review and support the project teams in this exercise.

e) There are certain pending clearances, including clearances to be given by the project for Excise Duty exemption for pipes procurement, which need to be expedited.

f) Village committees for MVSs (MVWSCs)need to be rejuvenatedwith representation from both existing and new villages. Action should be initiated by the next mission.

18. Other Issues:The mission also focused on the following other issues which need close follow-up.4 Government of India Program

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19. Community Involvement: Elections were held for the Gram Panchayats (GPs) in August 2013, after a gap of two years and the newly elected GP Sarpanches5 and ward members are now in place. Accordingly, efforts are needed to reorganize the previously formed village committees (Gram Panchyat Water and Sanitation Committees - GPWSCs) with new members and orient/train them. Guidelines developed during the mission on Community Engagement and Capacity Building (see Annex3) need to be followed hence forth.

20. M&E Systems: Project M&E systems rely on the state’s Watersoft software for the sector, which is used to monitor NRDWP and the project specific MIS, which is a static web based system (http://aprwssp.ap.nic.in). In the former, detailed physical and financial progress of each scheme is being entered, and in the latter, a summary is uploaded by the PSU, based on data received from the districts in Excel files. A separate dash board for the project is now created in Watersoft. The mission discussed and agreed that the project will draw scheme specific information from Watersoft as much as possible, and any additional information will be in the project MIS. Addition of O&M modules to the project MIS as discussed during the last mission has not been achieved. Presently, capturing of outcome information is based on information provided by DPSUs, but as of now, there is cross-verification for ensuring the accuracy of information. This needs to be pursued by the PSU. The current mission, with representation from the Bank’s Governance unit, discussed the need for establishing data quality and reliability checks, and the possibility of using mobile based technology to monitor and report progress, and assess service delivery outcomes. In this regard, the Bank will provide technical support to RWSSD by hiring a consultant to customize an existing system at the Bank, and the project will hire a vendor to implement the system. This module could be developed and piloted by end March 2014. For contract monitoring, an efficient ICT based system is needed, building on data acquired through Watersoft, for which the Bank will provide technical support. Further details on M&E are provided in Annex5.

21. O&M of MVSs: The mission focused on O&M of MVSs, which becomes an issue after completion of construction. The mission visited some existing MVSs in the state (known as Central Piped Water Supply schemes, CPWSS). The mission also reviewed the forward looking policy of the state on O&M of MVSs, issued in December 2012. The policy establishes the principle of involving communities, composition of committees and their roles and responsibilities, outlines the mechanism for sanctioning and execution of maintenance works through RWSSD, and envisages the creation of separate O&M divisions and sub-divisions. Based on the mission’s field visits and assessment, a few suggestions for improving the effectiveness of the O&M policy are given below:

a) Provide a transparent mechanism for meeting power charges for various categories of villages;

b) Strengthen the alignment between the roles and responsibilities of MVSWCS and GPWSCs;

c) Introduce directions on revenue planning for SVS and MVS;d) Clarify continuation of the existing system of connecting groundwater sources to static

tanks; and e) Provide further guidance on the establishment and operation of a complaint redressal

system.

5Sarpanch is the head of the Gram Panchayat

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22. The O&M policy is yet to be effectively implemented. In order to develop an implementation road map for the O&M policy, there is a need to review the performance of arrangements in a few existing CPWSS and initiate appropriate measures to improve O&M.The mission’s detailed assessment of O&M issues for MVSs is included in Annex6.

23. Implementation Performance Rating:Implementation Performance rating of the project has been revised to ‘Moderately Unsatisfactory’, given the need to further demonstrate progress on some of the critical issues listed above.

24. Review of Ratings: Project ratings will be reviewed and upgraded on achievement of the following:

a) Reorganization of GPWSCs in all SVSs, completion of at least 50 percent of the SVSs including handover and compliance with critical aspects of Exit formalities, preparation of O&M plans with budgeting and tariff fixation.

b) Completion of civil structures for Intake works of at least 75 percent of the MVSs.c) MVWSCs in all MVSs are formed and oriented, diagnostic study of all MVS - extension

schemes done for their performance improvement,and holistic plans are drawnfor their implementation.

IV. Project Costs and Disbursements

25. The revised project costs as per the assessment of the restructuring mission in August 2013 are as per Table6 below.

Table6: Project Costs

Component Cost (US$ M)A. Sector Development 2.7B. Infrastructure Development 113.2C. Project Implementation Support 7.9

Total 123.8

26. The balance Credit after the cancellation in September 2013 stands at about US$123 million.Disbursement from the Bank as on December 24, 2013 was US$38.2 million, which represents 31 percent, and which includes the balance of US$14.83 million in the designated advance account.Projected disbursements and recovery of the special advance during the last two quarters is shown in Table7 below. The likely disbursement on the current project closing date (November 2014) would be about US$71 million, which would be 58% of the reduced credit.

Table7: Projected Disbursements

  Bank FY 2014 Bank FY 2015Total till Closing

  till Q2 Q3 Q4 Q1 Q2 Q3

Disb $M 38.2 10.3 11.9 6.0 4.9 0.0 71.3 (58%)

V. Institutional, Technical, Fiduciary and Safeguard Issues

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27. Institutional: The key institutional issues are: a) creation of village and multi-village committees and their involvement as part of decentralization; and b) human resource strengthening and capacity building. As discussed during the Mid-term review, the project has been successful in creating a decentralized structure, but efforts are needed to build capacities at local levels, particularly at the village level. At this level, the Gram Panchayat Water and Sanitation Committees (GPWSCs) are responsible for decision making on scheme planning, implementation, and O&M of water supply schemes. However, due to the externality of elections to the GPs not being held in the state for the past two years, representatives of GPs could not participate significantly in implementation, particularly in SVS’ implementation.6As new GP representatives are in place, the GPWSCs need to be reorganized and involved in remaining scheme implementation, followed by O&M, which requires significant effort. As discussed during this mission, the process will be initiated through the involvement of additional human resources (MRPs, DRPs, VRPs and DWSC teams etc), as explained in Annex3.

28. There is no political representation at the district level too, as elections have not been held in the districtsfor the past two years.Though district level elections were expected along with GP level elections in August 2013, they are now likely to happen with the general elections in April/May 2014. However, the state bifurcation issue overhangs the situation and at this stage it is unpredictable as to how the situation will evolve. However, the mission highlighted that Multi-village Water and Sanitation Committees (MVWSCs) reorganization should be initiated with at least GP representation from the participating GPs of the MVS, and administrative support to the committees should be provided by the districts. This needs to be followed up.It is also necessary to establish post project support to the GPs from the districts, which needs to be thought through. This would possibly include establishing a helpline to the GPWSCs, arrangements to address defect liability, making supply chain arrangements for chlorination, dispute resolution at the village level etc.

29. The project has significantly enhanced its human resources, as explained in paras 12 and 13, and in Annex3.While various orientation and capacity building efforts are underway at the state level, district level, and village level, there is a need to re-focus on capacity building of local institutions (GP-WSCs and MV-WSCs) to address issues related to O&M of water supply and promotion of sanitation.

30. Governance and Accountability: Progress on this front follows agreements arrived at during the MTR. The PSU has since hired an Independent Construction Quality Surveillance firm, whichis now active. IT technologies (cell phones) would be used for undertaking these assessments on a pilot basis. The mission agreed to support the client on these pilots. PSU indicated that baseline data entry has been completed for about 90 percent of the surveys conducted and efforts are being made to hire a professional(either an individual or a firm) to come up with a summary report. The project continues to disclose information on its website- http://aprwssp.ap.nic.in. The PSU was requested to make the DPSUs disclosure of project related information in the villages at prominent places through charts, wall writings and display boards.

31. Technical: The key technical issues identified at MTR were: a) provision of operational controls in schemes; b) provision of 100 percent house connections to enhance service levels; c)

6 See MTR Aide Memoire, para 19 ( e)

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better integration of old and new schemes; d) effective implementation monitoring of MVSs; and e) developing O&M models for MVSs; e) source sustainability; and f) water quality monitoring.

32. On (a), the MTR mission highlighted the need to provide operational controls in MVSs, such as bulk flow meters, pressure regulating devices etc., which was followed up to assess requirements and estimates were prepared. Implementation has to start in MVSs and SVSs now, with priority on the latter before Exit from the SVSs. On (b), the mission is concerned that the situation needs to improve – as there was no active push from the project towards this, and in some villages stand posts still exist, and the quality of connections (where they exist) is non-standard. There is a need to standardize the approach and effort. The mission agreed that where pipelines are yet to be laid in SVSs, saddle pieces should be provided along with pipes. GPWSCs will be supported through orientation, to evolve and adopt locally applicable and financially sustainable policies to charge consumers and implement house connections. On (c), the integration of old and new schemes in SVSs has not happened, though some of the SVSs have been physically completed. This needs to be implemented now before Exit. For MVSs, while the trunk systems are designed to cater to the connected habitations, a comprehensive assessment is needed, and any improvements required should be supported either from the project or from NRDWP funds. The Bank will hire a consultant to support the project in the assessment. On (d), close implementation monitoring of MVSs has started through regular meetings at the Secretary level. However, this effort requires technology support through ICT, and frequent field visits by the PSU teams, including by the Project Director. The Bank will further support the project in this regard. On ( e), please see update inpara. 43. On (f) please see update inpara. 44.

33. The other emerging issues arepoor works quality in certain SVSs, as observed during the mission’s field visits and as per ICQSC observations. Some typical issues observed are: use of defective centering material, honeycombing in concrete, not doing hydraulic testing of pipelines, lack of protection of elevated reservoirs from rain scouring / overflow water scouring, need to clear loose earth from foundations for reservoirs before laying concrete. These issues are critical for safety and long term performance of the assets, and must be given due attention by PSU and DPSU staff. An action plan has been agreed to address these issues (see Annex4).

