world bank documentdocuments.worldbank.org/curated/en/... · 6. an efficient and reliable...

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: ICR00004426

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IBRD-77480)

ON A

Loan

IN THE AMOUNT OF

US$305 MILLION

TO THE

REPUBLIC OF INDIA

FOR THE

HARYANA POWER SYSTEM IMPROVEMENT PROJECT

June 25, 2018

Energy and Extractives Global Practice

South Asia Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

(Exchange Rate Effective February 11, 2018)

Currency Unit = Indian Rupees (INR)

INR 64.4= US$1

FISCAL YEAR

April 1 - March 31

ABBREVIATIONS AND ACRONYMS

ADR Alternative Dispute Resolution

AMI Advanced Metering Infrastructure

BIS Bureau of Indian Standards

AMR Automatic Meter Reading

AT&C Aggregate Technical and Commercial

CAPEX Capital Expenditure

CGFA Corporate Governance and Financial Accountability

CPS Country Partnership Strategy

DPR Detailed Project Report

DHBVN Dakshin Haryana Bijli Vitran Nigam Limited

EA Environmental Assessment

EIRR Economic Internal Rate of Return

E&S Environmental and Social

ESPP Environmental and Social Policies and Procedures

EMP Environmental Management Plan

FM Financial Management

GIS Geographic Information System

GoH Government of Haryana

GoI Government of India

GSDP Gross State Domestic Product

HERC Haryana Electricity Regulatory Commission

HUDA Haryana Urban Development Authority

HVDS High Voltage Distribution System

HVPN Haryana Vidyut Prasaran Nigam Limited

IA Implementing Agency

ISR Implementation Status and Results Report

IT Information Technology

KPI Key Performance Indicator

LT Low Tension

M&E Monitoring and Evaluation

MIS Management Information System

MU Million Units

NPV Net Present Value

PAD Project Appraisal Document

PDO Project Development Objective

PMC Project Management Consultant

PIE Project Implementing Entity

R-APDRP Restructured Accelerated Power Development and Reform Program

RoW Right of Way

S&I Supply and Installation

SCADA Supervisory Control and Data Acquisition

TA Technical Assistance

UDAY Ujwal DISCOM Assurance Yojana

Regional Vice President: Ethel Sennhauser

Country Director: Junaid Kamal Ahmad

Senior Global Practice Director: Riccardo Puliti

Practice Manager: Demetrios Papathanasiou

Task Team Leader(s): Mani Khurana, Kavita Saraswat

ICR Main Contributor: Barsha Pandey

TABLE OF CONTENTS

DATA SHEET ....................................................................... ERROR! BOOKMARK NOT DEFINED.

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ........................................................... 5

A. CONTEXT AT APPRAISAL ................................................................................................................... 5

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) ............................................. 9

II. OUTCOME ....................................................................................................................... 11

A. RELEVANCE OF PDOs ...................................................................................................................... 11

B. ACHIEVEMENT OF PDOs (EFFICACY) ............................................................................................... 11

C. EFFICIENCY ...................................................................................................................................... 16

D. JUSTIFICATION OF OVERALL OUTCOME RATING ........................................................................... 17

E. OTHER OUTCOMES AND IMPACTS (IF ANY) .................................................................................... 17

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME .................................. 18

A. KEY FACTORS DURING PREPARATION ............................................................................................ 18

B. KEY FACTORS DURING IMPLEMENTATION ..................................................................................... 18

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .... 20

A. QUALITY OF MONITORING AND EVALUATION (M&E) ................................................................... 20

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ........................................................... 21

C. BANK PERFORMANCE ..................................................................................................................... 23

D. RISK TO DEVELOPMENT OUTCOME ............................................................................................... 23

V. LESSONS AND RECOMMENDATIONS ................................................................................ 24

ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 26

ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 32

ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 34

ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 35

ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 38

ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 40

The World Bank HARYANA POWER SYSTEM IMPROVEMENT PROJECT (P110051)

Page 1 of 40

DATA SHEET

BASIC INFORMATION

Product Information

Project ID Project Name

P110051 HARYANA POWER SYSTEM IMPROVEMENT PROJECT

Country Financing Instrument

India Investment Project Financing

Original EA Category Revised EA Category

Organizations

Borrower Implementing Agency

Government of Haryana DHBVN, HVPN

Project Development Objective (PDO) Original PDO

The development objective of the proposed project is to improve the availability, efficiency and accountability of electricity supply in the state of Haryana through strengthening the transmission and distribution systems. PDO as stated in the legal agreement

The objective of the Project is to improve the availability, efficiency and accountability of electricity supply in Haryana through strengthening the transmission and distribution systems.


Page 2 of 40

FINANCING

Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$)

World Bank Financing IBRD-77480

330,000,000 260,212,150 260,212,150

Total 330,000,000 260,212,150 260,212,150

Non-World Bank Financing

Borrower 80,000,000 0 0

Total 80,000,000 0 0

Total Project Cost 410,000,000 260,212,150 260,212,150

KEY DATES

Approval Effectiveness MTR Review Original Closing Actual Closing

04-Aug-2009 15-Oct-2009 08-Nov-2012 31-Dec-2014 31-Dec-2017

RESTRUCTURING AND/OR ADDITIONAL FINANCING

Date(s) Amount Disbursed (US$M) Key Revisions

19-Dec-2014 191.49 Change in Loan Closing Date(s)

26-Apr-2017 235.47 Change in Components and Cost Cancellation of Financing Change in Financing Plan Reallocation between Disbursement Categories Change in Implementation Schedule

KEY RATINGS

Outcome Bank Performance M&E Quality

Moderately Satisfactory Satisfactory Substantial


Page 3 of 40

RATINGS OF PROJECT PERFORMANCE IN ISRs

No. Date ISR Archived DO Rating IP Rating Actual

Disbursements (US$M)

01 10-Feb-2010 Satisfactory Moderately Unsatisfactory 27.79

02 28-May-2010 Satisfactory Satisfactory 27.79

03 11-Dec-2010 Satisfactory Satisfactory 63.47

04 26-Jun-2011 Satisfactory Satisfactory 96.29

05 01-Jan-2012 Satisfactory Satisfactory 106.30

06 24-Oct-2012 Satisfactory Moderately Satisfactory 115.46

07 20-Jun-2013 Moderately Satisfactory Moderately Satisfactory 132.72

08 31-Dec-2013 Moderately Satisfactory Moderately Satisfactory 162.83

09 21-May-2014 Moderately Satisfactory Moderately Satisfactory 192.32

10 27-Feb-2015 Moderately Satisfactory Moderately Satisfactory 192.32

11 07-Aug-2015 Moderately

Unsatisfactory Moderately Unsatisfactory 201.89

12 07-Apr-2016 Moderately Satisfactory Moderately Satisfactory 216.82

13 29-Jun-2017 Moderately Satisfactory Moderately Satisfactory 236.30

14 21-Dec-2017 Moderately Satisfactory Moderately Satisfactory 236.30

SECTORS AND THEMES

Sectors

Major Sector/Sector (%)

Energy and Extractives 100

Energy Transmission and Distribution 62

Other Energy and Extractives 38

Themes

Major Theme/ Theme (Level 2)/ Theme (Level 3) (%)


Page 4 of 40

Private Sector Development 28

Business Enabling Environment 17

Investment and Business Climate 17

Jobs 11

Job Creation 11

Public Sector Management 33

Public Administration 33

Transparency, Accountability and Good Governance

33

Human Development and Gender 17

Health Systems and Policies 17

Health Service Delivery 9

Adolescent Health 4

Child Health 4

Urban and Rural Development 22

Urban Development 11

Urban Infrastructure and Service Delivery 11

Rural Development 11

Rural Infrastructure and service delivery 11

ADM STAFF

Role At Approval At ICR

Regional Vice President: Isabel M. Guerrero Ethel Sennhauser

Country Director: N. Roberto Zagha Junaid Kamal Ahmad

Senior Global Practice Director: John Henry Stein Riccardo Puliti

Practice Manager: Salman Zaheer Demetrios Papathanasiou

Task Team Leader(s): Sudeshna Ghosh Banerjee, Ashish Khanna

Mani Khurana, Kavita Saraswat

ICR Contributing Author: Barsha Pandey


Page 5 of 40

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES

A. CONTEXT AT APPRAISAL

Context

1. Sectoral challenges. India’s Economic Survey of 2006 estimated the annual cost to the economy from power sector inefficiencies to be US$75 billion, or 7 percent of gross domestic product. During the appraisal period in 2009, bottlenecks in intra-state electricity transmission and distribution network were identified as one of the main challenges to India’s economic growth. Compared to central sector entities, state entities have less mature governance structures and are more vulnerable to changes in political economy. State entities are also financially constrained due to below-cost-recovery tariffs, operational inefficiencies, and underdeveloped institutions.