34. Fiduciary: Procurement. The mission reviewed procurement activities and procurement performance under the project. While procurement of works under Component B: Infrastructure Development is fully completed, there are some remaining activities: procurement of consultancies (such as environmental audit, project evaluations etc), minor additional works for scheme sustainability (such as source recharge measures, SCADA systems), and goods and services for strengthening project M&E systems etc..An updated procurement plan for remaining procurement activities has been sent to the Bank for comments/clearance.

35. While there have been delays in completion of activities as scheduled, progress has been made in regard to MVS and SVS schemes. In view of the restructuring, the number of schemes to be undertaken has undergone revision and new timelines have been set such that work will be completed prior to credit closure. The mission highlighted that any activities or payments beyond the credit closing date will need to be financed through GoAP’s own resources.

36. Procurement Rating. In view of the confirmation by the PSU that procurement officials are available in all districts, that all major works are contracted, and that only some minor works and small community based activities remain for which procurement will be completed in next

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two to three months, the procurement rating of the project has been revised to ‘Moderately Satisfactory’. Procurement progress will be monitored closely over the next three months based on which the rating may be reviewed and revised, as required. Detailed findings of the mission are available in Annex7.

37. Financial Management. The mission reviewed the continuing adequacy of the financial management arrangements for the project and progress made on the action plan agreed during the previous mission. The recent developments and key issues are highlighted below.

(a) Fund Flow: Funds continue to be transferred by the PSU from the Project Director (PD) account to DPSUs and their respective RWSS Division's separate bank account for Components A and C. The mechanism of parent child banking, which will help in avoiding funds lying unutilized at the district level, was again discussed during this mission. Though the PSU pursued this with its commercial bank (State Bank of Hyderabad,SBH), it has not yet put the system in place, as SBH mentioned that such a facility is not available. During this mission, a meeting with the Chief Manager of SBH was held to facilitate the understanding of the precise requirements, following which SBH has confirmed that such an arrangement can be made. The project has agreed to work out the modalities with SBH and put in place this arrangement at the earliest.

(b) Accounting: The project maintains separate records (bank book, including bank reconciliation statement, PAO bill register, PAO reconciliation, contract register) for payments made through the PD account and payments made through the PAO system. A consolidated contract register was still not available, however, financial performance of contracts can reportedly be monitored through Watersoft (though it is still in the initiation stage).

(c) Financial reporting with respect to submission of various formats dividing expenditure between PAO and PD account is now streamlined. The mission reiterated that internal controls for reporting expenditure under the PD account needs to be adhered to and the competent authority should sign the expenditure statements.

(d) Community Contribution: Separate bank accounts have been opened by GPs for collecting capital cost and O&M contributions. DPSUs maintain records of capital cost collected from GPs as community contributions, and the PSU aggregates this based on information received from DPSUs. However DPSUs also need to maintain records of all Bank accounts for depositing community contributions and prepare a statement to track community contributions collected from each GPWSCt.

(e) Staffing: A senior retired R&B department official has assumed responsibility as Finance Manager at the PSU, a position which had been long vacant.

(f) An Internal Auditor has been appointed by the PSU, who is expected to begin work immediately.

(g) External audit report for financial year 2012-13, which was due by September 30, 2013, is yet to be submitted by the project. There was a delay in the audit due to the Telangana districts being inaccessible for audit due to the agitation in the state. AG has now completed the auditing process for FY 2012-13, however the audit certificate has not yet been submitted to the PSU. The mission requested thePSU to submit the audit report at the earliest to ensure compliance with the legal covenant. If by January 31, 2014 the Bank does not receive acceptable audit reports, the

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Bank may discontinue disbursements for the project. The detailed findings of the mission are available in Annex8.

39. FM rating: Project Financial Management is rated as ‘Moderately Satisfactory’ as the external audit report is yet to be received by the Bank, and the internal auditor has just been appointed.

40. Safeguards. EnvironmentalManagement.The mission reviewed progress on Environmental Management Framework (EMF) implementation through a meeting at the PSU, through field observation and interaction with the district team at Mahbubnagar district, and review of relevant documents. Overall, EMF implementation is Moderately Unsatisfactory, for the reasons explained below. There is a need for further strengthening with regard to implementation of Environmental Management Plans (EMPs) in MVS, planning and implementation of source sustainability structures, and water quality. Detailed findings of the mission are in Annex9, and a summary is provided below.

41. Implementation of EMF and EMPs. Review of a sample of MVSs during field visits indicates that environmental appraisal was undertaken as per the EMF. Detailed Environmental Appraisals (DEA) and the Environmental Management Plans (EMP) have been prepared for all 46 MVSs. For effective implementation of EMPs, there is a need to orient the DPSU field team and the contractors on the EMPs included in the bid documents, which should be done by the District Environment Experts (DEE). In October 2013, PSU organized an internal monitoring of environmental supervision, covering about 10 percent of completed SVS and 5 percent of Augmentation SVS. Issues identified are: poor protection of source borewell; possible damage to casing pipe leading to poor water quality; stagnation of water around source borewell; leakage of surface water into source openwell; presence of pit level taps, etc. DPSUs will submit reports to the PSU by the end of February 2014on action taken on the recommendations of internal monitoring,. A second round of internal monitoring on implementation of EMPs of MVS willbe undertaken by the PSU by March 2014. A format for capturing information on integration of Environmental Assessment into scheme planning and implementation was developed during this mission, on which information would be captured by January 2014, and updated on a monthly basis.

42. Environmental Audit. The Terms of Reference for the environmental audit were finalized during this mission and audit will be completed by April 2014.

43. Ground Water Source Strengthening. Of the targeted 250 recharge structures to point sources, 111 have been identified, 40 were cleared by the PSU, 24 were sanctioned, and only one has been constructed. This needs to be expedited, DEEsshouldbe trained by January 2014, and source failures should be monitored (a format was developed during this mission)starting January 2014 and updated quarterly. Considering the poor progress on source sustainability issues, it was agreed that the Bank would mobilize a consultant to make a broader assessment of ground water dynamics in the project districts, and suggest the way forward.

44. Water Quality Management. Water quality testing was done at scheme design stage, and is being undertaken twice in a year (pre- and post monsoon) for chemical parameters. Samples are tested in sub-divisional laboratories of the RWSS Department and reports are available at the sub-division, division or district levels; but backward communication to the GPs on status and

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follow-up needs strengthening. Field kits for water quality testing have been provided to the GPs for testing of chemical parameters and residual chlorine. PSU is to still compile a database on water quality hotspots and develop remedial action plans, for whicha format was developed during the mission; data will be captured by January 2014, and will be updated quarterly.

45. Social Management. Social Safeguards under the project mainly relate to: (i) land acquisition resultant; and (ii) Tribals (Indigenous Peoples). As regards the former, the project preparation had developed a Resettlement Policy Framework (RPF) to be adopted as and when land acquisition is dire essential. So far, such a situation has not risen and the project activities are being taken without resorting to acquiring lands involuntarily. As regards the latter, the project has planned and implementing a Tribal Development Plan.

46. Tribal Development Plan. Given its emphasis on community centered and inclusive approach aimed at improving drinking water and sanitation services in the rural areas of the state, as well as in accordance with the Bank’s safeguard policy (OP 4.10), the project has a special focus on tribals in Schedule V areas within the state (Adilabad and Vizag districts). Additionally, the project saw a significant development during the latter part of 2013. To reach effectively the Scheduled Castes and Tribes (SC/ST) communities, GoAPenacted the Andhra Pradesh Scheduled Castes Sub-Plan and Tribal Sub-Plan (Planning, Allocation, and Utilization of Financial Resources) Act, 2013. This act aims at promotion of equity among the SC/ST relative to the other communities, mandating every department in the state has to prepare an exclusive Annual Action Plan (SC Sub-Plan and ST Sub-Pan), in consultation with the social welfare/ tribal welfare departments. In accordance with this, the project is also preparing such sub-plans.

47. The project is likely to cover 2024 habitations in six districts. A little more than 25 percent of these are expected to be tribal habitations. In Adilabad, Visakhapatnam and Mahaboobnagar districts, coverage of tribal habitations under the project is more, at 45 percent, 30 percent and 33 percent respectively. The project interventions in tribal habitations will benefit a total of about 211,000 tribals (42140 households). Total financial outlay for TDP is Rs. 96 Cr, which is about 12 percent of project cost. Overall, TDP is progressing quite well. As of date, schemes have been completed and are delivering water to 715 tribal habitations. Further statistics are enumerated in Annex-10.

VI. Key Agreed Actions

Sl.No Action Responsibility TargetProject Ratings

1 Focus on key priority actions for improvement of project ratings

PSU April 30, 2014

Water Supply2 Improve Works Quality monitoring and management as per

the strategies agreed during the missionPSU and DPSUs February 28, 2014

3 Undertake contract-by-contract monitoring of MVSs, revise contract management plans realistically to complete the schemes within the project period

PSU and DPSUs February 15, 2014

Sanitation4 Implement sanitation strategy based on the methodology

agreed during the mission, and complete at least an initial target of 1000 toilets

PSU and DPSUs March 31, 2014

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Sl.No Action Responsibility TargetInstitutional Development

5 Mobilize remaining human resources as agreed (DRPs, VRPs, MRPs for Vizag) and implement orientation to all additional staff mobilized

PSU and DPSUs February 28, 2014

Community Development6 Reorganize GPWSCs and MVWSCs and orient them on

project processesPSU and DPSUs March 31, 2014

M&E System7 Establish a review system for ensuring reliability of data

being fed to the M&E systemPSU February 28, 2014

8 Implement the pilot on mobile based technology PSU March 31, 2014O&M of MVSs

9 Undertake O&M review of existing CPWSSs and identify measures to be addressed in O&M contract

PSU March 31, 2014

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Annex1:Project Indicators – Status as of November 2013Sl.No

Indicator OPCS Core?

Units Target Achievement Remarks

PDO Indicators1 Number of people in rural areas

provided with access to Improved Water Sources under the Project.

Yes million 2.15 1.23

2 Improved latrines constructed under the project

Yes Nos 12000 4232

3 Improvements in cost recovery -- %(i) contribution to capital cost 100 33(ii) contributions to O&M cost (through community contributions and government subsidies)

70 Not Available Measurement not started

(iii) average O&M collection efficiency across completed schemes

70 Not Available Measurement not started

Intermediate Results Indicators4 Number of other water service

providers the project is supporting.Yes Nos 1549 1549 1503 GPWSCs

and 46 MVWSCs5 Number of schemes constructed by

the community themselves.-- Nos 150 115 These are small

schemes of < INR 6 lakh value

6 Number of persons trained through capacity building programs

-- Nos 75000 79478

7 New piped household water connections that are resulting from the project intervention.

Yes Nos 42000 18500 In 143 schemes

8 % of schemes constructed yielding required quantity and quality of water

-- %

(i) SVS 100 100 The completed schemes are reported to be working at full capacity, but quality needs to be confirmed

(ii) MVS 100 Not yet due MVS are not completed

9 Number of recharge structures built to strengthen the sources

-- Nos 250 1

10 Number of soakpits constructed under the project to dispose offsullage

-- Nos 12700 7709

11 People trained to improve hygiene behavior/ sanitation practices under the project

Yes Million

(i) Male 0.08 0.0629(ii) Female 0.12 0.0939

12 Field based periodic reviews undertaken by PSU and DPSUs

-- Text Ongoing District teams and Third Party auditor are visiting field

13 % constructed schemes which have carried out:

-- %

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Sl.No

Indicator OPCS Core?

Units Target Achievement Remarks

(i) independent supervision quality checks

100 40 614 schemes were audited by third party auditor

(ii) community monitoring /social audits

100 10 The process of social audit and community monitoring is being revamped

(iii) Sustainability Evaluation. 50 0 To be initiated now

14 Baseline data collected for project villages as per agreed baseline format; and mid-term and end term (project performance evaluation) conducted by independent agencies

-- Text NA Base line data collected, mid-term review completed

15 External Audit of environmental performance of project conducted

-- Text NA ToR agreed. To hire consultant

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Annex2: Sanitation Strategy – Implementation Methodology

1. The Project has drawn a pro-poor Sanitation strategy which focuses on targeting and saturating SC/ ST habitations. Initially, The villages covered by SVS will be taken up. It is expected that the project shall target at constructing 12000 Individual Household Latrines (IHLs). For this, each IHL will get a subsidy of Rs. 9100 -- Rs. 4500/- from the project and Rs. 4600 from NirmalBharathAbhiyan (NBA). The beneficiary will contribute an amount of Rs. 900. PD-DSU shall be responsible for managing this activity in its entirety including the release of subsidy. Following key steps have been agreed upon:

The GPWSC with the assistance of MLT and VRP will conduct a baseline survey of the village duly identifying the households requiring IHLs and prepare a plan. For this baseline data collection the following format is suggested, but, PSU may revise this as necessary. The MLT and MRP need to train the concerned VRPs in data collection. S.No.

Household name

Latrine Availability

Latrine Usability

Latrine Usage

Soak pit Availability

Soak pit Functioning

Remarks

Yes/No Yes/No Yes/No

Yes/No Yes/No

Elaborate community based triggering exercises are not envisaged, as past experience shows that these methods were successful in created curiosity only, but not sustained interest in sanitation. It is advised that house to house campaign on sanitation will be taken up by the concerned VRP and the GPWSC members using well designed IEC material. Repeated visits to each household by the VRP before and during construction of latrines and during their usage by households are required. This need to be monitored by MRPs.

The DPSU will enable the GPWSCs to take up the construction of IHLs through Community Contracting mode. Household Soak Pits for disposal of sullage will also be promoted under the same community contracting mechanism in these SC/ST habitations.

The PM, DPSU will make available several types of designs to suit the local conditions. The household beneficiary will chose from the various designs available with the help of GPWSC and VRP.

In addition to household subsidy, incentives to the community for achieving higher performance too has been worked out.

Rigorous IEC measures will be adopted to ensure fuller usage of the latrines. District specific IEC material need to be prepared using a well designed communication strategy. Presently such kind of material is not seen at village level.

DPSUs need to take up training of VRPs and selected GPWSC members in sanitation, in usage of designed IEC material and one-to-one communication at household level. This need to be supported by PSU.

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Annex3: Institutional and Human Development, Community Engagement

As discussed during the Mid-term review, the project has been successful in creating a decentralized structure, fill in agreed positions, but efforts are needed to build capacities at local level. The following are the details:

I: GPWSCs: Gram Panchayats, through Gram Panchayat Water and Sanitation Committees (GPWSCs) are responsible for O&M of water supply schemes, once they are constructed and handed over to them. About 1522 of single village schemes are going on and GPWSCs have been formed in almost all of these habitations. Elections were held for the GPs in August 2013, after a gap of two years, and newly elected GP Sarapnches and ward members are now in place. Accordingly, efforts are needed to re-organize the previously formed GPWSCs with new members and orient/ train them. Due to these elections the state is able to access 13 th finance commission grants for GPs and can be used for O&M of water supply schemes7. It has been agreed to strengthen the overall support available to re-organize, train and monitor the performance of GP-WSCs through the following mechanism;

The District Collector will be requested to direct District Panchayath Officer to communicate to all GPs for the conduction of GramaSabhas for reorganizing the GPWSCs.

PSU will DPSU will form Mandal Level Teams (MLTs) under the leadership of Assistant Engineer (AE)/ Assistant Executive Engineer (AEE)/ Manager (Technical) consisting of (i) One expert from DWSC team (IEC/HRD/ Sanitation expert) (ii) one member from DPSU team (Social Expert/ Environment Expert) (iii) One Divisional Resource Person (DRP) (to be appointed) and (iv) MRPs of the concerned Mandals. These teams will be responsible for the re-organization of GPWSCs and train them, as required.

It was agreed that PSU will make all efforts to facilitate reorganization of GP-WSCs by end January 2014, through the above mechanisms. The PSU experts will prepare/ compile existing training materials (such as bye-laws for GPWSC) necessary materials for training and orientation of the teams at district level and below and will also undertake regular field visits to support the teams. The social, IEC, environment, HRD and Sanitation experts available at district level (under the DPSU team and also DWSC teams) will support the DRPs and MRPs.

The PSU issued a detailed guideline to the district teams, on these issues, wide their office memo dated 1st January 2014. This reflects the importance attached by the PSU to these issues.

II: MV-WSCs: The Multi Village Water and Sanitation Committees (MV-WSCs) are formed in almost all the MVS schemes. However, they have not been able to function effectively due to the absence of elected representatives at ZillaParishad and Mandal levels8. It is agreed that efforts will be made to re-organize these committees with new elected representatives from the villages 7As per the 13th Finance commission recommendations, GoI releases two types of untied grants to local bodies (PRIs and ULBs). These are basic grant and performance grants. However, the release of these grants is subject to some conditions, basic being existence of elected local bodies. After elections to GPs, the state started getting the share of grants allocated for GPs. Out of these grants GoAP decided to earmark some funds for O&M of water supply schemes. Currently, this is equivalent to Rs 35/ head/ year for single village schemes and about Rs 65/head/year for multi-village schemes. However, as ZPs are responsible for O&M of multi-village schemes, this amount is not yet released as elections for ZPs were not held.

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(as not there are elected representatives in villages) and re-orient/ train the committees on their roles and responsibilities. The project will use the same mechanism described above for GPWSCs, for strengthening MV-WSCs also.

III: Strengthening Human Resources: The bank team discussed with Secretary, RWSSD, various dimensions of strengthening human resources, required to facilitate efficient execution of schemes and also facilitate capacity building of local governments and different committees.

VRPs: It was agreed to hire Village Resource Person (VRP), in each project village, to provide real time hands on support to the GPWSCs. These VRPs will be paid a honorarium of Rs. 500- 1000/- per month for about six months. These VRPs will act as interface between the community and the PSU, extend all support to the GPWSCs on a full time basis and be the project nodal persons at village level.

MRPs: As discussed during the Mid-term evaluation the RWS Department appointed about 237 MRPs (out of the required 286 numbers). However, there have been issues related to renewing of contracts of some MRPs. RWSD informed that they have taken a decision to hike the salary package9 of these MRPs in December 2013 and plans are drawn to renew/ revise their contracts. It is agreed that an additional allowance (Rs 1000/- per month) will be provided from project funds to the MRPs in these six districts to facilitate their active participation in the project activities. MRPs will support VRPs and also undertake activities related to sanitation promotion, communications and capacity building, with a focus on O&M of water supply schemes.

DRPs: It was agreed to complete hiring of Division resource persons (in all 18 project division offices) who will supervise and support MRPs. The DRP will under supervision of the Executive Engineer (EE), in-charge of the divisional offices of the RWS department.

The social, IEC, environment, HRD and Sanitation experts available at district level10 (under the DPSU team and also DWSC teams) will support the DRPs and MRPs.

Technical Consultants: As agreed during MTR mission, PSU appointed 186 Technical Consultants (qualified engineers) to support the division sub-division offices in executing the project works. This is a good move and bridges the engineering capacity gap, needed for executing schemes.