2. State of Haryana. Haryana was and continues to be a middle-income state1 with a population of 21 million,2 traditionally dependent on agricultural economy. However, a growing manufacturing and services sector has fueled rapid real estate and infrastructure growth, shifting agriculture’s role in the composition of its economy. The state, located in the northern part of India, has towns that are integral to the national capital region. It was the first state to achieve 100 percent electrification in 1971 and has infrastructure supporting various economic activities. It has India’s largest automobile hubs and accounts for two-thirds of passenger cars, 50 percent of tractors, and 60 percent of motorcycles manufactured in the country. The state has also emerged as a base for the knowledge industry, including information technology (IT) and biotechnology.

3. Haryana’s power sector. Haryana was among the pioneer states that initiated legal, structural, regulatory, and institutional reforms in the power sector much before the enactment of Electricity Act 2003. In 1998–1999, the Government of Haryana (GoH) unbundled and corporatized the vertically integrated Haryana State Electricity Board into four companies—Haryana Power Generation Corporation Limited to undertake generation of electricity; Haryana Vidyut Prasaran Nigam Limited (HVPN) to undertake transmission; and Uttar Haryana Bijli Vitran Nigam Limited in the north and Dakshin Haryana Bijli Vitran Nigam Limited (DHBVN) in the south, for electricity distribution and retail supply. Further, the Haryana Electricity Regulatory Commission (HERC) was set up in 1998 as an autonomous entity. However, despite these developments, Haryana’s power sector faced the twin challenges of serving an increasingly commercial, urban, and industrial customer base while also serving the needs of its rural communities.

4. The main challenges faced by the sector at appraisal are summarized as follows:

(a) Rising electricity demand and persistent shortages. Haryana was able to meet a peak demand of 4,863 MW in 2007–2008 with peak-time deficit of 1,200–1,500 MW and off-peak deficit of 400–600 MW. These resulted in expensive and carbon-intensive coping strategies by consumers and businesses.

1 Gross state domestic product (GSDP) US$1,143 per capita in FY2008. 2 According to Economic Survey of Haryana 2009–2010.


Page 6 of 40

(b) Low cost recovery through tariffs. With rising costs and deteriorating service levels, state authorities found it difficult to justify higher tariffs, which just exacerbated the situation. The main impact was felt by citizens who lacked access to alternate means of power supply, that is, farmers and poor households in urban and rural areas. The state opted instead to subsidize supply costs from its budget, which adversely affected spending on social sectors and still left the utilities vulnerable to inadequate compensation.

(c) Power supply to agriculture sector. Groundwater (pumped through electricity-powered pumps) was (and continues to be) the predominant means of irrigation, and electricity consumed by agriculture constituted (and still does) almost 40 percent of total electricity consumption. Electricity supply to agriculture pumps was largely unmetered and priced at a highly subsidized tariff. This led to an ambiguity on electricity consumption estimates related to the agriculture sector, and the regulator was unable to compensate the utilities fully.

(d) Incomplete sector and institutional reforms. The sector had been unbundled a decade ago, but institutions were immature and their empowerment was still a work in progress. The companies, though autonomous, suffered from weak management systems and continued to depend on the GoH for critical areas like recruitment.

5. The above challenges led to a worsening financial performance of the power sector and higher dependence on subsidies. The budget subsidies for power sector increased from US$210 million in FY2003–04 to about US$482 million in FY2007–08 (1.5 percent of GSDP).

Rationale for the Project

6. An efficient and reliable electricity transmission and distribution network at the state level is key to making India’s power sector responsive to the demands of consumers and fueling economic growth. In the past, the World Bank had led pioneering efforts in the Indian power sector in the states of Haryana, Orissa, Andhra Pradesh, Uttar Pradesh, and Rajasthan and achieved mixed results. With lessons drawn from these engagements as well as international experience, the World Bank was well placed to support the project.

7. Given that Haryana was among the Indian states supported by the World Bank in the late 1990s, this project was a natural transition from a policy and structural support to investment lending support combined with technical assistance (TA) for specific areas. The project also contributed to the implementation of the broader South Asia Energy Strategy of the World Bank that identified service/distribution improvement, clean energy, and transmission/energy markets as the three pillars of engagement.

8. The project was also aligned with the priorities of the Government of India (GoI) and the World Bank’s Country Strategy for India, mainly (a) achieving rapid economic growth and (b) increasing the effectiveness of service delivery by focusing on infrastructure investments. The distribution component of the project was aligned with the GoI’s Restructured Accelerated Power Development and Reform Program (R-APDRP) launched in FY2008, and the distribution subprojects were designed to focus on reducing technical and commercial losses and on improving services to further leverage R-APDRP investments.


Page 7 of 40

Theory of Change (Results Chain)

9. As shown in Figure 1, the results chain was clear and simple. It also fitted well with the needs and priorities of the sector. It was built on the assumption that Government and utilities’ ownership of the actions identified to strengthen institutional capacity and corporate governance of the utilities, was solid. The project was designed to support network augmentation as well as institutional development and improvement in operational efficiency. Based on lessons learnt from the past state level engagements, the investment sub-projects were confined to specific geographies and focused on both short-term and long-term results, by achieving intermediate outcomes, directly related to areas of intervention rather than the sector as a whole. The project considered the political economy of the sector and adopted a phased approach to institutional changes rather than a drastic sector reform approach as was done in past state level engagements. The first component supported the transmission company to increase its network capacity to cater enhanced supply. Component 2 focused on improving the efficiency and reliability of electricity supply in selected high load centers in urban areas, while Component 3 on Technical Assistance, was designed to include support on aspects related to successful implementation of Components 1 and 2, like project planning and implementation, and institutional aspects like employee management and corporate governance. Areas of intervention included under Component 3 were identified through a highly consultative process initiated during project preparation which resulted in the development of a ‘capacity building and institutional strengthening’ plan. On the technical side, the utilities were supported during project preparation to undertake load flow studies to identify least cost investments, update technical specifications and prepare bidding documents based on World Bank guidelines. Given the significance of subsidies to financial sustainability of the sector and importance of improving regulatory effectiveness, the World Bank provided support to Government of Haryana and HERC (outside the project but concurrent to it) on development of an MIS to monitor agriculture consumption and put in place multi-year tariffs.

Figure 1. Results Chain

Activities Outputs Outcomes

Project Activities Outputs Intermediate

Outcomes Outcome

Longer term outcome

1. Contract to build transmission lines and associated substations

Transmission lines and substations built

Increase in transformation capacity and transmission lines

Improved availability of electricity and reliability of transmission system.

Enhance the state’s economic growth by alleviating power supply bottlenecks in an economical and sustainable manner

2. Contracts to convert low tension (LT) lines to high tension lines and construct new 11 kV feeders for

High voltage distribution lines constructed.

Reduction in aggregate technical and commercial (AT&C) losses

Improve efficiency and reliability

New feeders constructed to relieve overloaded feeders


Page 8 of 40

Activities Outputs Outcomes

Project Activities Outputs Intermediate

Outcomes Outcome

Longer term outcome

urban distribution system

3. Technical assistance to strengthen institutional capacity and corporate governance of the utilities

Institutional strengthening action plan implemented

Improved institutional capacity

Improve the accountability and institutional capacity of the utilities (transmission and distribution).

Corporate Governance and Financial Accountability (CGFA) Action Plan implemented

Improved the corporate governance of the utilities

Project Development Objectives (PDOs)

10. The original PDO as stated in the legal agreement is to improve the availability, efficiency and accountability of electricity supply in Haryana through strengthening the transmission and distribution systems.

Key Expected Outcomes and Outcome Indicators

11. The project aimed to achieve three key outcomes measured by the four PDO indicators (outlined in Annex 1) as follows:

Table 1. List of outcomes and indicators

Expected Outcomes Outcome Indicators

Improve the availability of electricity and efficiency of transmission system

Total energy transmitted through the transmission system (million units); Increase in Transmission Lines (Kilometers); and Increase in transformation capacity (kVA)

Improve the efficiency of the distribution system (selected)

Reduction in AT&C losses (in percentage); and Introduce system for managing and measuring customer service standards in selected urban centers (Yes/No).

Improve accountability and institutional capacity of the utilities (transmission and distribution)

Development and implementation of institutional strengthening; Proportional reduction in weighted average of delays in project execution (Months); Inter-unit reconciliation of accounts (Yes/No); and Development and implementation CGFA action plan.

Components

12. The project had three components. Please see Table 2 for details. The difference in estimated and actual allocation is due to a cancellation which is discussed in section B.