Independent Works Quality Monitoring Agency: As agreed during MTR mission, PSU also appointed an independent works quality monitoring agency to check the quality of works and advise accordingly.

8As per the GoAPs rules the following is the composition of MV-WSCs. (i) Chairman- ZP President, (ii) Vice-Chairman- ZPTC member (of Mandal where the source is located), (iii) Members- 5 chairpersons of GPWSCs from participating villages ( on rotation basis for one year, in alphabetic order), (iv)Secretary- EE,RWS Division office, (v) Members- ZPTC (from other Mandals), (vi) Members- representatives from SHG/ Youth/Citizen (one third of members shall be from SC/ST, one third shall be women and minimum 8 members). Since elections did not take place for ZPs, the positions of elected representatives are occupied by designated officers.9The current salary package of the MRPs is about Rs 3800/- per month. This is now revised to Rs.5000/- per month by RWSD, GoAP. These salaries are paid through NRDWP allocations. It is also agreed that the all the MRPs in project districts would be provided an additional incentive of Rs 1000/- per month from the project funds.

10The team appreciated the efforts of Secretary, RWS department in ensuring that the contractual staff hired at PSU and DSU levels are suitably remunerated. The RWSD issued orders, wide office memo dated 8/10/2013 to enhance the remuneration for these staff.

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Thus, the current technical capacity is adequate to manage the construction activities of the project. Once, the agreed plans of hiring / renewing contracts for VRPs/ MRPs/ DRPs are implemented (within the next two months) the capacity to work on ‘social and capacity building’ activities will also be adequate to handle related activities of the project.

IV: Capacity Building: The project has been carrying out capacity building/ training activities at all levels. In 2013-14, the project has undertaken about 500 training events at all levels, covering about xxxx people. A large majority of these trainings are carried at village level to benefit the local people, who are the end target groups.

However, as the mission recognized a need to re-orient the GP-WSCs and MV-WSCs and also train the newly recruited people, future training efforts should focus on these aspects. The PSU team shall take a lead role in developing/ putting together appropriate training modules (most of them are available at PSU/ districts and only need some revisions to suit the current project needs) and also support district teams in organization/ conducting of the trainings.

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Annex4: SVS and MVS Implementation Issues, Engineering and Technical issues

SVS Implementation issues

1. While SVSs are getting completed, a number of last mile closure activities remain to be addressed, as listed below. For the works ongoing, these need to be addressed during implementation. The relevant proposed actions agreed are also indicated

a) In a number of villages, the existing schemes are running in parallel to the new schemes being built under the project. The interface between the existing and new schemes is not properly addressed; particularly in terms of unified supply/pumping arrangements, source protection of existing schemes, control of leakages in the existing schemes, required key rehabilitation measures. The objective shall be to enhance service levels in the village, with the existing and

new schemes as an integrated unit. The required rehabilitation and improvement measures in the existing schemes shall be implemented before the project’s Exit from the village. To start with, this can be initiated in the completed schemes.

b) Provision of required control and operational measures, such as bulk meters, disinfection arrangements, pressure regulating measures, though discussed and agreed earlier, have not been implemented. For all ongoing and completed schemes, this shall be implemented.

c) Quality of works in certain schemes is less than satisfactory. Some of the key gaps are: use of defective centering material, honeycombing in concrete, not doing hydraulic testing of pipe lines, lack of protection of elevated reservoirs from rain scouring / overflow water scouring, need to clear loose earth from foundations for reservoirs before laying concrete. Necessary remedial measures where require need to be implemented, and for the ongoing works, timely measures shall be taken to avoid these gaps. The nature of checks to be undertaken is grouped into Critical / Semi-Critical /

Routine, for improved focus by all parties. The Quality Auditor (ICQSC) and Engineers have to coordinate on work programs

and ensure that necessary quality monitoring and audit is undertaken in time. The Project Director / Dy Project Director shall resolve the coordination issues when they visit the districts for inspection.

The district team of ICQSC shall intimate the Executive Engineer immediately on their observations for follow-up. For any observations of serious nature, which undermine the safety / functionality of the assets, the ICQSC shall immediately send intimation through a fax/e-mail to both the PSU, SE and the latter shall take necessary immediate remedial action. The EE shall conduct monthly review meetings and ensure compliance.

When payments are certified, the EE shall confirm that all critical and semi-critical issues are complied with and any observations of ICQSC team for remedial measures are addressed.

Based on the nature of observations from all districts, ICQSC to list out the generic issues (along with pictures where possible) and solutions and present them to the Project Director, who shall issue a circular to all districts to avoid quality deficiencies. In doing so, ICQSC shall also highlight best case examples for wider dissemination.

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d) During this mission, it was agreed that in order to promote house connections, wherever possible (where distribution pipelines are yet to be laid). The project would finance inclusion of saddle pieces. This needs to be taken up

immediately.e) The social and sustainability audits of the scheme are to be taken up.

This will be discussed during the next visit of the Bank teamf) Source sustainability is likely to be an issue. (see Annex-10 on Environmental

Management) To take up point recharge structures immediately Bank to hire a consultant to support the project

g) The physical and financial closures of the schemes are to be done in a systematic manner. An Exit check list needs to be developed with required measures to be taken up

before the Exit from the village. Bank will share samples from other projects. Certain critical aspects of Exit as listed in the Box-1 below need to be complied with on priority.

h) Community interface has to be improved, particularly in terms of withdrawal of officials from the village committees and establishing new village committees with elected representatives, raising the awareness of community on O&M; establishing proper O&M arrangements including proper accounting, tariff fixing and collection arrangements, resolution of issues, regular water quality and surveillance monitoring along with the community. See details in Annex-4.

i) Establishing arrangements for post implementation support from the district level. This needs to be further discussed during the next missions.

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Box-1 Critical aspects to be complied with before Exit

1) Rejuvenation of GPWSCs and orienting them,2) Integration of existing and new schemes to make them function as a unified scheme

for service provision in the village,3) Strengthening the ground water sources as required4) Joint verification of assets created as per estimate by RWSSD and GPWSC.5) Joint assessment of the performance of the system.

Service delivery – Quantity, Quality, Reliability at household level.6) Proforma of handing over

i. List of assetsii. Completion plans (soft copies)iii. Check list for O & M and format for registers.

7) Complaint Redressal ( Help line)i. Contact particulars of the contractors upto defect liability period.ii. Contact particulars of the AE/AEE/DEE & EE of RWSSD.

8) Appointment & training of operators during trial run.9) Financial details (O&M budget and tariff fixation)10) Social Audit.

j) Some of the schemes have entered the O&M phase, but the data gathering on O&M costs and tariff collections has not yet started. PSU to start collecting data on these issues.

MVS Implementation Issues

2. The mission identified the following issues in terms of implementation of MVSs.

a) All the works have started except Y.Palem MVS which was awarded last, but the progress on intake and head-works is less than expected. By the next summer season, these works shall be completed.

b) The following clearances are pending, which need to be expedited.

Sl.No MVS Scheme District Pending clearance

Works components affected

1 Manthani Karimnagar Forest Source, Pipeline – which pass through forest

2 Ramagundam Karimnagar Irrigation – water drawal

Source

3 Chikampur Kadapa Railways Pipeline4 Kindapuram Kadapa Railways Pipeline5 Madhavaram Kadapa Railways Pipeline6 VallurPendlimarr

iKadapa Railways Pipeline

c) In addition, Excise Duty clearances to be given by the project to the contractors for procurement of pipelines were delayed, but the Project Director reported that all clearances were issued.

d) Y palemis the largest MVSs. To control its implementation, the following time lines shall be followed:

Contract Signing (grounding) shall be done by January 31, 2014 Work shall start by Feb 07, 2014 Work on SS tank shall start by Feb 15, 2014

e) There are 22 extension schemes, which already connect some existing schemes, and are proposed for extension covering additional villages on the same scheme. Keeping in mind the overall performance of the scheme and the need for bringing all villages connected to the scheme under the same Multi-Village committee, during the MTR mission, it was agreed that the rehabilitation needs of such extension schemes, particularly on i) the trunk facilities to cater to all villages, ii) for any operational controls for efficient system operations, and iii) for improvements required in intra-village facilities will be assessed and necessary improvement measures are taken up. The assessment was made, and it was decided by the project that out of these, (i) and (ii) will be covered entirely from the project, and (iii) is partly covered from the project and NRDWP. The necessary provisions shall be made from the project now and all required measures shall be taken up immediately.Any extensions to the schemes shall not be planned further unless it is assessed that the trunk facilities have adequate capacity.

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f) There is a large difference between Physical and financial progress reported, particularly in Kadapa district. This needs to be sorted out.

g) Contract Management Plans were prepared at the time of contract award, which need to be modified based on the current realities, to complete the works within the time frame. The asking rate of progress, sequencing and inter-linkage of activities, and targets for intermediate milestones need to be reworked out after contract-by-contract review by the DPSUs and the PSU.

Engineering and Technical Issues

3 Status of implementation: (i) About 876 SVS are completed out of 1503 schemes taken up, (ii) About 792 augmentation schemes are completed out of 1117 schemes taken up, (iii) Out of 46 MVS proposed, 45 MVS are in progress. (iii) About 18500 House connections are given in 143 SVS, (iv) Out of 111 recharge structures identified for ground water sources one is completed. Technical team of the Mission visited the Project works in Adilabad District, discussed with Project officials, GP Sarpanches and GPWSCs. Schemes visited are (i) CPWSS in Basar maintained by RWSD, (ii) Abdullapur SVS, (iii) Kirgul-k SVS, (iv) Boath- Karathwada MVS, (v) SVS Heerapur, (vi) Pochamloddi SVS , (vii) Ada -Asifabad MVS (viii) Itikial MVS. Mission has also held discussions with the PSU officials and officials from the Project districts. The observations, issues and agreed actions pertaining to technical aspects are summarized below.