Page 9 of 40

Table 2. Project Components

Component Description

Component 1: Transmission System Strengthening (Estimated US$312.5 million) (Actual US$312.5 million)

This component included priority investments in 400 kV, 220 kV, 132 kV, and 66 kV substations and transmission lines for system strengthening and augmentation. These investments were expected to reduce overall system losses, improve reliability, and increase the transfer capability of the state transmission network.

Component 2: Urban Distribution System Strengthening (Estimated US$87.5 million) (Actual US$67.5 million)

This component adopted the twin pillar strategy of improving operational efficiency and enhancing customer service. Three high growth towns (Charkhi Dadri, Faridabad, and Gurgaon) were selected for their distribution infrastructure improvement. The specific activities included (a) conversion of feeder network to High Voltage Distribution System (HVDS) (to reduce technical and commercial losses); (b) construction of new 11 kV feeders to relieve overloaded feeders; (c) construction of dedicated industrial feeders; (d) building new 33 kV substation to respond to increased demand; and (e) Advanced Metering Infrastructure (AMI) for select consumers.

Component 3: Technical Assistance and Capacity Building of Transmission and Distribution Companies (Estimated US$10 million) (Actual US$5 million)

The TA activities were designed to support project implementation and institutional development through interventions designed to put in place a revamped organization structure and improved business processes, employee management systems, and automation of business functions. Given the high-growth scenario in areas served by the distribution utility, this component also supported development of a long-term investment planning process.

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE)

13. The PDO and outcome targets remained unchanged. One significant subproject (AMI) under Component 2 was deleted.

Revised PDOs and Outcome Targets

Not applicable.

Revised PDO Indicators

Not applicable.

Revised Components

Not applicable.


Page 10 of 40

Other Changes

14. The project was restructured twice (level 2) on December 19, 2014, and February 23, 2017, and on both occasions the project closing date was extended. In the first instance, closing date was extended to allow for completion of ongoing contracts and add new subprojects (from the least-cost investment plan prepared during preparation) to utilize surplus funds available due to U.S. dollar/Indian rupee devaluation and cost efficiencies achieved during contracting. In the second instance, the closing date was extended to allow for completion of ongoing contracts. No new subprojects were added. The first restructuring extended the project closing to November 30, 2016, while the second restructuring extended the project closing date to December 31, 2017, cancelled US$25 million of unallocated funds and increased the percentage of eligible expenditure financed by the World Bank.

Rationale for Changes and Their Implication on the Original Theory of Change

15. Rationale for the first restructuring. The first seven transmission packages were awarded during the first year of the project and indicated average savings of 9 percent from estimates. There was a pause in procurement after two more packages were awarded, for almost a year, as the planned generation capacity addition was delayed and HVPN did not want to create stranded transmission assets. Also, contractual issues (such as incompetent sub-contractors, improper operational health and safety practice) were faced during implementation of awarded contracts due to which implementation was delayed. Further, the contracting of AMI package had not been completed though the process was quite advanced. The first restructuring was done to extend the project closing date from December 31, 2014, until November 30, 2016, to allow completion of ongoing contracts, allow contracting of the AMI package, and add additional subprojects to use savings from devaluation of the Indian rupee and contracting efficiency.

16. Rationale for the second restructuring. The second restructuring was primarily done for three reasons:

(a) To extend the Project closing date from November 30, 2016 to December 31, 2017 – This was done to allow time for completion of the already awarded packages that were delayed due to contractor default on account of reasons beyond the control of Implementing Agency (IA), and Right of Way (RoW) issues. Further, the upgradation of the supervisory control and data acquisition (SCADA) cum Energy Management System (sub-project under Component 1) was yet to be completed. This sub-project was of strategic importance as an upgraded SCADA system was necessary in the transmission utility to effectively utilize the enhanced asset base and improve grid operations and system reliability.

(b) To cancel $25 million of loan amount - The client decided to cancel the procurement of AMI and bundle it with, the then recently announced, Smart City investments to ensure technical consistency and to avoid infructuous expenditure. Further, there were cost savings in some subprojects. The part cancellation was done to account for these two factors.

(c) To increase the percentage of eligible expenditure to be financed by the World Bank from 80 percent to 90 percent Under the Loan Agreement, the World Bank had agreed to finance 80 percent of the eligible expenditures against Components 1 and 2. However, during implementation, the costs associated with land acquisition, crop/forest/railway


Page 11 of 40

compensation, which were all part of the project costs but not eligible expenditures for Bank’s purposes, increased significantly. The counterparts’ contributions exceeded the agreed counterpart funding of 20 percent of the project costs. Therefore, the borrower requested Bank to finance 90 percent of the eligible expenditures under Components 1 and 2.

II. OUTCOME

A. RELEVANCE OF PDOs

Assessment of Relevance of PDOs and Rating

17. The project was and remained substantially aligned with and relevant to both the World Bank’s Country Strategy 2009–2012 and the GoI’s strategic need to scale-up infrastructure investment and services at the time of project appraisal. The GoI at the appraisal stage, that is, during 2009 envisaged an ambitious investment program of US$175 billion to meet the expanding demand for power and targeted over 80,000 MW of new generation capacity, with corresponding investments in transmission and distribution networks.

18. Similarly, the PDO is relevant to Outcome 1.2 (improved inter-regional power transmission connectivity) of the Country Partnership Strategy (CPS). The CPS promotes financially sustainable access to electricity by addressing bottlenecks in generation, transmission, and distribution at both the state and national levels. Continued rapid economic growth is a precondition for poverty reduction and shared prosperity, and to achieve economic growth, it is imperative that India can provide all its citizens with affordable and reliable electricity supply, in line with growing demand. Moreover, the power sector developed well in Haryana in the past several years to the extent that power disruptions have reduced significantly in the three cities where project investments were made.

19. The PDOs were derived from the Government’s priorities, as mentioned earlier, by addressing the Government’s need for both hard and soft support through the two project components. Component 1 and 2 supported in solving the bottlenecks that the sector faced during the appraisal stage. Component 3, on the other hand, focused on improving staff capacity, operational efficiency, and accountability.

Rating: Considering the above facts, explanations, and assessment, the overall relevance of PDOs is rated High.

B. ACHIEVEMENT OF PDOs (EFFICACY)

20. The PDO had three main outcomes:

(a) Improve the availability of electricity and efficiency of transmission system; (b) Improve the efficiency of the distribution system (selected); and (c) Improve the accountability and institutional capacity of the utilities (transmission and

distribution).


Page 12 of 40

21. To measure the PDO’s achievement, four PDO-level indicators and five intermediate indicators were developed. For more information on indicators and status at completion, please refer to annex 1.

Assessment of Achievement of Each Objective/Outcome

Outcome Area 1: Improve the availability of electricity and efficiency of transmission system

22. The project achieved the targets set at the beginning of the operation. The project was successful in transmitting 49,220 million units (MU) from 26,145 MU, increase the transmission lines length from 8,203 km to 14,701 km, and increased the transformation capacity from 9,700 MVA to 19,750 MVA. The project has surpassed its targets of establishing 13,500 km of transmission line and increasing the transformation capacity to 16,000 MVA of the transformation capacity. Outcome 1 indicator ‘total energy transmitted through the transmission system (MU)’ to measure the achievement is an indicative measurement to capture the benefit of the intervention in strengthening the transmission network in the state.

23. Although Outcome 1 is clear, achievable, and outcome-oriented, the outcome indicator for this is not fully attributable to the World Bank’s investment. The increase in total transmitted electricity is not solely the result of this project, but also to other investments HVPVL has taken up during the lifetime of this project. While, it is difficult to measure the electricity transmitted due to the World Bank’s investment, Bank’s intervention has increased the transformation capacity and thus, resulted in increased electricity transmission.

24. The Outcome Area 1 had two intermediate indicators:

• Increase in transmission lines (circuit km); and

• Increase in transmission capacity (MVA).

25. The project fully achieved the intermediate indicators before the closing date and in fact, surpassed the target. The achievement of the targets has addressed the challenges of supply shortages, improved the technical losses, and dependence on power purchase from other states. In total, over 45 substations of 19,750 MVA capacity and its associated transmission lines and SCADA expansion have helped in transmission of increased power generation across the state resulting in improved availability of power supply, reduction in overall system losses, and enhanced power quality in the intervention areas.

26. As stated above, the PDO indicators for availability measured not the project level, but state level targets. While this makes it difficult to assess the outcomes achieved by the Bank investment, the surpassed targets that the state has been able to achieve indicates that the transmission company has been performing well. The performance of the utility can partly be attributed to Bank’s effort.

27. The project faced challenges that affected the achievement of the outcomes during implementation, namely RoW issues, local protests for land compensation (under other infrastructure projects) closer to World Bank project areas, contractor default due to liquidity issues, significant capital expenditure (CAPEX) scale up while project implementation capacity was still maturing, and deliberate pause in contract award to avoid stranded transmission assets due to delay in generation capacity coming on line. The outcomes would have been achieved earlier if the project had not face these challenges.


Page 13 of 40

Though some of these issues were beyond the project’s control, it tried its best to resolve them by working together with the district administration.

Outcome Area 2: Improve the efficiency of distribution network in selected cities

28. Outcome Area 2 is measured by one outcome-level indicator and two intermediate level indicators. The PDO was mainly focused on improving the distribution system efficiency of three towns namely—Charkhi Dadri, Faridabad, and Gurgaon by replacing the low voltage network with high voltage, construction of new feeders, and relocation of consumer meters to facilitate meter-reading. The AT&C loss figures available during project preparation did not appear to be based on reliable data and therefore, it was decided that a baseline would be developed through a third party and losses monitored against this baseline. However, the target figures were decided based on data available prior to baseline study. The outcome was partially achieved as all planned feeders could not be converted due to RoW issues, and the urban development authority did not allow construction of overhead network in some areas because of which no work was carried out in these areas. Further, the reconnection and relocation of consumer meters was not initially included under the project and utility preferred to undertake this work using their own resources. This also resulted in partial achievement of planned outcome. In subsequent contract packages, this scope was included.

Table 3. AT&C losses comparison

Name of Town AT&C Losses

(Before the Project) (%)

AT&C Losses (Targeted in Project DPR)

(%)

AT&C Losses (FY2017–18)

(%)

Charkhi Dadri 52.19 26.00 35

Gurgaon 17.49 13.39 9.43

Faridabad 23.86 14.86 7.8

Note: DPR = Detailed Project Report.

29. The project was able to overachieve the AT&C loss reduction target in these cities. In the case of Dadri, the baseline data in the Project Appraisal Document (PAD) varies significantly when compared to the baseline survey data (70 percent according to baseline survey versus 52 percent as per PAD). However, the Results Framework was not updated to reflect the data collected by third party consultant. For assessment of the outcome and to address the ambiguity of the data, the difference between target and baseline has been used to measure the achievement. At appraisal stage, the baseline AT&C losses were 52.19 percent and target was to reduce to 26 percent, that is, 26.19 percent reduction in AT&C losses. According to the latest report from the third-party consultant, more than 35 percent reduction in AT&C losses has been achieved. Nevertheless, the targets have been met and this indicator is fully achieved.

30. There is a duplication of PDO and intermediate-level indicators. The reduction of AT&C losses is used as an indicator for both the project outcome indicators as well as intermediate outcome indicators. The first intermediate-level indicators are already discussed earlier. The second intermediate-level indicator was to ‘Introduce system for managing and measuring customer service standards in select urban centers’. This intermediate-level indicator is fully achieved. The DHBVN established a customer grievance system and grievances are received at a centralized Customer Care Center in Gurgaon.


Page 14 of 40

31. The deployment of AMI could not be delivered despite best efforts from the World Bank as well as the Government. Initially, AMI deployment was deliberately delayed as India had set up ‘India Smart Grid Task Force’ to prepare technical specifications for smart meters. Indian standards for smart meters were considered necessary to develop an interoperable AMI system as well as meet the regulation of the Ministry of Consumer Affairs that requires all electricity meters to be BIS3-certified. However, while the specifications were still under finalization, the IA decided to go forward with Automatic Meter Reading (AMR) instead of AMI as AMR was already deployed on high value consumers while large scale implementation of AMI was still seen as an expensive option and limited to pilot projects. During pre-bid meetings for AMR package, IA received strong market feedback about maturing of AMI technology and modified the technical specifications included in AMR package to allow AMI solutions. However, the procurement (single stage single packet) had to be cancelled as the lower bids did not qualify and there was a significant cost difference between the lowest (unqualified) and the qualified bidder. The Procurement Strategy was revised in the next round of bidding and two-stage two packet system was followed with provision for technical discussions with qualified bidders and revision of technical requirements based on these discussions. The procurement was almost at award stage when the GoH decided that they would take up smart meters as a part of Gurgaon Smart City Project which was announced in 2015 and cancelled the procurement.

Outcome Area 3: Improve the accountability and institutional capacity of the utilities (transmission and distribution)

32. The Outcome Area 3 is achieved. The outcome-level indicator ‘development and implementation of institutional strengthening action plan and corporate governance and financial accountability action (CGFA) plan’ were prepared and implemented. There have been shortcomings in the implementation, however, the plans are under implementation and well-endorsed by the management of both the implementing agencies. The DHBVN and HVPN made considerable efforts toward strengthening of the various FM and corporate governance aspects as well as institutional capacity development.

Table 4. List of TA activities

Area of Intervention

Output Results

TA activities undertaken during project preparation using grant funds

Diagnostic studies and vision exercise

Capacity Building and Institutional Strengthening Plan

Interventions for Component 3 of the project were identified

Network planning Investment Report based on load flow studies

Investments required in the transmission system were identified and prioritized. The top priority investments were undertaken under Component 1.

TA activities undertaken under the Project using loan funds

Contract Management including safeguard aspects

Project Management Consultant (PMC) appointed

(a) PMC provided resources to IAs to supervise and monitor contracts (b) Standard contract monitoring formats prepared (c) Asset quality, particularly civil works, ensured (d) Safeguard management support provided

3 Bureau of Indian Standards


Page 15 of 40

Area of Intervention

Output Results

Long-term capital investment planning

Long-term capital investment program till 2025 prepared using standard load forecast methods and robust network topology

Recommendations like distribution at 33 kV, underground network, compact substations, and so on are being followed in expansion of Gurgaon city’s electricity distribution network.

Employee management

Key performance indicator (KPI)- based performance management system; Transfer Policy

KPI-based performance management system rolled out in both IAs Transfer Policy notified

Business Process Reengineering

Redesigned organization structure and business processes to strengthen the key processes (including finance)

Prepared manuals relating to financial accounting, internal audit costing and budgeting

IT support Recruit IT-skilled resources to implement/integrate its Enterprise Resource Planning, R-APDRP, and other ongoing IT initiatives

Updated geographic information system (GIS) database including assisting DHBVN in cleaning up and updating consumer records; validated system generated AT&C loss reports and helping the DHBVN identify and address-related issues

Training program Funding of the training calendar in the HVPN and DHBVN

Personnel increased knowledge through technical, managerial, and training on safeguards

Concurrent TA activities (under grant funds)

Agriculture subsidy Monitoring and Evaluation (M&E) framework to estimate and monitor agriculture consumption

Three methodologies developed and presented to regulator. Tool for accepted methodology developed and handed over to distribution utility. The accepted methodology applied by regulator to approve subsidy.

Regulatory capacity enhancement

Multiyear tariffs regulations The HERC adopted the multiyear tariff regulation and have used it ever since

Assessment of Achievement of Each Objective/Outcome

Justification of Overall Efficacy Rating

33. Based on the earlier assessment of the achievements of the three PDOs, the project’s overall efficacy is rated Substantial. The Project focused on institutional capacity building which is a significant factor for the success of any institutions and sustainability of the project. The Project was successful in developing the capacity of the human resources with respect to procurement planning, contract management, safeguards etc. Through this Project, the two implementing agencies could make considerable changes and upgradation in their business processes especially focusing on financial management, inter audit costing and budgeting employee management. The effort put on the governance side has a long term sustainable effect in the way the organization performs. This was reflected in their day to day improved functioning of the organization.

(a) The project fully achieved the PDO Outcome Area 1 and improved the availability of electricity and efficiency of transmission system, as reflected in the attainment of the relevant PDO and intermediate indicators for this outcome. The PDO-level indicators were


Page 16 of 40

met with minor shortcomings considering the fact that the entire outcome cannot be attributable to Bank.

(b) The project achieved the PDO Outcome Area 2.

(c) Under Outcome Area 3, the project made significant contributions to building the capacity of the IAs in project management, employee management practices, financial management (FM), and corporate governance aspects. This outcome is very important as achievement of this, reflects the achievement of outcome 1 and 2 as well. The Project did a tremendous effort to build the institutions capacity in all aspects.

C. EFFICIENCY

Assessment of Efficiency and Rating

34. The efficiency is rated Modest for the project. The cost of achieving the project objectives was much lower than what was envisaged during appraisal. The project has allocated US$330 million during appraisal from IBRD resources and later, cancelled US$25 million as the scope of AMI installation was later cancelled from the project. The project has disbursed around (85 percent) US$260 million so far, leaving US$45 million undisbursed. There were various reasons for this huge unallocated amount such as cost-savings from competitive biddings, client being able to save resources due to Indian currency devaluation, and cancellation of few of the contracts. However, with a project duration of over eight years, this amount could have been utilized more efficiently.