4. SVS: (i) Bulk Flow meter and disinfection facilities are not installed in all SVS, (ii) distribution system is not covering entire habitation, (iii) interconnection between new and existing system is not provided, (iv) Public stand posts are provided in the project SVS and House connections are yet to be given, (v) In a few Project SVS where water supply is commissioned, community is continuing the existing small pumps connected to static tanks (vi) Water quality analysis reports are not available, (vii) Disinfection facilities are left unprotected, (viii) Construction quality records are not available at the sites, (xi) GPWSC are to be rejuvenated (x) Community is not aware of O&M cost or tariff to be paid by them.

5 MVS: (i) Progress on intake works and treatment plants is very slow, (ii) In several schemes, Pipelines are yet to be laid due to initial delays in obtaining excise duty exemption letters, (iii) Intake works located in rivers have just started (iv) Head works are left un-protected with fencing especially where they are away from the habitation and approach road is required at few places to reach the Intake works for some MVS (v) For some MVS, Infrastructure is being created to cover all en-route Fully-Covered (FC) habitations and limiting the distribution system only for the Project Habitations, and in some Project MVS infrastructure of existing CPWS is being used to connect to project habitations. In both cases the status of existing distribution system and service delivery will affect supply of water to the Project habitations. Since time available for project closure is November 2014, vigorous monitoring will be required to complete the scheme preferably before onset of monsoon.

6 Independent Construction Quality Consultants(ICQSC): ICQSC staff are available at all project districts and providing technical support in ensuring construction quality; Their concentration need to be more focused on MVS for critical items like hydraulic testing of pipelines, water tightness test of water retaining structures and performance tests of Pump-sets

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and WTP. Check lists were finalized for key tests to be complied by Third Party consultants and Engineers duly referring to the Technical Manual.

7 Status of Power charges and its effects: At present free power is provided to small GPs and power is charged only for major GP s and dedicated power supply taken for CPWSS/MVS. The Project’s MVS construction contract document includes six months of O&M in the scope of contract. It is informed that O&M payment to the contractor includes power charges also. PSU will estimate the amount of power charges that will be paid in the six months period from Project funds. O&M budget after six months has to be prepared and tariff fixed accordingly. In a few Project SVS where water supply is commissioned, community is continuing the existing small pumps connected to static tanks since free power is provided, This needs to be reviewed in the light of need to conserve power and water.

8 Source Sustainability: Information on the failure rate of bore wells after drilling and pump installation, is not updated and the pace of implementation of recharge measures is very poor.

9 Water Quality: Water quality testing of all scheme sources is reportedly being undertaken in all completed and commissioned schemes. There is a need to make the data on water quality accessible to all stake holders.

10 Technical consultants’ action plan: It was decided that PSU will prepare training material using the technical manual and ICQSC will provide the training to technical consultants (TC) at respective district head quarters and ICQSC will provide training to the TC.

11 Exit Strategy: Proper contract closure and follow-up with social and technical audits will form part of exit strategy. The methodology has to be worked out, for which some formats will be provided by the Bank. Some of the elements to be covered are: (i) after Trial-run, joint inspection by both GPWSC/ Community and RWSD will be done to ensure water supply is ensured for all households, (ii) Bulk Flow meter and disinfection facilities installed (ii) distribution system is covering entire habitation, (iii) interconnection between new and existing system is provided, (iv) Saddle pieces are provided to all households, (v) motivate the households to take House connections (vi) Water quality analysis reports are available, (vii) Construction quality records are available at the sites, (viii) GPWSC / Community is aware of O&M cost and tariff to be paid by them is fixed, (ix).Operator selected by community is trained, (x) Soft and hard copies of all financial details of the scheme, completion plans and required contact numbers for effective complaint redressal and provide post implementation technical support to GPWSC.

12 Sustainability evaluation: PSU will arrange for periodic verification of service levels, social and sustainability audits of all completed schemes. The methodology needs to be worked out.

13 Agreed actions: Status of last mission's actions on engineering aspects was discussed and the following actions were agreed. PSU will

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a) Arrange training to the recently appointed Technical consultants through ICQSC at respective Project district HQ, using the training material prepared by PSU along with practical training in conducting crucial tests in the sites.

b) Provide Bulk flow meters, disinfection arrangements, pressure regulating measures at households located at low levels for better management of the schemes,

c) Arrange to interconnect with existing system and ensure that entire habitation is covered with distribution system and rehabilitate existing distribution systems to eliminate leaking pipes to ensure efficient service provision,

d) Arrange to provide saddle pieces to all households in the distribution system pipelines of SVS and MVS at project cost to achieve 100% house connections.

e) Arrange to Carry out performance assessment study for the enroute FC habitations of project MVS and also in the existing habitations of existing CPWS/MVS where new habitations are now proposed to be served from the same infrastructure.

f) Prepare proposals for provision of SCADA in the large MVS.g) Prepare comprehensive Contract Management Plans for each of the MVSs and

closely monitor implementation. Additionally, vigorous monitoring MVS to Y palem and other habitations will be done to complete the scheme preferably before onset of monsoon.

h) Ensure that ICQSC will concentrate (a) in ongoing works and conduct onsite tests including sand silt content and slump cone test, (b) to witness hydraulic tests of pipelines and water tightness tests of al water retaining structures especially in MVS, (c) to witness performance tests of water treatment plants and pumping machinery, (d) to identify any leaking pipes and water retaining structures in completed and commissioned schemes.

i) Arrange for Ground water quality to be regularly monitored and take appropriate measures for improvement.

j) Improve the pace of implementation of point recharge structures for sources.k) Estimate the amount of power charges for MVS which will be paid in the six months

period from Project funds.l) Prepare a format for exit and withdrawal as noted in para 13.m) Arrange for periodic verification of service levels, social and sustainability audits of

all completed schemes.n) Arrange for establishing Help Line to the GPWSC to assure post implementation

technical support including arrangements to address defect liability and also make a Supply chain arrangement for Chlorine solution.

o) Arrange for documentation of Water Quality analysis reports of all completed schemes in soft copies and made available online.

p) Arrange to maintain for completed schemes, all estimates, designs and completion plans, water quality reports and Construction quality records in E library both in PSU and RWSD divisions.

q) Arrange to maintain the information of the schemes being implemented under the project e-library at RWSSD offices.

r) Prepare for discussion with World Bank Technical/Engineering Specialist (a) Contract by contract status of MVSs, (b) Contract Management Plans for MVS, duly modifying based on current status and (c) Checklist for exit and withdrawal

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Annex5: Monitoring and Evaluation

1. The project’s M&E system is described in the main Aide Memoire. The following recommendations to improve the effectiveness and reliability of M&E function have been discussed.

a) First, current formats capture information on physical and financial progress, trainings, IEC activities but do not capture information on O&M aspects. There is a need to develop special formats for these issues and integrate it with the project M&E system. PSU should develop such formats by end February 2014 and initiate data collection. M&E shall also provide data on service level and water quality aspects of the sources at habitation level. Present classification of habitations into FC, PC, NC etc is based on service level assessed by estimating quantity of water filled in the ESR s. In the project provision is made for SVS and for small MVS for installing bulk flow meter at entry to the ESR s. This will provide a reliable data to assess service level. PSU has to make arrangements to read and enter the data online to capture this data along with water quality of the source. SACADA is being proposed for large MVS where the bulk flow meter readings are transmitted online which can be linked to Project M&E. Theproject may implement GPS and web based flow monitoring in at least one project district on a pilot basis, for which concept is described in Box-1 on next page.

b) Second, there are no specific quality checks to ensure data correctness. The PSU unit should take a lead in designing these quality checks and also undertake sample checks for all the data. The role of PSU, DRPs/ MRPs and also the Independent Construction Quality Surveillance firm needs to be defined in the quality checks. PSU should develop an appropriate plan of action of ensuring quality and reliability of data collection by end February 2014.

c) Third, the possibility of using mobile based technology to monitor and report progress and service levels performance in the villages and project outcomes,has been discussed and agreed, as per details in para-2 below. This module could be developed and piloted by end March 2014.

d) Fourth, the M&E system should also be able to monitor contracts, based on ICT technologies. The Bank will further support the project teams to develop such system.

2. On Step 1 (c ) above, after discussions with Secretary, it was agreed that the Bank will provide technical assistance to the GoAP in developing a comprehensive solution for monitoring the evaluating the progress of works and assets, service levels and outcomes, in addition to providing the assistance in training the resource persons in the selected villages – to be done on a pilot basis. The steps involved are the following:

a) In this context, it was agreed that the Bank will hire a national consultant who will assist Project team in facilitating the system study and developing the functional specifications of the mobile and web based M&E solution, customizing the existing modules that the Bank already has in this regard, design the technical architecture of the system and help in supervising / monitor the deployment of the solution in the pilot phase. Specifically the scope of work includes:

28

Carry out the system study in association with the Bank team, select a vendor and prepare system requirement specifications and technology architecture required. This will include: i) Preparation and submission of the system study report and incorporate changes suggested by RWSSD and the Bank team, ii) Develop the TORs for the vendor for implementation and maintenance of the solution as well as scaling up framework, and iii) Monitor the deployment of the solution and carry out the quality control inspections to ensure the confirmation of the solution developed with open data and interoperability standards.

Support the Bank team, as required in the discussion and developing strategic program of support to RWSSD as well as for execution of the Open Data workshop.

b) It was also agreed that the M&E vendor for the pilot M&E project will be hired by the project directly through a competitive bidding process. After the successful completion of the pilot phase, the M&E system can be roll out further as needed.

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Box-1: Concept of Web-based flow monitoring systems

The concept to measure the inflow into ELSR and transmit flow data to central server is described below.