35. The economic returns of the project are high at completion stage of the project. Please see table 5 to see the Economic Internal Rate of Return (EIRR) and Net Present Value (NPV) for the HVPN and DHBVN components. The increase in the economic returns were mainly attributed to lower costs and higher benefits realized due to evacuation of additional energy from new generating plants and reduction of transmission losses. The component achieved its objective in costs lower than what was estimated in the appraisal stage. Please see annex 4 for further details on efficiency assessment.

Table 5. Appraisal vs. completions stage efficacy assessment

Financial Cost (US$, millions)

Economic Cost (US$, millions)

NPV (US$, millions)

EIRR (%)

Appraisal Completion Appraisal Completion Appraisal Completion Appraisal Completion

HVPN 313.82 227.3 200.85 181.04 1145.58 3685 83 83

DHBVN 66.37 33.1 45.31 25.68

Dadri 5.37 3.31 3.91 2.65 4.84 52.94 45 66

Gurgaon 25.25 13.24 17.24 10.59 25.56 69.15 59 69

Faridabad 35.39 13.24 24.16 10.59 38.47 104.99 61 92

36. Considering, the cancellation of the AMI component (one major subproject to achieve reduction of commercial losses), over three years of project completion date extension and high economic returns, the efficiency is rated Modest.


Page 17 of 40

D. JUSTIFICATION OF OVERALL OUTCOME RATING

37. Based on the abovementioned ratings, the overall outcome rating is judged as ‘Moderately Satisfactory’.

E. OTHER OUTCOMES AND IMPACTS (IF ANY)

Gender

38. The activities under the project focused on gender activities by improving women’s access to infrastructure and allied services, thereby, improving their overall quality of life. Employment opportunities were created through civil work for men and women living close to the project site.

Institutional Strengthening

39. Strengthening the institutional capacity of the Government was part of the PDO and it was achieved through the various activities undertaken under Component 3. Further, the World Bank organized a transmission workshop where international best practices in transmission planning were presented and arranged a study tour to understand the way the distribution companies in Brazil became profitable by reducing theft and improving customer satisfaction. The indicators for the institutional component did not fully capture the extent of the achievements for that component.

Mobilizing Private Sector Financing

Not applicable.

Poverty Reduction and Shared Prosperity

40. The project made more electricity available to the state. Availability of electricity and economic growth are directly proportional resulting in increased productivity of different income-level groups. The project not only improved supply but also resulted in reduction in AT&C losses in three major towns.

Other Unintended Outcomes and Impacts

41. The use of project management cum quality assurance consultants was beneficial for the Implementing Agencies (IAs) as it is always challenging for Government organizations to meet significant CAPEX scale-up targets as was the case here. Since this was the first time the IAs worked with the PMCs, it was initially challenging for the three entities—Employer, Contractor, and PMC—to function efficiently. The PIEs addressed this by issuing a procedure order defining roles and responsibilities and communication protocols of employer and PMC in relation to the contractor. By the end of the project, the PMC was well-integrated and their role appreciated by the IAs. The utility is now using similar arrangements under domestic funded projects also.

Relevance Efficacy Efficiency Overall Outcome Rating

High Substantial Modest Moderately Satisfactory


Page 18 of 40

42. Two major challenges related to agriculture subsidy and regulatory issues were also faced by the state, but not addressed as a part of the project being sensitive from political economy point of view. Given their criticality to sustainable power sector operations, they were addressed concurrently under grant funds. The intervention on agriculture subsidy included the measurement of actual power consumption and related data corresponding to segregated feeders, establishing MIS for measurement and control of agricultural consumption, and developing guidelines and methodology for reporting on actual agricultural consumption to the regulator. The support given to the HERC addressed issues related to tariffs (the implementation of a multiyear tariff incorporating transmission pricing and benchmarking, and so on), pushed state power market development (intra-state availability based tariff and institutional arrangements required for further market development), and promoted mechanisms to enhance consumer voice in regulatory decision making.

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME

A. KEY FACTORS DURING PREPARATION

43. This project was an opportunity for the World Bank to reengage in power sector reform at the state level after 2004. The project was carefully designed based on lessons learned from past engagements, considered the political economy realities and recognized that it is not possible to address all sector challenges at the same time. It focused on improvements in specific geographies, which could serve as internal benchmarks to carry out similar improvements in other geographies. The operation was also consistent with vision of state utilities to achieve sustainable development of power sector to meet economic development targets. The project rightly identified risks such as poor implementation capacity and gaps in institutional set up and addressed them through the project. The following are the key factors discussed in detail during the preparation that affected implementation outcomes:

(a) Appropriate project design. The project design considered the reality of political economy of the state’s power sector and the support it required to develop its institutions as well as infrastructure. Complex issues like agriculture subsidy, regulatory issues were not included in the project but supported outside it.

(b) Realistic objectives. The objectives of improving the efficiency and customer satisfaction of the distribution system were designed with right level of ambitiousness. The subproject scope was ringfenced to focus only on outcomes achievable as a direct result of project interventions. The project selected three cities, carried out baseline survey to set the baseline data and later measured the target.

(c) Risk assessment of the institutional capacity. While the team carried out a correct assessment of the institutional capacity, the mitigation measures could have been stronger. It was very evident during preparation that the implementation capacity was limited. The role of the PMC in HVPN could have been enlarged to include day-to-day supervision as in case of the DHBVN.

B. KEY FACTORS DURING IMPLEMENTATION

Factor Subject to Government’s and/or Implementation Entities’ Control


Page 19 of 40

44. Project management. The project faced various challenges resulting in delays and cancellation of packages. While some were attributable to external factors, there are aspects that could have been better addressed—ensuring cash flow of contractors through faster payments, close contract monitoring right from award and proactive actions to avoid delays thus avoiding levy of liquidated damages, using provisions available under the contract like direct payment to supplier in case of liquidity issues with main contractor to ensure progress and avoid cancellation of contracts, are some examples. However, the contract management improved considerably as the project progressed and IAs worked with the PMCs and imbibed good practices. Initial lack of close monitoring from IA resulted in time lag between HVDS installation and LT connectivity within Dadri and Gurgaon, resulting into delayed utilization of the HVDS line. However, this was addressed during subsequent packages and LT connectivity works were a part of the HVDS installation for Faridabad and added as additional scope in the Gurgaon contract.

45. Hiring of capable subcontractors. A few packages were delayed due to slow progress by the contractors. The bidding document included enough clauses to ensure hiring of capable contractors but initially did not include criteria for sub-contractors. Capacity needs assessment of the subcontractors is essential before the project is handed to them to avoid delays in implementation. The project later set the criteria for subcontractors as well to maintain a certain quality.

46. Delay and cancellation of AMI package. The deployment of AMI could not be delivered despite best efforts from the World Bank as well as the Government. Procurement of AMI package was deliberately delayed (as mentioned in the outcome section) to allow development of Bureau of Indian Standards (BIS) for smart meters. During this time, the IA altered its strategy and decided to go forward with AMR instead of the AMI as the AMR technology was considered more established. The project lost three years in this process. Furthermore, the first round of procurement had to be cancelled as the lower bids did not qualify, and there was a significant cost difference between the lowest (unqualified) and the qualified bidder. The rebidding took time and when the procurement was at completion stage the GoH decided to take up smart meters as a part of Gurgaon Smart City Project and decided to cancel the procurement under the project. This subproject was dropped in the last restructuring.

47. Lengthy project cycle. The project closing date was extended twice and even after eight years, one package remains incomplete and is expected to complete in September 2018. There are many external and internal factors responsible for delays in completion of the project. The procurement was on track when project was initiated in 2009. The G1-07 packages were awarded in 2010 and two more a few months later. However, the IA faced issues related to non-mobilization of qualified civil subcontractors, and mismatch between material supply and physical progress. These were addressed by introducing appropriate clauses in bidding document which improved performance of subsequent contracts. However, some contracts still could not be completed due to liquidity issues faced by the contractors and contracts had to be terminated and re-bid.

48. FM staffing. Appointment of Director (Finance) in the DHBVN remained a critical issue during the implementation of the project. Though advertised, as there was no response for the vacancy for a long time. At the HVPN, a team of section officers, divisional accountants, and junior accountants continue to work on a contractual basis. This issue, though flagged during almost every mission, remained prominent throughout the project implementation. However, what needs to be taken into consideration is that these two agencies can only make recommendations as the ultimate decision on the hiring process is done by the GoH.


Page 20 of 40

49. Frequent changes in management. The World Bank task team noted frequent changes in senior leadership at both the utilities. These changes led to delay in decision making and weak implementation oversight, affecting implementation progress of the project and adoption of the KPI within the institutions.

Factors Subject to the World Bank’s Control

50. Hiring consultants under institutional capacity building program suffered delays due to major differences between departmental procedures and the World Bank Guidelines. There could have been wider orientation on World Bank’s requirement within the implementing agencies to apply agreed arrangements.

51. Not including last mile connectivity with the HVDS packages resulted in a time lag between the HVDS installation and consumer connectivity within Dadri and Gurgaon, resulting into delayed utilization of the HVDS line after completion. It was a deliberate decision to carry out these works in a phased manner using the IA’s own staff given the possibility of consumer resistance, particularly in Charkhi Dadri. In Gurgaon, once the first few connections were shifted to the new network and quality of supply improved, acceptability from consumers increased and LT connectivity for Gurgaon was included in the HVDS package through a contract amendment while it was made a part of Faridabad HVDS package from start.

Factors Outside the Government’s Control

52. Cash flow. A few years back, many infrastructure contractors were facing a cash flow issue which lead to delay in mobilizing resources and completing the work. The problem was not limited to contractors in this project. This issue was outside the Government’s control as well. In view of this, a study has been initiated by the Bank to consider capacity issues for civil contractors and suggesting mitigation measures.

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME

A. QUALITY OF MONITORING AND EVALUATION (M&E)

M&E Design

53. The project’s Results Framework was prepared according to World Bank’s guidelines. The PDO indicators and targets were compatible with the Government’s approach, donor (Global Environmental Facility) inputs, and India’s overall policy reform agenda in the power sector. The targets for the outcome indicators used under Outcome Area 1 cannot be attributed fully to the World Bank’s investment as the increase in total transmitted energy is not solely the result of this project but several other initiatives the state and the Government have taken up during the lifetime of the project.

M&E Implementation

54. The project was subject to 14 implementation support/supervision missions along with monthly technical visits that monitored detailed progress and provided extensive support. The client has been very appreciative of the regular support the task team have provided to the client. The progress, issues, and guidance was recorded in the Implementation Status and Results Reports (ISRs) and Aide Memoires. The third-party quality assurance support was highly appreciated by the client and helped them effectively. The regular field and corporate office reviews with contractors, which were started under the project, are


Page 21 of 40

now a norm and used for all contracts. The task team regularly collected detailed progress data, updated current progress against the baseline, and highlighted issues for the World Bank management’s attention. In addition to the supervision missions, the outcome/results of the project were monitored through information provided included quarterly progress and FM reports, annual audits of project accounts, and external monitoring reports from consultants. During the implementation, a consultant was hired to establish a baseline for the three towns, however, the results framework was not revised to reflect the correct baseline making it difficult to assess the outcome at the completion stage.

M&E Utilization

55. The M&E system in place was capable of effectively reporting the output-level indicators and deliverables and informing the management on key decisions to be made for resolving ongoing and implementation issues. It proved to be useful for the management in understanding the immediate status and issues of the project, but also to inform the management on the effectiveness of the intervention and the longer-term impacts the project may have.

Justification of Overall Rating of Quality of M&E

56. Considering (a) just-in-time support to the client provided to resolve the issues, (b) commitment from the M&E’s team during the implementation, and (c) oversight on key indicators as discussed above, the overall quality of M&E is rated Substantial.

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE

57. Environmental and social safeguards. Overall, performance and supervision of social safeguards have been Satisfactory. The project was assigned Category ‘A’ due to the potential to impact specified area of Aravallis hill—designated as eco-sensitive zone by the GoI, among other factors. This was averted through screening of subproject locations and Environmental Assessment (EA)/Environmental Management Plan (EMP) was done according to procedures in the Environmental and Social Policies and Procedures (ESPP) in the planning stage of project. The implementing agencies developed ESPPs for identification, assessment, and management of environmental and social (E&S) concerns at both organizational as well as project levels on their own. An E&S training was provided at the HVPN’s training institute (covering officers from HVPN & DHBVN, and contractors) following which, the HVPN developed Environmental and Social Management Framework on their own. Nearly 11 packages needed preparation of Resettlement and Rehabilitation Action Plans, which adhered to the provisions of ESPP. Haryana State Industrial and Infrastructure Development Corporation Ltd. acquired all the land (government land), which was legally transferred to the HVPN, which is one of the highlights of the project. However, despite adherence to ESPP, three subprojects 220 kV substation at Raj Ka Meo, 220 kV substation at Rai, and 132 kV single circuit line from Kalanur to Meham witnessed community agitation resulting in delayed work that led to the site being either dropped or changed to a different location.

58. For a total of 33 transmissions subproject, the HVPN has completed all requisite process for forest clearance and deposited INR 86,510,460 with Haryana Forest Department for compensatory afforestation. The HVPN had also completed all requisite process for Resettlement Action Plan preparation and made payments of INR 1,654,749,000 against crop compensation, forest compensation, railways/ Haryana Urban Development Authority (HUDA), and land cost. The water-harvesting structure


Page 22 of 40

is constructed at all new substations supported under the project in line with the ESPP and this continued to be used, except for three substations whose construction is delayed due to contractual issues. During early stage of implementation, the project had two accidents and the World Bank Team had follow-up with the DHVBN on monthly basis seeking status on providing safety gear to workers, delineation of the worksite, and periodic campaigns to raise awareness about safe work practices. As part of corrective measures, the monitoring and follow-up was supplemented by contractor’s awareness on the ESPP and review and revision of Safety Manual. The project utilities also established mechanism for grievance redressal both off-line (toll-free number) and online (mails), and so on, which was accessible to the project stakeholders.

59. FM and corporate governance. The risk rating has been ‘Moderate’ due to the commitment and improvement made by both the DHVBN and the HVPN. Although, at the start of the project, the risk rating for the project was Substantial, an action plan was developed and agreed with the World Bank for strengthening financial accountability and corporate governance.

60. At project effectiveness, FM arrangements required strengthening with internal control deficiencies like absence of robust internal audit mechanism and repeat observations in external audit reports. Although there were initial delays in External Audit Reports and Interim Unaudited Financial Reports, these were generally received regularly. As part of the project interventions, Finance Manual and Costing Manual were developed by external consultants and adopted by the management of both entities in close consultation with the World Bank. Finance and accounts personnel were trained and implementation was planned in a phased manner. An Internal Audit Manual was also developed and put into practice. Internal audit, however, continued to remain an area of concern with delays and vacancies in the department.

61. Corporate governance and financial accountability. At the start of the project, a CGFA plan was established and agreed with both the entities which aided in developing a framework for better governance and institutional arrangements in the organization. Through the project life, this plan was actively implemented to bring about institutional strengthening. Achievements have been in: constitution and functioning of Board of Governance and Audit Committees, use of technology for accounting and decision making, audit issue compliances, and so on.

62. Procurement. The project was procurement-intensive with almost 100 percent of the project cost used for contracts. The procurement packages, were divided between two implementing agencies, with the HVPN handling 24 investment packages under Transmission System Strengthening Component and the DHBVN handling five investment packages under Urban Distribution System Strengthening Component. Component 3 (Institutional Capacity Building Program) was managed by both the HVPN and DHBVN. The delays were caused by factors such as multiple reviews as well as prolonged bid evaluation. Hiring consultants (under Institutional Capacity Building Program) faced delays due to major differences between departmental procedures and the World Bank Guidelines.


Page 23 of 40

C. BANK PERFORMANCE

Quality at Entry

63. The team at appraisal had a good combination of task team members with local and international experience and was knowledgeable of the country context. The project’s alignment to the country priorities, strategic relevance, E&S development issues, fiduciary aspects, and implementation arrangements with the right selection of the implementation agency, were reasonably addressed at entry, which was facilitated by the team’s experience in the sector. However, there was a shortcoming at entry that potentially could have been addressed during preparation, by the task team—the team could have better assessed client capacity and readiness for implementation. Even though the Engineering, Procurement, and Construction and supply and installations (S&I) contracts moved faster, the consulting contracts (project monitoring/quality assurance) took more time. The consultants should have been planned to be on-board before the ‘works’.

Quality of Supervision

64. The project implementation progress was regularly reviewed through formal World Bank missions, technical visits (including site visits), and other informal interactions with the GoH and the implementing agencies. The core project team was retained throughout the project’s duration. The implementation support missions were regular and ISRs and Aide Memoires were filed accordingly. Likewise, support and guidance to the implementing agencies on project implementation, FM, procurement, and environment and social safeguards was provided by the World Bank’s team as needed, on a regular basis.

65. The task team addressed many issues during the implementation. The capacity of the staff was strengthened on fiduciary front, the issues of the subcontractors were addressed by revising the bidding documents including minimum criteria for sub-contractors as well. The World Bank team was active in responding and resolving issues as and when they came up. However, the project faced some major delays in implementation mainly due to forest clearances, RoW issues, and local agitation (on account of a road project close to World Bank-funded site).