1. Components of the system

Bulk Flow Meters: Woltman Type with magnetic drive and Pulse Output to facilitate AMR system along with C.I strainers.

Data Transfer Unit: A battery operated data transfer unit with GSM output housed in metal sheet box provided with lock and key

Power input : Lithium Battery 3.6V/14Ah with life of about 8years Sim card of mobile service provider. Desktop PC at control station/Server for downloading and storage of data including software

2How it works: Bulkflow meter and data transfer unit are installed at ESR. A mobile sim card of a service provider is inserted in the data transfer unit. Pulses generated by bulk flow meter is captured and converted to flow and GSM output is generated which will be transmitted to a central server through a mobile phone sim card of a service provider who has network coverage in the ESR area. Flow data can be captured and stored in PC at required intervals. Battery life is expected to be about 5 years for one reading a day. More number of readings per day will exhaust the battery earlier.

3Tentative costs of the system are as below:

Installation cost:(i) Cost of bulk flow meter which may vary from rs 10,000 for 50 mm to Rs 50,000 for a 250 mm meter. Mechanical flow meters are available upto 500 mm. (ii) Data transfer unit with battery along with protection box, PC and software is likely to cost about Rs 40,000 per ESR (irrespective of size of meter). (iii) Sim card cost may be about Rs 100. Hence installation cost per ESR location is likely to be varying from Rs 50,000 to Rs 90,000

Maintenance cost:Sim charges payable to service provider may be around Rs 100 per month. Battery costs about Rs 300 ( for 5 years or 60 months) and is likely to cost at Rs 5 per month

Annex6: Assessment of O&M issues for the MVSs

1. The last aide memoire referred to streamlining the operation and maintenance of MVS through the O&M policy issued by GOAP in December 2012. The specific steps agreed included initiation of an O&M performance study and organization of a workshop with O&M operators to identify issues to be resolved in implementation of the O&M policy.

2. The objective of the O&M review of the mission was two-fold. First, to understand GoAP’s O&M policy and suggest improvements on the same. Second, to review the existing practices relating to O&M of MVS and to identify specific actions to help streamline the current practices.

3. A system of O&M of Multi-Village Schemes (MVS) through local Operators is in place in Andhra Pradesh for quite some time. As of April 2012, there are 525 MVSs in the state serving about 10000 habitations, covering a population of about 20 million. GoAP has reviewed the functioning of these MVSs through the private operators. After assessing the strengths of the system that already exists for O&M of MVSs through a private trust (Sri SatyaSai trust), GoAP has issued an O&M Policy for MVSs in December 2012, to streamline the system across the state.

4. Broadly, the O&M policy notified through a GO issued by RWSSD in December 2012 is forward-looking and based on the SWAp. It establishes the principle of involving communities to manage O&M of schemes. The composition of committees for MVS and SVS and their roles and responsibilities are also prominently highlighted including their role in imposition and collection of user charges. The policy also articulates the mechanism for sanctioning and execution of maintenance works through RWSSD and envisages separate O&M divisions and sub-divisions are proposed to be created under the RWSSD, to handle O&M issues. Based on a review of the policy and also the field visit by the mission, a few suggestions for improving effectiveness of O&M policy are given below:

Clarity on continuation of existing system of connecting groundwater sources to static tanks

Provide further guidance on establishment and operation of a complaint redressal system Introduce directions on revenue planning for SVS and MVS Strengthening alignment between the roles and responsibilities of MVSWCS and

GPWSCs Clarify a transparent mechanism for meeting power charges for various categories of

villages

5. The mission visited eight MVS across six districts to review the present system for O&M of MVS. Based on the review of the mission, the issues surrounding O&M concern four different aspects.

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a) Poor coverage of house connections due to absence of clear responsibility for providing house connections in contracts ; high connection charges11; inadequate distribution system; and continuing supply through standposts and static tanks which reduce incentive for house connections.

b) inadequate O&M arrangements characterized by absence of clear performance standards and procedures in O&M contracts; absence of operational efficiency measures such as SCADA and bulk flow meters in MVS to ensure adequate service levels; limited interface between those responsible for inter-village and intra-village O&M.

c) Limited community mobilization due to inadequate mobilization of community level institutions and limited interaction of resource persons with community on O&M issues; absence of communication of O&M policy; lack of awareness of community on the implication of O&M.

d) Poor sustainability characterized by absence of planning relating to management of bulk systems; non-imposition/ inadequate collection of user charges; lack of clarity on meeting power charges; inadequate level of financial planning on how O&M costs will be met from user charges and other sources

6. Recommendations: The government O&M policy is yet to be effectively implemented. With a view to implement the O&M policy, there is a need to Review of performance of arrangements in a few existing CPWSS and initiate appropriate measures to improve the O&M. The following steps can be followed:

a) Undertake O&M performance study for MVS : This study should be initiated at the earliest to identify actions required to enhance operations, institutional arrangement, and financial sustainability of MVS. The observations from the current mission can serve as a starting point for the study and also for defining its terms of reference. The scope of such a study should cover the following:• Present precedure for operations, routine maintenance, setting tariff, repairs,

collection of user fees.• Roles and responsibilities of various institutions including GP, GPWSC, ZP,

MVSWSC, and RWSSD • Provision of funds for O&M and payment to O&M contractors• Adherence to O&M manual• Registers maintained in O&M• Existing complaints redressal mechanism and steps for improvement of the same• Standardisation of performance metric system for O&M contracts• Strengthening community participation in O&M• Mechanism for coordination between intra-village system and the main scheme

b) Organize O&M workshop with contractors: Such a workshop should have involvement from existing operators to obtain their feedback on the problems in the current O&M system and policy and procedural changes required

11 Until recently, certain GPs such as Basara had a connection charge of Rs.3000. In addition the household also bears the cost of connecting the pipe to the main line.

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c) Introduce 100% connections: This is critical to ensure that the present investment leads to improvement in service levels. It is also critical to discourage illegal connections and for ensuring that available water is efficiently used. As a part of the project, saddle piece should be provided for all households to motivate them to take individual connections

d) Mechanism for payment of power charges: Clarity on how power charges would be met is required as the O&M policy vests this responsibility with MVSWSC and GPWSC while the actual practice is different.

e) Operationalize community participation for O&M: Community involvement in O&M needs to be significantly enhanced and this requires mobilization of MRPs and other resource persons as well as intensive involvement of RWSS staff to explain the implications of O&M to the community.

f) Standardize O&M contracts: The O&M contracts can be standardized so that performance metrics and clearly outlined. Further, the standard operating procedures given the Project Implementation Plan (PIP) can be quickly adapted to include a check list against which working of contractors can be monitored.

7. Tentatively, the following time line is agreed:

Agreed Action Responsibility Target1 Initiate O&M performance improvement study PSU 28th February 20142 Organise O&M workshop with contractors PSU 28th February 20143 Prepared standard contract document for O&M of

MVSPSU/DPSUs 30th April 2014

4 Clarify organizational roles and responsibilities in MVS including financial management planning

PSU/DPSUs 31st May 2014

5 Capacity building of MVS-WSCs PSU/DPSUs Ongoing

Annex7: Procurement Management

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1. Procurement of Civil Works. In view of the project restructuring some of the works (SVS/ISL/Soak pits/RWH/SLWM/UGD/Hygiene promotion) have been reduced or dropped. The revised status is as under:

Scheme Detail Number of works where Bids invited

Number of works Grounded

Number of Works completed

Likely completion date for Balance works

SVS 1503 1503 876 June,2014

MVS 46 45 0 May 2015

Aug of SVS 1117 1117 792 March 2014

ISL 12000 units Community 4232 units November 2014

Soak pits Community 2729 units June 2014Recharge Structures 250 1 1 144

by March ‘14

104 by June ‘14

Innovative technology-SCADA

8 MVS identified 0 0 Along with MVS schemes

Innovative technology-SOLAR

30 (5 for each District)

0 0 May 2014

2. In addition to above there are certain consultancy contracts and sector strengthening activities which are likely to be taken up by the DPSU and completed before project closure .Mission reiterated that any activities or payments beyond the credit closure date shall be funded by GoAP through its own resources.

3. Procurement plan: Given the limited time available before project closure and keeping in view the available resources APRWSSA will work out on plan of action in regards all procurement activities to be taken up under the project. APRWSS assured that they will closely monitor all pending activities and ensure timely delivery and completion of schemes. Any revision to the last Procurement plan for goods, works and consultancy services to be procured till closure of project will be sent to Bank for clearance.

4. Complaint Handling. Mission was informed that online grievance redressal is in place which is managed and tracked by the PSU. In addition the Districts maintain complaint registers. PSU informed that till date they have not received any complaints under the project.

5. Staffing and capacity Building: Mission was informed that 5 of 6 Districts have procurement official in place. For Adilabad district the EE holds the additional charge of procurement. At PSU APD and Manager technical is supported by a full time procurement consultant.

6. Procurement Post Review (PPR). The PPR findings reflect issues related to procurement procedures and contract management .PMU informed that for 2011-2012 they have been coordinating with Districts and will send comments to Bank for needful action without any

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further delay. More than 100 contracts were reviewed and some of the key findings were:

The participation in the bidding process has been noted to be poor with majority of packages attracting just a single or two bid(s). One of the major factors affecting participation could be the delay in payment/ lack of funds which increases the investment cost of the contractor thereby acting as a deterrent to submit a bid

Instances were noted wherein, award of contract after the expiry of the bid validity period.

Instances were noted wherein, minimum three quotations/bids were not obtained for procurement within Shopping threshold

7. Procurement MIS: Mission noted that procurement MIS is being compiled by PSU for the entire project. The data for all the procurement activities under the project is received and consolidated at PSU level. Mission advised APRWSS that in preparation for ICR they should consolidate all the procurement data capturing all the good practices, learning and way forward.