Justification of Overall Rating of Bank Performance

66. Considering the positive aspects of the supervision and the minor shortcomings observed, the overall World Bank Performance is rated ‘Satisfactory’.

D. RISK TO DEVELOPMENT OUTCOME

67. The risk to development outcomes are negligible to low. The project has achieved almost of its objectives and the remaining activities would be completed by July 2018 at the latest under the GoH’s funding and following the World Bank’s safeguard standards. The implementing agencies have developed their capacity in procurement, E&S, and FM, thus creating an operating environment that would help maintain the development outcomes that the project had aimed.


Page 24 of 40

68. The AMI package was dropped in the last restructuring. However, the GoI’s Ujwal DISCOM Assurance Yojana (UDAY) program, for which Haryana has signed up mandates for the provision of smart meters to all consumers with monthly consumption above 200 units, in a phased manner. This is being monitored by the GoH and utility has already signed a Memorandum of Understanding with Energy Efficiency Services Limited to undertake the procurement of smart meters on their behalf.

V. LESSONS AND RECOMMENDATIONS

69. Value addition by a quality assurance consultant. In the organizations where, existing manpower is limited and the investments are spread across the state covering a large geographical area, a quality assurance consultant can add a lot of value. It will ensure monitoring the progress of contracts, and identifying and resolving the key issues that might delay implementation and will also ease the pressure on the utility manpower.

70. Periodic campaigns to reinforce the importance of safety: It is not only important that safety manuals are developed in a project but also that periodic campaigns/workshops are held to reinforce the key safety issues. This also includes training programs for contractors which highlight importance of using safety gear by workers and other safe work practices. There were two accidents under the project due to negligence and it was clear that the importance of safety has to be reinforced in each interaction. After the accidents every quality assurance consultant report not only had the progress on each package but also a report on safety practices being followed in the field.

71. Contract management is a specialized function and requires specialized approaches and domain specialists within the implementation agencies for better ownership and sustainability. Associated systems and procedures like an appropriate organization structure (separation of operations and maintenance from project function), contract management manuals, communication protocols, and dashboards for senior management are required for efficient project management. The World Bank should continue to monitor and provide support on these aspects during implementation. Continuous experience sharing with organizations that have a good track record of project implementation is helpful and should be a part of implementation as well. Taking too legalistic and adversarial approach while managing contracts is not always helpful. Contractual remedies like applying liquidated damages, en-cashing the performance security, and so on need to be done judiciously so that contractor is not cash-starved resulting in further slowing down of contract implementation. Similarly applying “risk and cost” approach should be the last resort as almost all such cases end up in arbitration or litigation. Alternative Dispute Resolution mechanisms like Dispute Resolution Boards may be helpful in such contracts.

72. New technology advancements will need a new approach. The AMI package was a new technology for India and Indian Standards (required as per central law for all consumer meters) were not available at start and became available only in 2014. This should have been considered during preparation and appropriate strategy discussed with the central agencies and state government. The AMI procurement was treated like a regular supply and installation procurement, whereas it needed a different approach (adopted during the second round of bidding) which allowed the utility to hold one-on-one discussions with qualified bidders, update technical specifications, and obtain final bids.

73. Minimize the period between project design and project implementation. This is especially true for highly dense populated (urban) areas like Dadri, Gurgaon, and Faridabad. The situation on ground


Page 25 of 40

changes rapidly (new construction/extensions and so on) therefore, to minimize changes in scope of work and maximize the impact of the interventions, there should be minimum time lag between DPR and implementation.

.


Page 26 of 40

ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS

A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: The development objective of the project is to improve the availability, efficiency and accountability of electricity supply in the state of Haryana through strengthening the transmission and distribu

Indicator Name Unit of Measure Baseline Original Target Formally Revised

Target

Actual Achieved at Completion

Total energy transmitted through the transmission system

Megawatt hour(MWh)

26145.00 46800.00 46800.00 49220.00

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017

Comments (achievements against targets): The target has been achieved before the Project closing date and has exceeded target set during appraisal.


Target


Reduction in AT & C losses in selected project urban areas

Percentage 0.00 0.00 0.00 0.00

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017

Reduction in AT&C losses in Dadri

Percentage 52.19 26.00 26.00 35.00

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017


Page 27 of 40

Reduction in AT&C Losses in Gurgaon

Percentage 17.49 13.39 13.39 9.43

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017

Reduction in AT& C Losses in Faridabad

Percentage 23.86 14.86 14.86 7.59

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017

Comments (achievements against targets): The target was fully achieved.


Target


Development and implementation of institutional strengthening action plan and corporate governance and financial accountability action plan

Yes/No N Y Y Y

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017

Comments (achievements against targets): The target was fully achieved.

A.2 Intermediate Results Indicators

Component: Component 1


Target



Page 28 of 40

Increase in Transmission Lines

Kilometers 8203.00 13500.00 13500.00 14701.50

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017

Comments (achievements against targets): This indicator was fully achieved, surpassing the set target before the closing date.


Target


Increase in transformation capacity

Kilovolt-Amphere(KVA)

9700.00 16000.00 16000.00 19750.00

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017

Comments (achievements against targets): The indicator exceeded its target before the closing date.

Component: Component III


Target


Proportional reduction in weighted average of delays in project execution

Months 7.00 4.00 4.00 4.00

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017

Comments (achievements against targets): The target is achieved.


Target



Page 29 of 40

Inter-unit reconciliation of accounts

Yes/No N Y Y Y

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017


Component: Component II


Target


Introduce system for managing and measuring customer service standards in select urban centers

Yes/No N Y Y Y

01-May-2009 13-Jul-2009 13-Jul-2009 29-Dec-2017



Page 30 of 40

1. KEY OUTPUTS BY COMPONENT

Objective/Outcome 1

Outcome Indicators 1. Total energy transmitted through the transmission system (Million Units)

Intermediate Results Indicators 1. Increase in transmission lines (circuit km) 2. Increase in transformation capacity (MVA)

Key Outputs by Component (linked to the achievement of the Objective/Outcome 1)

1. Two 400 kV substations, 17 numbers of 220 kV Air Insulated Substations (AIS) substations, 4 220 kV GIS substation, 12 numbers of 132 kV substation, 8 numbers of 66 kV AIS substation, and 2 numbers of 66 kV GIS substations completed. 2. Over 14,000 km of transmission line constructed. 3. Total of 24 procurement packages were awarded.

Objective/Outcome 2

Outcome Indicators 1. Reduction in AT & C losses in Charkhi Dadri, Gurgaon and Faridabad

Intermediate Results Indicators 1. Reduction in AT&C losses in Charkhi Dadri 2. Reduction in AT&C losses in Gurgaon 3. Reduction in AT&C losses in Faridabad


1. 39 numbers of HVDS/Bifurcation feeders completed 2. 111 numbers of 33/11 kV Substation completed

Objective/Outcome 3

Outcome Indicators 1. Development and implementation of institutional strengthening action plan and corporate governance and financial accountability action plan


Page 31 of 40

Intermediate Results Indicators

1. Introduce system for managing and measuring customer service standards in select urban centers 2. Proportional reduction in weighted average of delays in project execution 3. Inter-unit reconciliation of accounts


1. Manual prepared for the accounts and the audit wings 2. System developed for entity-wise MIS with clearly defined KPIs at the corporate level.


Page 32 of 40

ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION

A. TASK TEAM MEMBERS

Name Role

Preparation

Sudeshna Ghosh Banerjee, Ashish Khanna Task Team Leader(s)

Supervision/ICR

Mani Khurana, Kavita Saraswat Task Team Leader(s)

Shanker Lal, Debabrata Chakraborti Procurement Specialist(s)

Supriti Dua FM Specialist

Boonsri Prasertwaree Kim Team Member

Ritika Rodrigues Team Member

Gaurav D. Joshi Environmental Safeguards Specialist

Pedro Antmann Team Member

Parthapriya Ghosh Team Member

Khabilongtshup Khumujam Environmental Safeguards Specialist

Surbhi Dhingra Social Safeguards Specialist

Barsha Pandey Team Member

B. STAFF TIME AND COST

Stage of Project Cycle Staff Time and Cost

No. of staff weeks US$ (including travel and consultant costs)

Preparation

FY08 45.400 127,681.21

FY09 142.141 688,910.56

FY10 5.631 101,278.50


Page 33 of 40

FY11 0 481.71

Total 193.17 918,351.98

Supervision/ICR

FY09 0 0.00

FY10 113.159 519,262.13

FY11 80.344 479,030.42

FY12 50.982 198,167.91

FY13 34.385 138,127.53

FY14 47.068 84,591.58

FY15 33.428 70,493.93

FY16 22.489 52,188.28

FY17 10.545 38,011.51

FY18 15.512 40,092.84

Total 407.91 1,619,966.13


Page 34 of 40

ANNEX 3. PROJECT COST BY COMPONENT

Components Amount at Approval

(US$, millions) Actual at Project Closing

(US$, millions) Percentage of Approval

(US$, millions)

1. Transmission System Strengthening

312.50 312.50 100

2. Urban Distribution System Strengthening

87.5 67.50 77.14

3. Technical Assistance and Capacity Building of Transmission and Distribution Companies

10.0 5.00 50

Total 410.00 385.00 93.90


Page 35 of 40

ANNEX 4. EFFICIENCY ANALYSIS

1. The project’s efficiency analysis was carried out at two levels during the appraisal stage. First, at the project level and the second at the entity level. The economic analysis was based on cost-benefit methodology to derive net present value and rate of return. The economic analysis at the completion stage follows the similar approach as that of the appraisal stage.

2. Ideally, for transmission investments of HVPN, the analysis should have been performed for each scheme assuming its unique technical parameters, financing, and implementation arrangements. While the costs are explicitly determined for each scheme, the benefits cannot be attributed explicitly as there are other related investments in the project areas. Therefore, the economic assessment is undertaken for transmission investment (Component 1) as a whole. Similarly, for the distribution investments of DHBVN (Component 2), the analysis is carried out for investments in each of the three urban centers (Dadri, Gurgaon, and Faridabad).

3. Cost. The efficiency analysis takes into account the actual costs incurred in the completion of the substations, transmission lines, HVDS, and consulting services. The cost for the assessment also included the counterpart funding and associated E&S costs. For the economic cost calculation, taxes and duties, price contingencies, and interest during construction are excluded.

Table A4.1. Cost category

Cost Category HVPN (US$, millions) DHBVN (US$, millions)

Actual contract cost 226 32.6

GoH funds 62.5 5

E&S cost 26.7 17.5

4. Benefit. The economic benefits of the schemes primarily accrue from the additional energy generated from two sources—transmission of energy after it has been evacuated from new generating plants and reduction of transmission losses. The total capacity addition is presented in Table A4.2. The following assumptions are used to compute the additional energy: (a) capacity utilization of 70 percent, (b) load factor of 67 percent, and (c) power factor of 95 percent.

Table A4.2. Capacity added at different locations

Additional Capacity (MVA)

HVPN 1, 050

Dadri 492

Gurgaon 4546

Faridabad 3089

5. HVPN. In the economic benefit computation, the economic value attached to additional energy flowing into the system by transmission of new generation is valued at a fixed cost of generation facilities at INR 1.26/kWh4 as it assumes the generation facilities are already built and the transmission congestion points were preventing the additional power from reaching the consumers. The opportunity cost of

4 HERC’s Annual Report 2015–2016.


Page 36 of 40

energy saved through reduction of transmission losses can be valued using INR 3.825/kWh—the incremental cost of expanding supply through alternate thermal generation by recent independent power producers.

6. The economic and financial fundamentals are robust implying the project will contribute to overall welfare and be beneficial to the consumer in the state. The economic NPV of the project is estimated to be about US$3.6 billion with an EIRR of 83 percent.

7. DHBVN. The benefits are primarily computed by catering to the extra load and energy savings through reduction in AT&C losses. The AT&C loss reduction will in turn lead to substitution of captive generation of energy to grid supply. In Dadri, the losses are expected to decline from the estimated 70 percent to a loss level target of 53 percent. The loss levels reduction targets will be achieved after the implementation of HVDS, bifurcation of feeders, correct loading, and reduction in breakdown. In Gurgaon and Faridabad, the losses are estimated to decrease from 17.49 percent to 9.43percent and from 23.86 percent to 7.59 percent, respectively.

8. The economic value of the additional capacity is valued at INR 1.26/kWh, which is the fixed cost of generation. The generating facilities will remain idle if the distribution system do not come online in time to distribute the power to consumers and earn revenues for the utility to pay the independent power producers and state generators The technical loss reduction is valued at the cost of supply of incremental thermal generation of INR 13.04/kWh, which is arrived at by adding the cost of incremental thermal generation (INR 3.82/kWh), transmission cost (INR 0.28/kWh), distribution cost6 (INR 6.72/kWh), and transmission and distribution losses (INR 2.22/kWh). This is the opportunity cost to the economy of losing energy through technical losses. The commercial loss reduction is more difficult to value. The completion-stage assessment uses the same approach as used during the appraisal stage. The commercial losses are valued at willingness to pay (It is defined as the area under the demand curve to the level of consumption observed); however, no household surveys were carried out to identify the willingness to pay. The tariff is the only observable point on the demand curve that serves to validate willingness to pay, that is, from all accounts, it is below the willingness to pay of paying customers (above zero and below the tariffs). For this analysis, the commercial loss reduction is valued at half of the lowest category of the paying customers. Table A4.3 summarizes the computed NPV and EIRR:

Table A4.3. Comparison of appraisal vs. completion stage efficiency assessment

Financial Cost (US$, millions)

Economic Cost (US$, millions)

NPV (US$, millions) EIRR (%)

Appraisal Completion. Appraisal Completion. Appraisal Completion. Appraisal Completion.

HVPN 313.82 227.3 200.85 181.04 1145.58 3685 83 83

DHBVN 66.37 33.1 45.31 25.68

Dadri 5.37 3.31 3.91 2.65 4.84 52.94 45 66

Gurgaon 25.25 13.24 17.24 10.59 25.56 69.15 59 69

Faridabad 35.39 13.24 24.16 10.59 38.47 104.99 61 92

5 Data provided by HPVN 6 Data Provided by BHDVN


Page 37 of 40


Page 38 of 40

ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS

Feedback from the Borrower

DHBVN

• The World Bank’s continuous support during the project implementation phase has helped the smooth execution of the project and helped achieve the intended project objectives. The World Bank’s regular implementation support has been of importance to guide DHBVN to remove the bottleneck, which has helped complete the project.

• DHBVN realizes the need to strengthen their monitoring system and provide more trainings to their staffs to increase the awareness/responsibility of operation and maintenance of said facilities. It is challenge for them to maintain the system properly.

Lessons Learned by the DHBVN during the Course of Implementation

• LT connectivity should be part of the HVDS system so as to reap the full benefits of strengthening the distribution. Based on the learning from Charkhi Dadri and Gurgaon, it was included for the Faridabad project in the original scope.

• More accurate site assessments are required to plan the alternatives on time. The project cost decreased by 5 percent (approximately) due to change in site conditions.

• Such project needs an efficient contract management process and the contract termination of inefficient contractors, and the award of new contracts for such work should be time based.

• During implementation of this project, the project management techniques followed through a third-party agency were useful for quality assurance of material and equipment, field erection work, and safety. Periodic meetings were held with all the S&I agencies at the level of Managing Director/Director (DHBVN) including World Bank representatives and were also helpful to drive the project. Most of the issues were discussed in these meetings, and directions to resolve them were provided on time. This has been a very good platform for all concerned to put up their issues across and have the right solution. A third-party agency was engaged by DHBVN for project monitoring, inspection, and quality assurance for the first time for this project. Fortnightly and monthly reports were prepared for DHBVN highlighting all the critical issues and bottlenecks so that actions could be taken on time for the smooth execution of the project. This agency monitored all the project activities to the satisfaction of DHBVN.

• The learnings from this project have been enormous, and these learning have been reapplied by DHBVN for areas where the AT&C losses were very high. HVDS was included for Shi Village, Badhkal feeder, and Mewla Maharajpur. The work in these areas is in process and expected to complete by March 2018. The expected outcome is that the losses would come down to 50 percent.


Page 39 of 40

HVPN

The World Bank duly provided support during the bidding as well as during the execution of the contracts. The World Bank’s support on termination of contracts with dismal progress is highly appreciated. Lessons Learned by the HVPN during the Course of Implementation

• Preferences should be given to multi-circuit towers to minimize the RoW-related issues.

• Practices of laying extra high voltage power cables should be adopted to minimize RoW issues and crossings; high temperature low swag (HLTS) conductors need to be used to reduce RoW issues feeding more number of substations.

• Optimal use of the existing substation and transmission lines should be ensured by upgradation to avoid land-related issues.

• Executive engineers in the field offices were given certain level of authority to deal with the contractors for smooth operation of the works.


Page 40 of 40

ANNEX 6. SUPPORTING DOCUMENTS (IF ANY)

Not applicable.

world bank documentdocuments.worldbank.org/curated/en/... · 6. an efficient and reliable...

Documents