8. Procurement rating: In view of the confirmation by the PSU that procurement officials are available in all districts, that all major works are contracted, and that only some minor works and small community based activities remain for which procurement will be completed in next two to three months, the procurement rating of the project has been revised to ‘Moderately Satisfactory’. Procurement progress will be monitored closely over the next three months based on which the rating may be reviewed and revised, as required.

Action Required:

Activity By whom By when PPR report 2011-12 comments PSU 31 January ,2014Readiness for PPR to be conducted by Bank consultant for 2012-13)

PSU Since done

Annex8: Financial Management

Budget and Disbursements: Against the budgetary provision of Rs. 1150 million for FY 2012-13, the actual expenditure is Rs 972.98 million. For FY 2013-14, GoAP has made a provision of

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Rs 3100 million (Rs 252.5 million under PD account arrangements and Rs 2847.5 million under PAO system) for the project. The project is regular in submission of IUFRs and claims till quarter ending September 2013 have been filed with the Bank. Disbursement from the World Bank as on December 24, 2013 is USD 38.20 million which represents 31.00% of the credit of USD 123 million and includes balance of USD 14.83 million in the designated advance account.

Fund Flow arrangement: Though it was advised to the project to explore the model of parent child account/core banking solution/cloud banking etc., yet the same has not been put into actual practice. In this regard, a meeting was held with the chief manager, State Bank of Hyderabad wherein it was agreed that there will be one main pool bank account maintained at the PSU in which funds will be kept and district accounts can maintain dummy accounts which are attached to this pool bank account,. The project has agreed to work out the modalities with the Bank and put in place this arrangement at the earliest.

Accounting/ Payments: The payments to contractors are being apparently delayed. However, for timely payments to be made to the contractors it was deliberated that it is necessary for them to submit their bills in a timely manner for allowing adequate time for processing of payments. Also, it was advised that the Project should maintain records of physical progress made vis-à-vis the payments made and the gap between the two should be monitored by the PMU.

Reporting and IUFR preparation: As advised during the previous mission the project is now submitting i) a statement bifurcating the expenditure made through PAO and PD account. ii)

a statement showing the opening, closing and movement in the bank account balances maintained for operating the funds under PD account. In September quarter IUFR review it was observed that DPSU Karimnagar, EE RWSD Karimnagar and DPSU Prakasan PD abstracts have been signed by Financial Expert and/or Procurement specialist instead of Project Manager/ Divisional Executive Engineer. During the mission it was reiterated that internal controls for reporting the expenditure under the PD account needs to be adhered to and the competent authority should be signing the expenditure statements.

Community Contribution: There was a brief discussion on the community contribution towards capital cost and O&M cost to be collected under the project. Though Project Director has already issued instructions in this regard but compliance of those instructions needs to be ensured by the PSU. PSU is collecting information from the districts on the amount of community contribution collected but they also need to maintain records of all the Bank accounts opened for depositing the community contribution and prepare a statement to show amount of community contribution collected from each GPWSC under the project.

Staffing: The position of finance manager has been filled up by retired finance officer of the AP Finance services.

Internal Auditor: The internal auditor has been appointed by the project . The contract has been put in place and the scope of the internal audit includes reporting on the accounts/ records beginning from FY 2011-12. For the years 2011-12 and 2012-13, annual internal audit reports have been agreed upon and for FY 2013-14 onwards, quarterly reports shall be submitted by the internal auditor. PSU should monitor that that the team composition mentioned in the contract is

35

actually performing the audit on the field. Further, it was suggested that before the audit is initiated, a meeting should be organized with the internal auditors to brief them about the design of the project and the actual expectation from the assignment.

External Auditor: The audit report for financial year 2012-13 which was due by September 30, 2013 is yet to be submitted by the project. The project informed that AG has completed the auditing process for the FY 2012-13, however the audit certificate has not yet been submitted to the PSU. It was advised to the project to submit the audit report at the earliest to ensure compliance of the legal covenant.

1. Status of previously agreed actions

Agreed Action By Whom Timeline StatusExplore pool bank accounting possibilities for operation funds through PD Account

PSU/ PIU September 30,2013 Open

Maintain consolidated contract register PSU/ PIU September 30,2013 Open/ Though new software may provide the data

Provide additional statements (expenditure bifurcation, bank movement, change in note) with each IUFR for expenditure made through PD account

June 30,2013 Complied with

Issue instructions to maintain separate bank accounts for GP Capital Cost & O&M contribution and prepare detail statement of the contributions made

PSU/PIU September 30,2013 Complied with partially in respect of opening & maintaining of bank accounts

Fill vacant posts of Finance Manage at PMU and Divisional Accountants at the Divisions

PSU/PIU November 30,2013 Complied with

Appoint Internal Auditors for the project PSU/PIU June 30,2013 Complied with (though delayed)

2. Current agreed action planAgreed Action By Whom TimelineSubmit external audit report for FY 2012-13 PSU Immediate

Set up pool bank accounting for operating funds under PD Account

PSU/PIU March 31,2014

Provide statement on community contribution PSU/ PIU Continuous

Maintain updated records of Contracts and the progress made

PSU/PIU Continuous

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Annex9: Environmental ManagementEnvironmental Management

The APRWSS project falls in the environmental assessment category B as per OP 4.01. The project had developed an Environmental Management Framework (EMF) with the objective of mitigating any negative environmental impacts that can occur if the schemes are not properly designed, sited, implemented, and maintained. In order to ensure that the environmental issues are systematically identified and addressed in the various stages of implementation of the project supported schemes, an Environmental Analysis (EA) and Environmental Management Framework (EMF) have been developed.

The EMF describes a screening and appraisal process, institutional arrangements, and plans for capacity building and monitoring on environmental management aspects. The mission reviewed the progress on EMF implementation through a meeting at the PSU, through field observation and interaction with the district team at Mahbubnagar, and, review of relevant documents. Overall, the progress on the EMF implementation is moderately unsatisfactory, and there is a need for further strengthening with regard to implementation of EMPs in MVS, planning and implementation of source sustainability structures, and, water quality.

1. Integration of environmental aspects in scheme planning and implementation:

1.1 Status:

The progress on environmental safeguards was reviewed through field visits and through meetings with the PSU. The mission’s review of a sample of four MVSs (including three MVSs that were under the limit for prior-review by the Bank) during this mission indicates that environmental appraisal is being undertaken as per the requirements of the EMF. The DSRs of the MVS schemes include the Environmental Data Sheet (EDS). Detailed Environmental Appraisal (DEA) and the Environmental Management Plan (EMP) have been prepared for all 46 MVS. Of all the schemes in the project, one scheme (MVS, Manthani, Karimnagar) is reported to involve forest land. The process of obtaining permission is still under way (request for permission has been sent to the Divisional Forest Officer in February 2013).

The responsibility for ensuring implementation of the EMF is anchored at the state level by the State Environment Expert and at the district level by the District Environment Experts. District Environment Experts (with post-graduate qualifications in Geology, and, having between 7-35 years of experience) are in place in all the 6 project districts.

It is encouraging to note that the PSU has organized an internal monitoring (supervision) exercise in a peer-review mode. The District Environment Experts were assigned a district different from their own for this monitoring. They undertook field visits to selected schemes along with the resident District Environment Expert. Interactions were held with the VWSCs, AEE/DEE and the scheme components were inspected. Formats for recording field observations and for the report were provided by the PSU. About 10% of the completed SVS and 5% of Augmentation SVS spanning all 6 districts were covered in this exercise which was undertaken in October 2013. The key issues identified during this exercise include: poor protection of source borewell, possible damage to casing pipe leading to poor water quality, stagnation of water around source borewell, leakage of surface water into source openwell, presence of pit level taps,

37

etc. Reports from 4 districts are available at the PSU – these also contain relevant recommendations and have been shared with the respective DPSUs.

1.2 Key Issues:

During the field review of two MVSs in Mahbubnagar, it was learnt that the EMPs have not been provided to the DEE/AEE and to the contractor. It was also noted that measures to ensure public/worker safety are not in place and that there is a need for ensuring adherence to regulations on sourcing of sand for construction.

Field inspection of schemes by the District Environment Experts (in the last 6 months) has been limited to 19 MVS out of the 40 MVS being executed during this period. The reports of this field inspection are not being reviewed by the State Environment Expert.

1.3 Actions:

While the mitigation measures in the EMPs are included in the bid documents (in the contract conditions), it is important to share the EMPs with the DEE/AEE as well as with the contractor in order to ensure proper implementation. This needs to be done by the District Environment Experts immediately.

Action-taken reports from the DPSUs on the recommendations of the internal monitoring (supervision) of SVS need to be sent to the PSU by the end of February 2014.

A second round of internal monitoring (supervision) focusing on implementation of EMPs of all the MVSs needs to be undertaken and completed by the end of March 2014. Necessary logistics support (including vehicle for travel) needs to be provided by the DPSUs to the District Environment Experts to facilitate this.

The Terms of Reference for the environmental audit for the project was finalized during this mission and it was agreed that the audit would be completed by April 2014.

A format for capturing information on integration of EA into scheme planning and implementation was discussed with the PSU’s State Environment Specialist and APD during this mission and it was agreed that the information would be captured by January 2014 and updated on a monthly basis.

2. Source sustainability and groundwater recharge:

2.1 Status:

The mission reviewed progress with regard to the agreed end-target of 250 recharge structures. A total of 111 structures have been identified out of which clearance has been provided by the PSU for 40 structures so far (and clearance for a further 59 structures is due to be provided shortly). These include recharge pits (based on the SuGWM model) and 3 check dams. Of these, administrative sanction has been taken by the DPSUs for 24 structures and only 1 has been constructed so far. The mission was informed that ESCI has been identified as the training institution for providing training on groundwater recharge measures to the District Environment Experts.

2.2 Key Issues:

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Considering the current pace of progress, it is unlikely that the target of 250 recharge structures will be met (based on discussion with the SEs/EEs of the DPSUs it is likely that around 100 structures may be constructed).

In order to ensure that the identification, design and execution of the recharge structures is done properly, it is necessary that the District Environment Experts are provided training including exposure visits on this subject. However, this has not been organized so far.

So far, the only recharge structures identified are recharge pits (recharge through rain water harvesting) and in a few cases, check dams. The DPSUs have expressed concern about the challenge of continued maintenance and declining performance of the recharge pits.

The small and scattered nature of the recharge structures identified is posing a challenge for construction (the transport of small quantities of construction materials may not be feasible within the estimated cost).

There has been no progress on the action agreed during the last mission that the PSU Environment Expert will compile and periodically update a database of the schemes with source failure (after pump installation) including details on date of drilling, yield, date of failure, possible reason for failure, action needed, etc.

2.3 Actions:

It is recommended that a five-day training be organized by ESCI (or by the PSU, if ESCI does not work out) for the District Environment Experts as well as AEEs/AEs on identification, design and execution of recharge structures specifically for drinking water sources. This training needs to include (in addition to other relevant experts) resource persons and field exposure visits from/to Centre for World Solidarity’s SuGWM project. This training needs to be organized by the end of January 2014.

A format for the database of the schemes with source failure was discussed with the PSU’s State Environment Specialist and APD during this mission and it was agreed that the information would be captured by January 2014 and updated on a quarterly basis.

3. Water quality:

3.1 Status:

Water quality testing of all scheme sources is being undertaken and the water quality reports are included in the DSRs. Water quality testing of all existing sources in the project habitations is being undertaken twice in the year (pre and post monsoon) for chemical parameters. The samples are tested in the sub-divisional laboratories of the RWSS Department. The reports are available at the sub-division/division or DPSU levels. Field kits for water quality testing have been provided to the Gram Panchayats which include testing of chemical parametres as well as residual chlorine.

3.2 Key Issues:

The system for communicating the water quality test results of sources in the project habitations to the GP/VWSCs/community, facilitating follow-up action and maintenance of records of the test reports by the GP/VWSC needs strengthening.

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There has been no progress on the action agreed during the last mission that the PSU Environment Expert will compile a database of water quality test reports of all schemes and develop remedial action plan for sources where the parameters are close to or have exceeded permissible levels.

3.3 Actions:

A format for the database of the schemes including water quality aspects was discussed with the PSU’s State Environment Specialist and APD during this mission and it was agreed that the information would be captured by January 2014 and updated on a quarterly basis.

A priority list of sources will be identified, based on a review of the database, where the parameters are close to or have exceeded permissible levels for remedial action on a case-by-case basis (differentiated use, dilution through recharge structures, installation of appropriate treatment system, identification of distant safe source, etc.).

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Annex-10: Tribal Development Plan Implementation Status

Sl. No.

District

Cat

egor

y

Works Sanctioned Works Completed Balance Works

No. of works

No. of Habs.

Est. Cost (Rs. in Lakhs)

Population as per 2001

Census

House holds No.

No. of works

No. of Habs.

Est. Cost (Rs. in Lakhs)

Population as per 2001

Census

House holds No.

No. of works

No. of Habs.

Est. Cost (Rs. in Lakhs)

Population as per 2001

Census

House holds No.

1 Adilabad SVS 150 150 2385.17 33417 6684 126 126 1974.39 27253 5451 24 24 410.78 6164 1233

    MVS 1 3 450.00 6671 1335 0 0 0.00 0 0 1 3 450.00 6671 1335

      151 153 2835.17 40088 8019 126 126 1974.39 27253 5451 25 27 860.78 12835 2568

2 Mahaboobnagar SVS 160 160 1585.60 27178 5436 40 40 430.56 6386 1278 120 120 1155.04 20792 4158

3 Karimnagar SVS 22 22 353.60 5984 1197 22 22 353.60 5984 1197 0 0 0.00 0 0

4 Kadapa SVS 4 4 46.57 1828 366 3 3 26.57 967 194 1 1 20.00 861 172

5 Prakasam SVS 14 14 417.20 23081 4617 1 1 23.00 366 74 13 13 394.20 22715 4543

6 Visakhapatnam SVS 98 98 2234.00 41290 8258 43 43 854.40 17485 3497 55 55 1379.60 23805 4761

    MVS 5 26 1065.00 13509 2702 0 0 0.00 0 0 5 26 1065.00 13509 2702

      103 124 3299.00 54799 10960 43 43 854.40 17485 3497 60 81 2444.60 37314 7463

  TOTAL:-   454 477 8537.14 152958 30595 235 235 3662.52 58441 11691 219 242 4874.62 94517 18904

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Attachment 1 to Annex-10: Scheduled Caste Plan Implementation Status

Sl. No. District

Cat

egor

y

Works Sanctioned Works Completed Balance Works

No. of

works

No. of

Habs.

Est. Cost (Rs. in Lakhs)

Population as per

2001 Census

House holds No.

No. of

works

No. of

Habs.

Est. Cost (Rs. in Lakhs)

Population as

per 2001

Census

House holds No.

No. of

works

No. of

Habs.

Est. Cost

(Rs. in Lakhs)

Population as

per 2001 Census

House holds No.

1 Adilabad SVS 13 13 226.73 4140 828 12 12 214.44 3936 788 1 1 12.29 204 40

2 Mahaboobnagar SVS 8 8 119.78 2970 594 2 2 38.70 1046 210 6 6 81.08 1924 384

3 Karimnagar SVS 36 36 582.28 25357 5072 30 30 459.68 17298 3460 6 6 122.60 8059 1612

4 Kadapa SVS 30 30 303.30 10909 2182 29 29 300.55 10801 2161 1 1 2.75 108 21

5 Prakasam SVS 41 41 1181.08 57948 11590 17 17 523.78 19831 3967 24 24 657.30 38117 7623

6 Visakhapatnam SVS 7 7 131.80 2882 577 6 6 113.30 2619 524 1 1 18.50 263 53

  TOTAL:-   135 135 2544.97 104206 20843 96 96 1650.45 55531 11110 39 39 894.52 48675 9733

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Annex 11: List of Persons MetI. Project Office

Mr. VeeraPratap, Project DirectorMr. Kishor, Deputy Project DirectorMr. R. Amareshwari, APDR. Ranga Rao, State Environment ExpertYesuRatnam, EE – Engineering Specialist

II. Districts Mr. Vinaya Kumar, Supredendint Engineer, KadapaMr. B. M.M. Rao, Executive Engineer, KadapaMr. T. M Prasad, Procurement Specialist DPSU, KadapaMs. IndraSen, SE, AdilabadMr. S.K SirajuddinArit, Executive Engineer, AdilabadMr. M. Jovardhan, M&E Specialist, AdilabadMs. Gayatri Devi, Executive Engineer, RWSS, VisakapatnamMr. Y.L.V.V.D. Prasad, Assistant Project Director, VisakapatnamMr.USNMurtthic, Procurement Specialist, OngleMr. L. Ramchnad, Executive Engineer,RWSS, ManthaniMr. J. Chakravarthy, Procurement Specialist, KarimanagarMr. N. Sudharkar Reddy, Executive Engineer, KarimanagarMr. P. Raghuramailv, Executive Engineer, RWS, Pulivenduls

III. Contractors AdilabadSri K. Srinivasa Rao, M/s. Standard InfratechSri. Abdulla, M/s. Abdulla Spl. Class Contractors, AsifabadSri N. Sheetal Kumar, M/s. Manjeera Pipes Pvt. Ltd.,KadapaSri. T. Venkateswara PrasadMr. K.L. Sridhar Reddy, Sri K. Ramamurthy ReddyKarimanagarSri K. Ravi Kumar, M/s. Premier Plastic IndustriesSri K. Ram Reddy, M/s. K. BalaNarasimha Reddy Engineering & Contractors Pvt. Ltd.MahabubnagarSri J. Ch. Pulla Reddy, M/s. Premier Plastic IndustriesPrakasamSri G. Srinivasa Rao, M/s. SrinivasaEngg. & Construction Company, NarasaropetVisakhapatnamSri N.V.R.K. Raju, Sri. H.R. Venkata Reddy, Sri V.R.K. Reddy, Sri K. Madhu Kumar,Sri V. Rama RaoSri G. Rajasimha Reddy, M/s. Koya ConstructionSri. B. Raju, Team Leader, ICQSC, Egis IndiaSri V. Krishna Reddy. Senior Engineer, ICQSC, Egis India, KarimnagarSri P.Gopi Krishna, Sri Navee& Sri R.L.N. Rama Prasad, M/s. NarothamMadhav& Ramesh Chartered Accountants (Internal Audit)

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Annex 12: List of Villages visited by the mission

District Villages Visited

Mahabubnagar Bomraspet Thimmaipally Gudibanda Amangal Shaikpally Sasanool Madgul

Adilabad Basar Adbullapur Kirgul Nirmal Boath Heerapur Pochanloddi Asifabad Itikial

Kaddapa Odiveedu ZinkamadigaPalli Sanipayi Besthapalli Sidhout Akepadu MVS – Akepadu

Prakasam Ramkur Lakkavaram KukatlaPalli Juvvaleru YeruvariPalli GuntavariPalli MulevariPalli

Karimnagar Jugundla Maddibanda Subhashnagar Ramadugu Malkapur Kurmapalli Laxmidevipalli Jagityala Jammikunta

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